I Like Market Data

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Even before they contacted me to ask if I was interested in writing about it, I’d seen that Krush had released the Executive Summary for the Krush Buyers Report and it seemed an intriguing idea. Most of my five loyal readers know I think three things about market research and data.

First, that we don’t get enough of it, though that seems to be changing. Second, that when we do get good data, we, as an industry, sometimes don’t know how to make use of it so don’t really understand the value. That’s a particular problem if you’re a company trying to sell the data you worked hard to collect. Third, you have to drill down on the methodology to understand the strengths and weaknesses of the collection and analysis process. That’s true for any process; not just Krush’s.
What Krush did was invite “…a select group of brands exhibiting at AGENDA to preview their upcoming Spring 2012 lines to their consumer fan base using KRUSH technology.”  Then they had, “Consumers – thousands who represent brands’ trend setters as well as their “mall-shopping” followers – rated each item from new collections in an online SneakPeek™ event on KRUSH. “ They generated 135,217 ratings of 1,059 different products that included pretty much everything but hard goods.
The idea is that Krush can take this data and generate a report for each brand that indicates what is likely to sell (or not sell) well when the product hits the retailer, thereby allowing the brand to positively influence retailer buys and sell through and perhaps adjust what they produce.   The question I asked immediately, that you are no doubt asking and, to be fair, that Krush acknowledges in their summary as key is, “How do we know these results will really be predictive of what people will buy?”
Krush has done this before with scores of brand, and tells me the data is “predictive” of what’s actually sold. But of course as a brand, you won’t “know” how it worked until the product hits the retailer and you compare what sells with what the reports said would sell. Let’s take a closer look at their methodology as they describe it and see if there are some obvious questions we might ask.
Here’s how Krush starts its description of its methodology:
“KRUSH uses proprietary Crowdsource™ technology that leverages proven predictive models, game theory and online social networking technologies to capture, systematize and analyze large amounts of data designed to assist brands in improving demand forecasting and sales of goods in the Action Sports and Lifestyle industry.”
Well, that sounds impressive and seems kind of intuitively reasonable. Trouble is, I have no idea what it means. They go on to say their “Web-based platform allows manufacturers to preview items from upcoming lines to consumers and fans of the brand up to one year before market introduction in an online SneakPeekTM event.”
Now we’re getting somewhere. Consumers see the product on line and tell you what they think about it. I understand that, though the process is much more complicated than I’ve glibly described it. Here’s what Krush says:
“…manufacturers submit their line-ups to KRUSH which are entered into our system and tagged for features such as color way, material, style, trim, accents etc. KRUSH then leverages social networking communities to identify consumers and fans of the brand, then invites selected individuals to preview and rate the latest items. Using an intuitive rating system, consumers indicate whether they like or dislike each item in the line. Within days there are enough ratings to produce accurate predictive data…”
Now, I think, some of the questions you might want to ask about the process become obvious.
1.       The participants are “self-selected” as fans of the brand. They are, for lack of a better word, “core” customers. Does that selection process bias them towards the brand? Maybe that’s a good thing.
2.       What exactly do they see on line? One piece? All the brand’s pieces? A brand’s piece compared with comparable pieces from other brands? Line drawings or actual photos? In one color? Which color? On a model or just the item by itself?
3.       Is the comparison valid across categories?  That is, should we be asking just if the consumer likes this hat better than another hat or is the right question if they’d chose the hat over the t-shirt or the pair of pants or another brand’s hat?
4.       Will what a consumer is disposed to buy based on what they see in the survey be what they are disposed to buy in an actual store or an online site?
5.       Are suggested retail prices featured in the online survey and is price taken into account in estimating probability of purchase?
6.       Why do we believe that months later a customer’s bias will remain the same? I suppose that’s a problem we have to deal with no matter what.
7.       80% are male and 63% are between the age of 15 and 20. What do you do with this data if that isn’t your market?
Krush goes on to say, “Each item within a SneakPeek and the SneakPeek as a whole are then scored using a combination of proprietary popularity and ranking algorithms that incorporate preferences, passions, purchasing intent, demographics, influence, and other factors. The items are then normalized and ranked, with the highest scores indicating the most popular items and the lowest scores reflecting the least popular items in the line.”
You can see from that quote they are trying to deal with some of the questions I raised. In fact, if you go to this link and then hit “continue browsing” you can see the brands they are, have, and will be collecting information on. In fact, you can rate the open brands’ products.
When you do this, you’ll be asked if you “like” or “dislike” the product. The price is given and you can “Buy It Now” or reserve it if it’s not yet available. There’s also a box for a comment.   Go do it yourself. It’s better than my description.
Spending a couple of minutes doing this answers a few of the questions I asked (and suggests that maybe I should have spent time on the web site before asking them) and raises some new ones. For example, it seems that I can give my opinion on any product I want. Trouble is, cool as I am, I am not the target demographic. My opinion messes things up. But then, when I try to say I “like” something, it makes me login to my Facebook account. Krush wants access to my information on Facebook and wants permission to email me. I wasn’t prepared to do that. Maybe that helps to self-select against people they really don’t want in the sample.
Where the item is available now, the price is shown and you are offered the chance to buy it. You see a standalone picture of the item. Sometimes it’s on a model. As you can see, each brand apparently has considerable flexibility in how they show their products. And of course, you’re being asked to like or dislike a single product in isolation from other brands, colors, and merchandising presentation. Well, nobody is suggesting that isolating and figuring out consumer motivations is easy.
You, as a brand, have some beliefs, probably both anecdotal and empirical, about who your customers are and why they buy your product. Maybe Krush’s process will allow you to test those. In any event, you’d certainly want to know something about how the different factors are ranked, which is given more or less emphasis, and why. As Krush notes, the participants identify themselves as “core” (not Krush’s word) consumers. Is that your market?
While we’re on the subject of trying to ferret out consumer motivations, you might go read a book called Blink, by Malcolm Gladwell. He’s the guy who brought us The Tipping Point. Here’s the ubiquitous Amazon link to Blink.
I think what Krush is doing is a good idea. Of course, if it works well, you won’t have any choice but to use it because everybody else will be. It could become sort of like, “Show me the CarFax!” That would have to be Krush’s wildest dream.
My guess is that it will be like all the market research I’ve ever seen. Not a panacea, but useful if you’re thoughtful about how it’s done and how you use it. To use Krush’s word again, it’s “predictive.” It’s not going to tell a brand precisely what and how much to make and a retailer what and how much to buy. The point of this article is that with Krush’s market research, or anybody else’s, you’ve got to dive deep into the details before deciding to participate and if you decide to participate to get real value out of it.

