My Macy’s Provides Recession Blueprint

Late last year, Macy’s consolidated its divisions and started tailoring in-store merchandising to the needs of different regions, an approach that it calls “My Macy’s.” It turns out that “My Macy’s” has been such a success that it is rolling out the effort across all of it’s stores. According to Karen Hoguet, Macy’s CFO:

For the spring season, the My Macy’s districts outperformed the remaining stores by 2.6 percentage points

My take: These results aren’t surprising. In a previous post, I gave “My Macy’s” a thumbs-up for following a recession strategy that I called: simplify, target, and align. During a recession, companies have less opportunity for sloppiness so they need to more effectively align their offerings and efforts to the specific need of target customers. Since the needs of customers vary across regions, it makes sense to merchandise in different ways in different regions.

The bottom line: What’s your “My <Your Company>” strategy?

My Recession Management Favs Over 2 Years

In a continuation of the look back at my first two years of blogging, today I’m listing some of my…

Favorite Recession Management Posts

The essence of leading in a recession is captured by this quote by John F. Kennedy:

The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity.

While there is some debate as to the accuracy of JFK’s interpretation, the sentiment is right. Here are some of my fsvorite posts about managing in a recession:

The bottom line: Recessions require more leadership than ever. 

The Customer Experience Journey To Oz

My opening keynote speech at Forrester’s Customer Experience Forum was titled “Charting Your Customer Experience Journey Through Tough Times.”  I made a lot of references to Dorothy’s journey in The Wizard Of Oz.

Dorothy had to overcome a lot of obstacles (flying monkeys, cranky witches, etc.). It turns out that the key ingredients to her success are also the key ingredients for a company’s customer experience efforts in these tough economic times:

  • Heart (Tin Man): These economic times are unsettling for customers and employees. So companies need to raise the bar on their empathy to cater to the changing needs of customers and to build engagement with employees.
  • Brains (Scarecrow): It’s easy to make sweeping across the board cuts to respond to a tough economy. But companies need to think more deeply about their business to distinguish what’s really important (and shouldn’t be cut) from those things that are not important (and can be cut).
  • Courage (Lion): While the natural tendency is to get into a defensive mode during a recession, companies need to prepare for the future and strengthen their business. I referenced this quote from John F. Kennedy:

The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity.

There’s some debate as to the accuracy of JFK’s interpretation of the Chinese characters, but the sentiment is absolutely correct!

I ended my presentation with a rewritten version of the song “Somewhere Over The Rainbow.” Here are the lyrics:

SomewhereOverTheHorizon

There was a lot more in my speech, like the Yellow Brick Road of customer experience maturity. So I’ll be writing more about my comments and other parts of the forum over the next week.  Stay tuned!

The bottom line: Don’t wait for a wizard to improve your customer experience

Lessons From Condoms And Canned Goods

Okay, I’ll admit it, I used “condoms” in the title as a cheap trick to draw in readers. But don’t blame me, I’m discussing an article in Time Magazine called What Sells in a Recession: Canned Goods and Condoms.

The article uses Nielsen Co. data to discuss things that are selling (and not selling) in this economic environment. Here are some tidbits:

  • “Family planning” products, which include condoms and over-the-counter female contraceptives, were up 10% for the first two months of this year. My take: Couples are going out less, which is leading to a phenomenon that the article calls “cocooning.”
  • A catch-all category called “seasonal general merchandise,” which contains thawing salt, body warmers and gift packages with candy went up the most. My take: Even in a downturn, people need to deal with the cold and snowy winter, and candy is a more affordable Valentine’s Day gift than jewelry.
  • Canning and freezing supplies like jars, bags and containers were up 11%.  My take: Consumers are cooking in bulk to prepare for a lot of in-house dining.
  • Other categories in the top 20 include baking mixes and supplies, fresh-meat, vegetables and dry grains, dry pasta, cheese, wine and liquor. My take: Looks like a surge in home-cooked Italian meals. Yum!
  • Film and cameras dropped the most, a decline of 31%. My take: Less traveling and more contraception cuts the demand for picture-taking.
  • Sports and novelty cards dropped 26%.  My take: Could anything be more discretionary?!?
  • Magazines dropped 17%. My take: Part of a longer trend in the media industry. Some blogs can be even more engaging than magazines. :-)
  • Cookies and ice cream cones dropped 10%. My take: People are opting for more home baked desserts.
  • Other products that dropped include air fresheners and deodorants, kitchen gadgets, lawn and garden items, and bath accessories. My take: I have no idea why this is happening, but houses are going to look and smell worse.

