Beyond the Buy Button: The Huge Additional Value of Retail Websites

Sometimes, I think we focus so intensely on the e-commerce sales of our sites that we miss the overwhelming additional value they bring to our businesses. Retail websites, particularly for multi-channel retailers, are more multi-dimensional than any other channel and any other brand vehicle. We fail to recognize the value of these sites beyond the buy button at our own peril.

Some are starting to see the additional value. During her presentation at the Retail Innovation and Marketing conference in San Francisco last week, Express Chief Marketing Officer Lisa Gavales talked about her epiphany surrounding Express.com’s value to the brand. It was Express.com’s traffic numbers that sparked the light bulb in her head. She realized that Express.com got as much traffic in a week as all of the Express stores combined. In other words, half of Express brand interactions were occurring on Express.com. Lisa immediately understood the marketing value of such high levels of engagements from Express’ customers. So much so, in fact, that she came to a conclusion she deemed controversial during her presentation — Express.com should be a marketing vehicle first and a direct sales channel second.

After the presentation, my good friend Scott Silverman, Shop.org’s Executive Director, asked me if I agreed with Lisa’s positioning of Express.com. I rambled on a bit before essentially saying “yes and no.” I’ll now take this space for what I hope is a more coherent answer.

I completely agree with Lisa that retail websites are much more valuable to the overall business than their direct sales indicate. Applying resources and strategic importance to sites based only on their percentage of sales is a mistake that could prove very costly in the long run. Customers use our sites for many reasons beyond direct transactions and our failure to highly prioritize those intentions is a disservice to our customers that will affect our bottom lines. But the value of our sites goes well beyond just marketing and direct sales and simply switching priorities is not enough. Furthermore, I worry that prioritizing marketing higher than everything else will lead to the types of conversion problems I previously discussed in my post “Conversion tip: Don’t block the product with window signs.”

Let’s consider some of the many values a retail website provides for a multi-channel retailer:

• Marketing vehicle
  As Lisa noted, the marketing value of our websites is immense. We are getting tons of traffic, and each engagement is an opportunity to enhance our brands. (Of course, if we’re not careful, the opposite is also true.) Websites are a highly efficient way to strengthen the Customer Engagement Cycle. Both online and offline marketing vehicles can direct customers to our sites to further enhance our messages. Our sites are also a great way to tell people about our stores on both a collective and an individual level.
• Merchandising vehicle
  Customers come in droves to our sites to learn more about the products we sell, whether they intend to buy online, over the phone or in our stores. Our sites have to essentially be our best and most knowledgeable merchants. They have to lead customers to the right products for them and provide the right information for them to make a selection, regardless of the channel where the purchase takes place.  This is a huge, often untapped, opportunity for quality merchants to reach their customers and sell them the right products.
• Customer research tool
  This is a bit of a double entendre. As mentioned above, our customers are certainly using our sites for their research. But we can also use our sites to learn more about our customers. There is a wealth of information to be had about what our customers are doing and what they desire. Not only can we see what they purchase, but we can also use web analytics to see what they look at. With tools like those provided by ForeSee Results (shameless plug), we can also know what they are thinking, what they are intending to do, and how they are perceiving our brands. All of this can be done fairly easily and inexpensively in ways that are either impossible or impossibly expensive in the physical world.
• Customer relationship enabler
  We can continue to build relationships with our customers by applying what we’ve learned above to give them better experiences. The applied knowledge of our merchants combined with the long-lasting memory of our websites should allow us to constantly serve our customers better. As we focus on building those relationships with more personalized site experiences, more informed personal interactions via contact centers and in-store, and more relevant email and direct mail communications, we will build stronger loyalty with our customers.
• Community builder
  Websites also give us ways to connect our customers with each other. Our brands can act as a central hub for like-minded customers to find each other and help each other find products that meet their needs or solve their problems. How great is that? We can make these connections both via our own sites and via social networks like Facebook. Either way, it’s another way for our brands to provide services for our customers. Our sites can also allow our brands to be more localized by providing additional vehicles for our stores to connect with their communities.
• Sales driver — in-store and online
  And, of course, we can sell stuff. We can sell lots and lots of stuff online. Our sites are still not where they need to be for maximum usability, so we have plenty of opportunities to improve their ability to sell directly. But we also have lots and lots of opportunity to drive traffic into our stores. We can show inventory; we can let people buy or reserve online and pick up in-store; we can host coupons;  we can help people find a store close to them; we can provide reviews and recommendations to people standing in our stores (whether via kiosks or mobile phones). The possibilities are endless.

