Category Archives: Retailing

How Do You Reinvigorate a Mature, Cyclical (but still really fun) Industry? Part 1: The Challenge

This is a story about a great industry that was extremely hot…until it suddenly wasn’t.
It presents a unique challenge in how to navigate long-term growth in a world with changing values, attitudes and demographics – – in an unpredictable economic and political climate.

This is Part 1 of a two-part post.  Part 1 sets up the challenges to the boating industry.

In Part 2 we’ll discuss some things the industry is doing to meet these challenges, based on observations at the industry’s premier annual event, the Miami Boat Show – which begins on February 14, 2019.

Perfect Storm - Title

Powerboats are indisputably lots of fun, whether it’s to fish, ski, dive or just to cruise around.  It’s no surprise that about 140 million Americans participate in boating annually, and that in 2018 the industry generated an estimated $170 billion in annual economic activity (Source: NMMA).

Boating-NMMA

Source: NMMA

But as we’ll see, even with several years of growth, the powerboat industry is facing some real headwinds in countering demographic shifts and bracing for the inevitable next recession.

Please read on, and if you’d like, post your ideas on how you’d attack this challenge in the comments section.

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The Ultimate Discretionary Purchase

At the very far endpoint of the need-want continuum (aka 0% need, 100% want), beyond ice cream, puppies, personal Zambonis or large screen TVs, there are recreational boats.  Unless you make your living on the water, you don’t need a boat.

And with considerable entry costs leading to ongoing expenses (fuel, insurance, dock space, maintenance, accessories, etc.), this is an industry that is inextricably linked to economic ups and downs.

As a CNBC commentator put it: “Boating is perhaps the most cyclical consumer sector imaginable. Vessels are expensive to purchase, time consuming and completely discretionary.”
https://www.cnbc.com/2014/04/01/yachts-a-practical-investment-for-regular-investors.html

Boat Slip

Entry-level recreational boats can be very affordable, but prices can easily push six or even seven figures as size and complexity increase.  A relatively ‘entry-level’ 25-foot recreational boat can cost $200,000 or more.  A 40-footer can be well over $1 million. This is an industry that has historically tried to push the envelope during optimistic economic times.

Boat_Sales_NMMA

National Marine Manufacturers Association

But the seas are not always smooth.  Powerboating, in particular, is vulnerable to a perfect storm.

  1. Not counting the very wealthy, most people considering a major discretionary purchase will delay or just not buy in an unstable economy
  2. Like the tide drawing out, when economic uncertainty hits, many existing boat owners sell their boats, creating a large pool of relatively new and very affordable used inventory. Anyone still interested has ample reasons to buy used, which is crippling if you’re trying to make or sell new boats.
  3. The average age of boat owners is relatively advanced (currently around 55), meaning that a lot of purchasers (many of them Baby Boomers) from earlier growth years are permanently exiting the market. There are new, younger buyers, which is great, but currently not enough of them to sustain continued growth.
  4. In an economic downturn, related personal factors such as existing loans, lack of available credit and home sales come into play as people make decisions – and cutting boat expenses can be considered a less painful way to try to balance the family books.
  5. As powerboats generally use internal combustion engines, they can be subject to the political climate and resulting legislation. The ‘un-green’ optics of boating are a turn-off for a certain population segment, and ‘greater good’ legislation can create negative real consequences for marine (one example: ethanol is widely mandated but causes expensive damage in marine motors which are run more sporadically).
Boater_Age_NMMA

National Marine Manufacturers Association

This perfect storm was on full display in the few years leading up to 2010.

The Great Recession – all kinds of ugly

In the early 2000s, economic optimism drove strong unit growth, with about 375,000 new powerboats sold in 2006.  Dollar growth was even higher, as convenience features like stereos and refrigerators, the conversion from 2-stroke to cleaner/quieter 4-stroke motors, greater available horsepower and resulting higher prices all increased industry sales markedly.

And while there was some softness in 2007, when the stock market tanked in 2008, the industry nose-dived.  Annual sales dove to about 150,000 in 2010.  Even with several recent years of strong market growth, as of 2018 it has not fully recovered, with sales of new powerboats reaching 280,000 – – still below levels of a decade earlier.

Boat for sale

As one industry official put it in 2015: “We fell off a cliff about five years ago.  Homes were going into foreclosure, and people were making hard choices. On top of that, manufacturers didn’t build many boats in those years. But we lived through it.” https://www.sacbee.com/news/business/article8801072.html

Numerous manufacturers and dealers simply closed up shop.  One estimate had the boat manufacturer workforce reduced by 50-75% as a result of the recession.