 

 

Popup Playgrounds; An Intriguing Marketing Idea

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It’s not like I look to the New York Times for all my good industry advertising and promotion ideas. Still, once in a while, they come up with something that gets me thinking. Their “Presto Instant Playground” article is one such idea. You may have to register to read it, but it won’t cost you anything.

“During a two-month period last year, seven civic coalitions in New York neighborhoods like East Harlem and the South Bronx got permits from the city to close certain local streets to traffic for designated periods of time — say, between 10 a.m. and 3 p.m. on a summer weekday. Working with the police and other city agencies, they re-designated the areas as temporary “play streets,” encouraging neighborhood children to use them for exercise and offering a range of free games, athletic activities and coaching.”

My immediate reactions was that this was an especially good idea for skate brands because a skater’s playground is the street and brands already have connections with skate parks and park and recreation commissions. But I really liked it because it connects with parents and kids, doesn’t appear to cost much if you don’t want it to, involves the local community, and gets kids outside and active. We have a business as well as a social reason to want to see that happen.
 
I know retailers and brands (sometimes in cooperation) have done some similar things. And I recognize it might be a little harder for a snowboard or surf company to make the connection. But the approach I was thinking about was not for a brand to do it themselves, but to contact their local civic organizations and see if they could do something similar in cooperation with those groups.
 
I’d start by contacting some of the groups that did it in New York and find out just how they pulled it off and if they had contacts in other locations that might also be interested. My hope would be that the civic organization would do most of the organizational work using already existing contacts with the local government and other stakeholders. The brand, or retailer, would be left to provide maybe a bit of cash, some product, the presence of team riders perhaps, pop up tents, and maybe some food and drink. I don’t know- it would depend on the specifics.
 
I also recognize that a snowboard company, for example, might have to be a bit cautious in their approach if they were doing it with lower income, inner city kids whose chances of going snowboarding were poor. But maybe, for example, you give some of those kids a chance to go and maybe you’re just there to get the kids outside and active at a low cost and you hope for some brand benefit somewhere down the line.
 
Anyway, it just seemed like a low cost, positive, valuable thing to do, so think about it.

 

 

The Lesson to be Learned from SIA’s Sales Report

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SIA recently reported that the snow sports market in February exceeded $3 billion. You probably get the same emails I get, but if not, you can see the announcement and analysis here. SIA expects the industry to set a record by the time the season ends. Through February, sales are up 13% in dollars and 8% in units. In February unit sales were down 2% and dollars sales 1.5% compared to February last year. But gross margins rose 8%.

With the usual cautionary note that we always do well when the snow gods favor us, let’s look briefly at the opportunities these results present us with.

I’m thrilled to see February sales down and margins up 8%. That happened because inventories were tight. For the whole season, sales are up more than units, also reflecting rising margins.
 
If dollar sales fell 1.5% in February but margins were up 8%, how did you do? I’d say you had more gross margin dollars than if sales had been a bit higher but margins lower. Those gross margin dollars, I may have argued a time or two, are what you use to pay your bills. But wait! There’s more!
 
You have less working capital tied up in inventory. You could have spent less money on advertising and promotion. Your customer is learning not to wait for a deal. Tons of closeout product isn’t showing up in places we really don’t want it (unless you’re one of those close out people, in which case you may not be too happy). There’s not a pile of left over product in your warehouse waiting to be cleared out before the start of the season next year.
 
Won’t it be fun when customers start coming in looking for cheap stuff and you can tell them that not only isn’t there any, but if they don’t get what they want now, they may not get it? You’ve already improved your gross margin by next year just by not having a bunch of inventory left and we’ve collectively improved our brands’ images.
 
As an industry, we go to conferences, hold trade shows, create learn to ski/ride programs, run all sorts of programs, do studies advertise and promote, and spend overall millions of dollars trying to get people to try riding/skiing and stick with it.
But I’d hypothesize that we could forgo a bunch of that if we just didn’t get so damned greedy and continued to control our inventories. Oh, and we- you, that is- could make more money with less risk.
 
Now, I’m the guy who’s always said every business is going to (and should) make the decisions that they perceive to be in their own best interest. That’s true. But it looks to me right now that what’s good for your business is probably good for the industry in at least this one instance. Everybody left standing in the ski/board industry has figured out, finally, that there’s no way to make money in winter sports if you’ve got a pile of left over inventory. And also you won’t be able to pay your bills.
 
I know we’re left with the not so simple issue of trying to match production and purchases with how much it’s going to snow and where. And I know that somebody, somewhere (probably more than one) is going to see the inventory shortage as an opportunity and crank up their factory and/or purchasing. But if most of us perceive that it’s in our interest to buy and sell a little less at higher margins, we can sleep better over the summer, have stronger balance sheets, make more money with less investment and help get more people on the mountain.
 
At least think about that before you say, “Shit, I could have sold more last year” and up your orders.                           

