#editor's perspective

By Adam Blair, Executive Editor

Today’s marketers have lots of tools for measuring individuals’ Customer Lifetime Value (CLV). Companies like Adobe and Salesforce, along with platforms like Facebook and Google, offer data, analytics and technology to “make each customer visible to us,” said Peter Fader, the Frances and Pei-Yuan Professor of Marketing at The Wharton School, during the recent Sourcing Journal Summit.

“The differences [between customers] are staring us in the face,” Fader added. “And not only are customers vastly different from each other, but their lifetime value varies by orders of magnitude.”

Fader and Neil Hoyne, Head of Customer Analytics for Google, kicked off the Summit by making a strong case for CLV. In addition to making marketing more effective, CLV also can positively impact advertising, promotions, financials, R&D, sourcing and product design.

“If you can come up with a lifetime value measurement, it’s like a number shining over each customer’s head,” said Fader. CLV provides a different framework for running a retail or brand business, he added: “Rather than focusing on product, you would want to figure out what you could do for these really valuable customers. What products and services should you offer to enhance the value of those customers, and to find more customers like them?”

Using CLV Analyses To Boost Customer Retention

Until recently, CLV has stayed mostly within the walls of the marketing department. Much of marketers’ interest in CLV stems from the frustrations they experience in turning newly acquired customers into repeat customers. (This also will be a key topic for the upcoming Customer Acquisition and Retention Benchmark Survey Report from Retail TouchPoints, scheduled to publish in December.)

“Marketers are spending all this money to acquire customers, and then they make one purchase — it’s almost like they have to acquire them again,” said Google’s Hoyne. “However, if the marketer can prove that the customers they are acquiring are more valuable, they can go back to the company CFO and say ‘These are the value these customers are driving.’”

Taking a CLV-centric approach to customer measurement can cause a radical shift in how retailers and brands value their companies’ assets. “A customer-based corporate valuation means adding up the total value of each customer to determine the value of the company,” said Fader. “It’s done all the time in the apparel space. The truth is you’ll only get so far with innovation and efficiency; to succeed, you need to think of your customers as individual entities.”

The Benefits Of Catering To Top Customers

One brand that has taken the CLV concept to heart is the video game company Electronic Arts. “They had traditionally been a packaged goods company, with no visibility into their customers, but they did the pivot to CLV during the last 10 years,” Fader reported. “Now everything they look at is through the lens of lifetime value.

“They look not only at the lifetime value of each customer, but which customers have shown the greatest increase in lifetime value,” Fader added. “They find out which games these people are playing, and which scenes within the games they are staying the longest on. Electronic Arts uses this information for creative copy — they don’t have an ad agency — and they also share it with the game developers, so that they can come up with cool games to appeal to these people. They are always looking for ways to enhance these customers’ value, and to find more customers like them.”

One reason this CLV-centric focus is so effective for Electronic Arts is that the gaming industry represents an extreme of the Pareto Rule, which states that 20% of a company’s customers typically account for 80% of its business. “In gaming and apps, it’s more like 98% of the revenue comes from 0.2% of customers,” said Hoyne.

Even if the proportions are different, however, the principle is the same — and the results can be impressive. “In retail, perhaps 2.5% to 3% of the people who come to a web site actually buy something,” said Hoyne. “But for [retailers] using CLV, we’re seeing conversion rates as high as 40%.”

CLV Also Can Protect Margins

Using CLV as a retail strategy means taking a truly customer-centric point of view, and acting on it to create a real two-way conversation between the retailer and the customer. For example, e-Commerce retailers can respond to multiple signals from customers throughout the shopper journey, but too many continuously steer customers to a certain product purchase, rather than responding to shifting shopper preferences.

“As the customer is giving more signals about their behavior, do you change the way you market to them?” asked Hoyne. “Do you do anything differently, or do you just keep pushing them to buy that product — including throwing coupons to them and giving up your margin? And, do you follow them to see what they do afterwards, so you don’t have to start the relationship all over again the next time they come to your site?”

Hoyne stresses: “The relationship doesn’t have to end with the purchase. You can project it forward by multiple years. Then you can answer questions like, How do you find more of these people? How do you develop the ones you have? And how much should you spend to retain them?”