These site values are not mutually exclusive. Their value in combination is exponentially higher than any one individual value. Therefore, it’s critically important to consider our sites holistically when determining their place and priority in our strategic plans. We need to consider their combined value when we determine allocation of resources and organizational structure.

Too often, though, resources and executive attention are not apportioned to the site according to this additional value. And we often don’t even measure these additional value points (which might explain the lack of resources and executive attention). If our most important measures of our sites revolve solely around direct sales, we will continue to minimize the importance of all other values of our sites.

I believe the multichannel retailers with the brightest futures in this new decade will be those who fully embrace and leverage the multi-dimensional value of their websites.

What do you think? How is your site valued in your organization? What retailers do you think are most recognizing the additional value of their sites?

Sitting in the “Marketing Hot Seat”

My good buddy Adam Cohen, a Rosetta partner who heads up their Search, Online and Social Media businesses, issued a challenge called “The Marketing Hot

You’re the CMO.  You
have a marketing budget of $1M.  Your company is a consumer product
company, relatively unknown / early stage.  Customers who know the
product like it. CEO wants ROI within 12 months.  What do you do?

I thought this would be a fun exercise to take on, particularly because the scenario placed me in the seat of a manufacturer, publisher or product company. Would my retail oriented perspective provide a different line of thinking than would typically come from a manufacturer, and would that perspective be worthwhile? I’d certainly love to know your thoughts.

My take is actually the first one Adam posted on his blog, A Thousand Cuts. Check things out over there over the next few weeks to see perspectives from the other 12 bloggers.

Here’s my answer to Adam’s challenge:

OK.
Setting aside all the caveats about the fact that I don’t know what the product is, what it costs to make and what our margins are, here’s generically how I would approach the situation:

Strategy

1. Thoroughly understand the customers who like our product
   The customers who know our product like it. We need to find out why, in their words, and determine what personality traits, hobbies, demographics, etc. in those customers are relevant to their liking our products so that we can speak to others like them.
2. Get our online destinations right
   With a relatively small marketing budget, we’re going to need to maximize our online strategy. (Actually, we should do that even if have a large marketing budget.) We need to make sure our website and our retailer websites are highly usable and highly effective in merchandising our product and providing the ability for customers to easily spread the word about us.
3. Drive traffic with whatever budget is left
   Only when we have ensured that we have solid destinations for our traffic will we start to actively search for traffic.

Tactics

1. Learn as much as we can about the customers who most love the product.
   Why do they like it? What are there personality types; let’s use the Myers-Briggs personality test and really get a  thorough understanding of these folks. How do they describe our product? Let’s pay attention to the words they  use as we’re going to reuse those words in our copy.
2. Hire ForeSee Results to measure our site’s effectiveness from our customers’ perspectives.
   I realize this may seem self-serving since it’s my company, but I was a client for seven years before joining the  company three months ago, and I’ve see how well it works.  So, I want it in this role. So there! We’ll use  measurements, analysis, Session Replay and usability audits to ensure we’re providing the best experience  we can.
3. Hire Bryan Eisenberg to develop archetypes and to implement Persuasion Architecture on our site.
   We need to speak to customers in language that resonates, and Bryan understands how to do that. We’ll also use  his language for product descriptions and other content we give to retailers for their sites.
4. Create a high quality product video.
   We’ll use this video on our own site and we’ll give it to retailers for their sites. We’ll focus on the key aspects  customers love and use copy that includes words that resonate with those customers. We’ll also show real  customer testimonials.
5. Launch customer reviews and customer forums on our site
   We need to make sure our customers can openly provide their thoughts about our product, even when  they’re negative.
6. Launch several blogs on our site
   Since we only have one product, we need to provide some fresh and compelling content on our site to give people a reason to come back. The content doesn’t need to be about the product all the time. It can be able anything, as  long as it’s compelling. I’ll focus on general marketing, our CEO can blog about leadership, and we’ll find some  people to blog about topics our customers are interested in. All of this blog content will also be great for SEO.
7. Launch a marketing campaign to retailers informing them about key customers and teaching them how to sell the product
   Our initial marketing efforts will essentially be internal. Let’s get the sellers pumped up and doing their jobs well  before we send customers their way.
8. Develop a widget for retailers that gives customers the ability to easily share information about the product
   We need to give our customers ways to share information about our product on their own in a way that is easy and  positive. Let’s create a fun widget that people want to share on Facebook, Twitter, email, etc.
9. Get our SEO right, buy search terms, send emails, run re-marketing campaigns, etc.
   I don’t want to minimize the value of these techniques, but we really need to make sure our destinations are right  before we add lots of traffic.So there you have it. My main point here is to focus on the customers first, the destination second and the traffic driving last.

