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We’re all doomed. According to some of the more alarmist news publications, we in the UK are plunging headlong into a recession which will have families out on the streets and so on and so forth. No one will be able to afford to pay their astronomical fuel bills and spiraling mortgage costs, let alone having cash they could call ‘disposable’. A nation is headed to the Poor House.

Granted, the general consensus seems to be that we’re in for at least two years of relative hardship – relative, that is, to a decade of constant growth, cheap credit and cheaper consumer goods. An entire generation has grown up viewing saving less as a necessity, more as something you do if you can’t quite squeeze that 42” plasma TV onto the Visa card. The expectation that the profit on one’s house would accommodate one’s retirement plans was not uncommon amongst a certain demographic.

Naturally, the knee-jerk reaction to this news is to expect an abrupt halt in consumer spending, sending the retail industry into chaos and turmoil. It’s clear to see that with credit becoming more expensive (and harder to obtain), and the heaviest spending demographics being forced to live within their means, less will be spent overall. More interestingly, from my perspective, will be the trends developing within what continues to be spent. Looking for a silver lining, if you will.

Let’s look first at some early signs from the high street. A few months ago, Retail Week announced both Faith’s slide into administration, and Thorntons’ 20% year-on-year increase. Zavvi are also bucking the trend, showing a 10% like for like increase, with strong performance within the DVD and games categories. French Connection is showing signs of strain, posting an H1 operating loss £1m greater than in 2007, whereas Debenhams is outperforming the market with a year on year drop of only 0.9%.

Across the board, the picture’s clear:

• ‘At home’ is being preferred to ‘out’, both in terms of eating, entertaining and watching films.
• Whilst shoppers are increasingly price-conscious, they are still spending. They are more prepared to shop around on price and deals, and will go that little bit further than in previous years. Convenience is becoming a luxury in itself.
• Trading down, especially in terms of the FMCG market, is a growing trend, but importantly only within certain ranges. For example, a Tesco Finest shopper might move down to core range, potentially to value, but relatively few of them will actually move to Aldi or Lidl. Those who typically buy branded goods will begin to move to own-brand.
• The home is becoming increasingly important. Partly as a place to entertain (cheaper than going out), partly out of a need to maintain a basic sense of security in uncertain times. A lick of paint here and some new plants there will keep up appearances.
• Fewer holidays will be taken. There are suggestions from some parts of the industry that we’ll be seeing a move back to the old trend for one ‘summer holiday’ a year, rather than numerous short breaks.
• With Christmas around the corner, more creative ways are being sought to keep the standard up to what we’ve come to expect; saving, buying in advance and so on. This year, at least, it’s unlikely customers will skimp during this period unless they literally have no option.
• Treats and luxuries are still on the shopping list, but they’re of lower value than in previous years (ie chocolates, rather than new shoes).

So what do these emerging trends mean for a retailer? With the UK’s once profligate consumers battening down the hatches, how does the retail industry weather the storm? The truth is, there’s no silver bullet, and if I had it I wouldn’t be writing it on an open forum like this. Some businesses will be inherently exposed to the worst the recession has to throw at them. Others, particularly those in the discount sector, have a significant opportunity. For the majority though, observing a few simple points will see significant rewards:

• Manage costs and reduce wastage. It sounds obvious, but when applied to investing to move a business forwards, it’s a little trickier. Understanding your customer in detail will help inform genuinely ROI-focused development, so it’s worth investing a bit in order to get accurate information in a clear and useful form. This exercise in itself should fuel user-centred design across the business as a whole.
• Make the most of every customer. Another obvious-sounding point, but one which few online retailers can answer with confidence. With hundreds of thousands of users hitting your service every day, can you be sure that you’re selling to each one in the best way possible? See an earlier post for more on how to achieve this.
• Stick to your knitting. Now is not the time to be radically overhauling the brand – as consumer confidence drops, it’s more likely to alienate existing customers than attract new ones. Focus instead on the aspects of the brand that appeal to the concerns consumers have.
• Avoid knee-jerk reactions. Marketing and development budgets are easy to cut in the short term, but the long-term impact of these cuts is expensive to rectify. This in itself represents a false economy. In adverse economic times, those businesses who slash the very budgets their future success depends on generally end up losing market share, often for good.

The rules of engagement are no different in hard times than they are in times of growth. The only difference is that the price of poor business management will be much, much higher in the coming years than they have been since the early nineties.

A recent blog entry by my colleague Richard got me a bit worked up recently, and as usual I'm keen to add my two cents. His experience with Empire Direct is a perfect example of a multiple channel business not working as a genuinely integrated multichannel retailer, something that’s unfortunately all too common. Whilst the business presumably considers itself ‘multichannel’, the service levels, experience and the proposition all differ from one touchpoint to the other.