In some ways, boating faces a long-term challenge.

  • Many current boaters will eventually age out of the market
  • New younger (and less affluent) boaters are interested in experiences but less interested in possessions — including single-family homes where possessions (like a boat in the driveway) can be stored. They are also influenced by ecological considerations.
  • A multitude of other factors complicates things: consumer confidence, rising student debt, an increasingly diverse population that may not have boating as a shared experience – – even concern about fuel price stability

Make no mistake, as of now the industry continues to grow, it is expected to grow further in 2019, and there are several bright spots of strong growth – – like the emerging wake sports segment, and personal watercraft (aka jet skis).

Malibu_SeaDoo

Brands pictured:  Malibu, SeaDoo

And the economy still appears strong, consumers appear to be confident, and the boating industry is continuing to extract growing revenue from ever more big, exotic and outrageous products (a 627 HP, $90k motor was introduced a few years ago, and immediately a 53-foot, $3 million luxury fishing boat was introduced deploying 4 of them – along with 50 neon-ringed speakers.  Rumor is that there will be a six-motor boat at this year’s show).  So making hay while the sun shines is definitely a current strategy – take advantage of consumer confidence and feelings of wealth.

53 Suenos

Pictured: HydraSports 53 Sueños

But the next recession is not a matter of if, it’s a matter of when, and Boomers will continue to exit the market.

SO – WHAT CAN BE DONE TO ENSURE SUSTAINABLE GROWTH IN THIS MARKET?

Maximize growth with current products?  Introduce game-changing products?  Hedge with counter-cyclical products?  Double down on technology?  Pivot to something else entirely?

Would love to hear your thoughts.

For Part 2, we’ll report back within a week, including some evidence of the current (greater luxury and features) and future (laying the groundwork for the next few decades).

See you at the show!

MIBS - 2019

Is This Any Way to Treat a High Value Customer? Ask My Mother.

Posted on

Do You Know Your Most Valuable Customers?  Do they know that you love them?

ecommercecrm

It’s 10 times harder to get a new customer than to keep an existing one.  Loyal customers are more profitable and have the highest Lifetime Customer Value. They love your company already.  They have already been acquired, qualified and taken through the funnel – – you have them where you want them!

So why, with today’s sophisticated customer management systems, are loyal repeat customers too often just an afterthought?  Or missed entirely?

In today’s post we will try to demonstrate that marketers must make extra effort to identify and appreciate these great customers.

Customer Relationship Management (CRM) data-based systems have given marketers the illusion that they not only know everything about their customers, but that their email outreach perfectly motivates everyone.  This is not always the case.  They don’t always get it right.  Customer targeting algorithms written too narrowly can miss the bigger picture.

Case in point: my very own Mom.

  • Mom’s primary indulgence is periodically taking her 5 kids and their families (20-25 people total) to an all-inclusive resort. Club Med has been the most frequent (but not exclusive) beneficiary. (Yes, I chose my mother extremely well). Her aggregate investment is well into 6 figures over the past 20+ years she’s been doing this.

ClubMed1

In the case of Club Med, the algorithm failed.  They were focused on the last 3 years only.  And they completely missed the fact that she’s a long-time customer who brings a group. Mom turns out to be a mere Turquoise!  A rookie in their eyes!

ClubMed2

ClubMed3

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ClubMed6

  • Mom selects the location, makes the reservations and all expenses go through her. She has 99% of the decision-making power on where we go. She should be a Big Kahuna to Club Med. They should make sure she’s happy, show their appreciation, and make every effort to acknowledge her loyalty.

ClubMed5

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ClubMed4

  • Yet Club Med scores loyalty on a per-person visit basis over the last 3 years. So despite influencing a lot of spending, Mom is classified as entry-level Turquoise, with the same status as a 10-year old who goes along with her parents. There is no acknowledgement at the corporate level, and none at the local Club level – – no one has told them who this is. No bottle of wine or fruit in the room. No upgrade. No ‘thank you for your continued loyalty’. Nothing.

ClubMed7

  • Small victory!  But it took a lot of effort.  Shouldn’t have to.
  • What defines your best customers? Longevity? Frequency? Cumulative $ spent?  Early adopters of new products?  This is really important to figure out.

Club Med of course doesn’t want to ignore their best customers. It’s just that their system isn’t set up to recognize them all the time.  To their credit, they handled my email rant with grace – – and came through in the end.

