Category Archives: blog

The Big Red Herring of Amazon & Physical Retail

communication-1082656_1280

For many years now we’ve been witnessing the phenomenal rise of Amazon.com. Retailers and manufacturers of all kinds have been scurrying to get their digital act together. The media has been rife with questions about traditional business models of stores and distributor channels.

And now finally, Amazon has opened physical stores in key categories – grocery and books to name a few. The Whole Foods acquisition has come as a recent big announcement.

What’s going on with Amazon & physical retail and how to make sense of the game plan that Amazon has?

red-46564_640First, here’s the red herring – the battle is not about digital or physical, or any combination of the two. It’s not even about innovation and leadership. Its a given that people are going to go digital given enough time and experience. Every channel needs time to develop and be a comfortable experience for customers. And slowly but surely, goods of various categories are falling into that bucket. We thought it will never be clothes, except that we find now that clothes are actually pretty commoditized if we know what we want, and if we’ve bought them before. Same for grocery and food which are after all the same shopping list being created and executed week after week. Its been that way for a long time with electronics and spare parts as well.

The biggest hurdle to digital commerce was the risk factor – what if the purchase is not what we think it will be? And Amazon, like many retailers, has solved for that already through an easy and simple returns process. Its no wonder then that people who shop heavily are folks who get free shipping and an easy returns process. in fact, Amazon Prime members in many categories have much higher return rates than customers shopping at stores. That’s simply because we buy more than we need (extra sizes, different colors, different styles etc. ) and then we return  what we don’t need. It’s pretty darn convenient.

So Amazon entering physical retail cannot be a threat on its own. Sure, they may have better online presence, and fast shipping and distribution mechanisms, but they also have lower margins.

Instead, almost everyone is missing the real point that this is a battle for building a connected ecosystem. It was never about individual product lines being sold digitally which we should take for granted as a universal certainty. In fact, the biggest competitor for established businesses (and their Achilles heel) is the combination of Amazon Marketplace, their diversity of product businesses, and their Prime membership model. Think of what we get with this combination – movies, books, free and fast shipping, TV – and not to mention almost everything under the sun on Amazon.com from marketplace sellers.

Not surprisingly, in 2016, Amazon.com had already beaten Google as the top search engine for product search (55%) when customers reasonably know what they want. More than 70% of customers do so because of the wide variety of product availability on Amazon. These 2 capabilities together are a lynchpin of modern commerce. These two capabilities help get customers in, and then all these customers have frictionless (and free) access to commerce transactions. Everything else is easily competed against – better online presence, personalized recommendations, easy purchase process, good shipping, good returns, etc. These are all table stakes. In fact Amazon is not really that great at many of these things and like everyone else is constantly improving.

So Amazon.com buying  Whole Foods is not at all threatening if you apply the traditional lens and consider only the grocery business. There are plenty of players who will beat Amazon hands down in that business. Instead, what is missing in the media headlines right now is that this play is not just about grocery or retail. It’s actually about building a connected ecosystem that brings everything a customer needs under one nice umbrella called Amazon Prime, and a marketplace that has unlimited choice.

Hence, the issue of Amazon & physical retail is a red herring. But the situation is not hopeless. Here’s what everyone else can do to counter this juggernaut:

  1. Redefine your identity and start connecting: In today’s connected age, we cannot operate in a small silo and expect not to be disrupted. So long as grocers think of themselves as grocers, banks as banks, and pharmacies as pharmacies they will continue to see invasion of broader players into their space. Digital has made that a near certainty. Instead, we must expand our identity and build a connected, digital business. Becoming connected doesn’t mean becoming a conglomerate like Amazon.com. That’s neither easy nor possible for many. Instead its time to start being a trader / seller of different kinds of services that consumers need, and not just the products we’ve sold for decades. Take for example a grocery chain creating a local network of fitness centers, health food brands and dieticians. Its a win-win for everyone involved. All parties see increased retention and higher wallet share from the customer. That’s a partnerships model and much more doable. Especially because its also local. The possibilities for this network are endless and can include banks, local sports clubs, farmers markets, restaurants, and many others. That’s the only way to win in today’s customer centric economy. We cannot be selling in silos and expect to win. Some examples do exist today (like health insurers working with fitness centers) but those at-an-arm’s-length partnerships are not enough. These relationships must become more intense, more deliberate, and much more obsessed about customer experience.
  2. Build a connected loyalty model: Those of you who’ve read my 3-Tier loyalty model will know that a connected business can build what others (or even Amazon) can’t today. Loyalty today is all about instant discounts and rebates. But loyalty must move towards experiential and aspirational rewards. A connected ecosystem can accomplish that so easily and keep the costs down as well. Can a loyal member of the network in the example above win a wonderful candlelight dinner on Valentine’s day at a restaurant, or can customers build their rewards towards great seats at the Super Bowl next year? The possibilities are limited only by our imagination. That’s the loyalty model a connected business can build with its partners. And it could easily be in addition to the 20c off the salad dressing, or 20% off the first 2 months of the gym membership.
  3. Orient the org to look beyond legacy and focus on CX: How can multiple companies from different sectors come together and make this happen. The short answer is that they can’t unless they reorient to focus on CX, not product lines. Fortunately the solution is simple for those willing to dare. They must create a CX layer on top of their products and services business. The CX layer will be made up of folks from all partners across industries and their only job is to manage just one product – the connected CX. This layer of product managers will create exciting and innovative journeys, and then make them happen through existing products. Read more about this model here.