 

 

Accidental Encounters with Two Magazines and Market Evolution

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The other day I was reading Vanity Fair. That’s a little weird. But my wife gets it, and one of the highlighted cover stories was “Surfing the World’s Giant Waves.” I enjoyed it and learned a little more about surfing history. Still, I was a bit surprised to find the story there. The mag was full of high end fashion ads. Those ads weren’t a surprise.

Then, on another other day, I picked up Complex magazine while getting my oil changed. Actually, it was my car’s oil. Mine should be okay through trade show season.

There were five pages of Vans ads and Volcom had a two page spread. They were right there with the Smirnoff’s ad, the Puma ad, the video game ad, and the various car ads.   DC had an ad for the Rob Dyrdek collection.
None of the ads I notice in either of these magazines (I might have missed one) mentioned skateboarding, snowboarding, surfing, or any of the other sports that might be considered to be “action sports.” Not even the Vans, Volcom or DC ads.
Vanity Fair obviously believes that big wave surfing is of interest to its readers. That’s good news for surf companies. I’m guessing that most of Vanity Fair’s readers don’t surf. But all but the smallest surf companies sell a chunk to most of their product to non-surfers, and they are certainly pleased to see upper income non-surfers be exposed to surfing.
Complex represents a culture, attitude, lifestyle that I’d characterize as young, urban, sarcastic, and a bit in your face. It suggests a certain level of indifference to convention and norms and implies that if you adopt its standards you’ll somehow be self-confident and respected. Cool, if you will.
It is what and how the cores of skate, snow and surf began. Except that you actually had to skate, snowboard or surf to achieve this differentiation back then, and that was a simple distinction.
If our industry was all about, and only about, supporting people who surf, skate or snowboard, I doubt there would be any successful public companies. The participant market and its growth prospects are not large enough to interest Wall Street.
Vans, Volcom, and DC, public or owned by public companies, know this. So we find them running what I think I can fairly characterize as fashion ads (hell, maybe all ads in our industry are fashion ads) making no mention of their roots and the sports they are/were closely associated with. You and I, of course, know what those associations are and our perception of those three brands are influenced by that knowledge. And the people who read Complex? Some of them know, but I imagine a lot don’t. And apparently that’s fine or these brands would feature that association in their ads.
No ads in Vanity Fair yet, and maybe we’ll never see that day. The Vanity Fair sensibility (high style?) is a lot different from Complex (urban/trendy?). Still, though I don’t expect to see it, wouldn’t it be interesting if some brand decided to take a flier just for fun? I can see the Mervin Manufacturing ad now. “Some fool in the marketing department put an ad in Vanity Fair.  They’ve been fired but you can buy our snowboards anyway if you want to. They work good and besides, the ad’s already paid for.”
Yes, it’s easy for me to be cavalier with somebody else’s money.
But you can see a divide happening in the industry, whatever industry we’re in. On the one side are companies that service participants. On the other side are the ones who are more and more fashion based and have to decide how to position themselves with respect to their roots. Is it about trendy, stylish, comfortable product or about making the trick? Can it be both? Depends on your market and how you segment it.
It isn’t that black and white, and the discussion would be different for every brand. But if you make the fashion decision, then you are choosing to compete in a market that dwarfs the traditional action sports industry in resources and sophistication. And you probably need help. This is, and will continue to be, the rationale (a valid rationale) for consolidation and the acquisition of brands that want to “take it to the next level.” In fact, I think it will be the unusual company that gets to that next level without being acquired.

 

 

An Interesting Advertising Observation; What Does it Mean?

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I was recently paging through a couple of Transworld consumer mags (Surf and Skate I think) and something caught my attention. I don’t know what made me notice it, but I suddenly realized there was not one non-endemic advertisement in either mag. Okay, maybe I missed one, but there was no Ford Trucks, Mountain Dew, AT&T or any other of the major brands that had previously graced their pages. There was Nike. I’ll get back to that.

Talking about coming full cycle. I remember when there use to be none of these big advertisers in Transworld’s magazines at all and we thought that was a good thing. I had conversations with various Transworld people years ago about their efforts to work with these major brands. The brand, having exactly no understanding of the industry or the demographic they wanted to reach, would submit ads that were, well, not specifically too good. Transworld would try to work with the company to get it to change its ad, but that meant working through the advertising agency who could hardly go back to their client and say, “Actually, our ad sucked and we didn’t know what we were doing.”