ClubMed8


ClubMed9

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So figure out who your best customers are and take care of them!

Right after you take care of your mother.

 

Peace of Mind as a HUGE Competitive Advantage

Some of you may know that I recently moved from the Chicago area to Raleigh after some 35 years.

While I have moved away from many close family members and old friends, the person I will probably miss the most is Mr. Lee (who, like my elementary school teachers, has no known first name).

Mr. Lee runs a humble shop called North Town Auto, and took care of our out-of-warranty cars, both domestic and foreign, for many years. It helped that he was only 2 blocks from us in Northbrook (convenient to the Metra Station!). And while there are probably mechanics who could do a certain thing for a slightly lower price. I would use Mr. Lee even if it required a drive to get there.

The reason? Peace of mind. Peace of mind that the car would be fixed correctly, that I would not overpay, that I would not pay for unnecessary repairs, that things would be done on time, that if he said I needed to do something, then I actually needed to do it.  That there was service with respect and a smile.  No worries, as they say.

I had complete loyalty to Mr. Lee.  And when it comes to loyalty, peace of mind turns out to be a huge competitive advantage.

Americans spend a lot on lots of stuff. They generally don’t seem to mind spending a lot.

However, Americans HATE the thought that they might be over-spending. And they don’t want to worry about it.

Think about institutions that offer what Mr. Lee does:

  • fair price (not necessarily the lowest)
  • high quality
  • consistency in delivery – no surprises
  • customer focus – great service, you don’t need to be on guard

Here are a few that come to mind that deliver great peace of mind:

unknowntj

  • COSTCO – – once I pass through those portals with my oversized shopping cart, I’m pretty sure that anything I put in my cart is a great deal and great quality (even if in the back of my rational mind I realize that some things are better value than others)
  • Trader Joe’s – – great value, interesting selection, fun experience – 2-Buck Chuck!
  • Amazon Prime – – I know my selections will be delivered on time and at no cost
  • Tire Rack – – awesome customer service, great pricing, instant shipping – – it’s the only way to go
  • Online window treatments – seriously – – it’s so automated and competitive that you’re not going to make a big mistake
  • Spirit Airlines (just kidding!)

Here are a few organizations that seem to fall down on the peace of mind continuum – – you might be overpaying, you’re not sure of the quality delivered, etc. And that bugs you.

chipotle

  • 1-800-Flowers – – sometimes works, sometimes doesn’t
  • Chipotle – – unfortunately moved from the other list – – love their food, but still have a vestige of doubt
  • Car Dealers – – sorry, guys – no change
  • Movers, painters, realtors, various local contractors – – until you build a track record like Mr. Lee, you’re not on my speed dial.

Why is peace of mind so important? Because we’re so stressed with just the basics of surviving from day to day that we need to simplify and eliminate unnecessary decisions.

dog

While Mr. Lee is a small businessman, the Peace of Mind list includes enterprises of all sizes.  We all have our examples of who provides peace of mind and who doesn’t (would love to hear about yours).

In the end, it’s about delivering consistent, dependable value. And that’s good advice for everyone.

Don’t Be Something You’re Not

This week a woman named Federica Marchionni was eased out of her position as CEO of Lands’ End after only 19 months on the job.

federica

Federica Marchionni

This illustrates (fairly predictably) what can happen when a brand tries to be something it’s not.

Ultimately, brand-building success is driven by meeting customers’ needs, not by trying to teach them to want something different. And loyal customers have this peculiar habit of resisting (resenting) signs that they’re being taken for granted.

lands-end-1981

Lands’ End 1983

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Recent Lands’ End

 

 

 

 

 

 

 

 

 

In the case of Lands’ End, since its 1963 founding by Gary Comer as a sailing supplies business, it developed a heritage as a casual sportswear business that was eventually bought by Sears (and spun off in 2014).  Mr. Comer was fond of saying “Take care of the customers, take care of the employees and profits will take care of themselves.”

But Lands’ End had recently been stumbling, so Ms. Marchionni, with a background at high-style retailers Dolce & Gabbana and Ferrari, was brought in and offered an experienced, glamorous executive who could help reshape Lands’ End “into a meaningful, global lifestyle brand”.