To be clear, online and digital is the way forward. So there is no reason to think Amazon.com entering physical retail is any vindication of physical stores being a must for business. Quite the contrary – physical stores are a complement to digital but they will most definitely become a specialized channel for retail (or banking or automobiles for that matter).

The real challenge is to build a connected business. The part about Amazon entering through buying up the physical stores is just a big fat red herring.

unicef-discover-the-movement

Lessons in Customer Engagement from the UNICEF Kid Power Program

In today’s fast paced, connected world, it has become crucial to engage with our customers, not just find ways to advertise to them. Customer engagement is actually a strong branding vehicle because it helps us align with the causes our customers love. And it can drive more profitable growth because it realigns our business with its higher purpose.

The UNICEF Kid Power program provides some great lessons for how businesses can drive such programs.

The purpose of our products

unicef-williamWhen my son brought home the UNICEF Kid Power band, I could see just 1 thing on his mind – he was doing good for someone else by being fit. The other features of the band such as counting steps, iPhone pairing, sharing with people etc. were not important at all. They were taken for granted. It was almost as if they didn’t matter because the decision criteria was different. In other words all the other devices were commoditized. He discarded other sophisticated devices once he knew his daily steps with this band would help a kid somewhere get better. This fitness band was different. The band drives fitness by driving a higher purpose. Perhaps, the struggles of the leading fitness wearable providers is probably because of this simple reason. They are fighting on features, while customer engagement is done on aspirations.

What is UNICEF?

UNICEF (United Nations International Children’s Emergency Fund) is an organization dedicated to helping children worldwide. It was established in 1946 and is headquartered in New York. Their primary stated goals are to:

  1. Solve the global problem of malnutrition: About 25% of the children worldwide are malnourished (with more in developing and poor countries) leading to severe health issues.
  2. Get children to be more physically active: In developed countries, the levels of physical activity have reduced by almost 50% leading to obesity and related health problems.

The Kid Power Program

unicef kidspowerThis is such a creative program by UNICEF! Essentially, through a fitness wristband, they encourage children and families to be active and unlock points, which in turn are used to unlock nutritional food packets supporting children worldwide that need help.

In addition, the program has created “Missions” which have a celebrity champion from sports or entertainment. These celebrities own a mission. For example, a mission to help 100 children in Haiti in 6 months. Every child worldwide who has the kid power band now can join the mission and start earning points by being more active. Every 2400 steps unlocks a point, and every 25 points unlock a food packet. Right now the key sponsors are Target and Star Wars, and  more are expected.

This year there are 170,000 children participating in the UNICEF Kid Power Schools Program – a teacher-led experience. In spring of 2016 alone, 61,000 students in over 2600 classrooms across 13 Kid Power Cities participated in the program. That was a 500% increase over 2015.

How does it apply to us?

What a wonderful way to be part of the community, and build a community. I hadn’t heard of UNICEF in so many years and then I heard it from my son. I remember how we had to be told what UNICEF and its mission was, and even then it was something remote, to be appreciated and admired, and join once we had the means. And now our kids are actually participating directly and contributing to the mission – without any money!

The simple – and not novel by any means – business lesson I took away was this: as the world becomes digital, and traditional business models fall by the wayside, who will win? My guess is that a business that has established an ecosystem and customer engagement through the right emotional connections with its customers will win.

Isn’t this just another advertising gimmick?

Depends on how you run it. By being in the middle of such an engagement program, you promise 5 things to participating members / customers:

  1. You will help them meet their aspirations
  2. You will bring like minded businesses and customers together
  3. You will not sell at every chance you get
  4. You will adapt your business model to align with aspirations of your customers
  5. You will engage continuously and actively

unicef-make-a-differenceThe first one is obvious. The second promise above means that you will get started with enabling a platform that other businesses can join to boost the program. In short, you will  do what today’s digital world is all about – build ecosystems. Just like health insurers are partnering with fitness centers, banks and retailers can join in too.

