Sweetening the Deal1 Sep, 2009 By: Jacqueline Renfrow Response
DR's creative risks yield big rewards for retailers
There is no doubt that the past fiscal year has meant tough times for many retailers — as clearly evident 2008’s holiday sales results — and it is almost impossible to count the number of store closings and bankruptcies that have occurred since the start of the recession. But for those that have survived and are starting to see the light at the end of the tunnel, Response wants to know, how did they do it?
Behind many of these savvy retailers, from small to mammoth, are direct response marketers that carefully crafted messages targeted at a distrustful and penny-pinching consumer. These marketers are able to sweeten the deal not only for consumers, but also for the retailers — their customers — and prove to store owners that creative, accountable, targeted and technologically advanced DR marketing is the way to keep up customer base, even in the worst of times.
Not to mention, many products originally sold through direct response channels are using the momentum created from their proven value to move into the retail space. “The economic environment, combined with major home run items, has created a perfect storm for the industry,” says Jeff Buchbinder, executive vice president at bDirect.
For those in retail, the results may feel slow, but customer business is returning. May was the first month-over-month increase in retail sales in almost a year (0.5 percent). U.S. chain-store sales rose 0.1 percent for the week ending July 4 — and rose 1.6 percent the prior week — marking back-to-back weekly growth. And experts are optimistic: retail and food service sales are expected to continue to rise, as they did at the end of the summer (exceeding $347 million). RBC Capital Markets, along with Retail Lease Trac, have been tracking the progress of expanding companies and conclude that 2,000 retailers are planning to open 64,926 stores in the next 24 months. Categories planning to open the most stores include gift/specialty and family apparel.
Multi-Channel Sales and Marketing
Today, most retailers use multi-channel sales outlets in order to reach potential customers where and when it is convenient for the customer. Simultaneously, direct marketers for these retailers need to reach out to consumers through multi-channel marketing. And while traditional radio, television, print and direct mail are still a large percentage of marketing budgets, most retailers are finding that new digital technology is a powerful tool that can not only target customers, but can do so relatively inexpensively.
Columbia Sportswear Co., the Portland, Ore.-based active outdoor apparel and footwear retailer, recently launched its E-commerce site, www.columbia.com, to sell directly to customers. The company considers this move the third piece of its direct-to-consumer strategy, along with branded stores and outlets. The introduction of the site was also another way to get customers engaging in conversations with Columbia and includes an interactive social networking functionality — the “Inside Out” blog and video content on Columbia athletes, founders and pioneers.
Beyond multi-channel marketing, retailers are finding that some of the best marketing is one in which the company can have an ongoing conversation with the customers. Retailers want to create a partnership between the two, allowing the consumer trust and transparency. This conversation now not only happens when a consumer calls a customer service line, but also via E-mail, blogs and online social communities. Today’s retailers need to be available and accommodating — customer service is key.
“Speak to the consumer directly with content that is relevant and personal based on expressed interests,” says Paul Zaengle, senior director of E-commerce for Columbia. “Understand where they research and who influences their decisions, as well as how they influence others. Look at every marketing experience as an opportunity to make it conversational, not a one way message.”
Zaengle adds, “Launching an E-commerce site … is a proven way to create venues where consumers can be immersed in the brand, learn about our key marketing initiatives and experience the full scope of our innovative product offerings, increasing their emotional connection to our brands.”
In addition, in a time when consumers are more invested in purchases, the E-commerce site is a place for potential buyers to do research and learn more about product features and benefits. Leisure Trends reports that the No. 1 source of research prior to making a purchase is the brand’s Web site.
Creating Customer Loyalty
One of the key elements to successfully marketing in retail is building loyalty, whether it is through conversations, brand building and/or customer loyalty programs. Columbia also recently launched a customer loyalty program. Greater Rewards is a loyalty program that offers member rewards and also serves as a marketing tool to encourage new members to join. “The program offers financial and experiential benefits to members,” says Zaengle. “Columbia has also learned from our member base, allowing us the opportunity to evolve the program to be more of what members want based on feedback.”
