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Kevin Hillstrom - How The Future of Retail is Like Professional Sports

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Marketing Festival 2016

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Kevin Hillstrom - How The Future of Retail is Like Professional Sports

  1. 1. How Retail And E-Commerce Will Become More Like Professional Sports Kevin Hillstrom President, MineThatData
  2. 2. Why Listen To Kevin? Analyzed 200+ Retail, E-Commerce, and Catalog Brands In The Past 10 Years. Wrote Approximately 1,000,000 Lines Of Computer Code To Analyze Customer Behavior. Processed About 10,000,000,000 Purchase Transactions.
  3. 3. Why Listen To Kevin? The data I analyze, actual customer transactions (billions of transactions), suggest that all of the gains in channels and optimal marketing strategies and the introduction of social media and mobile are not causing customers to spend more. This is disappointing. We’ve been sold a bill of goods.
  4. 4. Let’s Compare How Professional Sports Generate Success To How Commerce Brands Plod Along!
  5. 5. Sports The best customers pay the most for the best seats. They pay in advance.
  6. 6. Commerce The best customers are given discounts and promotions and savings via loyalty programs. Customers are not generally asked to pay in advance (though Amazon Prime gets customers to pay in advance).
  7. 7. Sports The biggest events have expensive tickets and limited seats. Few can participate.
  8. 8. Commerce The biggest events (Thanksgiving, Cyber Monday, Christmas in the United States) have the biggest discounts and promotions. Huge inventory levels mean that everybody can participate.
  9. 9. Sports In the English Premier League, there is a big match each week. This generates anticipation and excitement and buildup to the match.
  10. 10. Commerce Here’s a quote from an Executive I work with: “It is July, and we’ve been saying the same thing for five months. We have nothing left to say until the new merchandise assortment is available in September.”
  11. 11. Nordstrom Anniversary Event = The Big Annual Event! Customers who spent $750+ in the past year earned special benefits.
  12. 12. Sports / Promotions The Seattle Mariners played seven home games in seven days in September. Six of the games aligned with special promotions. September 2 = Girls Night Out! September 3 = Guys Night Out! September 4 = Run Around The Bases After The Game. September 5 = Family Day. September 6 = Bring Your Dog To The Ballpark Day. September 7 = Grand Slam Family Package Day. September 8 = No Promotion.
  13. 13. E-Commerce: Promotions
  14. 14. E-Commerce: Promotions
  15. 15. Sports Teams practice frequently. As a result, the players are well trained and their performance is optimized.
  16. 16. Commerce When is the last time you practiced anything at work? Do you practice? Do you have a simulation environment? Or are you asked to “do your job”?
  17. 17. Sports Players are developed across many different leagues. By the time a player is signed by Sparta Prague or the Czech National Team, the player has performed in hundreds of games.
  18. 18. Commerce What is the development process you employ with new merchandise? Do you leverage email marketing to identify new items that have potential, or do new items just go up on the website and then you simply hope for the best?
  19. 19. Sports Many matches are broadcast on television, for free. Television networks pay to televise the matches. Advertisers pay Television networks. Customers pay Advertisers (in theory).
  20. 20. Commerce Your store or website are open, and you are paying the bills!
  21. 21. Sports Free broadcasts do not hurt in-stadium attendance. If anything, free broadcasts help generate interest.
  22. 22. Commerce Your free-to-view website generally cannibalizes in- store sales, making it hard to run a profitable retail channel.
  23. 23. Sports Analytics are designed to measure how players (merchandise) perform. Values are assigned to each player, so that the team knows how much to pay each player.
  24. 24. Commerce Analytics are generally designed to measure how marketing campaigns perform. Values are assigned to each marketing campaign, so that the marketer knows how much to spend on each campaign.
  25. 25. Commerce = Uncertainty You acquire a customer from paid search. You lose $4 profit acquiring the customer. You generate $20 of long-term profit. Do you acquire this customer? You acquire a customer from Facebook. You lose $15 profit acquiring the customer. You generate $20 of long-term profit. Do you acquire this customer?
  26. 26. Sports Each team has a philosophy on how to build a winning team. Each team applies different strategies to out-compete other teams.
  27. 27. Commerce “Brands” are told to follow “Best Practices” and are encouraged to perform the same promotions the same way.
  28. 28. Sports Content is designed to create interest, interest drives customers to purchase from an expensive and limited ticket assortment in-stadium.
  29. 29. Commerce Content is generally designed to “engage” the customer, keeping the customer sitting on his/her couch. Outside of “Fast Fashion”, there is no urgency or need to visit a store.
  30. 30. Sports The in-stadium experience couldn’t be more different than watching a match at home.
