Kohl’s, Office Max, Best Buy Dominate Advertising Awards At RAC Conference

By Amanda Ferrante

In a year when retailers needed to pull out all of the stops to drive traffic and conversions, the Retail Advertising and Marketing Association (RAMA) acknowledged those who outshined their competitors with innovative marketing with the 2009 RACie Awards, as part of the 2009 Retail Advertising Conference in Las Vegas.

Broken down by advertising medium, the awards recognized retailers who thought outside the box in 2008. Kohl’s reigned supreme with ten honors, most notably for its “Life In Rythym” campaign, which outdid its competitors in the newspaper, outdoor, TV spot and multimedia categories. Kohl’s “Simply Vera by Vera Wang” campaigns also made waves in the magazine, private label and multimedia sectors.

Best Buy was a top player thanks to its “BlueShirt,” “Geek Squad” and “True Stories” campaigns. The electronics retailer dominated the digital interactive and multimedia categories and took home silver honors for innovation. Best Buy was also awarded the top honor, the Peter Glen Award for Community Service for its BlueShirt Corps Cause Marketing Initiative.

Office Max’s “Elf Yourself 2009” campaign brought back the laughs in the digital interactive and digital media Web categories. The office supply retailer kept the humor in full swing with its “Back-to-School Penny Pranks” TV spots earning Gold honors in the multimedia category. Office Max also earned silver honors in the private label packaging category for its 4WRK brand, and took home bronze honors for innovation for its “Fashion Week Lounge.”

Walmart and JC Penney were each acknowledged with three honors—Walmart for its Christmas TV spots and JC Penney for its digital interactive promo, gift card innovation and “Back-to-School High School” TV spots. Target earned recognition for its innovative gift cards, one that doubles as a digital camera and the magic gift box gift card. The Target GO International campaign won bronze honors in the digital interactive category.

Other winners in the TV single spot categories include The Home Depot for the “It’s Time” Olympics commercial. Circuit City’s “Mixed Signals” spot earned recognition, as well as Build-A-Bear Workshop’s “Wish” spot. The single media print campaign category honored Saks Fifth Avenue for its “Great Gifts—the Conundrums campaign, as well as Toys “R” Us for its holiday campaign.

A detailed look at this year’s winners is available via the RACie Winner’s Book, an interactive guide to the top campaigns in retail.

Professor Tom Davenport Advises Retailers To Cultivate Potential Benefits of Analytics

By Debbie Hauss
Industry experts and retailers themselves agree that most retail companies have not yet realized the full potential of the breadth of analytics available to them today. Economic climate aside, retailers must strategize for long-term success, and using analytics effectively can go a long way to creating security for businesses on the other side of the economic recovery.

Recently SAS and Teradata commissioned a study on analytics along with Tom Davenport, professor at Babson College and co-author of the book “Competing on Analytics.” The original plan for the study was to focus on specific themes related to analytics in retail, but Davenport quickly found out that first the industry needed to take a step back and evaluate all possibilities and potential retail analytics could provide. The recently published study is titled “Realizing the Potential of Retail Analytics.”

“I was surprised by the huge potential of retail analytics and the breadth of opportunities retailers have to choose from,” says Davenport. “But I was equally surprised at the lack of coordinated approach coming from retail businesses. It was difficult to find one person in retail who could speak to the broad range of analytical activities.”

Learning from the Best
During interviews with 33 retailers and more than 25 retail analytics experts, Davenport noted that the same companies came up over and over again when discussing best practices. Companies like Best Buy, Walmart, Target, Kohl’s and JCPenney have taken the lead in developing successful processes using specific types of analytics. But, he notes, none could speak to the complete realm of analytics resources.

Overall, Davenport found that “the companies that have aspirations to be big and successful are focusing most closely on analytics, including department stores, online retailers, and probably most of the large discount retailers.” But most retailers today are realizing the potential benefits of analytics, and some have very recently changed their outlook regarding analytics. “A few years ago I did some work with TJX and at the time they said: ‘We are traditional merchants and are not sure analytics relate to kind of merchandising we do.’ But they are not saying that anymore.”

Making the Best Analytics Choices
Given the breadth of choices available, and the fact that most retailers don’t have a huge amount of money for investment today, making the right choices is critical, says Davenport. He suggests that the first key step is to understand your company’s business strategy.