Loyalty programs are just one piece of building a strong relationship with customers. Netflix, the leader in home delivery of movies, knows that building trust and relationships is key to its business success. The online distributor carries 12,000 movies and television shows on DVD and changed the way that Americans have rented movies. DVDs are delivered right to consumers’ doors – and now they can even be viewed instantaneously through streaming video.
According to Netflix, 90 percent of its members talk about the brand and promote it to other consumers, while more than 20 percent say they joined because of a recommendation. Along with word of mouth, traditional direct mail, public relations, online advertising, TV, radio and newspaper inserts are the leading forms of marketing for the 10.6-million member company.
But loyalty and retention is a large part of the marketing team’s job — the cancellation rate is below 4 percent. “Once you’re members, we don’t do a lot of upsell,” says Steve Swasey, vice president of corporate communications at Netflix. “We’re focusing on the benefits for you, not trying to get more money from you.”
Netflix keeps in constant communication with its customers through many channels, including online social communities, like Twitter and Facebook, and blogs. Swasey says it’s an opportunity for the company to answer a lot of questions directly and really hear what the customers think of the brand.
“We’re all overwhelmed with work and family obligations,” he says. “So if you, as a company, have a customer service that can make it simple, you can win.” In fact, Netflix is so concerned with customer service, three years ago it moved from E-mail to phone contacts for customer service representatives to better address concerns. The center is open 24 hours a day, and customers get much faster results than waiting 24 hours for an E-mail response.
Of course, Swasey says he cannot downplay the importance for any retailer, including Netflix, of keeping up with the latest technology. He predicts that in 15 or 20 years, Netflix will be entirely streaming — no mailing of movies — and so it’s already started preparing for the switch by offering a streaming option through devices such as TiVo, BluRay and some television sets themselves. “Our marketing message will change over time, and it will be more about instant watching than just DVD deliveries,” says Swasey. “It’s an innovative company that has changed American behavior, and we’re changing it again with streaming video.”
Another company leading the way in marketing technology is SmartReply, the Irvine, Calif.-based provider of mobile marketing solutions to retailers. The company has worked with more than 90 retailers and recently ran a successful mobile campaign for women’s clothing chain Lane Bryant. The company started as a voice marketing and IVT company, and in the past five years it moved into digital communications, with its core now lying in mobile marketing.
“With the changing dynamics of the marketplace, we could live a commercial-free life now if we wanted to,” says Mike Romano, executive vice president of SmartReply. “We can skip with DVRs on television, satellite radio, and even online E-mail marketing. It’s a lifestyle change and now people are using mobile devices for a lot more things than just talking on the phone.”
Mobile devices are personal, and so it gives brands an opportunity to become a part of that lifestyle. “If a customer has opted in to get information from the retailer, it’s a welcomed way to connect with them,” he adds.
Plus, a mobile marketing campaign allows retailers to connect with customers when they’re most able to make a purchase. For instance, hitting them on their ride home from work with a coupon from EZ Lube or a sandwich offer at lunchtime. “We find that mobile has increased response rates and high receptivity, and the retailer doesn’t have to spend as much money on direct mail,” says Romano. “For every direct mail piece a retailer sends out, we can send out 10 text messages. The ROI is quite attractive to retailers.”
Not to mention, SmartReply offers a great way for retailers to acquire new customers and capture those consumers’ data. The company delivers about 35 million mobile ads per month, and that can open a lot of opportunities for retailers in partnership with the company. “We do take precautions so that all of the advertisements we send out are to customers that have opted in to participate,” says Romano. “Receptivity to mobile advertising is as high as 63 percent among consumers. They say it’s fine if they get value in return.”
And once a consumer opts in, SmartReply makes sure not to send them more than one text message a month (unless specifically requested otherwise) to avoid bombarding the consumer. At the moment, a lot of SmartReply’s messages sent out for retailers are meant to be reminders of discounts, sales, etc., but ultimately, as the technology evolves, there will need to be a greater ROI attached to it.