Making greater use of CLV also requires a level of discipline and accountability in dealing with low-CLV customers. “Many companies are bending over too far to keep customers,” said Fader. “If you can quantify the CLV, you can figure out what kinds of discounts you should be offering — or, what kinds of value-enhancing activities you should offer instead of discounts.”

By Adam Blair, Executive Editor

Artificial intelligence (AI) is threatening/promising to remake the world’s workforce, and the retail industry will not be spared. (Nor will journalism, for that matter.) The futurists, analysts, brand and CPG executives who spoke at the ai.now workshop sponsored by Fractal Analytics, held July 18 in New York City, shared an over-arching warning: If your workload is data-driven and/or highly repetitive, a combination of AI and robotics could make your job obsolete.

One of the simplest examples is in health care: Nurses and primary care physicians who interact with patients are more likely to stay employed compared to radiologists, who examine X-rays for tumors and other health issues. Image recognition solutions powered by machine learning can be trained to review these X-rays, and they can examine many more than a human doctor ever could — and in some cases with greater accuracy.

The future isn’t exactly the bleak dystopia of the Terminator movies, however, even if the keynote by futurist Martin Ford was titled Rise of the Robots. Ford, author of a book of the same name, provided data that revealed how much the world of work has already changed due to changes in information technology. “New industries are not labor intensive,” said Ford, making the following comparison:

• In 1979, General Motors generated $11 billion in earnings (measured in 2012 dollars) and employed 840,000 workers;

• In 2012, Google generated $14 billion in earnings, 20% more than G.M., but employed only 38,000 workers — 4.5% of G.M.’s workforce at its peak.

“Since the 1960s, each succeeding decade has produced fewer new jobs (by percentage),” Ford noted. “There has been a hollowing out of the job market, and that’s almost certainly a result of technology.”

White-collar jobs are not exempt from these trends, Ford added: “In 2004, the median staffing of a corporate finance department was 120 full-time employees for each $1 billion in revenue,” he said. “By 2014 it was down to 71.26 employees. In journalism, the development of smart algorithms can tap into a stream of data, find the most interesting elements and create an article. One of these is published approximately every 30 seconds.”

People Skills Will Save People’s Jobs

Retail jobs that require complex human interactions — a sales associates helping a customer find the right product, for example — are less likely to be usurped by AI-powered technologies. “Human-to-human interaction is still a critical skill,” said Matthew Keylock, Head of Data and Analytics for Connected Solutions at Mars Petcare. He added that AI solutions rely on data, and lots of it, to function, and “there’s so little of context that can be captured in a data form, so understanding relationships and their context will still be important.”

People who can understand what’s happening inside the “black box” of an AI-powered solution also will remain employable. “With AI, governance is key,” said Keylock, noting that existing cognitive biases can affect how an AI/machine learning solution develops. “Companies need not only technical experts but also business translators, and those can be harder to find than the technical people. You don’t want an [AI solution] to run riot where you don’t know what’s happening with it minute to minute.”

How AI And Humans Can Work Together

Many AI-based solutions can serve as tools that improve a human’s ability to do his or her job. For example, “If you’re a typical customer service rep, you’re not set up well to succeed,” said Kjell Carlsson, a Senior Analyst at Forrester. “The economics of call centers means you aren’t paid very much, and you have no information about the person calling in or the types of things they are calling about.”

With an AI-powered “listening agent” capable of voice recognition and sentiment analysis monitoring the calls coming in, however, “the solution could present 10 likely options for what the call is about,” said Carlsson. “Then the human can quickly identify the one that is likeliest.”

Companies may be tempted to do a full rip-and-replace of their customer service apparatus and replace humans with chatbots, “but if you start with the perspective of augmenting someone that is already doing this job, it’s easier to make headway,” Carlsson noted. “If you can make a person just slightly more efficient, you can measure that. However, the sexiness of full automation and a soothing voice coming from the black box are the AI applications that get all the attention.”