What do you think? Does my strategy make sense? How would you have addressed the challenge? Do your manufacturer/publisher/product partners address your needs?

The Case to Cross It Up

For any retailer with more than one channel, becoming cross-channel is a critically important way to fully leverage its assets to provide a greater experience to its customers, which ultimately leads to more customer retention, brand loyalty and, of course, sales and profits.

In an effort to highlight and tackle the issues associated with implementing cross channel strategies, Kasey Lobaugh of Deloitte Consulting and Jim Bengier of Sterling Commerce pulled together a Cross Channel Retail Consortium of retail thought leaders that included executives from a cross section of retailers as well as some industry analysts, vendors and yours truly for a day of discussion this past Sunday on the strategy, tactics and challenges of implementing effective retail cross channel experiences for our customers.

Before I delve deeper into my thoughts on the day, it’s probably worth defining “cross channel.” Many times, “multi-channel” and “cross-channel” are used interchangeably, but I don’t think they’re the same thing at all. “Multi-channel” is simply operating in more than one channel while “cross-channel” is leveraging the strengths of each channel to create an overall customer experience that is greater than the sum of its parts. It’s 1+1=3.

Sounds great, right? So, why aren’t more retailers doing it?

Three basic themes emerged from the group:

1. Lack of executive and board level understanding of the value of customers transacting in multiple channels (and, conversely, the negative affects that occur when customers are prevented from interacting with a brand across channels)
2. Lack of incentives for various employees, from executive to front line staff, to encourage shopping across channels
3. IT systems limitations

So, let’s tackle these issues one-by-one.

1. Lack of executive and board level understanding of the value of creating cross channel experiences

The group agreed that getting the buy-in of the CEO is critical. No one believed, and I certainly agree, that a strategy as all-encompassing as creating a cross channel experience has any chance at success without the CEO actively driving it. So, just get the CEO to support it. Easy, right? Not so much.

In my experience, the best way to convince a CEO of the value of any strategy is to show him or her how it will maximize profits. One retailer in the room was able to show the value of customers shopping in multiple channels pretty easily by tracking customer transactions in all channels through a loyalty program. Others were able to do the same in various degrees, but the general concern was the potentially high cost of discounts provided in exchange for such information. (I have lots to say about loyalty programs, but I’ll save that for another post). Janet Sherlock of AMR Research extolled the virtues of emailed receipts as an environmentally attractive and altogether less costly alternative option to harness ID’d transactions. I find that proposal extremely intriguing.

While transactions tell us about customers who completed transactions in each channel, they don’t tell us about customers who researched online to buy in store or customers who took a look at products in store before buying online, and the group longed for an industry standard metric that could be used to assess the amount of sales influenced by the another channel.