Ask the question: “What are we trying to accomplish as an organization?” For example, a number of analytics applications relate directly to understanding the customer, knowing what products they buy and developing a detailed understanding of what they want to purchase in the future. “Those applications make the most sense for organizations that have customers who spend a lot with them, have relatively high margin products and can afford to invest a lot in learning more about their customers,” he notes.

Other companies might want to focus their analytics choices elsewhere. “A discount retailer might want to focus on assortment planning or pricing optimization – two applications that deliver a quicker ROI.”

Retailers also can learn from their peers when making decisions about implementing analytics. “Today, everybody in retail should consider themselves in multichannel environment, and therefore should look at the leaders in that area such as Amazon and eBay. Those organizations are doing extensive testing, using lots and lots of web analytics, and collecting product recommendations.”

Outside retail, retailers could look to other industries for best practices. “The credit card industry has done a lot in looking at customer behavior,” Davenport notes. “And banks, Capitol One for example, have been very aggressive in the use of analytics and testing. Additionally, the travel and transportation really pioneered a lot of the pricing analytics.”

The 18 Most Common Analytics Applications
Taking an almost encyclopedic approach, Davenport constructed a list of 18 common analytics applications in his report. In explaining each application, Davenport notes best-practice retail examples. The list is separated into three distinct categories:

Widely Adopted Analytics Processes

1. Assortment Optimization and Shelf Space Allocation
2. Customer-Driven Marketing
3. Fraud Detection and Prevention
4. Integrated Forecasting
5. Localization and Clustering
6. Marketing Mix Modeling
7. Pricing Optimization
8. Product Recommendation
9. Real Estate Optimization
10. Supply Chain Analytics
11. Test and Learn
12. Workforce Analytics

Organizational Trends

13. Adoption and Use of Analytics
14. Analytical Ecosystems
15. Centralizing Analytics
16. Store-Level Empowerment

Strategic Initiatives

17. Analytical Performance Management
18. Multi-Channel Analytics

Looking to the Future
While many retailers are still getting their proverbial arms around the current analytics options, they also should keep their eyes on what’s coming down the road. Davenport notes five future analytics trends to watch:

1. Clienteling. “I think if you’re Brooks Brothers, Nordstrom or Nieman Marcus, you already are doing clienteling to some degree, but you going to use analytics to determine product selection in the future. This could be a relatively minor application to add.”
2. Video Analytics. If you’re really into fraud detection and shrinkage prevention, soon it will be possible to analyze video in that way, “but first the industry must wait for the vendors in this area to mature a bit.”
3. Sentiment Analysis. “It could be cool to know what customers are thinking about a particular fashion line and could help retailers select styles for fashion-oriented goods. I don’t expect this application to take off soon, though.”
4. Demand shaping analytics. “We are not that far away from this. Companies are already doing a lot of supply chain, pricing and assortment optimization. Once they get these systems connected they will be able to perform advanced demand-shaping analytics.”
5. Real-Time Offers. “This is already happening a fair amount in online and people in other parts of world are doing it with mobile technology, but the U.S. is lagging the world here. More and more of mobile phones are capable of transmitting proximity information, so I think it’s probably not that far off. We could easily see that a particular carrier and technology manufacturer (AT&T and Apple, for example) could partner to ask customers if they would like to be notified of deals they would be interested in when they are physically within the proximity of a retailer.”

While Davenport began the study before the most severe economic downturn, he hopes that retailers will continue to invest in analytics. “It is pretty clear that the really great, well managed companies continue to invest in analytics, even in a down economy.”

To access the complete study, go to http://www.sas.com/events/cm/622624/index.html.

Valentine’s Day Promos Show Love For Innovation Beyond Price Discounts

With Valentine’s Day spending projections down to $102.50 from 2008’s $122.98 figure, according to NRF, retailers were looking to spread the love and get consumers out spending. While some analysts expressed concern that too many retailers continued to pull the discounting lever, there were some signs this holiday that retailers are getting more creative with cross channel promotional offers that may shore up the broken pricing levees.
“Consumers have different perceived values and emotions for their loved ones, and marketers should try to better understand these differences and promote to consumers' emotions rather their wallets,” says Yoram Greener, Senior Director, DbM Consulting, Merkle. “Marketers need to realize that every promotion is an opportunity to build relationships with their consumers. Having said that, retailers need to look deeper into customer preferences and reactions to be successful. Competition on price is a dangerous value proposition, since you end up commoditizing your value proposition, rather build relationships.”