By Glenn Taylor, Senior Editor

For some people shopping, a.k.a. retail therapy, provides as much relaxation as a cruise vacation. Starboard Cruise Services strives to combine the two, and also to making shopping fun for everyone. In celebration of its 60th anniversary, Starboard opened a media tour of its “Fun Shops” on the Carnival Horizon, which are designed to embody a theme identified by President and CEO Beth Neumann: “These shops are not about transactions but about creating experiences for guests onboard.”

With high-end brands such as Victoria’s Secret, Hublot, Kate Spade, Michael Kors, Swarovski, Breitling and Le Vian all under one roof, Starboard and Carnival didn’t skimp on bringing in partners that would catch the eye of a cruise-goer. Before taking the store tour, it was clear to me that Starboard very much understands the nature of retail in 2018. Neumann noted during her opening presentation that Starboard saw how retail on land has undergone a difficult transformation, and the company has evolved its cruise retail model to stay at the forefront of industry trends.

“It’s about creating magic in retail onboard and has to be about entertainment,” Neumann said. “There is so much to do onboard, so as a retailer we have to ensure guests choose our experiences. That can mean educating them in the art of watch-making or offering a Victoria’s Secret night out. Also, you don’t sail if you don’t like people, and we help connect people to each other.”

Victoria’s Secret was the clear star of the experience — as soon as I walked into the central hub of the ship, I was greeted with a three-floor display illuminated in hot pink with the Victoria’s Secret logo plastered all over it. Additional lights on the roof displayed the same shade of pink, illustrating that Victoria’s Secret would be a recurring theme throughout the ship.

The tour’s first stop? None other than the Victoria’s Secret boutique. The “Girls Night Out” experience, which is the first for the fashion brand, enables guests to browse the latest assortment of merchandise and fragrances while sipping champagne, with the chance to compete in a runway face-off or spin a wheel where they could win a selection of beauty prizes. Additionally, the site included a beauty and fragrance bar where guests could experiment with various makeup and fragrance options. Press attendees were most enamored with the prize wheel, and if that’s any indication, I could certainly see that being a big hit among guests given the excitement of a free gift along with a purchase.

The next set of experiences took place at the Le Vian location, with the jeweler hosting the “Le Vian Style Me Famous Fashion Event.” At the event, a specialist styled attendees with the company’s signature Chocolate Diamond ring, and they could pose for a photo-op. All press received a Le Vian gemstone with the option to upgrade to a piece that complements their style.

The last stop was at The Library Bar, an intimate lounge that enables attendees to read from a selection of books while having a drink. But the tour also opened up a chance for men in attendance to learn more about jewelry, watch and cologne brands with the tutorial “The Gentleman’s Guide to Love & Life.” For the tour, the two men hosting the event focused on teaching the audience how to tie a bow tie, but the full experience is designed to give attendees ways to perfect their own signature cocktail, choose a gift for their significant other and source ideas for a date night.

By Glenn Taylor, Senior Editor

Two weeks ago when I attended Salesforce Connections in Chicago, one major theme captured my attention: it is vital to track, analyze and understand shopper data. “Data is the bedrock,” noted Heike Young, Manager of Industry Strategy and Insights at Salesforce, in a panel discussion that continually emphasized why today’s retailers won’t succeed without knowing the customer’s every move.

It appears that successful brands are getting this message. Elite performers — brand leaders that reported a revenue increase of at least 10% in the past fiscal year — focus on data at nearly 2X higher rates than underperformers across all areas, on average, according to the Salesforce-Deloitte Consumer Experience Report.

As more retailers seek to achieve that elusive goal of putting the customer at the center of every interaction, it’s no doubt data is crucial — and these merchants are realizing it. In fact, there will be a 3X increase in demand for data scientists over the next three years, according to Rob Garf, VP of Industry Strategy and Insights at Salesforce. H&M is one of the latest examples of a retailer increasing its reliance on data scientists, working with 200 (both internally and externally) to diversify the merchandise in individual stores.

But despite this influx of human intelligence, data scientists won’t be the panacea for retailers, according to Garf. It all has to be driven with a direct purpose, he said. Retailers may vary in how they define the role of their data management capabilities, but they must build out a clear strategy of what they’re looking to find out about the consumer.