The 3rd and 4th promises above are linked because you will not sell, but you will adapt to provide enough value and reduce friction to the right level so that selling is natural and automatic. It’s a proven fact that value is no longer measured only in monetary terms if it enables something aspirational (that’s why branding exists). I might invest with my bank if the rates are reasonably comparable and if it helps me easily support  my favorite causes (aspiration), and if it makes it seamless to invest my surplus funds (feature). Moreover, I might favor one brand over another just because it aligns better with my personal passions – just like I am now a Unicef Kid Power dad although they don’t have anything like that yet. Ultimately that’s what a brand is if you equate away the core quality and price.

Such a program also forces you to look at continuous customer engagement and reinforcement, and not just when an offer is available. In fact, customers who have more meaningful touch-points and interactions with a brand or product are likely to spend more and be more loyal. An engagement program like this solves that problem comprehensively.

The UNICEF Kids Power program is only a model

The possibilities for customer engagement in a community are endless. The UNICEF Kid Power program shows again a model that is proven – people care and every business can help. For example, banks can solve the financial security and inclusion problem, health insurers and fitness centers can solve the problem of people coming out together and socializing, and retailers can solve the problem of clothing and food for all. We can be as inventive as we want to be with our goals, and the power of working together multiplies everyone’s reach manifold. Every hobby and passion in the world can be part of such a program, with every business driving what it chooses to. The model can of course be extended by introducing tiers of engagement, promoting social status, providing meaningful rewards  and recognition, linking different types of organizations and so on.

As we get connected, and go digital, the basic need for people to form communities and work together towards a cause must still be met. As business models are under pressure, some of these activities have taken a hit. But the UNICEF model shows how with a little bit of creativity, we can adapt our customer engagement models to become an integral part of our customers lives. When we speak of Omni Channel customer engagement, perhaps this kind of engagement should be a part of that strategy. Examples do exist such as the Amex OPEN program for small business, the CVS fitness program among others. Our business must mean something to our customers, because the products don’t make a brand (well, some do).

PS:

  1. Images taken from the Unicef Kid Power website. I encourage you to take a look at the program. I am in no way affiliated with them so this is not an advertisement.
  2. This blog is based on the principles in my latest book Connected! How #Platforms of today Will Become Apps of Tomorrow. Its free for Kindle Unlimited members. You can also write to me for a discounted paperback(signed by me if that matters at all!)

 

Fintech Innovation Watch – What’s next!

innovation-2057544_1920

There’s so much is happening in the financial services world that its enough to make your head spin. At the same time, if you take a look at the news today, you can see who’s getting it and moving forward, and who’s content with playing the same old game risking their very survival.

Here’s my Fintech Innovation Watch. With a twist! With every news item, I’ll also go out on a limb and derive some future potential innovations that might happen (or might not)!

APIs: Xero tied up with Capital One. Its a great partnership but the news is getting old now with Wells, SVB etc. already on this bandwagon. I’m sure better things are coming soon. This integration is great for a customer to import their bank transactions into Xero (and hence be happier with Capital One), but banks need to prepare for the new frontiers in customer engagement? For example, in a connected world, a simple 2-way API that helps build up context of the customer transactions that’s available in Xero to help with analytics on receivables and other cash management needs? The number of value added services (perhaps paid) that can be developed by banks are countless. We only need to look beyond the traditional products of business checking account and loans. Read the original news item here.

Core banking and community: In another interesting development, Fiserv signed up Apple Creek Bank. This is a small community bank in Ohio. The reasons for moving to Fiserv are based on traditional metrics of faster processes and providing additional digital services like PopMoney to customers. Fiserv has started to do that really well no doubt. And great goals by Apple Creek too. But if you think about it, the goals also reflect the pains of all banks who are severely constrained, and perhaps trapped inside their own perimeters. With less than deep pockets, many of them rely on their foundation platforms to carry them into the new world. Banking providers should be enabling Internet of Everything for community banks, and helping to actually build a community connected by exciting types of commerce. By serving same old same old, the community banking menu of offerings won’t be able to make escape velocity. Read the original news item here.

Payments: Then we see the continued rise of seamless payments. M&B restaurants are leading the way just like Uber and Lyft did, by making the payments and ordering seamless with Flypay. We order, we eat and drink, and we walk away. Its like Panera++ and Starbucks++! There’s also the added bonus of seamless loyalty across all the M&B brands, not to mention lots of labor efficiency gains. No doubt future enhancements like order ahead and recommendations are on the way, and we should be closely watching how these sector specific payment models will work with more traditional models such as cards and even Apple Pay. Will the list of payment options always be available? Going even further, will restaurant platforms open up APIs for ordering and payments  – to be skinned by anyone? Now, that would be a mashup to watch! Read the original news item here.