  31. 31. Commerce The in-store experience is designed to “integrate” with the online experience (called ‘omnichannel’), eliminating excitement and unique points of view. Omnichannel = Boring.
  32. 32. This Is Not Boring – Or “Omnichannel”
  33. 33. Why Will Commerce Become More Like Sports? A dire need for new customers (fans). A dire need for new merchandise (new players) to better compete with Amazon. A need for entertainment, especially in stores, which creates a reason for the customer to visit a store (to better compete with Amazon).
  34. 34. For My Average Client … The annual repurchase rate (% of those who purchased last year buying again this year) is … 37%.
  35. 35. For My Average Client … If 100 customers purchased last year, we have to find this quantity of new + reactivated buyers just to keep the customer file flat: 63.
  36. 36. If My Average Client Has To Replace 63 Out Of Every 100 Customers Every Year, Where Should The Vast Majority Of Your Energy, Effort, And Marketing Spend Occur?
  37. 37. Customer Acquisition!
  38. 38. For Most Businesses, New Customers Matter
  39. 39. Point of View = Customer Acquisition Strategy
  40. 40. Inventory = Customer Acquisition Strategy
  41. 41. Merch/Offer = Customer Acquisition Strategy
  42. 42. Odd Merch = Customer Acquisition Strategy
  43. 43. Merchandise = Customer Acquisition Strategy Zara has achieved global success with almost zero advertising, which the founder calls a ‘pointless distraction’. Speed and disposability are the new black. Nearly 2,000 stores in 77 countries. Staff churn out 30,000 designs per year – near carbon copies of fashion’s big names. Lightning fast, locally targeted designs. Vertically integrated business model limits outsourcing, making most of carbon copy merchandise in-house, guaranteeing quality levels. Garments hit floors within three weeks of design, vs. six month industry average. Fashion used to be sold in four seasons. Zara wants you to buy in 104 seasons (2x per week). Styles arrive in stores twice a week, days known by customers as “Z” days, or “zed days”. This fuels the need to turn over your wardrobe.
  44. 44. Merchandise = Customer Acquisition Strategy Zara has achieved global success with almost zero advertising, which the founder calls a ‘pointless distraction’. Items are ironed, and price tags are affixed prior to shipping to a store, saving store staff time so that they can sell. Records are kept of any item tried on but not purchased. Customers visit the store six times as often as customers visit competing brand stores. When Zara opened a store in Sidney AU last April, 80% of the stock was snapped up within three minutes. “We spend a fortune researching and working up ideas, and then Zara comes along and walks off with them for nothing.” Zara has achieved global success with almost zero advertising, which the founder calls a ‘pointless distraction’. A business built for speed, designed for addiction. http://kottke.org/15/11/the-secret-to-zaras-success
  45. 45. Social = Customer Acquisition Strategy Think of social as your “prospecting list” … you expect to convert a tiny percentage of your prospects over time. This list is not monetized in the short term (if ever).
  46. 46. Send More = Customer Acquisition Strategy Ariana Bee ♥ @amosborne How does @EvilSupplyCo make any money I just got twice as much as I ordered AND maybe a friendly ghost houseguest.
  47. 47. Software = Customer Acquisition Strategy Personalization of merchandise typically leads to 15% - 50% increases in sales per visit / conversion, and consequently, more new customers. And it isn’t hard – vendors are ready to help. Just do it!!
  48. 48. Personalization = Customer Acquisition Strategy
  49. 49. Personalization = Customer Acquisition Strategy The question of how to provide personalized shopping experiences to consumers is one that has long puzzled digital retailers. But Stitch Fix, an online personal styling service for women, thinks it has the answer. According to Chief Operating Officer Julie Bornstein, “the founder of Stitch Fix, Katrina Lake, had the theory that there is probably someone out there better at shopping for me” than me. So how do they do it? A new client fills out an online quiz where she provides her “size, her fit, her budget and her style preferences.” Stitch Fix then looks to its team of personal stylists — assisted by an algorithm — to select five items that will fit the client’s needs. Once the client receives her stylist’s picks, she keeps the things she likes and returns the rest, along with feedback explaining why she did or didn’t like the items. As the company comes to fully understand the client’s style and needs, Stitch Fix becomes an indispensable part of the client’s shopping experience. And it shows: “80 percent of our first-time clients come back within 90 days to have a second fix,” Bornstein said.
  50. 50. Ship Something = Customer Acquisition Strategy Sure, your return rates might be 65% … but that also means that 35% of the folks you shipped something to became new customers … that’s a bit higher than the 0.4% response rate on a co-op mailed catalog, don’t you think?