One of the most-referenced statistics throughout the event highlighted the challenges in delivering this strategy. In total, the average brand has 39 different front-end, customer-facing systems working for them at once, ranging from POS, mobile, call center, e-Commerce, email marketing, social and content management. Most retailers are still in the middle stages of adopting a single platform to merge this disparate data under one roof: 31% are either creating a formal plan, developing a business case or seeking budget. Only 11% of 550 brands studied said they operated on a unified platform.

With Google Integration, MuleSoft Acquisition, Salesforce Sets Out To Conquer Customer Engagement

Platform unification is where Salesforce enters the picture. The company spent a lot of time during the event sharing its new slew of tools designed to further enrich the customer engagement process. Salesforce debuted a new solution that combines the company’s Marketing Cloud platform with Google Analytics 360, allowing users to leverage campaign data for tailored audiences and unlock deeper customer insights.

The cloud commerce giant also unveiled its Integration Studio, which consists of three platforms: The Integration Platform, Integration Builder and Integration Experiences. The platform is essentially the offspring of Salesforce and its recently acquired $6.5 billion subsidiary MuleSoft, and is designed to deliver personalized experiences across channels (such as email, social, mobile, digital ads or in-store kiosks) in response to real-time signals from the customer’s actions.

Experiences come in the form of personalized offers — such as a discount for shoes because a pair of shoes were placed in a shopping cart on a web site but not purchased — that can be made through any channel supported by the Salesforce platform. These offers can be automatically coordinated with any ongoing campaigns, such as an email blast.

The addition of the Integration Studio on top of the partnership with Google Analytics is a clear signal that Salesforce is positioning itself as a do-it-all solution for all cloud-based personalization needs — a development that would take the company well beyond its CRM roots.

Top Trailblazers Include Lacoste, Samsonite

During the Commerce Cloud Keynote, Salesforce execs highlighted numerous Trailblazers — members of which learn the Salesforce Commerce Cloud program through a series of training courses. Trailblazers such as Samsonite, Milk Makeup, Lacoste and Asics Digital also have improved the customer experience and used data as a competitive advantage via the platform.

In a video played during the keynote, members of the Lacoste team shared that approximately 75% of its e-Commerce strategy is built on Salesforce, while 8% of the company’s revenue is driven by an in-store app driven by store associates.

By Debbie Hauss, Editor-in-Chief

I’ve always been impressed by the unlimited returns policy at L.L.Bean. I think it’s the faith in humanity that the policy represented that impacted me the most. Personally, I don’t have the kind of faith that believes most consumers will be honest and forthright when they return a product. Unfortunately, it looks like the consumer population has proven me right and L.L.Bean wrong.

I know that the executives at L.L.Bean always anticipated some level of fraud or misrepresentation from consumers returning a product, but the overall positive impact on the brand image outweighed the negatives. Industry research has proven that L.L.Bean is highly regarded by consumers. The company ranked number three out of 100 as a customer service leader, according to the 20th Annual Mystery Shopping Study by Astound Commerce.  

Maybe the relatively new L.L.Bean President, Stephen Smith, got fed up with the increasing cost of returns. Smith, appointed in 2015, is the first CEO selected from outside the company in the retailer’s 103-year history.

But the facts for L.L.Bean are hard to ignore. Over the past five years, the company has lost $250 million on returned items that are classified by the company as "destroy quality," said L.L.Bean spokeswoman Carolyn Beem in an article on cnbc.com.

Don’t Forget About The Nordstrom ‘Tire’ Story

While L.L.Bean may be better known for its historical returns policy, the Nordstrom ‘Tire’ story is infamous. For those who don’t know it, a Nordstrom store in Fairbanks, Alaska is supposed to have given a customer a refund for tires that he rolled into the store — even though Nordstrom has never sold tires and the customer did not have a receipt for his purchase. But one client experience executive has outlined the negative impact this kind of policy can have on overall business practices.

In a 2017 LinkedIn post, Sean Tygrett, Senior Director of Client Experience for Cox Automotive, outlined the reasons why an unlimited returns policy can damage overall customer service. He asked and answered three key questions that addressed:

Existing processes and supporting technologies;

Scaling the unlimited returns experience across all stores; and

Overall business benefit.