Another driver of CEO support is attention to the issue from the Board. One retailer said all it took was a bad experience by one 17-year-old granddaughter of a Board member to get the issue front and center. Funny how life is, isn’t it? Who could imagine that one young girl’s frustration can drive a strategic shift in a major national retailer? But maybe the lesson here is about the importance of getting decision makers’ heads out of the financial spreadsheets and into real-life experiences to help them understand how their companies are (or are not) serving their customers.

2. Lack of incentives for various employees to encourage shopping across channels

One retailer described the challenges of focusing on customer experience at a retailer that is driven by “an imperialist merchant organization.” (There was no way I could write this piece without including that quote.) Merchants, by their nature, tend to care a lot more about product than customers. But in the end, they’re generally heavily driven by sales, margin and turn metrics. There are many cross channel strategies can be implemented to help merchants drive these key metrics.

For example, the web has many selling capabilities that are nearly impossible to achieve in store because of physical constraints. Customer reviews are extremely popular online and customers regularly report using them to make purchase decisions (both online and in store); however, they are very difficult to make available in a physical environment. Some retailers are making them available via in-store kiosks, but the kiosks are a large capital investment to make if they’re not already available. But just about everyone’s got a computer in his or her pocket or purse these days. Let’s make more use of mobile phone technology to give people access to customer reviews, recommendations, wish lists, gift registries, etc. in store while they’re standing in front of the products.

There are also advantages in stores than can be leveraged online. Many retailers have incredible experts in their stores. How can those experts build content that can be used by customers and other employees alike to improve the shopping experience? How about security? Should retailers start to look for ways to accept payment in their stores for web orders when customers aren’t comfortable paying online? Believe it or not, there are still a lot of customers out there who aren’t comfortable using a credit card online, and in this economy there are more and more customers who aren’t comfortable or aren’t able to use credit cards period. But they’re still interested in buying from us, and we should find every way we can to help them do so.

3. IT systems limitations

There’s no question that IT legacy systems cause us a lot of trouble when we try to integrate our customer experiences. But I also wonder how many times we fall back too easily on such an excuse. I’ve written about my Tree Stump Theory previously, and it’s certainly prevalent in this case. We have a lot of compelling reasons why systems prevent us from implementing such key capabilities as the ability to accept returns of online purchases in store. But guess what? Our customers don’t know those reasons, and even if they did, they don’t care. While many retailers have found ways around the returns issues, just as many still have not. Either way, the case to prioritize such efforts should rely on some of the same techniques described above to make compelling cases to the CEO and the incent imperialist merchants.

Pure play retailers, and especially Amazon, continue to grow at rapid rates by pulling more and more market share. Multi-channel retailers have assets in their stores that pure plays don’t, but it’s going to take implementing true cross channel strategies to leverage those assets in a competitively advantageous way. Let’s cross it up!

What cross-channel strategies have you implemented or are considering implementing? What are the barriers to cross-channel in your organization?

Photo credit: Wikimedia Commons

The Case for an E-Commerce IT Org Change

As multi-channel retailers move more and more towards implementing cross-channel strategies, organizational structures need to change to support those new strategies. I am a huge proponent of breaking up most e-commerce silo  organizations and integrating online and in-store marketing and merchandising teams to ensure a common vision and voice across channels. For IT, though, I actually recommend the opposite approach. I believe technology  professionals who work full time (or near full-time) on the e-commerce site should report directly to the head of e-commerce.

While at a high level is seems like technology should have the same kind of continuity as marketing and merchandising, I believe a close look tells a different story.

Here’s why e-commerce IT is significantly different from traditional IT:

In e-commerce, the business is technology

Traditionally, IT creates tools that help employees be more productive and efficient. However, in e-commerce, IT is actually creating software designed to generate revenue. E-commerce “stores” are really self-service software  applications designed to help customers perform a service — in this case it’s to buy the products and services we sell.  Intuit has Quicken; Microsoft has Word and Excel; retailers have our e-commerce sites. We really need to think about  our sites more as software products and organize our teams in a product management type of structure.

Also, a particular pet peeve of mine is when IT folks refer to those in other functions of the company as “the business.”  Just that reference alone insinuates that IT is not a crucial part of the overall business and creates a separation that  frequently leaves IT coming across as second class citizens, which they are not. While I’ve never liked “the business”  reference in any circumstance, it’s doubly bad in e-commerce where success absolutely depends on technology team  members actively working as part of the business.