  51. 51. Annual Report = Customer Acquisition Strategy
  52. 52. 60 Data Scientists = Customer Acquisition Strategy
  53. 53. Employees = Customer Acquisition Strategy Nordstrom pays retail employees a commission, often close to 7% of the sale. The most successful employees earn in excess of $100,000 per year. Competing retailers pay employees $10.00 per hour. Which business model is going to attract highly motivated employees who love to “sell” merchandise, and consequently, which business model is able to generate new customers easier?
  54. 54. Pop Up Store = Customer Acquisition Strategy Source = Shopify Blog
  55. 55. Pop Up Store = Customer Acquisition Strategy Source = Shopify Blog
  56. 56. Secret Menu = Customer Acquisition Strategy
  57. 57. Creativity = Customer Acquisition Strategy
  58. 58. Stickers = Customer Acquisition Strategy Source = Shopify Blog
  59. 59. Stickers = Customer Acquisition Strategy
  60. 60. What Do New Customers Purchase?
  61. 61. Merchandise!!!!
  62. 62. And How Do We End Up With Great Merchandise? By Constantly Searching For New Merchandise That Eventually Becomes Best-Selling Merchandise!
  63. 63. Excluding Fashion, it typically takes 18-24 months for new merchandise productivity to peak. This means we must have a program in place to give new merchandise a chance to succeed.
  64. 64. E-Commerce: Developing New Items
  65. 65. Amazon Uses Merchandise To Attract Visitors
  66. 66. Where Is The New Merchandise?
  67. 67. Where Is The New Merchandise?
  68. 68. Where Is The New Merchandise?
  69. 69. Where Is The New Merchandise?
  70. 70. Focus on New Merchandise
  71. 71. Linking Merchandise To New Customers Company = Speakaboos
  72. 72. Linking Merchandise To New Customers Company = Speakaboos
  73. 73. Linking Merchandise To New Customers Company = Speakaboos
  74. 74. Linking Merchandise To New Customers Company = Speakaboos
  75. 75. Linking Merchandise To New Customers Company = Speakaboos
  76. 76. Linking Merchandise To New Customers Company = Speakaboos
  77. 77. Linking Merchandise To New Customers Company = Speakaboos
  78. 78. Linking Merchandise To New Customers Company = Speakaboos
  79. 79. Linking Merchandise To New Customers Company = Speakaboos
  80. 80. Linking Merchandise To New Customers Company = Lime Crime
  81. 81. Linking Merchandise To New Customers Company = Lime Crime
  82. 82. Linking Merchandise To New Customers Company = Lime Crime
  83. 83. Linking Merchandise To New Customers Company = Lime Crime
  84. 84. Linking Merchandise To New Customers Company = Lime Crime
  85. 85. Linking Merchandise To New Customers Company = Lime Crime
  86. 86. Linking Merchandise To New Customers Company = Lime Crime
  87. 87. Linking Merchandise To New Customers Company = Lime Crime
  88. 88. Linking Merchandise To New Customers Company = Lime Crime
  89. 89. Sponsorship at MailChimp
  90. 90. Employee Development at MailChimp
  91. 91. L.L. Bean Outdoor Discovery School
  92. 92. Thuggies
  93. 93. Rapha - Cycling
  94. 94. Rapha - Cycling
  95. 95. Rapha - Cycling
  96. 96. Rapha - Cycling
  97. 97. Linking Merchandise To New Customers
  98. 98. Betabrand
  99. 99. Betabrand
  100. 100. Betabrand
  101. 101. Betabrand
  102. 102. Betabrand
  103. 103. Betabrand
  104. 104. Betabrand
  105. 105. Linking Merchandise To New Customers
  106. 106. Tillys Retail brand. 90% of sales happen in stores. Marketing activities must be calibrated to motivate a customer to purchase in a store. Sales challenges (I find that the best companies and desperate companies try hardest in Customer Acquisition and New Merchandise Development.
  107. 107. Tillys
  108. 108. Tillys
  109. 109. Tillys
  110. 110. Tillys
  111. 111. Tillys
  112. 112. Tillys
  113. 113. Tillys
  114. 114. Tillys
  115. 115. Tillys
  116. 116. Tillys
  117. 117. Tillys
  118. 118. Tillys
  119. 119. Process Focus on finding low-cost or no-cost tactics that generate first- time buyers. Focus on promoting new items, moving the new items to winning item status. Fuse customer acquisition, new items, and events/fun … much like a sports franchise does.
  120. 120. Questions Kevin Hillstrom President, MineThatData http://blog.minethatdata.com kevinh@minethatdata.com Twitter = @minethatdata Soundcloud = http://soundcloud.com/minethatdata

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