The bottom line: The recession windfall: romance and home-cooked meals.

Recession And Innovation From Wool To Hulu

I just read a very interesting article in the New York Times called Why Bad Times Nurture New Inventions which combines some of my major interests: customer experience, innovation, and managing in the recession. It’s a series of short commentaries by five people:

  • Amar Bhidé, professor of business at Columbia and author of book “The Venturesome Economy.”
  • Scott Reynolds Nelson, history professor at the College of William and Mary and author of the forthcoming “Crash: An Uncommon History of America’s Financial Panics.”
  • Rita Gunther McGrath, professor of management at Columbia University and author of “Discovery Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity.”
  • Don Kelly, patent agent and former chief of staff for the United States Patent and Trademark Office
  • Martin Lindstrom, marketing consultant and author of “Buyology: The Truth and Lies About Why We Buy.”

Here is my take on the key items in the article:

Bhide: “The deck gets reshuffled in a recession as habits are re-examined and patterns of behavior are broken, perhaps to greater degree than when things are humming along at a steady state. And that’s what creates business opportunities.” Bhide discusses Kindles, iPods, and computers and the 1980s.

Nelson: “America’s financial panics have often been the periods of its most interesting commercial and logistical innovations. Plummeting commodity prices combined with new observations about manufacturing or trade often suggest new solutions to old problems.” Nelson discusses wool manufacturers circa 1815, industrial food canners circa 1873, and integrated circuits in the 1970s.

McGrath: “With business as usual off the table in a recession, people become more open to new and efficient ways of doing things. And they’re forced to show more entrepreneurial discipline – you have to expend imagination before spending money.” McGrath discusses recent companies Kiva Systems and Hulu.

Kelly: “Inventors and innovative entrepreneurs should be smiling. That timeworn proverb about “an ill wind that blows no good” truly applies in an economic downturn. No doubt, in garages across the country, innovators are hard at work as opportunity bangs on the doors. Answering the call, however, will require them to step back and take a hard look at the current environment.” Kelly discusses small entrepreneurs.

Lindstrom: “What do Lindt chocolate, the Rubik’s Cube, French perfumes and a pair of Wellies have in common? They’ve all had increased profits during this recession. The number of products getting these results, however, is small and getting smaller by the day. These brands, which may weather the storm, offer some hints for start-up businesses.” Lindstrom describes two concepts: 1) don’t ask consumers what they want; figure out what they need; and 2) practical features give consumers a reason to make a purchase.

The bottom line: It’s time to ask yourself if you’re keeping up with shifting customer needs

Obstacles To Customer Experience Success, 2009

I just published a new report called Obstacles To Customer Experience Success, 2009 that examines results from a survey of customer experience decision makers in Q4 2008.  I also published a similar piece of research last year. Here are some of the findings:

  • 89% felt that customer experience as either very important or critical to their firm’s strategy in 2009.
  • 80% said that their executive teams aimed to differentiate their firm’s customer experience.
  • 65% described their approach to customer experience as either disciplined or very disciplined (up from 58% last year).
  • 57% have a senior executive in charge on improving customer experience across products and channels (up from 45% last year).
  • More than half picked lack of budget and lack of cooperation across organizations as major obstacles to their customer experience efforts.
  • What do they expect from a continued recession? 48% expect spending on customer experience to get cut less than in other places, while only 12% expect it to get cut at a higher rate.