Although holidays such as Valentine’s Day and Mother’s and Father’s Day, represent smaller revenue opportunities compared to the fourth quarter, industry experts suggest they are a missed opportunity to engage with new customers. “Our research shows that when it comes to these holiday gift-giving opportunities, retailers really focus primarily on the fourth quarter, but they are missing the day in- day out opportunities you have with birthdays, anniversaries and smaller holidays that come around,” says Pam Danziger, president of Unity Marketing. “They don’t realize that gift-givers actually spend more money throughout the year for those occasional holidays than they do in total at Christmas time.”

Retail TouchPoints found the following bright spots for Valentine’s Day from the Valentine’s promotional landscape:

Tiffany’s nurtured last-minute shoppers by offering complimentary shipping and guaranteed Valentine’s Day delivery for customers who order online by noon today. In addition, the jeweler offered complimentary engraving in-store and online on select items Feb 2-9. While the company has a long standing policy against price promoting, they are thinking outside the little turquoise box to offer shoppers something different, while catering to customers by offering a personal touch.

Talbots, playing off the pessimistic consumer mindset, asked shoppers to share their worst Valentine’s Day gift ever on the retailer’s Web site. The grand prize winner gets a $1,000 Talbots wardrobe and a trip to NYC for a shopping day with Chief Creative Director Michael Smaldone. Second and third place winners win $500 and $250 Talbots gift cards.

“What I really like about [the Talbots promo] is that it encourages customer involvement,” says Danziger. “That’s the hook. It’s not the 20% off, but it makes the customer respond and become involved. It provides a platform of involvement and relationship with the customer that makes it so much more meaningful than simply buying a product or getting a discount. That’s making the connection.”

Sears is playing on the Valentine’s Day theme to sell some decidedly unromantic products. Its “Love this Sale,” which offered no payments or interests for 12 months on appliances over $300 with a Sears card, plus free standard delivery and haul away after Mail-In rebate.

“Most retailers define ‘loyalty’ as ‘market share,’” says Mark Lilien, consultant with Retail Technology Group. “True loyalty is defined as ‘price independence.’ It's the difference between Dell and Apple. For Valentine's Day, the best thing any large retailer can do: have merchandise of superior design not available elsewhere. For small retailers, have an assortment that's unlikely to be duplicated nearby.”

