What can Retailers learn from Direct Marketers?
Rowan Gormley, Chief Executive Majestic Wine PLC
At heart, I’m a Direct Marketer and relatively new to the world of multi-channel retailing. I worked for innovative direct companies for more than a decade from Virgin Direct to Naked Wines, pensions to Pinot Noir, until two years ago when Majestic Wine bought Naked Wines, and I took over running the whole Group.
I learned two lessons quickly: 1) Retailers obsess about sales, Direct Marketers obsess about customers. 2) Retailers guess, Direct Marketers analyse.
So who’s right? I think the direct marketing approach has real strength in today’s market. By obsessing healthily and analytically about customers, you can learn what you need to know about upcoming sales. The health of the customer base is the health of the business: if you have customer loyalty, sales look after themselves. If you don’t, it doesn’t matter if last month’s sales are good or bad, the foundations will start to crumble.
They say chess grandmasters don’t even see bad moves. This is because they have already spent years seeing bad moves followed by bad outcomes and have analysed the links from one to the other, making them ultra-efficient decision makers.
So when retailers talk about ‘analysis paralysis’, as if looking at data is an excuse for inaction, they misjudge. Great analysis isn’t a panacea: the canary may warn you of danger but it won’t show you the way out of the mine! Analysis won’t produce plans to correct the causes of your unachieved retail potential but it will help you exclude unproductive courses of action, saving time, money and energy.
Direct Marketing also embraces ‘test and learn’ where Retailers often fear to. In Direct Marking kindergarten, we learn not to guess but A/B or multivariate test every route and every segment. A test, learn, refine, re-test culture frees up your truly entrepreneurial people. They can try crazy new stuff because they are not betting the ranch; just testing a theory on a segment.
Sometimes results are counterintuitive. In a market driven by promotions, a test on Majestic’s customer base found that emails with informative, well-written, interesting content produced better results than promotions. It’s hard to second guess customers: better to test, improve or fail quickly, and learn. King Kanute was after all a tide abatement retailer who didn’t test and learn.
So, to flip the couch round, what should Direct Marketers learn from Retailers?
The hardest lesson I’ve learned is that things just take longer. When you have 1,000 people in 200 branches, a brilliant new idea takes a time to land. Retailers understand that it takes leadership and change management and ten times the energy to roll anything new across an entire estate, compared with a Direct Marketing organisation. Good retail is testament to the fact that once out, positive change runs through the very grain of a company and that is extraordinarily powerful.
Before I started at Majestic, I stress tested local staff: would they let me carry my own wine to my car? Turns out I literally had to wrestle the guys to the ground to take the wine off them. When a value is embraced, it becomes embedded. That is power of great retail staff.
So which model is better, Retail or Direct Marketing? Obviously, a hybrid. If you take a Retailer’s best people powers and combine them with a Direct Marketer’s obsessions with customers, analysis and test-and-learn, the alchemy yields a better business than either of the two operating discretely.
At Majestic, we are halfway through our transformation process. The base metal has not become a gold bar… yet! But, by embedding direct marketing principles into a traditional retailer, we see the lustre improving week by week.