Thus far in the mobile world, delivering barcodes or SKU numbers for coupons does not have a high rate of working smoothly at the register when they’re being read from a mobile device. “We have the technical capabilities,” says Ramono. “But POS systems aren’t advanced enough to actually scan with a high measure of probability.” So most marketers opt for SMS messaging to drive traffic to stores and then convert them into purchases.
According to Romano, the recession has benefited digital media companies like SmartReply because it can reach a greater audience with less money. Plus, the mobile market is growing. The fastest growing segment is females, aged 25-45, which also happen to be the majority of decision makers when it comes to making household purchases. Romano refers to it as the perfect storm: Where the medium is today — between the recession, the changing consumer dynamics and the technology — mobile marketing has what consumers want.
A Win-Win For Consumers and Retailers
A successful retail marketer makes deals that have little risk with lots of rewards — a sweetened deal for not only consumers, but the retailers themselves. One company focused on bringing no-risk marketing opportunities to retailers is Edo Interactive, a Nashville, Tenn.-based company focused on using its unique digital marketing platform to provide merchants with an alternative to traditional advertising.
The two-year-old company is primarily focused on offering consumers a loadable “prewards” card that the cardholder, or friends and family, can add money and rewards to by logging into an online account. Or as Ed Braswell, Edo’s CEO, refers to it, “A traditional gift card and online banking rolled into a single project.”
One of the strongest selling points of Edo’s offerings is not what it can do for consumers, but its merchant-funded royalty solution. It’s a great way for retailers to disseminate offers to customers that meet target demographics, whether it be psychographic, by sex, location, spending habits, preferences, etc. Braswell says the platform is a great way for retailers to give customers what they want, when they want it, at no risk. Edo makes money when rewards or coupons on a consumer’s card are redeemed — Edo gets paid based on the redemption rate of the prewards campaign. “We put our money where our mouth is, and people are happy to pay,” says Braswell.
In addition, an Edo card offers a measurable marketing tool for retailers. Tracking the redemption of a traditional print coupon can take up to 180 days; Edo can track card redemption in 1.8 seconds. While traditional coupons have a less-than-1-percent redemption rate, for Edo card offers, redemption is between 2.5 percent and 17 percent, based on the offer.
There is also a mobile component to the card, in that marketers can use text messaging to phones to send out reminders on prewards, mainly to drive traffic to a specific store at a specific day or time. For now, mobile offers less of a service feature than what Edo can offer online. However, in the future, once the technology of cell phone service is universal and features are consistent, mobile phones will be able to receive rich media and get campaigns that include links to Internet sites and various merchandising.
Braswell believes that prewards are the future of coupons. He mentions the elimination of traditional coupons by retailers because of fraud and also, of course, the push toward digital incentives. “People are over print, radio and online advertisers,” he says. “The merchant fund is a great incentive for consumers and retailers who want a targeted, card-based campaign. And it’s tied to a financial card (they partner with MasterCard) that customers don’t have to carry in a wallet.”
And while Braswell sees the Edo platform as the way of the future, he also sees the recession as a perfect time for marketers to get involved with the platform. “In this economy, retailers are sick of heavily discounting products for sales,” he says. “They are looking for an alternative way to reach consumers.” Plus, with the recent passing of the credit card reform act, the amount of credit and debit cards available to consumers is being reduced, and so prepaid, preloaded cards hold greater purchasing powers for consumers.
Buchbinder is also in the realm of offering alternative marketing campaigns that include enticing incentives to retailers. But for his company, Los Angeles-based bDirect., he’s helping to take products built in direct response and get them placed on the shelves of major retailers across the country. What truly makes the company unique is how it is compensated. bDirect is paid by its customers only based on what is sold through the cash register, what he calls “pay on scan.”
Buchbinder wants retailers and DR product makers alike to understand that the two can work together to create a win-win. “Retail is unique in that it has the ability to have a continual flow of marketing behind winning items and then use that win to create additional brands within direct response,” says Buchbinder. “For every person picking up the phone, there are many more walking into a retailer looking for a product.” And he reminds those in direct response to foster that relationship by bringing their best products and programs forward, early on.