Self-service applications require a different mindset

Working on an e-commerce application that is designed to be used directly by customers requires a very different  mindset than what is typically required when working on applications that support employees. Even when the  underlying technology is similar, the mindset required is substantially different. New employee applications usually  come with training programs and manuals. Moreover, employees are ultimately forced to use the app; they get used to it and get incrementally better at using it over time through daily usage. Customers, however, don’t get the benefit of manuals and training programs. They’re on their own. And if the experience doesn’t satisfy them, they give up and the sale is lost.

Site functionality and customer experience are major components of the e-commerce business strategy

The website application is a key differentiator for the business, and customer experience is hugely driven by site functionality. While functions other than technology certainly contribute to an e-commerce site’s success or failure, there can be little doubt that the quality of the technology is a massive contributing factor.

E-commerce is 100% dependent on technology to be open for business.

While technology is critical in all areas of the business, most retailers have offline contingencies for stores so they can  continue to make sales even if the system is down. Websites obviously don’t have an offline mode.

Web businesses are still immature and need considerable agility and flexibility to mature as quickly as possible

For many absolutely legitimate reasons, most IT organizations at multi-channel retailers have significant (and some might say onerous) processes in place to manage technology requests and roadmap prioritization. Because requests for technology improvements come from all corners of the company, it’s important for CIOs to ensure they are spending their resources on work that is thoroughly vetted and likely to generate the highest return on investment for the company. But given the absolute dependence of the e-commerce business on technology, typical IT prioritization and allocation processes are too slow for e-commerce businesses that need to be able to adjust quickly to issues that arise with customer experience.

The e-commerce competitive marketplace innovates far quicker than the brick & mortar marketplace

The CEO of a pure-play e-commerce company is in basically the same role as the head of e-commerce at a multi-channel retailer. If for no other reason than there is no alternative, the CIO of a pure-play reports to the CEO. This reporting structure gives the pure-play leader a leg up in agility and the ability to react to customer needs. In a multi-channel retailer, the CIO must split time between many functions of the business, and I find e-commerce often gets time allocated in a ratio roughly equal to its financial contribution to the business. While such an allocation is understandable given everything on a busy CIO’s plate, I believe this lessened focus can lead to stunted growth and lost ground to competitors such as Amazon who are more devoted to improving their software application and increasing their customers’ satisfaction with their site customer experience.

I believe if a head of e-commerce is to be truly held accountable for the success of the site, he or she should have  appropriate authority over such a major contributor to the success of the site.

So why should the head of e-commerce have authority over e-commerce IT and not e-commerce marketing and merchandising?

To me, it’s all about what faces the customer and what doesn’t. A brand should be clear to its customers about who it is and what it stands for, so continuity in marketing and merchandising trumps silo control over those aspects of the business. Site functionality has no parallels in other parts of the organization. Since it is both unique and customer facing, I believe the head of the online channel should maintain the authority to develop and execute the technical strategy for his or her business unit when it directly affects the customer relationship.

I’ll add this final point: I’ve lived through many different org structures surrounding e-commerce IT, and the only times I’ve found the pros to outweigh the cons of an org structure have been when e-commerce IT was part of the e-commerce operation and reporting to the head of e-commerce.

What do you think? Am I completely misguided? What structures have you seen work and not work? What structure do you think is ideal?

Defending the status quo kills companies

“Defending the status quo is what kills companies.” That line comes from the excellent book More Than a Motorcycle: The Leadership Journey at Harley-Davidson written by former Harley CEO  Rich Teerlink and his organizational consultant partner Lee Ozley. The book chronicles Teerlink’s and Ozley’s process to change the culture at Harley-Davidson to ensure the company was ready for the challenges to come. What I found most remarkable, though, was that they didn’t initiate this massive change when the company was troubled — they initiated massive change when the company had just completed a successful financial turnaround and the press was actively singing their praises.

They changed when conventional wisdom would have said to keep doing what they were doing.