The bottom line: Customer experience management won’t get pushed aside by the recession

Learn From Home Depot And Macy’s, But Not Office Depot

There was an interesting article about the latest earnings announcement of retailers like Home Depot, Macy’s, and Office Depot.

First of all, Home Depot and Macy’s are following a recession strategy that I call simplify, target, and align (okay, I just made up that name). Home Depot simplified by closing peripheral businesses like Expo Design Centers and cutting 7,000 of its staff. It targeted by keeping high in-stock levels and maintaining its incentive pay structure. The align step should come next; they need to get the organization to understand and embrace the strategy. And, I loved this quote from Home Depot’s CFO:

We believe if we take care of our associates, they’ll take care of our customers

This statement perfectly aligns with the 4th law of customer experience: Unengaged Employees Don’t Create Engaged Customers. But what makes it even more impressive is that it came from the CFO! Hopefully Home Depot can ignite the customer-centric spark that it once had.

Macy’s, on the other hand, simplified by consolidating its four divisions into a single organization and it’s targeting with an initiative called “My Macy’s,” in which it will tailor the merchandise in stores to target the customers in particular regions of the country. I feel compelled to say DUH! It shouldn’t have taken a recession for Macy’s (or any other retailer) to create localized merchandising strategies.

The article also discusses Office Depot’s disappointing earnings and weak same-store sales. Those results don’t surprise me. Office Depot ended up in last place out of the 25 retailers in Forrester’s 2008 Customer Experience Index and also had the largest drop in its ratings from last year.

The bottom line: Simplify, target, and align!

Customer Experience Correlates To Loyalty

I just published a report called Customer Experience Correlates To Loyalty that examines the connection between customer experience and three components of loyalty:

  • Reluctance to switch business from a company
  • Willingness to buy another product from a company
  • Likelihood to recommend a company to a friend or colleague

The analysis is based on a survey of nearly 4,700 US consumers in October 2008. The results are compelling. Across all 12 industries we examined, there was at least a medium level of correlation between customer experience and loyalty; in most cases the correlation was much higher.

This chart shows the level of correlation between customer experience (as defined by Forrester’s 2008 Customer Experience Index) and the three elements of loyalty:

0902_industrycorrelations5_small

I also did the same analysis with consumer data from Q3 2007 on nine of these industries (we added airlines, hotels, and PC manufacturers this year). It turns out that the correlation between customer experience and loyalty has increased in every industry.

I wasn’t surprised to find the link between customer experience and loyalty; I’ve worked with — and studied — enough firms to know that there’s a strong correlation. But I wasn’t sure how the economic downturn had altered this relationship. So it was very interesting to find out that the connection has become stronger in the recession.

The bottom line: Don’t neglect customer experience during the downturn.

The State Of Customer Experience

A couple of weeks ago I gave a teleconference to Forrester clients called “The State Of Customer Experience, 2009.” My key message: Customer experience is showing resilience in the face of the down economy.

My assessment comes from a few different angles. First of all, I’ve been in touch with many vendors who sell voice of the customer solutions and they are continuing to report pretty strong pipelines.

In addition, I analyzed consumer data from late last year; looking at the correlation between customer experience and loyalty. This was the same analysis that I did the previous year in research called “The Business Impact Of Customer Experience.” It turns out that link between customer experience and loyalty has increased for all 9 industries I examined. If you’re interested in more details on this analysis, look out for a report called “Customer Experience Correlates To Loyalty” in the near future.

I also looked at a survey of large North American firms that we fielded in Q4, 2008. Their responses showed no drop-off in commitment to customer experience. As a matter of fact, the percentage of firms that had a senior executive in charge of customer experience has increased from 45% to 57% and the percentage of firms that use a single measure of customer experience across their company has grown from 53% to 69%. 