And Transworld, no matter how much they wanted the money (and they charged these companies more than they charged industry brands) wouldn’t take the ads that sucked. Those ads made Transworld’s magazines look bad and inevitably generated irate phone calls from industry advertisers who found their ads next to the sucky ads of the companies that didn’t know what they were doing.
The economy has led brands in all industries to cut back on their advertising. But I can guarantee that Ford, Mountain Dew and AT&T have not stopped advertising everywhere. They have stopped advertising, however, in what I still consider the leading action sports consumer publications and have decided their dollars are better allocated somewhere else. Why?
I should note that if I had other action sports publications in front of me, I bet I’d find the same trend so this is not about Transworld.
You advertise through a particular channel because you believe that channel is the best way to reach and influence customers and potential customers. I can guarantee that action sports publications do not take up a big chunk of Ford’s advertising budget. Even though it’s a relatively small number, they found it expendable. Aside from the economy, there are a couple of possible reasons for that decision.
First are the changes in distribution that have occurred in the industry. Recent attempts to control certain distribution channels not withstanding, our products are all over the place. I suppose we could be critical of that (Hell- we are! All the time!), but it’s pretty much inevitable industry evolution.  In general (some brands are exceptions), we have sent the message that we’re not as exclusive as we use to be. And more and more of our customers are non participants so I’m guessing that the big non endemic companies no longer think it’s quite as necessary to be in the core publications to reach most of the action sports customers.
There’s also a certain decline in the panic that big non endemic companies felt when surf/skate/snow were growing like weeds and generating all kinds of publicity and excitement. Big brands were worried they were missing something, even if they weren’t exactly sure what it was.
Finally, there’s the recognition that the disposable income of the core magazine consumer has declined. Obviously, this has been made worse by the recession, but the decline in middle class real income is a long term trend that started before 2007.
Then there’s Nike, still advertising away in Transworld. The difference is that Ford, whoever they want to sell them to, still wants to sell pickup trucks. Nike wants to sell skate/surf/snow products and, in the process, build brand credibility across our demographic to sell the other related products they make.
So you can see why Nike is still in action sports magazines, but other big companies aren’t. The same analysis applies to Quik, Billabong, Volcom and other large action sports brands (if we can call them large in the same breath with Nike). They’ll be advertising in action sports magazines, but will spread their dollars to other advertising platforms as well. Because just like Nike, they want credibility in action sports to translate into sales in a broader market.
Only it’s not quite like Nike. Nike already has credibility and consumer recognition in the broader market and now wants to build that credibility in a small subset of that market. If they should fail (and it doesn’t look like they are going to), Nike will be just fine. Action sports industry brands are trying to go the other way- from a smaller, defined market to a much larger one. They focus every day on how to gain credibility in the larger market while keeping it in the smaller. They believe that without the later they can’t develop the former. And yet, ultimately, if they want to keep growing, they have to be able to keep larger market credibility even if they lose it in the market where they have their roots.
I think that, as much as anything, explains why our industry has evolved the way it has.

 

 

My Office Chair, Customer Service, and Expense Control

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 It’s a nice leather chair. I’ve had it less than two years.   So I wasn’t happy when it started tilting side to side as much as it rocked from front to back. It felt like it was going to leave me on the floor any day and, besides, it was practically making me seasick.

The nice people at Staples, where I bought it, gave me a copy of my receipt, the five year warranty, and the number of the Sealy company to call. I figured I was screwed. “Sorry to hear about your chair,” I could hear them saying. “Just package it up, ship it back, and in a couple of months we’ll send it back fixed, though the freight cost will be more than you paid for the chair and we have no idea what you’ll sit on until then.”
But determined to go through the motions, I called them anyway and told my story, then waited for the ax to drop. I’d already picked out my new chair.
“Sounds like you’ve got a broken weld in the pneumatic cylinder assembly. We’ll send you new parts and some instructions.”
I waited for the bad news. “You don’t want proof that the chair’s under warranty?” “No.” “You don’t need to see the chair first to confirm that it’s a manufacturing issue?” “No.” “How much do I have to pay for shipping and handling?”  “Nothing.”
I was pretty flummoxed, but I hung up and sure enough, ten days later (Christmas was in there) the parts showed up. I wouldn’t say the instructions were written perfectly, and there did turn out to be a sledge hammer involved, but here I sit in my repaired chair writing this and not swaying side to side.
Sealy’s has made a friend, and I’ll probably look for their chairs the next time I need one. But they’ve also saved themselves some money. They didn’t spend long on the phone with me. They didn’t have to manage a chair coming back or forth. They didn’t have to do the repair themselves. There was no administrative warranty management cost, and damned little accounting and tracking. Somebody threw some stock parts in a box and shipped them to me and they were done. They got me to do the work for them, and I was basically thrilled to do it and solve my problem.
From time to time I suppose they get had, and send somebody some parts who doesn’t have a valid warranty claim. But they don’t care, and I’m guessing not that many people want chair parts if they don’t have a broken chair. Sealy’s has calculated that the cost of those parts and shipping pale in comparison to the cost of carefully evaluating each claim, making repairs themselves, and making sure nobody gets parts they don’t deserve.   So their process makes sense even ignoring the customer service benefits.
It’s not easy to figure out what warranty claims cost you. The expense is hidden in and divided among customer service, cost of goods, freight and shipping, general and administrative, salaries and probably other categories depending on your particular accounting set up. Maybe that’s why more companies, as far as I know, don’t take Sealy’s approach to warranty claims.
There are some characteristics of Sealy’s business model that make their approach to warranty claims viable. I’m not suggesting every brand or retailer can honor every warranty claim for snowboards, skate shoes or board shorts that’s made. But I suspect that if you do the hard work of estimating what your warranty service costs really are, you’ll find you can save some money and make some customers happy at the same time.     

 

Alternative Camber; An Idea Who’s Time has Come- Again

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A couple of weeks ago, I was paging through Transworld Snowboarding’s Gear Guide, and I came upon the page on alternative camber. I read it with interest to try and keep with the latest technological trends, but paused when I saw the illustration of the cambered medley snowboard.