Robo-Advising: What a model this news represents! Something for all banks to think about. Danske bank launched its digital investment platform (June) to put to work deposits that are earning practically nothing where they are! Sure, all of us need a little cushion for the rainy day but lets face it – most of us have way more sitting in our checking accounts than we would like. So Danske has turned that simmering dissatisfaction into something of a delight. Independent robo-advisors watch out! Even though June itself is a robo-advisor it is showing us a model that so far has been limited to the large wealth managers like Vanguard and Schwabb. Now if only my own trusty old bank can get its act together, and actually help me manage my money better! Danske got a couple of things right – first they make it easy for customers to take an action, they offer a defined and tailored portfolio, and they’ve opened it up to customers outside of Danske. Now that’s a nice escape from the Innovators Dilemma and creating new business models of the future. Way to go! Read the original news item here.

Hope you liked my take on these innovations. Each of these innovations is awesome in its own right of course. It does take a lot of make a change, however incremental it may be. Do let me know what you thought of this Fintech Innovation Watch. These leaps of faith are based on the principles I used in my new book Connected! How Platforms of Today Will Become Apps of Tomorrow.

Thanks to Finextra for the daily sources. If you liked my take, do subscribe to the blog for when the next edition comes out in a few days. And PS: If anyone wants to partner up to target any of these innovations, look me up! Image courtesy Pixabay

Until next time!

Connected! is now live!

connected book frontExcited to announce from Barcelona, Spain, that my second book “Connected! How #platforms of today will become apps of tomorrow” is now live as a Kindle eBook! The paperback & hard cover versions will out through the distributors soon. I’ll also make the eBook available on Barnes & Noble & Apple in the next few weeks.

For a limited time, get  it now at the special price of 99 cents only!

This launch is truly special to me because it’s on my Dad’s birthday. I’ve been working towards this goal for a while, so its very fulfilling. 47K words seem to do just enough justice to this topic, and I did have this important deadline to meet!

The book covers some pretty awesome ground on how the new digital and connected marketplace is going to evolve, and how we can take steps to prepare our products and companies for it. The notion that platforms will become like apps is a very interesting one, but is also a gradually emerging reality. Something we should all be thinking about as we evolve our products and companies. I’m sure you’ll like the book. I’ll be posting blogs on on my website to cover some of the topics in more detail.

A note on reviews: Some independent reviews are coming soon, but do let me know if you’d like to review the book (a brief 2-3 sentence or longer honest review). As a sincere thanks, I’ll send you a signed paperback for free when the review is posted. Your reviews will help a great deal to spread the word, and to cover additional material through blogs and articles. The process is just a little involved when you don’t have a traditional publisher’s army behind you to guide you and do all the heavy lifting! I’ll appreciate your help. Access the Kindle eBook here.

Looking forward to yet another amazing journey! Adiós amigos, and see you soon!

“What we call the beginning is often the end. And to make an end is to make a beginning. The end is where we start from.” – TS Eliot (courtesy Brainy Quote)

Customer engagement lessons from the holiday season

holiday-shopping-1921658_640-1Let’s start with some cool statistics to set the stage for customer engagement. The numbers are hard hitting. Online sales clearly exceeded offline sales as nicely explained here. 25% more people did not stand in early morning lines.  Obviously the availability of blockbuster deals is not an issue anymore. Good in a way but kind of takes some fun and thrill out of Black Friday.

More interestingly, 40% of online sales were dominated by Amazon. Wal-Mart and others are catching up slowly of course. The prediction is that the big retailers will outperform small and smaller retailers which is a bummer. And lastly all of this pales in comparison to what happens in China. The US thanksgiving TOTAL 4 day online sales are only about 10-15% of online sales on Singles Day!!

Here are some lessons I took away for creating deeper customer engagement:

Ecosystem is important

As we are learning from Amazon, eCommerce is not just transactions and volume, Its about stickiness. With Prime, affiliate marketing, and more products by more marketplace vendors, the ecosystem dwarfs that of other retailers. Consider the added advantages such as eBooks, Amazon video and so on. The question every retailer needs to start asking is very simple. What’s our ecosystem game? And how do we get started?

Mobile is beyond transactions

The steep rise in online sales means that more customers are transacting via mobile phones and tablets. Merely optimizing your mobile site or app does not help. Features such as re-targeting to remind shoppers of products they’ve looked at before, searching local inventory, and allowing social validation and interaction are crucial. In addition, the broad catalog sales approach must give way to more personalized shopping. For this, customer engagement on wishlists or social causes are good methods.

Customers need help planning

A few customers know exactly what they want and go for it. But many are impulsive shoppers. While we know that returns are expensive, online returns are even more expensive. Helping customers set goals, analyze their needs, figure out their gifting etc. is commercially smart. On the one hand, such customer engagement efforts will reduce buyer’s remorse. Even better, customers will avoid the feeling that they somehow lost out on the deals party. It will also help tie your efforts to a noble cause.

Digital commerce is truly here and gaining fast. What we need now is to reinvent our channels for true customer engagement.