We also asked specifically about how the companies will react to the down economy; here’s one of those questions: 

20090205_temkin_stateofcxp_v3_vsmall1

If you look at these responses, 48% of companies expect relative strength in customer experience spending, which is higher than the number who expect cuts to be at par with other areas and 4 times the number of people who expect customer experience spending to go down more than in other areas.

While the tough economy will likely affect customer experience spending (as it does everything else), companies seem to understand that customer experience is one of the more important items to focus on in a recession.

The bottom line: Customer experience remains critical in a recession.

Take My Handbag, But Don’t Touch My Internet

There’s interesting research in February’s National Retail Foundation’s STORES magazine that looks at the willingness of consumers to give-up certain things during this economic downturn. Here’s a graphic that I recreated from the article (the online version was hard to read).

Top 10 items that consumers view as expendable and untouchable

My take: This is interesting data, especially when looking at the number of consumers unwilling to part with their Internet, wireless, and cable services. Even in a downturn, consumers want to stay connected and entertained — at least at home.

It’s hard to understand the impact that this will have on high-end items on the expendable list (luxury handbags, maid service, etc.), because most people go without these items to begin with; so it’s not surprising that many people view them as expendable.

The bottom line: Don’t let poor customer experience make you “expendable.”

Leadership Insights From Obama’s Inauguration Speech

As for our brand, we reject as false the choice between cutbacks and our ideals

This is an edited excerpt from President Obama’s inauguration speech. In addition to delivering a powerful set of messages to US citizens and other people around the world, Obama’s words also contained extremely valuable lessons for executives trying to lead their organizations through the recession. Here’s my take on some insights in his speech:

Today I say to you that the challenges we face are real, they are serious, and they are many. They will not be met easily or in a short span of time. But know this America: they will be met.

My take: Leaders need to communicate the reality about the difficult economic environment, but still maintain a vision of hope for employees (as well as customers, suppliers, and investors).

It has not been the path for the faint-hearted, for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things – some celebrated, but more often men and women obscure in their labor – who have carried us up the long, rugged path toward prosperity and freedom.

My take: The success of a company comes from the day to day activities of all employees. So it is critical to keep them engaged in the shifts being made to react to the recession. How? By making sure to actively communicate and look for their help in finding solutions. Remember the 4th law of customer experience: unengaged employees don’t create engaged customers.

Our workers are no less productive when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions – that time has surely passed.

My take: It’s important to acknowledge the core strengths of the company, but recognize that this is a time for making tough decisions. This may call for cutting off entire initiatives while raising investments in others. As management guru Ram Charan recommends: Just say no to across-the-board cuts.

The state of our economy calls for actions: Bold and swift. And we will act not only to create new jobs but to lay a new foundation for growth.

My take: It’s time to take decisive action that protects your company in the short-term and also prepares the company for its post-recession future. Jeff Immelt, GE’s CEO, captured this nicely in his advice to GE’s top executives on how to manage through the recession: Keep your company safe but keep building the future.”

We will restore science to its rightful place and wiled technology’s wonders to raise health care’s quality and lower its costs.

My take: Don’t just do less of the same thing in this downturn, rethink how you operate. Look for opportunities to use technology to create more even value at lower costs. For a great example of this type of thinking, just look at Aravind Eye Care.

As for our common defense, we reject as false the choice between safety and our ideals… Those ideals still light the world, and we will not give them up for expedience’s sake

My take: Don’t forget the common purpose that holds your company together. Even in a downturn, make sure that decisions are consistent with the ideals of your brand. As Gandhi once wisely said: “All compromise is based on give and take, but there can be no give and take on fundamentals. Any compromise on mere fundamentals is a surrender. For it is all give and no take.”

The bottom line: Take this moment in time to rethink your leadership approach.