Something about the cross section of the board, showing camber at both ends, jogged my memory. I went down to my garage, ventured into the storage space under the house, and came out with my dust covered Inca snowboard, circa, I want to say, 2000.
It’s a 157 and was called a dual camber but you know, it looks identical to the cambered medley profile pictured in the gear guide. Back when I actually rode the board (because I thought the technology worked for me which seemed like a pretty good reason), the reaction of people, at best, was tolerance and sometimes it ran to ridicule. Granted, the graphics were ugly. And entrepreneur Jerry Stubblefield, the founder of Avia, didn’t come with a lot of snowboard credibility or cool factor. But damn it, I thought the thing worked.
So I was a bit perplexed to read that in three years the gear guide had gone from 0 to 170 snowboards having some kind of alternative camber and that “…their sweeping popularity can be attributed to one thing: it can make snowboarding easier.”
To my untrained eye, it looked like the dual camber of 2000 was essentially the same as the cambered medley of 2009, but what did I know. I mean, obviously they must be different because everybody who knew anything about snowboarding seemed to hate it in 2000 and love it in 2009.
I thought I’d better call in an expert, so I reached Mike Olson at Mervin Manufacturing. Mike has been designing and building snowboards for multiple decades, and it was the Mervin designs that lead and are leading the alternative camber charge.
I love talking with Mike and need to find more reasons to call him. Our nearly hour long conversation ranged all over the snowboard and action sports business. It was part history lesson, part standup comic routine, part “how to” guide for entrepreneurs and from time to time we actually got around to talking about the technology of camber, some of which went right over my head. Subtleties of materials and manufacturing that Mike takes for granted kind of escaped me as I tried to absorb it all. And of course the conversation tended to remind each of us of other topics, so we sort of careened from issue to issue.
Anyway, the bottom line is that Mike knows Jerry and has spoken with him on a number of occasions. If Lib Tech’s C2 Banana isn’t exactly the same as the Inca due to improvements in technology and materials, it’s certainly conceptually similar. According to Mike, “Inca has 2 huge cambers centered under each foot (which is what Gnu tried for a season in 1986) while we now have a giant rocker (Banana) between the feet with minute cambers out on the ends of the snowboard.”
But the clincher was when I described to Mike the complaints I got from people when I showed them the Inca and they (you know who you are) universally complained that it was too flexible. “Like a noodle,” as one industry insider put it as he trashed the concept.
“Of course it’s flexible,” says Mike. “That’s part of the cambered medley concept and without the flexibility, the construction wouldn’t work.”
Mike reports that Mervin’s sales have doubled from three years ago. 
I guess this is a cautionary tale about the dangers of stereotypes and preconceptions. If Mike Olson, who has been experimenting with alternative cambers for decades, had come out with as cambered medley snowboard in 2000, would it have been a big hit? Don’t know. But I’ll bet that no matter when Jerry Stubblefield came out with one (even without bad graphics) it wouldn’t have taken off no matter how good the technology.  Anybody want to claim we’re not in the fashion business? 
Just something to think about.        

The Relationship Between Marketing and Business Risk; Do One and Reduce the Other

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Have you ever noticed how often the group of people who create ads, run promotions, and manage sponsorships are called the marketing department? That’s always struck me as kind of odd. I think marketing is the process of figuring out who your customer is, or can be, and why they buy your product. Advertising and promotion are the tactics you use to reach and attract those customers after you’ve reached some decisions about your customer based on your marketing.

I suppose it’s so obvious it shouldn’t have to be said, but if your advertising and promotion isn’t based on solid marketing you can spend a lot of money and damage the only real asset you have in this business- your image. We’ve all seen retailers and brands do it.
 
The thesis of this article is that good marketing reduces business risk and the perception of business risk, perhaps helping you to think in a way that facilitates recognizing new customers and markets.  It’s critical if you’re shop or brand is going to stand out in a crowded and highly competitive market.
 
The Status Quo and Its Downside  
 
 Right now, in this industry, everybody pretty much does the same advertising and promotion stuff. You all know what’s on the list of the ways we compete and I won’t bother repeating it here. I recognize that sometimes somebody’s ad is cooler than somebody else’s, or a particular team rider breaks out from the crowd for some period of time. But at the end of the day if we’re all doing the same stuff, and our products are more or less all the same, how do you, as a shop or a brand, break out from the crowd?
 
Answer- you don’t. If you’re doing the same as everybody else, and your product is no better, the best you can do is to be as good as they are. The exception, of course, is that you can do more of what all the others are doing. It may not be better or different, but it has an impact. But to do more, you have to have more- dollars that is. Then it’s only the big guys who win.
 
It probably hasn’t escaped your attention that the big are getting bigger and controlling more and more of the market. I’m suggesting that’s inevitable- in any industry- if, lacking solid marketing, the only basis for doing better over the long term is to spend more on advertising and promotion and cut prices. That tendency is exacerbated by the fact that it’s the larger businesses that are most likely to really do good marketing.
 
The Perception of Risk
 
I suppose this article had its genesis over a year ago when I talked to Santa Monica based ZJ Boarding House co-owner Todd Roberts at ASR. In the course of talking about a whole bunch of stuff, we got around to the ongoing travails of smaller retailers and what they needed to do. Todd said, “Jeff, you can’t be afraid to take some risks.”
 
I thought he was right. Still do. But at the time, I didn’t know where to go with it. It didn’t seem useful to say, “Take more risks!” unless I could explain why the risk was worth the potential payback and how it could be controlled.
 
Still, it seemed an important point, so I put it in whatever the part of my brain it is that holds ideas to be thought about and addressed later. It recently popped out more fully formed.
 
In helping businesses in this industry manage transitions, I’ve known for a long time that we all, including me, like to do what we’re comfortable with and have done successfully in the past. It’s human nature. So we go with the flow in running our businesses, following the annual schedule for developing ads, sponsoring events, attending trade shows and all the other stuff. It feels low risk, doesn’t it? That’s because it’s what we’ve always done.
 
Conversely, from time to time, really new ideas for advertising and promotion come across our desks. But they don’t fit our frame of reference. There isn’t a place for them in the annual advertising and promotion schedule. Other companies aren’t doing them. Doing the new things seems risky. Doing the same old stuff doesn’t.
 
Granted, it’s also a matter of available funds. It’s much less risky to do something new when you don’t have to cut out something old to try it. Another advantage to bigger companies with strong balance sheets.
 
We tend to perceive low risk in doing what we’ve always done. We perceive higher risk in doing new things. I think it’s the other way around. Industry conditions and the difficult competitive environment require that you do some of these new things if you are going to succeed. If you don’t, you have no opportunity to be better than anybody else.
 
And that gets us to marketing as a competitive tool, a money saver, and a way to fix your perceptual problems.
 
