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Even before the economy hit the skids, retailers were under increasing pressure to adapt to the fact that consumers are in the driver’s seat more than ever — and demanding more than ever. With the growth of TV shopping, mail-order, e-commerce and now mobile technologies, no longer can stores simply offer their wares Monday to Sunday, 9 to 9. But with the challenge comes opportunity to almost infinitely expand and market a brand. Companies from macys.com to David Yurman, Vivre to Martha Stewart Living Omnimedia Inc. discussed some of them at a one-day WWD Branding Forum, “Mastering the Multichannel World,” held in New York. Here, highlights of the day.
This story first appeared in the October 8, 2008 issue of WWD. Subscribe Today.
GROWING MACY’S IN THE ONLINE WORLD
Kent Anderson, as much as anyone in the dot-com universe, knows the potential and the challenges of the direct channel. He was the first employee of macys.com when it was started 10 years ago in San Francisco with the online bridal registry and The Wedding Channel. And he’s led the buildup, to a current staff of 4,500.
“This is a fast-growing part of our brand,” Anderson told the forum, citing a 50 percent annual compound growth rate. It’s “very profitable, potentially more diverse [than the parent Macy’s Inc.], and the younger perspective is very important,” given the Internet’s tendency to draw a youthful, computer-connected side of the population.
Anderson sees four priorities to sustain the growth: improve the shopping experience, provide compelling marketing, provide distinctive assortments and price simplification.
The pricing, he admitted, “is complicated and not as straightforward as I would like it.”
As far as macys.com cannibalizing sales from the Macy’s stores, “Frankly that’s not the case,” Anderson said. “I don’t think online sales will ever surpass store sales. We will still be doing more business in stores.”
Macys.com continues to strive to be in sync with the store assortment, he said. “There are two million sku’s [stockkeeping units] at the Herald Square flagship. We are about 350,000 sku’s online. We will continue to grow congruency with private label, like INC, and key vendors like Tommy Hilfiger and Martha Stewart. Being congruent has allowed us to magnify and personify some of these [exclusive brands] and make the assortments more compelling.”
He also spoke of a growing “marketing alignment” between channels, by getting more into a national calendar and e-mailing customers. “The stores have e-mail files to talk to customers. We are very actively involved in the marketing. We are a big help there.”
Among macys.com’s key features are e-mail notifications to customers to pay bills and e-mails that confirm the bill payment. “Customers like the convenience of going online to pay their bills.” Each of these e-mails includes call-outs to shop on macys.com as well as special offers on the site and in the stores, Anderson said, adding these are vital cross-marketing tools. A large amount of traffic on the e-commerce sites comes from customers clicking through to it from the bill paying section.
Also, the site is frequently used to find out about store hours, special events in the local Macy’s, and to find out where the closest store is to find the item a customer wants.
In terms of buying online and picking up the item in the store, as many other retailers currently offer, “that will happen” at Macy’s, Anderson said. However, the retailer currently faces challenges in terms of its regional operations and their warehousing, as well as the continued integration of systems from the former May Department Stores Co.
“The numbers are compelling; if we get customers to shop two channels, they spend more money,” he said. On average, the Macy’s customer spends $969 annually through both channels, versus $637 if a customer purely shops the store.
Even after 10 years in operation, Anderson says macys.com is “a work in progress,” adding, “It’s a very complicated process. We have not resolved all issues associated with price.”
The bridal online experience is separate from macys.com, but Macy’s has been able to move the customers in the bridal site to the general site, or “funnel them” from one site to the other, Anderson said. He agreed with a questioner that in most cases, getting a woman to register on the bridal site means they become regular users of macys.com, and a shopper at Macy’s, after her marriage.
As far as mobile marketing, “It’s just really emerging. We are in the customer-acquisition phase. Like e-mail, it’s a very complicated market,” Anderson said. “The target customers will be more sophisticated. There has to be a bottom line — an ROI [return on investment].”
— David Moin
SERVICE IS KEY
Eva Jeanbart-Lorenzotti, chief executive officer of vivre.com, knows what it takes to make a brand memorable.