I had a similar experience with UPS recently, which was pretty much the opposite of Richard’s ED tale. Shipping something from one continent to another is a reasonably complex task, and managing this through a self-service interface is something that the UPS website manifestly fails to achieve. At every step in the process, it’s unhelpful, misleading, full of unexplained jargon and every failed attempt I made resulted in a key part of the process being missed out. Quite how you can arrange a shipment from one place to another without being prompted to arrange a pickup separately is beyond me.

The natural result of this was a series of calls to UPS customer service, both in the UK and the US. Despite being a global company dealing in international shipping, their UK and US businesses do not communicate directly, so as a customer you have to deal directly with both sides, which will result in several hours of international calls at the full rate. Thank heavens for Skype.

However, once I’d got to speak with someone, their service was pretty much faultless. Helpful, informed and patient (useful with an irate and semi-incompetent customer like me), the result of every call was a step forwards in the process. The US team were particularly good, masking their sighs of despair quite well when faced with yet another customer had managed to arrange a delivery but no pickup.

Once the package was under way, it arrived far quicker than expected, and their tracking facility gave me realtime information on where the package was and what it was doing (or I suppose, what was being done to it). In the end though, what should have taken three days ended up taking over five weeks, with numerous false starts and delays whilst UPS worked out what had gone wrong.

So all in all, a very patchy performance, which could be solved by breaking down some of the territorial boundaries in the organization, and giving serious thought to the usability of UPS.com. Serious disconnects were evident internally, requiring the customer to jump through unnecessary hoops. Had I not been bloody-minded (and professionally interested) enough to see it through, I would have given up early in the process.

So why does this happen so much? In my experience, it’s a symptom or the organic nature of a business’ expansion into new channels. In the early days, a website was non-functional, and would probably fall under the remit of the marketing department (being solely a communications channel). With development and added functionality would come more involvement from IT at some point, and possibly a new business unit being spun off. This BU would comprise its own set of disciplines, from inventory to merchandising, and was most likely a completely discrete unit within the wider business.

This is where disconnects arise, not only operationally, but in terms of proposition, experience and brand. As Richard and I found out, a patchy experience leads to a vote of no confidence in the business. Whilst we both found things that worked really well, the overall experience left us cold (and motivated to tell the world about it…).

This is a tricky issue to solve, and one for which there’s no silver bullet. Change is principally required in a number areas:

Operational

Operational teams need to work across all channels. Marketing is usually ahead of the game here, with various communication channels being handled through the same team, but merchandising, commercial, operations and even occasionally finance are frequently siloed by channel. Customer services often ends up carrying the can here, with contact coming in from multiple sources and one function having to assimilate sometimes conflicting information from numerous business units.

Architectural

Share one common version of the truth. Whether a customer is buying an item from a store or online, there is an expectation that it’s fundamentally the same thing. In instances where the cost price differs, or even the selling price or the promotional mechanic, trouble looms. Can they return an item bought online to a store, for example? Conventional wisdom suggests they should; practical experience shows this is rare.

Also – on the customer service note above, every customer-facing staff member should have access to the same information. Can I change my address or contact preferences at the till? Can I reserve an item by SMS and pick it up instore? Can I edit this order at a later date on the website? The experience should be consistent throughout each touchpoint.

Cultural

A change that goes hand in hand with the operational side of things, but one which merits a separate mention. Do store staff see the website as competition or complement? Each channel needs to have an awareness of how the other operates, and an ability to communicate this directly to customers. Far too often, tell a member of store staff ‘I saw this on your website…’ and you’ll receive a blank look if you’re lucky. This plays into effective internal communications as well as a sound multichannel culture throughout.

In the example given above, I experienced two very distinct versions of UPS. One was friendly, helpful, informed and efficient; the other was obtuse, challenging and counter-intuitive. It could have been two entirely different businesses. Whoever has stewardship of the brand must ensure that it’s correctly represented at every touchpoint, not just in terms of look and feel, but tone of voice, service level, function and so on. Although a huge challenge, this can be achieved by addressing the points above over time, and building the entire business, from the shop floor to the Directorate, on the premise of true, integrated multichannel retail.

Naturally, if UPS would like to investigate how we could help them get their online business delivering the same excellent levels of service as their call centre, I'm always around at dan.wilkinson@conchango.com.

”… and suddenly, as if by magic, the shopkeeper appeared!”

Talking to an ex-colleague recently, the subject of behavioural analysis came up, provoked by an intriguing little habit Facebook’s got into recently, where it’s been advertising merchandise to me from some of the bands in my music collection. The crux of the issue had two parts. Firstly, and quite simply, what does one do with all that data? Obtaining it and storing it is enough of a challenge, but how do you go about making sense of it and using it to drive a business? Secondly, isn’t this all a bit of a black art? Don’t you need highly-skilled practitioners to make it all work?