Customer Experience Tops NRF Survey

I always feel gratified when companies recognize the importance of customer experience, especially in this economic environment. In a study just released by the National Retail Federation, customer satisfaction was selected as a top priority for 69% of the 153 retail companies it surveyed. This thinking is articulated nicely by Chip Molloy, Senior Vice President/CFO of PetSmart:

When we’re looking at areas we can trim, we like to focus on things that we think are not good for the customer. You don’t want your brand to deteriorate, and that can happen if you can’t differentiate yourself from the competition by offering a good customer experience.

The bottom line: I just feel like saying: Customer Experience Matters.

Retail Execs Discuss Leading In A Recession

At the National Retail Foundation Convention, a panel of of retail senior execs discussed leadership in tough economic times: Kip Tindell, CEO and Co-Chairman of The Container Store, Roger Farah, President, Chief Operating Officer of Polo, and Burton Tansky, Chairman, President and CEO of Neiman Marcus Group.

Their observations were straightforward:

  • Don’t panic
  • Communicate
  • Be flexible
  • Remember who you are
  • Put your employees first
  • Bring in outsiders…when it makes sense.
  • Guide your employees
  • Cultivate trust

My take: These retail execs echoed advice that I’ve talked about in previous posts about managing in a recession. There’s no magic bullet in these tough economic times; firms just a need to remain focused on the fundamentals: customers, employees, and brands. I particularly liked this quote from Neiman Marcus’ Tansky: 

You don’t spend that much time developing a brand and let it drop or change because of a crisis, it just can’t be. We have no intention in making any changes of our brand. There is absolutely no groundswell, no discussion, about changing who we are.

If companies start cutting costs without a keen focus on their brand, then there’s no telling what type of firm they’ll be left with.

The bottom line: Don’t forget to lead through a recession.

The Recession Is Not Just Bad News

There’s nothing good about a recession; or is there? Advertising Age has a very interesting article called Where to Find the Bright Spots in 2009. Here are the bright spots along with a short part of the description from the article:

  • Washington. In case you hadn’t heard, there are some new faces in the nation’s capital, and they will fuel growth for lobbying, public affairs and policy advertising in ’09.
  • Package-goods. Package goods marketers still have relatively flush budgets, can benefit from falling media rates as whole industries such as automotive pull back, and are starting to see relief from once-soaring commodity costs.
  • DRTV. These are salad days for direct-response advertisers of all sorts, as a growing glut of TV inventory has improved industry economics after the go-go years earlier in the decade drove some off the air.
  • Beer. Budget beer brands saw sales climb about 8% in December. Big gainers included Keystone and Pabst Blue Ribbon.
  • Online Video. In the U.S., online video will continue to rise dramatically relative to other online advertising channels in the next few years, dwarfing growth in search, display ads and rich media.
  • Hispanics. Hispanics account for about 50% of the population growth in the U.S., and the Pew Research Center forecasts that Hispanics will make up 29% of the U.S. population in 2050, up from 14% in 2005.
  • E-BOOKS. The wireless reading device [Kindle] was Amazon’s best-selling item in the electronics category in 2008. Read more of this post

Recession Leadership: Be Real, Communicate, And Look Ahead

Fast Company has an interesting Q&A with Ram Charan (author and management guru) about leadership in an economic downturn. My first post about managing in a recession, Lead Your Company Out Of A Downturn, was based on an article in Fortune Magazine by Charan.

I really liked Charan’s answer to the question: What is the biggest difference between the leaders who will be able to pull through and those who won’t?

There are three differences in the leaders in these circumstances. The first and foremost is defining realism, and then taking the actions now and not postponing them. The second thing is orienting people on the new reality with superb communications–internally and externally. And the third, coping with the toughness of the existing environment, but positioning the business to change the game after the storm.

My take: Take to heart the three things Charan prescribes for leaders in a recession: realism, communications, and future-orientation. It captures the essence of these great quotes by GE CEO’s:

The bottom line: Recessions require even more leadership.

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