Doing Marketing
 
Sometimes I just have good karma. I’d been working on a talk I had agreed to give on how we compete as an industry and how we can do it better. Before I finished preparing, I flew off to ASR. I walked into the room late, but managed to hear most of Mikke Pierson’s (the other co-owner of ZJ Boarding House) talk on how to utilize your data base effectively. I know this article is turning into a damned ZJ Boarding House promotional piece, but sometimes you just have to go with the flow.
 
So here I am, thinking about how the industry competes, why brands and shops need to take some risks, and why they often seem reluctant to do it. Having managed to put off my article deadline until after ASR, I was getting desperate for a good way to tie this all together in the real world.
 
And Mikke saved my ass.
 
To make a longer story short, he said, “We spent $4,000 with Customers First to clean up our mailing list and plot our customers on a map so we knew where they were coming from. We did our usual promotional mailing at a cost of $16,000 and it generated $135,000 worth of business. The cost of doing the mailing was a whole lot lower because we knew who we were mailing to and why. We didn’t have to pay the post office for returns, and we didn’t waste money on duplicates, people who weren’t interested, or who were too far away to come to the store.”
 
The $4,000 spent with Customers First is real marketing. And I want you to notice the following things.
 
  • It wasn’t some esoteric, company wide, long term, epic undertaking that produced a ream of data that nobody knew what to do with. It was practical, cheap, quick, and the return was immediate and measurable.
 
  • It reduced risk. They knew much better who they were doing a mailing to and why. Maybe just as importantly, it also reduced the perception of risk.
 
  • It generated additional sales- quickly.
 
  • It didn’t cost them money- it saved them money.
 
  • It wasn’t some change of direction, risk the company strategy. It was a fairly minimal, common sense sort of thing. If it hadn’t worked out they would have been out $4,000 and a little time and would have learned something.
 
  • It focused on their customers- not on their competitors and not on the industry.
 
What I said I was trying to do at the start of this article was demonstrate the relationship between marketing and business risk. The relationship is both perceptual and practical. Good marketing reduces your business risk. It also reduces the perceived risk because your actions and decisions are based on good data. That means you are more willing to try some new things.
 
And I don’t think you have much choice. Focus on your end customer and why they buy from you. Think of a dozen questions you’d like to have answers for and how those answers would make it easier to reach those customers. Answer just one and see what you can do with the information. The risk of not trying is just too big. Like Walt Disney said, “You don’t build it for yourself. You know what the people want and you build it for them.”

Doing Marketing; What, How and Why?

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At the Skateboard Industry Conference earlier this year and in these hallowed pages, I’ve argued:

 
1.     That advertising and promotional tactics like running ads and hiring teams pass for marketing in this industry but aren’t.
2.     That marketing (maybe better called market research) is the process of finding out who your customer is and why they buy your product.
3.     That few people in skateboarding (or in action sports) do marketing well if at all.
4.     That favorable demographics and large company interest in the skate vibe are creating opportunities that we aren’t taking advantage of.
5.     That good marketing will make you more efficient in the use of your advertising and promotional dollars, a good thing at a time when this is a tough business financially.
 
Marketing costs a little money, takes some time, and will leave you with as many new questions as answers if you do it right. It isn’t a one shot deal. Its value increases as you continue it over time and, indeed, as you institutionalize it within your organization. How might you do some marketing in your organization? Here’s one general approach. Not by far the only one. Not necessarily the best or the right one for your organization, but one I think you can implement and get some value out of.   
 
The Right Questions
 
It’s easy to come up with a list of questions that, on the surface, seem relevant. General questions like “Who’s my customer?” You could create a list of good, general questions like that in about twenty minutes and walk away thinking, “Yes sir, there’s not much to this marketing stuff.”
 
Instead, begin with the goal in mind. Let’s say the goal, as mentioned above, is to make more efficient use of advertising and promotional dollars. Ask questions that help you do that. Go through each of your advertising and promotion expenditures and develop specific questions- questions that will help you know where to spend your money and what you’re getting for it.
 
One such question might be, “Do people buy our boards because of the team?” Well, duh, yes of course they do. Or at least that’s always been your assumption. Ever tested it? In several industries I’ve been amazed at the number of once true assumptions that have been institutionalized in industry lore even when they were no longer valid.
 
Among winter resorts, for example, the current assumption seems to be “If we build it, they will come.” My guess is that snowboarders would come regardless of whether or not the resorts build new trails, facilities and lifts and the number of skiers will continue to decline in spite of all the capital investment.
 
I’m not suggesting teams aren’t important to skateboarding, but if I had to prove it in a rigorous way, I couldn’t. Not unless I’d done some marketing. Use marketing to test your traditional assumptions. If you find something has changed, it’s a potentially huge opportunity.
 
Based on a specific statement of what you are trying to accomplish, get more specific in the questions you ask. “Do people buy our boards because of the team?” is too general. No answer you’re likely to get will help you do anything better or differently unless, I guess, everybody says no.
 
Maybe “Whom do you know that rides for Brand X?” would generate some useful information if your goal is to focus your team spending on the riders who create the most brand visibility. If nobody knows a rider you’re spending serious bucks on, or if lots of people know somebody who only gets product, you’ve got a chance to spend your money more efficiently, or maybe just to spend less. Or to spend more but feel good about it.
 
Marketing’s biggest challenge is in asking the right questions based on specific goals.
 
Gathering the Data
 
I’m a big believer in quality and consistency over quantity. I’d rather have 200 thoughtfully and consistently completed surveys than 2,000 incomplete warranty cards where there was no contact between the customer and the company. Send team riders or employees to skate parks on weekends. Make a deal with some of your retailers to approach customers in their store in exchange for sharing some of the data with them. Let the retailers add a few questions they’d like answered. Give every consumer who works with the interview to complete a questionnaire a T-shirt and turn the collection of market data into a promotion.
 