He could clearly see the benefits from a business point of view (increased conversion, reduced cost per acquisition, improved customer experience etc), but where the difficulty lies for him is in the operational impact this would have on his (small) team. In my experience, it’s not an uncommon concern – many medium-sized retailers do not have the latitude to hire in new teams to support a data-heavy application, and so view the operational side as a massive challenge. However, perhaps the concept of behavioural analysis isn’t quite as new-fangled as the technology would have you believe.

In looking at how behavioural analysis works in principal, I’m reminded of my experience of running an Oddbins store in a medium-sized Cheshire village, quite some years ago. One of the unwritten rules of being a store manager or assistant manager at the time was that you would be expected to be able to remember at least 100 customers’ names and buying habits, and most of us could probably do more than that. So, when a customer wandered into the store, you’d recognize them, greet them, remember what their buying patterns were, and adjust your approach accordingly – even to the point where you knew who liked to be left alone and who usually wanted a chat. (I’d also like to take this opportunity to apologise to one Mrs. Talbot, who repeatedly asked me to stop selling her husband so much Burgundy, and whose entreats I steadfastly ignored. Sorry Mrs Talbot.)

This basic sales technique (less a ‘technique’, more common retail sense) could also be extended to customers you didn’t know. If someone’s scrutinizing the top shelves of the Bordeaux section, having parked the Bentley outside, you’re not going to start waxing lyrical about the new £5 Aussie Shiraz. If someone in formal dress rushed through the door in a panic, you’d be thinking ‘emergency gift’, not ‘wants to be talked through the range in excruciating detail’. This is behavioural analysis at its most basic, and like it or not, whenever you walk into a store, a good sales assistant will be going through this process.

Extrapolate this for a moment to the majority of online retailers. Whilst you’re browsing their site, they don’t know what you look like. They don’t know what you’re looking for. They don’t know what mood you’re in, and they can’t make any inferences about any of those things. They will sell to you in exactly the same way as they’ll sell to every other one of the thousands of other people browsing the site at that moment. To me, this sounds like everybody loses: the customer has a sub-optimal experience, and the retailer’s normally well-oiled sales machine is bound and gagged.

So what if certain bits of information were available to the retailer at the point at which you enter the site? Perhaps if that site knew that, as you’d clicked ‘Fine Wine’ first in each of your past four visits, now might be the time to advertise the arrival of a new and particularly good value parcel on the homepage? Or have you come from Google, where you typed in ‘wine gift’? Should that site be advertising gift sets from the off? If you’ve been researching that fridge for several weeks, is now the time when a small incentive might accelerate that purchase decision?

Granted – a blunt implementation of this can be annoying, as with the Facebook example. I’m the wrong side of 30, and stopped wearing band t-shirts about fifteen years ago – this is a good example of poor, one-dimensional targeting.

So, it’s fair to say that the fundamental principles of behavioural analysis are ones that will be instinctive to any seasoned retailer, and that, for most businesses, the data necessary to drive such a strategy exists. The missing links are simple: a sensible way to expose that data to a relevant application, and an interface to that application that makes sense to a business user whose core skill is selling, not data management.

The beauty of it is in the marriage of old-school retail sales skill and the sensible application of business intelligence technology by people who understand retail. We’re currently performing this service for a number of our retail clients – if you’re keen to see how behavioural analysis can transform your business, drop me a line at dan.wilkinson@conchango.com.

My years spent working at Oddbins have left me with a long-standing interest in wine, as I'm sure some of you know, and having just been talked up from intending to spend £0.00 to actually spending... a lot more than that in a wine merchant in Borough Market this lunchtime, it's clear that I'm always open to being sold some. Be it a particularly good New Zealand Pinot Gris or a decent quantity deal, there's a fair chance I'll be interested.

Interesting then, that despite numerous emails, direct mails and so on from Virgin Wines, I have yet to purchase anything following the rather ropey half-price case I bought off them shortly after they launched. Now, originally the problem was their catalogue - it just fundamentally wasn't that good. I've heard that recently it's got a lot better though, so it's not that that's putting me off.

Consider then, the tone of their recent email to me, a follow-up to one asking me to join a subscription deal they've recently put together, with the subject '3 reasons NOT to join our club':

"Dear Dan

I am not a sensitive person by nature, but I have to say that I am feeling a little hurt. We’ve invited you into our Club, but you’ve clearly decided not to.

So, as a one-off attempt at sheer bribery, I‘m offering you your first, trial Club case HALF PRICE at just £47.88 (that‘s a ridiculously low £3.99 a bottle!). Plus, two FREE gifts, worth £30. That‘s an overall saving of nearly £80.

Sound good? Then click here to claim your HALF PRICE case and FREE GIFTS.

But you‘re probably not ready to join yet. You‘re probably thinking..."