It’s not simply unique, emotion-stirring merchandise, although Vivre has plenty of that. Jeanbart-Lorenzotti, who features a Naeem Khan tunic covered with sterling silver sequins for $3,495 and a crocodile and mink tote by Nancy Gonzalez for $3,680 in the fall 2008 online magazine, said superior service creates customer loyalty.
“A great bathroom in a great hotel is just a great bathroom, but if somebody knows you’re staying there, you get a little more service” and you’ll remember the experience, she said. “Online gives you the opportunity to understand the customer. My dream is to build [a site] for one customer and track millions.”
The fact that 90 percent of Vivre’s sales come via phone indicates consumers want a certain level of attention and social contact. “We should make all the investment in the world in service,” Jeanbart-Lorenzotti said. “The product is unique. The more knowledge and investment you make” in training, the better.
Vivre, which recently added a leisure component that mixes travel content, is creating a VIP service to fulfill consumers’ needs. If a customer wants to go skiing in Gstaad, Switzerland, Vivre will hire a ski instructor and put together a wardrobe suitable for the trip, Jeanbeart-Lorenzotti said.
“Louis Vuitton found a perfect way to do this with the Marc Jacobs-Takashi Murikami handbags,” she added. “It’s modern art. They created a new layer of desire for the customer. The art market is doing so well. Why? It’s something with individuality.”
The next step for Jeanbart-Lorenzotti may be segmenting her customer base. “I would love to have a Vivre Men’s catalogue and a Vivre Baby,” she said. There may also be more Vivre stores in the offing. “Vivre as a retail experience works,” she said, referring to Escape by Vivre, the company’s first store, which opened in April 2007 at The Cove Atlantis resort on Paradise Island in the Bahamas. “We’re thinking about more stores. There is a Vivre culture. It’s a language, a state of mind.”
— Sharon Edelson
TARGETING THE MULTICHANNEL SHOPPER
Why, you may ask, is HSN investing in alternative technologies at a time when consumers are reining in their spending?
“Because the multichannel customer is so valuable,” said Bill Brand, senior vice president of programming and advanced services at HSN. “They spend more.”
Brand said HSN is the fourth largest cable network in terms of revenue, adding, “We’re no longer a traditional TV shopping network.”
Facilitating new ways to shop doesn’t always involve new technology, however. Sometimes simply tweaking content prompts consumers to pony up the bucks. According to Brand, HSN is evolving into a 24-hour, seven-day-a-week entertainment network. That is, for people who find the minutest product details entertaining.
Obviously, there are many people who do. Shows about an item as mundane as hangers — a brand called Huggable Hangers — have sold 200 million of the lightly padded, space-saving products.
“We’ve spent the last two years editing out a lot of brands,” said Brand. Some of the names HSN is bullish about include Patricia Field, Sarah Jessica Parker, Sephora and Iman, all of whom hawk products on the network. “We leverage all TV video on the Web site,” Brand said, referring to video clips of programs streamed to the Web. “A significant amount of sales are driven by videos on the Web site. Content is driving commerce.”
New alternatives to traditional TV shopping, which requires waiting for a show selling a product of interest to air in a scheduled time slot, put customers in charge of what they want to buy and when they want to shop. “We have an intuition about consumers,” Brand said, adding applications such as shop by remote, video on demand, broadband and mobile phones are all viable alternatives to TV. HSN is at the forefront of shop by remote technology, where consumers use their TV control pad to buy products, Brand said. The service is currently available in 15 million homes. “We’re seeing 10 percent of new customers being driven by this,” he added. “The return on investment is unbelievable.”
HSN is grooming new consumers — a younger generation of shoppers who grew up with the speed of the Internet and instant messaging — by bringing 15,000 videos to the Web via YouTube. “HSN product videos get 1 million viewings each month,” he said, citing a popular video for the Miss Tina collection by Tina Knowles.
Meanwhile, an experiment on Facebook involving beauty sampling is “creating another community of HSN shoppers,” Brand said.
The HSN logo has even popped up on entertainment programs such as “Extra! Trend Shopper Powered by HSN.” Segments matched up HSN celebrity brands with Hollywood celebrities who use them. “Extra!” viewers are able to call a special number or log onto a special Web site and purchase the spotlighted products.