H&M came under heavy scrutiny earlier this month for an advertisement image placed on its UK web site, showing a black child wearing a green sweatshirt with the words “coolest monkey in the jungle” on the front. The misstep sparked outrage at the company for the perceived racist overtones, and there were even protests at some H&M stores in South Africa.

As if the post itself wasn’t bad enough, the retailer actually may have made it worse by not taking it down until after the deluge of complaints came in.

“The response time in this case was awful,” said Matt Rizzetta, brand strategist and CEO of North 6th Agency (N6A). “The brand didn’t catch it. Customers caught it. This thing was getting destroyed — rightfully so — on social media by other customers and followers of H&M as soon as it happened. This is an incredibly deadly combination. You have a combination of a child and a racially insensitive message, you have a message that went out publicly and the brand wasn’t even the one to catch it. The combination of all that means that H&M is treading dangerous waters.”

The company actually apologized twice in the wake of the controversy. To me, this is a sign that they felt like they dropped the ball on the first one — and they did. The first apology didn’t show contrition for the act, and it wasn’t until they released a second statement to Pitchfork (and then again on Twitter) that the company acknowledged it had made in error in its approval routines and would remove the garment.

On January 17, more than a week after the backlash began, H&M appeared to have taken its first major step in the right direction, hiring a diversity leader. Annie Wu will fill the role of Global Leader for Diversity and Inclusiveness, but it is unclear exactly what her role will be, or how it ties to merchandising or any of the issues that caused the mayhem.

Beware The Angry, Image-Conscious Celebrity

The H&M gaffe also shows the power of celebrity influence on retail, particularly in the fashion industry. Two musicians, singer The Weeknd and rapper G-Eazy, ended their partnership with the retailer after the post gained notoriety. The Weeknd had worked on ad campaigns and collaborations with the Swedish retailer for his XO brand since 2017, while G-Eazy was anticipating launching a menswear fashion line in March 2018. Both artists posted statements on Twitter expressing their dissatisfaction with the brand and announcing their decision to part ways.

One of the most famous professional athletes in the U.S., NBA player LeBron James, also revealed his displeasure with H&M, but opted to spin the situation in a more positive light by posting a new version of the photo. In this shot he had a crown on his head and a crown was taped over the shirt with the phrase “King of the World” placed on top. While James has never been affiliated with H&M, he made $55 million through endorsements alone in 2016. If anyone has shown the ability to singlehandedly sway people’s opinions of a brand, it’s him.

Image from the Twitter account of Lebron James

Given that retailers often rely on celebrities to push products, these companies need to engage them quickly in the event of a mishap such as the H&M ad.

By Debbie Hauss, Editor-In-Chief

I’ve been covering the retail industry for a long time. In one of my first jobs out of journalism school, I worked for a magazine called Giftware Business, then I moved on to Private Label Product News and — fast-forward to the age of digital-only — I eventually landed at Retail TouchPoints (RTP). Now heading into the 10th year of publication for RTP, I thought this would be a good opportunity for a bit of reflection. So, I looked back at my digital folders containing articles from 2008 and, not really surprisingly, I found a lot of similarities between the topics we covered 10 years ago and the topics we’re focused on moving into 2018. We’re still focused on tracking the customer journey, personalizing the experience for the latest new generation of shoppers, and figuring out how to collect and analyze all the data we receive. In a 2008 article focused on 5 New Promotional Trends, we talked about the growing use of in-store digital signage and mobile; social media in marketing communications; and creative pricing strategies. But those 2008 articles didn’t include a lot of the terminology that is ubiquitous today: omnichannel, cloud, artificial intelligence, augmented reality, IoT and unified commerce. The technological revolution certainly has had a strong hand in configuring the “how” of customer engagement. Here’s another great example: The Retail TouchPoints annual Outlook Guide special report launched in 2010, featuring insights from leading retail industry analysts and experts — many of whom continue to work in the industry today. I’ve highlighted some “then” and “now” quotes from a few who have contributed to our Guide throughout the years.