Mid-Season Report Card For The Holiday Season Shows Missed Opportunities

Written by Debbie Hauss

The 2008 holiday season has been stressful at best for both consumers and retailers. Most of us would like to call 2008 an anomaly, but is that a safe assumption? We will only know for sure next year, but in the meantime, retailers, consumers and industry analysts are reviewing what they have learned this year in hopes that it will help for next year. “I think this year is a singularity,” says Paula Rosenblum from RSR Research. “We are living in a shell-shocked society at the moment, and I can’t imagine this will continue.” Consumers did flock to the stores on Black Friday 2008, but mostly to deep discounters and at those stores they were looking for unusually large markdowns. Retailers know that consumers, particularly this year, won’t blink an eye at a 20%, 25% or even 50% discounts in many cases. Those out shopping are looking for 70% off and higher – and in many cases the retailers responded…but at what cost? The Deep Discount Debate Many retailers have felt the pressure to offer consumers the deepest discounts this year, even if it is historically out of character for their companies. “It is the year of the deal,” says Brad Wolansky, vice president of global e-commerce for The Orvis Company. “Even merchants who traditionally aren’t promotional (such as Orvis) must pay to play this year. Serving up the ‘same old stuff’ doesn’t work, particularly on the web where customers can see the difference.” But industry experts have mixed opinions on the subject: “Deep discounts don’t boost your brand, they just destroy your margin,” says Nikki Baird from RSR Research. Greg Buzek, president of IHL Services, has a different take: “Retailers that are not willing to heavily discount during this season are going to see dramatic drops in same store sales. Abercrombie discounted less than others and saw their overall sales for November drop 28%. Those that discounted might not have increased sales, but they were able to weather the storm a bit better.” “To further exacerbate the problem, it has also been challenging for retailers to compete against the prices of competitors who have filed for bankruptcy and have already publicly announced their store closures,” adds Janet Sherlock, research director at AMR Research. “While top-level revenue figures were adequate during the 2008 Thanksgiving weekend, profit contribution was likely poor for many retailers. Unfortunately, we then train the consumer to expect excessively low prices. Next year, there will likely be fewer retailers.” Is Cyber Monday Effective? RSR’s Rosenblum says a resounding “No!” She contends that if the industry jumped off the Cyber Monday bandwagon retailers would gain more total gross margin dollars. “Cyber Monday is a creation of the industry (or let’s say, industry trade groups), not the customer. The core assumption is that people shop while they are at work because they have bigger and better computers, and that’s just wrong, or at least dated. If retailers stopped running those silly promotions on that day…they would be primed to provide a better customer experience.” Nevertheless, Cyber Monday exists and will likely continue to exist. To make it a successful event, retailers must first ensure that their web sites will work effectively throughout the entire Thanksgiving weekend, then they should focus on effective cross-channel retailing as an everyday practice. “Retailers have totally underestimated the amount of online traffic on Black Friday,” says Buzek. “Sears’ site went down and Walmart attempted a major change the week of Black Friday. That’s just asking for trouble.” That said, Buzek suggests that retailers bring Black Friday and Cyber Monday together for consumers to offer a better customer experience through effective cross-channel retailing. “The best thing would be to allow consumers to gain Black Friday pricing or Cyber Monday pricing in both channels. Particularly for Cyber Monday, the offers that are online should also be available in the stores.” But Baird sees challenges with trying to coordinate across channels during this hyper busy weekend. “There is little cross-channel opportunity because the challenge of managing high-demand items prevents you from making online or in-store promises.” Make Loyalty Members Feel Special Whether or not deep discounting is helping retailers this year or any year for that matter, retailers still must focus on garnering sales from their best customers not only during the holidays but all year long and from one year to the next. “Retailers really do very little to make their loyalty shoppers feel special,” notes Baird. “How about a special gold member lounge complete with foot massage and hot chocolate? Or loyalty members only from 4-6am and 9-10pm?” Buzek agrees. “I think most retailers are missing the boat on focusing on low margin sales only to drive traffic for (Black Friday) rather than building a longer term relationship that allows for outreach and ‘special days’ throughout the year. Retailers like Borders and Best Buy get it with their programs. I’m not sure of too many others that are taking advantage.” Other Innovative Alternatives to Deep Discounting Discounting on Black Friday, Cyber Monday or any other day of the year is just not an option for some retailers. Abercrombie chose to forgo discounts to maintain its brand image. Cloudveil, an outdoor apparel wholesaler and retailer, has responded similarly. “We can’t discount on our site or at our store because our products are sold through many other wholesalers and they would not appreciate being undersold by us,” says Jeff Wogoman, director of marketing at Cloudveil. Instead, Wogoman is looking at more innovative ways to sell Cloudveil products. “We are looking at developing more video content for our website and we are trying to crack the social media nut a bit more.” Wogoman cites Nike as one retailer that has “hit the ball out of the park” with social media. “Giving a forum to runners to download information and share with others – it was genius that they pulled it off.” Is There a Utopian Thanksgiving Weekend for Retailers? It’s called Black Friday because it’s the weekend when most retailers traditionally move into the “Black” and it is likely to continue beyond 2008 and 2009. But the Internet, social media and mobile retailing are forcing retailers to be more reactive on the spot. “You need to evolve daily and serve the promotions and products and prices that customers are looking for,” says Orvis’ Wolansky. AMR’s Sherlock offers up a few tips for retailers going into 2009. “Next year there will likely be fewer retailers and the retailers that remain should have learned to: 1. Buy as lean as possible 2. Keep supply chain cycles as short as possible in order to react quickly to market conditions 3. Drive value to consumers through programs, services, and experiential shopping, not just price 4. Wean customers from the constant state of deep discounting and continual promotion Those tips plus a healthy economic recovery could bode well for retailers in 2009 and beyond.

iPhone Apps Represent New Window Of Opportunity For Retail Marketers

By John Gaffney

After all the same store sales plunges, consumer spending pullbacks, profit nosedives and pricing collapses, one of the few the most positive image of 2008 can be found in a swirling picture of snow set against an iPhone screen and a big red bullseye. With Target, Amazon, and The Gap leading the way, the past two weeks has definitely put mobile applications on the retail agenda to stay.