“We’re working with other networks and TV studios,” Brand said. “We’re taking the network in a more aspirational direction. It’s about lifestyle.”
TRANSFORMING VIA THE WEB
Paul Blum, chief executive officer of David Yurman Inc., began his presentation with a quiz.
“Who invented multichannel marketing?” asked the executive, a history major in college. He paused for effect before adding, “Not Bill Gates, not Steve Jobs, definitely not Al Gore. It was Ben Franklin.”
According to Blum, Franklin, a statesman, inventor and one of America’s founding fathers, organized groups interested in media and printing, established a network of printers and created licenses in colonies to print “Poor Richard’s Almanac.” “Really, that was the beginning of multichannel marketing,” the ceo said.
Back then, taxation and secession would have been all the rage among the colonial bloggers. Now models take center stage, at least on the David Yurman Web site, which has a video of four models during the shoot for the jeweler’s latest ad campaign — Kate Moss, Natalia Vodianova, Daria Werbowy and Du Juan. “We are really excited about how our models expanded our reach. It’s our most watched page,” said Blum.
The Web site’s appeal has been a factor moving Yurman from primarily a wholesale company three years ago to one that’s international, dual gender, multicategory, competing with European luxury brands around the world and multichannel. “If we leverage our experience in media and multichannel marketing, we can compete,” Blum said.
The brand’s store expansion is regarded internally “as a way to balance our wholesale distribution,” Blum said.
“If you operate with integrity, and an openness as to how to do things,” Blum suggested, “it eliminates the competitiveness with wholesale accounts.”
The Yurman stores open in large markets with large populations and all freestanding units are owned by the company, including the brand’s first ones overseas, in Hong Kong and Macau. “They’re 100 percent consistent in every market.” However, Blum said Yurman is growing all channels of distribution. “The multichannel business is very challenging, but in my opinion it is the most solid business model.”
With that, he acknowledged David Yurman and his wife Sybil, had to refocus their efforts. But their key to success has always been to focus on product, and to interact with people.
“The world is becoming a small place, very intimate and they are doing well in an intimate world,” Blum concluded.
DIVERSIFICATION KEY DRIVER FOR MSLO GROWTH
Diversifying into new distribution channels has been key to the growth at Martha Stewart Living Omnimedia Inc.’s merchandising division, said Robin Marino, the company’s president of merchandising and co-chief executive officer.
MSLO is rooted in the persona that is the blonde domestic doyenne of Martha Stewart, but her image has transcended book and magazine covers as her eponymous company has expanded. The publisher of Martha Stewart Living, Martha Stewart Weddings and Everyday Food has expanded into television, Internet, book, radio programming and merchandising, the fastest growing segment of the company. “Our business is simple,” said Marino. “We create great content, original ideas, information and how-to advice that our customers want from us and need. And we turn it into beautiful inspirational products.”
Those products span categories from bedding to paint, all of which began with Martha Stewart’s line of housewares at Kmart. But MSLO has since tapped additional outlets — Marino credits MSLO’s partnership with Kmart to sell Martha Stewart branded home goods in grounding its merchandising division in the company’s early days, but said broadening the distribution channels and product lines into more specialty and high-end retailers, including Macy’s and Lowe’s, helped the brand reach more consumers and grow its revenue base.
“At the beginning of this decade, our merchandising business could be described in one word: Kmart,” said Marino. “While Kmart played a tremendous role in helping us build out our business, the future of our business is about a new story, one of diversification and growth.”
A few years ago, MSLO conducted research on consumer awareness of its brands and found that while a majority recognized Martha Stewart, “nearly one-third of them said they weren’t buying our product because they weren’t available where they shopped,” said Marino. It was then that the company decided to broaden its reach to higher-end retailers. “Here we have an affluent customer who is engaging with our media properties, but our products were only available at mass. It was clear we needed to redefine our strategy, by diversifying our offerings, trading our brand up and broadening our distribution channels,” she said.