That’s when the trouble started.

federica-kate-hudson

Marchionni and actress Kate Hudson

New lines were immediately introduced, meaning loafers were sold alongside stiletto heels. Ms. Marchionni dropped low-profitability catalog shoppers and hired prominent fashion photographers to shoot elegant catalogs at exotic locations. She insisted on working out of New York City rather than the corporate headquarters in Dodgeville, WI, and was often seen hobnobbing with celebrities.

lands-end-canvas

New Lands’ End Canvas Line

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Lands’ End shoes – traditional and new

 

 

 

 

 

 

 

 

 

 

 

 

All of this alienated not only customers but employees, who were used to casual access to top management in Dodgeville and who would be critical in execution of plans. And unfortunately sales lagged spending, creating a lot of red ink. Ultimately the board decided it was time for another change.

old-spice

Successful reposition – Old Spice

While there are success stories about brands repositioning to catch a younger/new demographic (think Old Spice or Target), this is not the first time a brand has suffered from trying to fly too close to the sun.

JCPenney famously failed recently; going farther back, the breeding ground (figuratively) of nerds, Radio Shack, tried and aggressively failed to get more hip by calling itself ‘The Shack’. And even staid Dolly Madison snack cakes invented a character called the ‘Snackin’ Dude with a Snackin’ attitude’ to try to become somewhat more hip. Another whiff.

radio-shack-the-shack

Radio Shack unsuccessful reposition

Back to Lands’ End, the acting CEO (COO James Gooch) spends all of his non-traveling time in Dodgeville and is odds-on favorite for the permanent role.

We’ll see how the company and customers respond to an expected return to tradition. On the other hand, Mr. Gooch was recently CEO of the S.S. Radio Shack. Hmm…

Conclusion #1- – ignore loyal customers at your own peril.

Conclusion #2 – – just because a brand isn’t hip, doesn’t mean it isn’t great

Customer satisfaction – the short path often beats the long road

Sometimes we need to be reminded that simple customer satisfaction is almost always the goal of most businesses – and that policies and procedures are merely means to that end.

A recent, hard-to-believe experience brought this to my attention.

Frustrated

While getting my ears lowered at my local chain haircut emporium (whose name still escapes me even after years of visits) a man came in who had apparently booked an appointment online for himself and his son.

The man was called up but asked that his son go first. The employee said that this was not possible; the computer indicated that he, not his son, was in the first position, and that it was corporate policy to do what the computer said.

The man politely but firmly mentioned that the online booking program does not allow one to enter preferences or even names of people; the order of haircut is randomly assigned – – and since it involved two family members (as opposed to two strangers), the order of haircut shouldn’t really matter.

Great Clips

Incredibly, the employee still refused to let the son go first, claiming it was “Corporate policy”.

The man understandably was confused and frustrated, but out of a surplus of good cheer he managed through the situation (after getting a more empathetic but no more satisfying repeat of the message from the store manager – “I’ll be sure to bring this up with Corporate”).

Corporate policy in this case would likely be in place for one of two reasons:

  • to avoid conflicts with two parties who have booked simultaneously
  • to gather information so that strategies and programs can be implemented to enhance the future experience of future customersShortPath

Now, I’m a big believer in insight-driven marketing; as described above it’s what one might call the ‘long road’.

HOWEVER, when the customer is standing right in front of you (or is on the phone, or in an online chat) the opportunity to create satisfaction is immediate – and needs to be taken!

As we enter the high holy season of shopping, this would be good for retailers to remember.

What an Epic Fail Integrated Marketing Campaign Looks Like

Monday’s Wall Street Journal delivered a rather amazing example of how NOT to promote a product, along with the news and pithy commentary.

Most marketers know that messaging can be maximized if deployed consistently across vehicles.  This is apparently more difficult than it seems.

Page A7 of today’s WSJ featured a full-page color ad for €5.99/$7.99 dress shirts, from a manufacturer somewhat oddly named ‘Mosegi & Haberdashery’.

Mosegi Ad 2

It is important to keep in mind that a full-page color ad carries a price tag of $386,865.98.

A cursory scan of the ad shows a few obvious errors:

  • CEO Earl Mosegi’s promise includes: “…will not lose their shirt off there back” (sic)
  • Featured product claim: “Women shirt now available”
  • Key contact called “Sale Representative”

Mosegi_Quote

It gets worse.

  • Ad contains a QR code that is inactive
  • Ad implies a Facebook page (but no URL) which if you find it, not only doesn’t reference the ad, it features products not remotely like a dress shirt. Seems to be targeted at kids.  And it hasn’t been updated since July 2014.

Mosegi_Cartoon

But wait – there’s more!