Bankruptcy courts are littered with companies who kept doing what they were doing and failed to adapt to changing marketplaces and changing customer needs and expectations.

I spent 20 years in the music industry with Tower Records, so I’ve see one of the best examples in recent years of an entire industry that desperately clung to the past rather than embrace the future. The music industry didn’t suffer because of Napster and illegal downloads; it suffered because it turned its back on its customers in favor of short term profits.

The music industry failed to recognize the opportunity that came with the advent of the Internet and digital music formats. Rather than see their industry from their customers’ perspective, the industry fell pray to the elitism I’ve discussed previously. So a computer company took their business from them. Apple’s iPod and iTunes took the music retailers’ business and substantially wrestled control away from the music labels.

The retailers could have created digital music stores if they weren’t so worried about protecting their current businesses. And there were other opportunities available. Seth Godin spoke to the industry last year and gave some excellent examples of opportunities to change the business model.

Now other traditional industries like newspapers, video stores and bookstores, among others, are also losing substantial market share to new, technology based upstarts. Others, like travel agencies, are mostly gone.

But some companies are embracing change even during the height of success.
A recent Forbes interview with Xerox’s retiring CEO Anne Mulcahy highlighted her strategy to focus Xerox on “paperless printing” even though the entire organization was basically built on paper-producing technology. Rather than focus on paper, Mulcahy instead said the company’s value was always about the creation, management and dispensing of information, “Democratization of information, however it happened.”

Threats to existing business models aren’t only coming in the form of digitization.
Look at the shoe business. In ten years, Zappos.com went from a germ of an idea to a $1 billion company. Their model? “In March of 2003, we made a decision to be about customer service,” say their CEO, Tony Hsieh, in a recent Fast  Company profile. “We view any expense that enhances the customer experience as a marketing cost because it generates more repeat customers through word of mouth.”

Customer experience as a marketing cost. It’s a whole new way of looking at the shoe business (or retail in general), and it’s a hit worth a cool billion in a short amount of time.

I can’t believe that billion dollars was incremental business to the overall market. That share came out of somebody’s  hide. And that means an existing shoe business could have done it first if the thought process and the courage to act  was there. If the Zappos model works, it can be applied to anything, and it appears that’s exactly what Zappos intends  to do.

And the radical ideas keep coming. Chris Anderson has a controversial new book, Free, that describes a future he believes will be centered largely around business models that give away 95% of their offerings and make money on the remaining 5%. Are Anderson’s ideas open for debate? Sure, but they and other seemingly nutty ideas should be regularly and honestlydiscussed. One of them may well be the next billion dollar idea.

It doesn’t take wholesale change in the marketplace to significantly disrupt a business model.
A drop in business of 10-15% can have massive impact, as many have clearly seen in the current economic downturn. But the economic downturn has not sunk all boats. Amazon.com reported a sales increase of 18% and a net income increase of 24% for their first quarter this year.

As e-commerce continues to be the growth vehicle in retail, and as Amazon continues to dominate e-commerce, I wonder how brick and mortar retail models will adapt. I believe there are many opportunities today to leverage both the growth and value of e-commerce and existing physical real estate.

Certainly, tying the web experience and the store experience together via cross-channel capabilities is a must. In the industry, we talk a lot today about capabilities like order online and pick up in store, and I think those are good.

But how can we take it further?
For example, I know from my experience with in-store kiosks at Borders that a lot more people than I expected still aren’t comfortable shopping online. They want someone to help them use the kiosks, and then they want to pay with cash at the register. Why not use our store POS systems to take cash payments for online orders? What if we took it a step further and took cash payments for other sites’ orders. What if the physical store essentially became an affiliate for a pure play e-commerce site and took the cash along with a commission? What type of opportunities might that open for both the pure play and the brick and mortar store? What other reasons should customers continue to shop physical stores well into the future as technology and delivery systems continue to improve?

What challenges does your business face in the coming years, or what businesses in general do you see most at risk? How could your business model change — maybe radically — to address those challenges? Or, do you think this is all hogwash? Let’s discuss.