And it moved rapidly. Since 2006, MSLO has struck more than a dozen licensing deals with retailers including Costco Wholesale Corp., KB Home, 1-800-FLOWERS and Michael’s for products such as craft products, holiday wares, food, dishware, gardening tools, paint and even customized homes. In all, MSLO products are available in 9,000 retailers nationwide. “The licensing model frees us up to focus on what we do best, which is design while our partners marshall their forces in manufacturing, sales and distribution,” she explained.
Marino has led the charge for the lion’s share of those deals, having joined MSLO as president of merchandising in 2005. Her roots are in retail: she was previously president and chief operating officer of Kate Spade LLC and senior vice president of accessories worldwide at Burberry. Ironically, Marino admitted that fashion was the one area MSLO was hesitant to enter, given that most of MSLO’s products serve its core franchises surrounding food, weddings, gardening or decorating. Marino did preface the statement by saying, “I never say never to anything.”
All new products have to go through a filter that ensures the business is something the customer wants, can make a difference in the space by creating a product that is innovative and unique, and the product must be “revenue right — a needle-mover, a strong revenue driver for our company,” she said.
That criteria also applies to products produced under names outside of Martha Stewart. In February, the company bought the Emeril Lagasse brand, which Marino said was “a great acquisition for our company because his core assets are in our wheelhouse. He brings a very powerful male and children engagement to the party.”
— Stephanie D. Smith
CONSUMER CONSUMPTION CHANGING WITH ECONOMIC FLUCTUATIONS
Americans have been sensing a downturn for at least two years.
“The American consumer has actually been spending as if we were in a recession for 24 months now,” said John Cetnarski, MasterCard Advisors senior vice president and global practice leader for information products. “So it’s preceding the buzz and press around the depression.”
How does MasterCard know? Because the credit card company believes that identifying behavioral trends can help marketers seize opportunities to court customers. Cetnarski outlined data points from MasterCard’s SpendingPulse, a tool that reports on national retail sales from buying activity tallied through MasterCard payments. Through analysis of macroeconomic data including gas prices, dollars spent during the holiday season and airline costs, SpendingPulse showed changing trends in consumption this year — as the economy has turned for the worse, consumers are spending more on essential goods and less on luxury and nonessentials.
As gas prices have increased and inflation has driven up the price of goods, SpendingPulse reported consumers are spending more money at drugstores and general merchandisers, but less on apparel and luxury goods.
“Practicality prevails,” he described.
But the rise in gas prices also means consumers are driving less, thus making fewer trips to the pump. During the summer months, said Cetnarski, drivers pumped nearly 4 percent fewer gallons of gas compared with the same period in 2007, validating this summer’s money-saving vacation strategy, the “staycation.”
From these patterns, retailers can identify what consumers are considering necessary purchases. “Think about different ways people are spending,” he advised. For example, if people are taking fewer vacations outside the home, where are they spending their money? “Maybe I didn’t buy new camping gear, maybe I was thinking about crafts at home. If I’m not leaving the house on a weekend, what am I doing?” he questioned.
He also urged retailers to think creatively about sales offers, such as offering free sales tax or shipping, which have proven to lure consumers in these penny-pinching times.
ZAPPOS.COM CORPORATE CULTURE BRINGS GROWTH, CUSTOMER SATISFACTION
A strong corporate culture is what Fred Mossler credits as a core driver behind Zappos.com’s growth into a premier online shoe retailer with a projected sales volume of $1 billion this year.
And he’s a walking example of that culture. Mossler, who served as the company’s senior vice president of merchandising, was recently given more responsibilities — he oversees creative services, marketing, product presentation and outlet operations. His new title is nonexistent — the company couldn’t think of one appropriate for his expanded role.
Mossler attributed Zappos.com’s success to a culture steeped in customer service and transparency. Steps the company has taken to improve customer service include moving its headquarters in 2004 to Las Vegas, where the call centers were located, and putting the company’s 800 number on every page of the Web site. “We want to speak to our customers. We look at it as an investment,” said Mossler. “Look at all of the marketing messages that go on every day. When else do you have the chance to speak to your customer for five minutes and have their undivided attention?”
