Lessons From Shop.org 2006

Last week, Shop.org held its annual summit in New York City. Here are just a few of the important takeaways.

Limited Choice vs. Long Tail

Barry Schwartz gave a compelling presentation of ideas from his book, “The Paradox of Choice.” In a nutshell, he warns companies of offering customers too much choice, which renders them incapable of making decisions. He offered many case studies that proved how sales went up when choices were limited. He spoke of comparison shopping, too many cross-sells, too many options for product configuration, and the need to find the sweet spot that offers enough products before the choices get too confusing for users, resulting in a drastic purchase decline.

Schwartz also addressed the difference between this theory and that of Chris Anderson, whose book “The Long Tail” proposes a different, possibly conflicting idea. Anderson speaks of selling less of a lot more products. On the surface, this notion conflicts with the idea of limiting choice. But Shwartz’s theories are geared more toward abundant choices of similar products and of the shopping experience, not merely limiting complete inventories. I highly recommend reading both books. They’re equally influential treatises on how to sell products.

People Don’t Want to be Barcoded

This quote is from Scott Key, VP of relationship marketing for Gap. Key was on my multichannel marketing expert panel. We discussed the ability to give users membership cards based on their online accounts, so in-store purchases could be added to their online accounts. Key says doing this without providing some kind of benefit doesn’t work, as people just don’t want to be barcoded. This doesn’t mean, however, that membership programs have to be structured in a way that costs the company money.

Brian Platter, GM of home delivery for Peet’s Coffee & Tea, was also one of my panelists. His Peetnik program is chock full of soft benefits, not hard ones. Such programs can actually become a revenue source. Instead of offering points and discounts, Peet’s offers an auto-replenishment service that automatically delivers coffee to your door, no discounts involved. The benefit is the convenience of getting the coffee you want, just when you’re running out. As a revenue stream, this home delivery feature accounts for over 50 percent of the online business. Compare this to poorly structured point programs that end up costing companies a lot of money to maintain, and you can see how a well-crafted membership club is different from a generic point program.

Loyalty Strategies Must Differ Among Different Companies

My loyalty panel had four companies on it. Each had a different take on what makes customers loyal. Home Depot focuses on using education to build loyalty. Its customers go to HomeDepot.com and to the stores because it’s a trusted source in the world of how-to projects.

Timberland, which has the benefit of having its own products (instead of selling commodity products), relies on customized products, such as “build your own boot.” The emotional connection between these personalized products and their buyers is extremely strong and reinforces brand loyalty.

Music123.com, on the other hand, decided it needs a loyalty program. It’s launching a traditional loyalty program (a point/reward system), which is tied to its rich backstage “meet the artist” content. It’s tried many other techniques to improve loyalty, but none has worked very well.

Part of the problem is, unlike brands that sell their own products, Music123.com sells the same products as its competition. A loyalty program is a strategic differentiator because the products aren’t differentiated. And if it’s structured well and mixes hard and soft benefits, the program won’t break the bank like traditional points programs based solely on giving away discounts do.

Multichannel Is Still a Hot Topic

Sessions dealing with multichannel marketing and multichannel user experience were among the most well-attended of the conference. Clearly, the topic is on everyone’s mind, and the industry is still in its infancy. Everyone talked about the future of multichannel shopping while acknowledging the technology still isn’t completely there and the transition to a really holistic multichannel shopping experience is still years away. But we’ve moved passed the first hurdle.

Though previous conferences had to introduce the idea (and convince attendees) that multichannel users are more profitable and loyal, this conference took that idea as an assumption. The topic of our multichannel panel this year was understanding the difference between being a multichannel company and thinking like one.

Simply being multichannel isn’t enough. Companies that operate each channel as a siloed parallel business don’t benefit from the fact that they’re multichannel companies. Companies that think multichannel are figuring out ways to tie the channels together and create seamless user experiences so users identify their brand as one company, regardless of the channels they choose to use.

All in all, the conference provided a terrific overview of the state of our industry and some great takeaways that affect our businesses on a daily basis. More important, the conversation has moved forward significantly from years past on topics such as loyalty and multichannel marketing.

Next week is the ClickZ E-Mail Marketing Conference. I hope to see you all there!

Until next time…

Jack

Meet Jack at E-Mail Marketing, the first in the new ClickZ Specifics conference series, October 24-25 in New York City.

Nominate your favorite product or campaign for the 2006 ClickZ Marketing Excellence Awards, October 16 through close of business (EST) on October 24. Final voting begins on October 30.