Do some training before you send people armed with good intentions and clipboards out to talk to customers. Make sure they understand why you’re asking the question, what you expect to learn, and what the benefit of having the data is. Get them to practice a little with other employees or friends so that their lack of experience doesn’t skew the data collection.
 
Exercise some common sense. It might not work to ask team riders to collect data about team performance. A rider isn’t going to be anxious to report that nobody ever heard of him. Consider the possibility that young males might consider this as an opportunity to do something besides collect market data and return surveys predominantly from the best looking girls at the skate park that day.
 
The data doesn’t all have to be collected in one massive effort. A couple of people in a couple of shops for a couple of hours a couple of times a months will build you a big data base faster than you think.
 
The experience the data collectors have can be as important as the information they come back with. They’ve just spent some serious face time with customers or potential customers. Sit down with them right after the session. What did they feel/see/think? What interesting comments did they hear that didn’t make it into the survey? What questions appeared to have been a complete waste of time? Did they hear gripes? New product ideas?
 
Most people from companies don’t spend enough time with the customer. Take advantage of people who are. In fact, spread the wealth- get as many employees as possible to take a turn gathering market data.
 
Your data collection is going to be biased in some way no matter how hard you work to collect it in a consistent and dispassionate way. The way the interviewers dress, the locations you select, the time of day, the different ways interviewers approach the customer and a bunch of others we can’t even conceive of will all affect the quality of the data. You strive to minimize these influences in the way you develop the survey, train the interviewers and select the locations. At the end of the day, with enough good interviews completed, you recognize, or at least hope, that the biases will have been statistically reduced to background noise. That brings us to what to do with the data.
 
Analysis
 
If you’ve gone through the process correctly, data analysis should be almost an anti-climax. From the process of designing the survey, you know specifically what you are trying to find out and what kind of decisions you hope to make from the data you collect. You know before collecting the first piece of data exactly what the analysis process is going to be. It will have become clear in the hard work you did establishing goals and developing the right questions.
 
Responses will be counted, and percentages calculated. Maybe you will have asked the same questions in a couple of different ways and will want to compare the responses. But when the simple counting and calculating is done, there are a couple of statistical techniques that will help you get the most out of the data.
 
Not all the questions you ask will require this kind of analysis. But when appropriate, the concepts of “mean “ and “standard deviation” are powerful tools that are not tough to use once you understand them.
 
A standard distribution is represented by a bell curve. Bells can be taller or flatter depending on how the data points are distributed. The vertical line that divides the bell exactly in half represents the mean on the curve. The mean is the point where half the data values are greater and half are smaller. Simple so far.
 
The standard deviation is a statistic that tells you how tightly all the data points are clustered around the mean . When the points are pretty tightly bunched together and the bell-shaped curve is steep, the standard deviation is small. When the bell curve is relatively flat, you know you have a relatively large standard deviation. One standard deviation away from the mean in either direction on the horizontal axis accounts for somewhere around 68 percent of the data points in this group. Two standard deviations away is roughly 95 percent. Three accounts for about 99 percent of all the data points.
 
So who cares? Just for fun, say you ask 200 customers how old they are. Their mean age is calculated as 14 with a standard deviation of one year. So you know that 68 percent (one standard deviation away from the mean in either direction on the horizontal axis) of your customers are between 13 and 15. 95 percent 12 and 16.    You can see how this might help you focus your marketing efforts.
 
Mean and standard deviation are calculations that lots of cheap calculators can do. Excel will do it for you on your computer. So, as I started out by saying, you can do this yourself. On the other hand, time is money, and there lots of companies around that specialize in designing surveys, collecting data and interpreting the results.
 
Any masochists out there who actually want the formula for calculating a standard deviation should let me know and I’ll be pleased to provide it. 
 
Even if you get some professional help and trade some money for time and efficiency in the process, your customer and industry knowledge will still be required to make sure the right questions get asked of the right people.
 
Somebody once said that half of your advertising and promotion budget is wasted- you just don’t know which half. Marketing can help you figure that out. Just to pick a number, if you spend $20,000 to do a survey that helps you save only $5,000 a year, a return on investment of 25 percent, isn’t that a great deal? My guess is that you’ll do better between more efficient spending and better customer focusing. Do the marketing yourself or get help. But please do it.

 

 

The Basis of Competition; How Do We Sell More Stuff?

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It’s funny how the fundamentals of business never change. Three years ago at the Surf Industry Conference in Cabo, I facilitated a panel of people from the skateboard industry because skate was going off and the surf guys thought skate was going to have them for lunch or something. Then skate sales plummeted though, happily, they are recovering now.