Zappos.com also operates the fulfillment center 24 hours a day, “which is not the most effective way to run it, but it helps us deliver the most effective service,” Mossler admitted.
The company requires each of its 1,700 employees to spend four weeks in customer loyalty training. Employees split their time between the Las Vegas call center and the fulfillment center in Lexington, Ken. Such rigorous service training reaps rewards on a regular basis. Mossler shared several stories of customer satisfaction as a mark of pride, including how a Zappos.com fulfillment center employee returned $150 in a wallet to a customer who had accidentally left the money inside.
“That service culture permeates every aspect of the business,” Mossler said, and keeps repeat customers coming back: of the site’s 8.5 million customers, 3.7 million are customers who’ve bought something in the last 12 months.
— Stephanie D. Smith
THE CONNECTING THREAD
Lynn Gonsior, executive vice president and chief marketing officer of Interbrand Design Forum, has a clear idea of the attributes of good Web sites. They are those that are easy for customers to access, on a 24/7 basis, and are consistent with the store experience and catalogue experience of the brand. “It should be seamless,” she emphasized. Web marketers need to understand the “red thread” that connects the channels.
In her assessment of the brands that provide the best customer experience, she cited:
• Lands’ End, for consistency online, with catalogues and in stores. “The brand speaks with a consistent voice….There is a seamless feeling.”
• Williams-Sonoma, for a “very seasonal-driven business with a magnificent presentation” marked by strong cross merchandising. Food displayed side-by-side with the kitchen products and beautiful aromas in the store inspire shopping for items that a consumer may not absolutely need, she said.
• Chipotle Mexican Grill, for a strong presentation of product, the ability to customize food orders and enabling customers to order online and pick up the order in the store. “They make it easy to access product.”
With Target, her review was mixed. Gonsior credited the discount chain for “trend-right merchandise at a great price, great ads, being fun and playful. In the store, there is a clear presentation.” However, she characterized the Web site as “a flat experience. The brand personality does not come through.”
Sephora, she said, “is trying to create that experiential feeling, a tactile quality, but it’s tough to do” with beauty products. Sephora does this in some categories with tips on color trends and palettes.
Bigelow, a small division of Limited Brands with 10 stores, is trying to create a contemporary apothecary, Gonsior said. Yet the experience is uneven. “The Web site is cumbersome and copy-heavy. It doesn’t have the freshness you feel in the stores. It is a brand that needs to continue to develop and evolve.”
Pink, a subbrand of the Victoria’s Secret division of Limited, is doing some interesting things to build a community, Gonsior said. Pink has captured a narrow niche, 18 to 22-year-olds, operates “playful” stores, sells a good range from sleepwear to casualwear, focuses more on its collegiate merchandise online and sponsors concerts through its Pinkapalooza promotion. She credited Pink with creating a sense of lifestyle and a unique customer community.
Other brands she favors are British fast-fashion chain Topshop, which “took off with Kate Moss, really has a sense of new arrivals, and does a lot to present themselves as fashion forward”; REI, which focuses on the hard-core outdoor adventurer by providing a range of services to plan trips to exotic places, and the avatar site Stardoll, which allows users to dress in their favorite apparel brands and live their lives the way they wish they could.
— David Moin
REGIONALIZED AND LOCALIZED
Marshal Cohen, chief industry analyst at The NPD Group, said, “The consumer is looking to change where she shops. Department stores lost an 8 percent market share since 2003. The majority of those shoppers went to mass merchants. Every percentage point represents $1 billion migrating.”
Color is driving the market, Cohen noted, adding the electronics market is out-coloring the fashion market. He was referring to brightly colored iPods in an array of shades.
Addressing some of the challenges of the dismal economic environment, Cohen said the rich are no longer spending without abandon. “Stores are underperforming in high net worth regions,” he said. “Retailers will have to regionalize and localize their businesses. You have to have a local message” and be a part of the community.
And Cohen — like many others — didn’t have much good news about Christmas, predicting holiday “will be all about the deal. The consumer is in a position to buy less. We’ll lose a lot of the impulse purchases.”
— Sharon Edelson