It then goes on to answer the three reasons it reckons I have which are preventing me from joining. The actual reasons are fairly simple - I like to choose my wine myself, I can't have it delivered to my house and I don't want to carry it on the tube home from work. Oh, and having put together pre-mixed cases myself I know exactly how the margin works and have no intention of buying a dozen wines when I know at least half of them are probably going to be rubbish.

There are so many things wrong with this. Not only do they have the presumption to guess what I'm thinking, they do so in the most confrontational way possible: "you've clearly decided not to" sounds ridiculously petulant and has put me on the back foot in the first sentence. So far, so not good.

Unfortunately this is pretty standard for the tone of their communications. Falsely matey, inappropriately jokey, and borderline offensive - I recall once getting a bit of direct mail, having changed my email address but not updated it with them, saying 'what have we done wrong? why haven't you told us your new email address?'. Shocking.

On the other hand, I urge you all to sign up for the Innocent Drinks newsletter. Without fail, this really brightens my week (although having said that does make me wonder if I shouldn't get out more). Generally there's a bit of news about fruit (surprisingly interesting), new smoothies, news reports and things going on in their office, plus a few other bits and pieces and, every week, a handful of random things they've found on the web that they like. Never anything about what they do, just fun stuff.

Now, to get an idea of how well appreciated their newsletters are, have a look at this, one of the YouTube links in this week's email. Now by the time you read this the comments might have moved to a later page, but at the time of writing, about 30-40% of them are all about Innocent. People love the newsletter, love receiving it, and feel that much closer to Innocent as a brand as a result.

These, to me, are great examples of how a brand can be managed purely through tone of voice. Virgin Wines set out their brand as irreverent, young-ish, good value and exciting, but they just come across as unpleasant and irritating. Innocent have not dissimilar aspirations, but by treating their customers like equals and engaging with them on an honest, open and informal level, they hit the target spot on.

Yes, there's a content aspect here, but more fundamentally than that, it's about understanding your audience, and pitching your tone appropriately. Simple, really... isn't it?

As a relatively recent convert to the agency world, having worked on the client side in retail all my professional life, I sometimes find myself seeing both sides of a problem, both in work we do for our clients and in wider industry issues.

Recently I experienced one such moment when, several minutes into a discussion panel session on ‘Tomorrow’s Advertising Formats’, I realized that in between the thinly (and in one speaker’s case, not at all) disguised adverts for their companies lay the answer to all their questions.

Diverging from the start from the main topic of the event, the panel quickly moved to discuss just why, oh why, are advertisers not driving forwards with new advertising formats and media channels or, in effect, why don’t our clients listen to everything we say? Speaking as someone who, in a previous life, was frequently sold ‘the next evolution in advertising’ or ‘a genuinely revolutionary way to engage with your customers’, and without exception found the offer to be wildly overpriced, poorly thought out and totally inappropriate for the business, it’s both enlightening and depressing to find that the sort of misinformation peddled by these people is constructed entirely within the closed circuit of their peers.

Whilst on the client side, something I’ve always looked for in an agency was someone who understood not only my industry, but who understood my brand, and the interaction my customers had with it. This applied to media buyers, to creatives and to full-service development agencies alike. Now, with this in mind, let’s look at a number of comments which that evening’s panel came out with, and consider how well these ‘industry-leading’ minds understand the customer:

“Bluecasting (broadcasting a message via Bluetooth, so that any Bluetooth-enabled devices in a specific area pick it up) is a fantastic way to engage with consumers at the most relevant times.”

“Television adverts generate an ‘emotional’ involvement from the viewer, whilst online video advertising promotes a more ‘rational’ interaction.”

“Marketing departments tend to actively prevent brands developing dialogues with their customers.”

“Some people pay a monthly amount for their mobile phone.”

“People like advertising – it’s how they find out about new things.“

Each comment more bizarre than the first, from the nonsensical (rational vs emotional?) to the outdated (anyone remember the fiasco that was bluecasting?) and the downright wrong, this selection neatly encapsulates the general themes of the evening.

One of the repeated complaints some of the panelists voiced was about how little Marketing departments and advertising buyers bought into their more innovative ideas. Call me a pedant, but personally I tend to be more receptive to innovation when it’s recommended by someone who truly understands both my position and the context of the market in which I operate.

What I noticed from the closed circuit discussions going on at this industry event was how little practical understanding was demonstrated in the room, and how most of the opinions voiced would render a seasoned retailer or media owner speechless. And that answers the complaint: develop a mutual sense of trust with a client, based on rock-solid sector knowledge, a thorough understanding of the customer relationships at work, and an acute awareness of core business drivers, and only then will your more progressive suggestions gain traction.

Because then, and only then, will the client know that your recommendation is made through careful, pragmatic business thinking, and not so you have something to brag about at your next industry panel.

And this, ladies and gentlemen, is why I made the leap across the desk and joined Conchango.