“It’s a very similar market to ten years ago when retailers started flocking to online advertising,” says Chris Negron, sales executive for online music service Pandora. “Now everyone wants to be mobile. I would say 50 percent of our online clients are looking to develop a mobile application and a good number of those are retailers.”

The importance of this initial flurry is twofold. First, it has taken mobile phone applications and advertising from the planning stage to reality in a short period of time. Second, it has established the platform as a legitimate touch point for retail consumers. Pandora has been officially listed by Apple as one of the top ten applications (out of 10,000) in the iTunes app store. It was one of the first applications developed for the device, and its service carries mobile on-screen ads.

Negron is not at liberty to discuss the retailers initially involved in his service, but he says there are major companies other than Target, Gap and Amazon. He has seen the retail interest level developing into the more substantial breakouts from the three retailers who bowed proprietary applications over the past two weeks. Here’s what the three are aiming at with their applications:
• Target: Developed by San Francisco-based AKQA, the Target app makes use of the “accelerometer.” Shake the iPhone and the gravity and vibration cause the screen to change. While other accelerometer applications are used to simulate beer chugging,in Target’s case it is a snow globe that settles around a product and then the logo. “Good mobile phone applications are good branding applications,” says Kevin Barenblat, CEO of Context Optional, which has developed iPhone applications for several brands. “That’s what Target does.”

• Amazon: Barenblat says Amazon’s entry defines the utility that must be associated with the brand magic for mobile apps. Amazon’s application offers access to other retailers, such as Target and Macy's, but its features, which include "one-click" shopping, are focused on Amazon. It also includes Amazon Remembers, an experimental feature that uses the iPhone's camera to help create visual lists of products you want. Take a photo, and the iPhone app uploads the image to Amazon.com; the service then tries to match products in the same category.

• Gap: Barenblat also urges retailers to make sure their mobile apps are viral. The Gap fills this requirement. Its first mobile app features music videos with Christmas carols being sung by popular artists. The videos can be sent to friends via email. Another allows users to mix and match clothing on male or female models, and then tap to buy the items.

The most important “to do” for retailers planning mobile app development is long-term planning. Negron counsels retailers that are either planning ad campaigns on apps like Pandora or developing proprietary solutions to think beyond the initial buzz. The iPhone for example, started with just 300 apps in June. By the fourth quarter of next year it could easily have 20,000 different applications ranging from the novelties like beer chugging to serious retail e-commerce channels.

“Think through the series of apps as you would a media plan,” he says. “They are changeable and they will all need to have their own promotion plan to achieve scale. Different applications will fit different times of the year.”

Most analysts believe e-commerce applications will be the rule rather than the exception for cross-channel retailing by spring. “Think beyond the first iteration,” Barenblat says. “And don’t settle for cool factor alone. Think in terms of ROI.”

Warning Signs Within Black Friday, Cyber Monday Spikes, As Retailers Go “All-In” Early With Holiday Deals

At first glance the results from the recent Black Friday and Cyber Monday sales gave the retail community some hope that consumers might be willing to open up their wallets again. Shoppers upped spending on Black Friday by 7.2% over last year, with the NRF’s 2008 Black Friday Weekend survey conducted by Big Research, estimating total Black Friday spending at $41 billion. Online sales for Cyber Monday also jumped 15% from a year ago, according to data from comScore, Inc.

However, a closer look at how those increases were achieved raises some caution flags. Sales spikes from the key Black Friday and Cyber Monday deals may have been more of a mirage that distorted the real slump still going on in retail. The November sales results reported this week continued to show a sharp downturn for almost every company not based in Bentonville. Target’s November sales dropped 10% and off-price leader TJX declined 12%. The November MasterCard Spending Pulse predicted a decline of more than 20% across several categories.