Many of us were around when snowboarding was going to take over the world. It didn’t.  And last week at the first ever and hopefully annual Snowboard Industry Conference at Laax, there was a great gnashing of teeth and ringing of hands over the fact that snowboarding didn’t seem to be growing and might even be declining.
Business cycles are immutable and inevitable. That’s especially true because of the way companies in an industry choose to compete with each other. They bring those cycles on themselves. This article will look at how we bring this death spiral of competition on ourselves, how we compete, and finally suggest a general approach (there’s no room to outline it in detail) that describes how an individual company might change that and sell more stuff.
This article had its genesis on the last evening of the Snowboard conference, when Tim Petrick of K2 was kind enough to buy a couple of bottles of just excellent red wine.  We were talking about the snowboard market’s perceived stagnation. In a BGO (blinding glimpse of the obvious) I spewed out something like “We got to do some things differently!”
Well, everybody was kind enough not to say, “What the **** does that mean?” Still, it seemed they were waiting patiently (and reasonably) for me to explain what I meant and perhaps even to say something useful. I tried. I really did. But my thoughts were unformed. An attempt to expand on the idea just sort of died and the conversation moved on.
Still, the initial impulse was right. We do need to do some things differently so that our sales and margins can increase.
The Death Spiral of Competition
We’ve done it to ourselves you know. Declining prices, over distribution, some say stagnant participation, high marketing expenses, and the commoditization of the product. Inevitably there’s some search for blame. But at the end of the day we can all point the finger at each other and we’d be right. Every company does what it perceives to be in its own best interest. Of course. Me too.
 We all do things to try and grow the market, but at the end of the day we find ourselves battling each other for scraps from the other company’s table in a market that isn’t growing that much. And even if we succeed what have we accomplished? Probably just pushed prices down further or increased marketing expense. We’re left with the same circumstances and maybe we’ve made it even a little tougher to succeed. There’s no “sustainable competitive advantage” from anything we do. All we can think to do to grow is expand distribution, open retail stores, diversify or acquire somebody (often just a form of diversification).
It’s no wonder that maybe a little of the optimism has gone out of snowboarding. This is a hard business we keep making harder by our competitive actions.
How We Compete
Here are the things we all do to one extent or another: They aren’t listed in any particular order.
·         Sponsor contests and events
·         Teams
·         Advertising
·         Give away product
·         Prices, terms and conditions
·         Strategic alliances
·         Graphics
·         Product features
·         Distribution
·         Trade shows
·         Films
Are any of us really doing any of these things much, much better than our competitors? I’d say no, though some have the resources to do more, which doesn’t necessarily mean better.
And those larger companies seem to be applying more and more of those resources to diversifying or expanding into the larger fashion/lifestyle business.
Our competitive environment is largely a zero sum game. What one gets, the other loses.
When we’re not busy diversifying to reduce our dependence on this hard industry, we’re focused like a laser on what the other companies are doing. To some extent we go to trade shows because they go and make sure our displays are comparable. We price according to their pricing. We run similar ads in the same magazines. We benchmark our product lines against theirs.
We’ve expanded distribution so much that we’re putting the specialty shops, which we all seem to believe are a bedrock of snowboarding, at risk. We’re eating our young. Is this any way to run an industry? You bet it’s not.
 Has anybody noticed that my entire diatribe here hasn’t even mentioned the snowboarder? Kind of odd isn’t it?
The Consumer
You remember them. The person who actually buys the product and, hopefully slides down the mountain? The one without whom we would all have to get real jobs? How can I possibly have written two thirds of an article on how we compete and not have even mentioned them? Doesn’t that bother anybody? It sure bothers me.
The goal here, as I understand it in my simple way, is to create more snowboarders who snowboard more often so that we can sell more stuff (thanks Tim). Sorry to be quite so mercantilist about it, but that’s what we all want to do I think. Otherwise we’ll be working in industries that have their trade shows and conferences in Kansas City. I’m quite sure I like Laax better.
I’m not quite sure I think going to trade shows where we all talk to each other helps us sell more. I get concerned when companies say they only sell product their team riders approve, because I don’t think team riders, or riders of that caliber, make up a very large percentage of the customers to whom we want to sell more. I know that making stuff cheaper in China because everybody else is and so we have to do it (which is true) doesn’t help us sell more. I hate it when we make it cheap and convenient for people to rent equipment, make no money on it, and excuse that by calling it marketing. And end up selling less.
How Do We Sell More?
 
The first thing I’d ask you to do is stop focusing quite so much on your competitors. They aren’t the ones you need to impress. I know that sounds risky. But on the other hand, what’s more risky than trying to compete in an industry that, if you believe the people at the conference, is stagnant to declining and where the process of competing is apparently making things worse, if you think my analysis has any validity.
Second, I want you to figure out who your consumer is and why they buy your product. You already know that? Great. But if you were to explain it to me and it involved reps opinions, anecdotal evidence, and a discussion of the kinds of stores where your product is sold, I might think you didn’t really know, or at least that you weren’t really sure.
Third, look very, very closely at how you compete. Start by creating a list of the ways the industry competes. Include on the list things that you do that others don’t, if any. Which of these are more or less important? How does the way your company competes in these areas differ, if at all, from your competitors?
This is not quite so obvious at it seems.   You would put team riders on the list I’m sure. But sponsoring team riders is something you do- not how you use them to compete. “Why are they important?” I might ask. “They influence kids purchase decisions,” you declare. “Prove it,” I say. “How exactly do they do that?”
“Everybody knows” can not be part of an acceptable answer.
The slicing and dicing would continue. Do they just influence kids? What do you mean by “kid” anyway? What are the things they do that create this influence? What makes them successful at it? How do you measure that? How many riders do you need?
As you can see, the list of how you compete evolves pretty dramatically over the process and become more focused. Some things will come and some go. General competitive ideas will be broken down into a number of more specific ones.
And so would your sense of what was actually important. And what was not. When you were finished, and if you did it right, your spending would have become much more efficient.
That is a good thing, and it might even help you sell more stuff, but it doesn’t get your out of your competitive space and mindset.
The process of evaluating your competitive strategy in detail and of being forced to question sacred assumptions generally leads to new ways to compete. It also tends to eliminate unproductive ones and put more focus on those that really work. It changes your company’s strategic profile.
There was package delivery before Fed Ex. There was ocean shipping before somebody thought of containers. There were winter sports before somebody decided one plank might be more fun than two.
Overnight package delivery, containers, and snowboarding kind of seem like common sense now, don’t they? But they didn’t to industries that were focused more on their competitors than their customers and potential customers.
Want to sell more? Take a hard look at your customers, what they want, and why they buy from you. Just for the moment, forget your competitors. If the process leads to a new market space your issues with competitors will take care of itself.