  • The website itself is remarkably incomplete but also quite entertaining.
    • Of 8 main tabs, only 3 have content. There is no contact info.
    • The all-important ‘ORDER’ page contains just a static image – – there is no ordering mechanism for all the consumers who have seen the ad to take action online!
    • The ad shows a minimum order of 12 shirts; the website lists minimum orders of both 100 and 300 shirts. Clearly this is a wholesaler trying a direct consumer appeal.
    • Most remarkably, an unfortunate keystroke error removed a key letter from the word ‘shirt’, resulting in an entirely new word, which shows up on the home page as well as every single header.

Screen Shot 2014-10-27 at 5.07.52 PM

This brings up a few key questions:

  • Is the entity who placed this ad a) the playboy son of a Turkish billionaire setting up shop online? b) an unemployed Russian hacker? c) a Nigerian scammer? or d) a third-grader?
  • How does an ad that has a bargain-basement pitch, contains so many obvious errors and leads to an online dead-end, get approved by the Journal’s advertising department? (guess: maybe $387k has something to do with it?)
  • Is this our official notification that QR codes are truly dead?
  • Does a re-integrator exist?

Marvin

This is a campaign that seems to have been thrown together with not much thought other than a price point and a photo.

These people really need to get their shirt together.

One thing this ad is excellent at is demonstrating, by omission, some obvious basics of an integrated campaign:

  • Start with a compelling message/offer (arguably they are ok here)
  • Infuse every element of your marketing mix with the same consistent message, offer and look
  • Make it easy for customers to take action
  • For crying out loud, have someone who knows the language check for accuracy.   (The Armchair MBA is particularly pained at this last point, as its companion business, Peregrine Advisors, specializes in helping clients avoid online gaffes).

The Armchair MBA works hard to scour the globe for stories worthy of your attention. This one fell into our lap.

As the saying goes, better lucky than good.

The Loyalty Program That Will Survive the Apocalpyse – – and Why

The future of shopping and loyalty is mobile – – we are continually reminded about this.  Digital loyalty programs can leverage vast storehouses of data and sophisticated analytics, and can deliver individualized promotions at a time, place and shopping occasion that optimizes ROI.

JewelOscoPromoSo why the heck is there, sitting on my kitchen counter, a sheet for gluing small stamps received with each shopping trip at the local Jewel (Albertson’s)?  (If enough stamps are collected, a piece of Cuisinart cookware can be ours!).  

After all, this is an utterly low-tech, old media, one-size-fits-all loyalty promotion here in the digital age.

Ultimately the reasons for this low-tech promotion’s survival are related to its low-techness, and can be helpful to more tech-driven modern programs.

S&H GreenStamps

SinclairS&H_greenstamps

Hard to believe but this is essentially the same concept as S&H Green Stamps, which debuted over 100 years ago and were highly popular from the 1930s to the 1980s.  You got stamps when you bought stuff, filled out books (typically 1200 stamps) and could then win prizes from a catalog.  Stores that gave out these stamps used it as a competitive advantage.

And this is not an isolated grocery type program – – McDonald’s famously runs its Monopoly program, where customers get game pieces on everything they buy, and can win big prizes if they collect the right stamps.

mcdonalds-monopoly2013-300x300McDonalds_monopoly_pieces

 So what accounts for these games’ popularity? 

1) Simplicity – no apps, no logging on or passwords, no points to track online, no devices at all.  Just shop, stick, rinse and repeat.  It’s likely that there is greater appeal among older users for some of these promotions, but that doesn’t explain the McDonald’s popularity.

2) Can visualize success – each new stamp makes progress tangible and encourages continued participation

3) User involvement – Unlike an automatic electronic promotion, manually applying the stamps actively involves the participant, much like adding the proverbial egg to the cake mix turned Mom into a baker – increasing personal commitment level.

4) Closed-ended – a finite promotion period, so no long-term commitment or long wait for a payoff

5) It’s fun! – there’s an excitement to participating in these promotions!  It’s not just a mercenary exercise in repetitive purchases; there’s often an element of chance (and like gambling and golf, hope is what brings people back in the face of continued abject failure).

I’ve not seen any statistics about whether any of these promotions is more effective at driving shopper loyalty than any other.  I know that stamp programs definitely impact our shopping habits at home.

In any case, it’s clear that digital/mobile is the future of loyalty programs, even if the transition will take some time.

But some of the factors that make these old-school promotions popular can help make future loyalty efforts more successful.  

And until tech can replicate all of the above factors, it’s likely we’ll be shopping, sticking and winning, well into the future.