What is even more troubling than the continued sales slump is the potential long-term impact that the desperate deep discounting and “promote-at-all costs” approach retailers have taken to try and paddle some new life into the holiday season. The huge traffic spikes merchants have come to count on Black Friday and Cyber Monday could easily be watered down in coming years as retailers offered head starts and extensions on the holidays this year. Some examples:

• Borders got a head start on Black Friday with an email campaign on Tuesday, Nov. 25, extending its Rewards members a Pre-Black Friday Savings Pass for the Wednesday prior to Black Friday, extending 50% off certain books and Buy 1 Get 1 offers as part of a special in-store promotion.
• On the Sunday prior to Cyber Monday, Circuit City sent out an email with the headline, “Our Cyber Monday Sale starts now--we couldn't wait until tomorrow!” On the flipside of starting early, Circuit City also dragged Black Friday for out for an “encore event,” with an email campaign hitting on the Thursday after Black Friday titled, “Back by popular demand: Black Friday deals, better than ever!”

Even more troubling were the promotion strategies seemingly borrowed from the automotive industry, such as “No Interest Financing until 2012,” and extending Employee Pricing to any customer that gets the Sunday newspaper. It has become much more common for retailers to extend Friends & Family discounts through their employee networks, but The Sports Authority took that to another level this holiday season with an advertisement that offered a one day Employee Pricing sale.

Given the meltdown of the economy and the related impact it has had on consumer spending it is understandable that retailers need to be extremely aggressive during the remaining weeks of the holiday season. However, it is also important that promotions be based on real value of special buys and/or hot merchandise, rather than desperation. As the auto industry is demonstrating in its testimony in Washington this week, once you have played all your cards with the consumer, there is no rebate offer or discount promotion you can offer to trump up demand. Ultimately, what happens is consumer trust is lost and shoppers become trained that a better deal is always coming next week.

Leading Retailers Relying On Analytics Tools To Respond To Shifts In Holiday Demand

By John Gaffney
The dynamics of the current retail landscape are fast and furious, with the next few weeks sure to turn up the heat even more as retailers look to make up for lost sales after a slow start to the holiday shopping season. Many experts are predicting customer data analytics, and the optimization processes that result from it, will play an essential role as retailers try to maintain their agility.

Leading online jewelry site Ice.com, which has been in business since 1999, is banking on data to help it get through a “tough” year,” according to Pinny Gniwisch, Vice President of Marketing. Next week the site will add a proprietary customer review application. “The data we collect helps us get to know our customers and helps us interact with them,” he says. “We used to manually search through shopping carts and wish lists to get customer data, and while that can work, it’s not automated. Now it’s automated. All the successful retailers that I track are using data to cut acquisitions costs and drive sales.”

Industry insiders predict data analytics will give leading edge retailers a competitive advantage on many fronts this holiday season. “Very simply data makes retailing more customer-centric,” says Alexi Sarnevitz, senior director of retail strategy for SAS. “That’s important in any environment, but it is essential in a tough economy.”

From a pricing perspective, Sarnevitz believes the stronger retailers will be able to quickly evaluate Thanksgiving weekend sales, and then make adjustments within days. From a marketing perspective, he expects that campaigns will be optimized or pulled based on the data generated by them. Many retailers have begun this process already and are looking at agility as a key to surviving this holiday season.

While SAS has been working closely with leading retailers on predictive modeling and predictive analytics solutions, Sarnevitz points out that past behavior counts too. Retailers who rely closely mine their data will be in better shape from an inventory perspective because their stock levels have been driven by data, not supplier relationships or past year comparisons. An example of how inventory optimization can be seen in recently published case study on Waitrose, a leading UK supermarket chain. Using SAS solutions to achieve accurate demand forecasting, Waitrose was able to realize more efficient stock ordering, delivery and replenishments. Waitrose also reduced its stock holding by 8%, its waste by 4% and was able to improve customer satisfaction significantly by ensuring product availability.

“Data needs to be managed end to end,” says Thomas Redman, author of Data Driven. “Retailers have to put good data in the system, and they will be rewarded with the ability to understand their customers. Those customers will still be here next quarter. All the good things that data brings to a business will be here next quarter too.”