Nikki Baird, Retail Systems Research (RSR)

2010: “Continued investment in customer programs, whether loyalty or more generic CRM-type programs, will be critical because it’s probably the best way to get the insights you need in order to figure out HOW to wean customers off of heavy price discounts.”

2017: “Retailers need to use all of the data they have — from online sales and behavior to loyalty, to in-store sales and behavior — to understand their customers. Retailers have two main options for adjusting to the modern, digital-savvy shopper. They can make the store more convenient, or they can make it more entertaining.”

Leslie Hand, IDC

2010: “The target customer is the ‘omni-channel’ shopper, an evolution of the multi-channel consumer, who wants to use all channels — store, catalog call center, Web and mobile — simultaneously, not each channel in parallel.” (Note: IDC has been credited with coining the term “omnichannel.”)

2017: “Operationalizing the digitally transformed retail business requires rethinking processes in five key business process areas: omnichannel commerce; curated product management; omni-experience customer engagement; autonomous supply and distribution; and efficient and innovation-ready operations.”

Jerry Sheldon, IHL

2010: “Retailers need to find new ways to interact with customers across many different touch points — through kiosks, mobile technology, handheld devices, digital displays, etc. Instead of being a museum, the store should be a destination.”

2017: Retailers need: “Mobile (not mPOS) for Associates: It is especially important for associates to have inventory visibility, training, HR, WFM functionality, fulfillment notifications, etc.; and Comprehensive Order Management Systems (OMS): Consumers desire a shopping experience that enables buy, fulfill and return from any channel.”

By Glenn Taylor, Senior Editor

I’ll admit that outside of skimming through a few tweets, I wasn’t too tuned in on the news that President Donald Trump signed a proclamation to reduce the size of the Bears Ears and Grand Staircase-Escalante national monuments in Utah. But a day after the news broke, Patagonia definitely got my attention in displaying the statement “The President Stole Your Land” on the front page of its web site.

The cutbacks of the two monuments totaled approximately two million acres, the largest rollback of federal land protection in U.S. history. Like many other politically charged issues, the decision drove debate — but only until the next problem came up and the public consciousness moved on to that.

However, Patagonia’s stance delivers by keeping this issue top of mind for both its own shoppers and those who don’t shop at the brand. The statement itself, bolded in white letters on a black screen, pulls no punches in getting the shopper’s attention. It also conveys a sense of urgency by tying it to the individual consumer, and how it affects them.

Shoppers Want Socially Responsible Brands

The decision caters to a retail clientele that, at least on the surface, appears to be more aware of who they’re buying from and what those companies stand for. As of 2015, 66% of global consumers said they were willing to pay more for products that come from sustainable brands, up from 50% in 2014, according to the Nielsen Global Corporate Sustainability Report. Millennials are even more attached to this idea, with 73% saying they are willing to pay extra for sustainable offerings.

Additionally, 81% of Millennials expect companies to make public declarations of their good corporate citizenship, according to Horizon Media. The growing presence of Gen Z also needs to be considered. This demographic identifies social responsibility as the fourth-biggest factor in making a purchase, after price, quality and brand name.

Simply put, causes matter. Patagonia has made a commitment to its own that transcends any product it sells or any marketing campaign it might put out.

REI Joins In On Cause Marketing

Fellow outdoor apparel and gear retailer REI knows a thing or two about this as well, making its own statement about the rollback as well as encouraging shoppers to write to their elected officials and voice support for public lands. REI has been vocal about causes in other ways, gathering widespread acclaim for its #OptOutside social movement, which encourages shoppers to do something fun outdoors instead of shopping on Black Friday. REI goes as far as to close its stores and online site throughout the day while still paying its employees. And the co-op sure hasn’t been hurting from the decision, giving back 70% of its 2016 full year profits to local outdoor communities.

Outdoor retailers aren’t the only companies who convey this politically activated mentality around causes they respect. The recent relief efforts for Hurricane Harvey showed that the biggest brands, including Walmart, Amazon, The Home Depot, Lowe’s and Target, are willing to donate to those in need and rally their shoppers to do so.