Today on the “It’s a Customer’s World” podcast, host Andy Murray interviews Steve Dennis, a consultant, keynote speaker, and author focused on retail growth and innovation. Steve has been named a top global retail influencer by multiple organizations, and his thoughts on the future of shopping are regularly shared through his role as a Forbes senior contributor. His recent book, “Remarkable Retail,” is a bestseller, and provides the starting point for Andy and Steve’s conversation on the shifting retail space and the why and how of making businesses remarkable.
Steve’s book is noteworthy for its historical contextualization of retail, as well as for its eight practical principles. After asking Steve about the writing process itself, Andy wants to explore both sides of the book. Together, Steve and Andy discuss the need for retail businesses to be remarkable, the “muddled middle,” and the massive disruptions that have arisen within the retail space in recent years. Businesses have had to navigate unchanging variables, manage pressure on expense budgets, determine how to balance physical and digital spaces, and much more. All the while, the most successful companies have been those keeping the customer central, cultivating empathy, fostering personalization, and improving processes. As the conversation concludes, Steve pitches the retail profession, answers student questions, and shares what gives him hope.
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Andy Murray: (00:05)
Hi, I'm Andy Murray. Welcome to It's a Customer's World podcast. Now more than ever, retailers and brands are accelerating their quest to be more customer centric. But to be truly customer centric, it requires both a shift in mindset and ways of working. Not just in marketing, but in all parts of the organization. In this podcast series, I'll be talking with practitioners, thought leaders, and scholars to hear their thoughts on what it takes to be a leader in today's customer centric world. Today, I have with me Steve Dennis. Steve is a consultant, keynote speaker, and author focused on retail growth and innovation. He has been named a top global retail influencer by multiple organizations. His thoughts on the future of shopping are regularly shared in his role as a Forbes senior contributor. His new bestselling book is Remarkable Retail: How to Win and Keep Customers in the Age of Digital Disruption.
Andy Murray: (01:07)
During my talk with Steve, we discuss his new book and a few of the eight essentials he outlines as key principles for becoming remarkable. Steve speaks with the wisdom gained from doing the hard yards of being in retail as a senior leader for some of the biggest and best known brands. I thoroughly enjoyed our talk as we covered not only the history of how we got here, but what the road looks like ahead. Hi, Steve. Welcome to the podcast. It's great to have you.
Steve Dennis: (01:33)
Thanks for having me. I'm excited to be here.
Andy Murray: (01:35)
Well, first, congratulations on your book. I can see that it's doing quite well.
Steve Dennis: (01:40)
Yeah, it was an interesting time. The book came out pretty much right during the pandemic, so it was an interesting time to try to launch a book. But thankfully, it's been pretty well accepted and continues to sell well.
Andy Murray: (01:51)
Yeah. Before we get into it, I know from what you stated, and I think the early beginnings of that, that you had this on your bucket list to write a book. Take me to that moment when you said, "I'm actually going to do this." And you actually set out on that quest to write it.
Steve Dennis: (02:07)
Well, I'll try to keep it short because it's a little bit of a long journey. But yeah, as you said, I've wanted to write a book for quite some time. I like writing. I've written, I don't even know, close to 1000 blog posts and Forbes articles over the last decade. Been doing speaking quite a lot the last few years. Definitely working on all sorts of content for a while, but never quite had the right lens on what I thought would carry a whole book. But I think maybe three or so years ago, particularly as I was speaking and having to develop a storyline around what I was going to talk about, a framework, a narrative, started to develop. Then I just started kind of putting the pieces together.
Steve Dennis: (02:56)
Then at a certain point I was like, "Okay, I'm just going to sit down and really try to outline this as a book." I went through that process, and that gave me more confidence. Ultimately, I just had to sit down and really pound the thing out. It really was an accumulation of ideas over a fairly extended period of time. It was probably about three years ago where I really pivoted to saying, "Okay, I think I've got something that could turn into a book."
Andy Murray: (03:21)
Well, I've got one in process, and I don't think people have any clue how hard, if you've never written one, how hard that is and how long it takes. So, congratulations on that. That's quite an achievement.
Steve Dennis: (03:30)
Thanks. I mean, it is a lot of work. The one thing I will say is that even for people, and maybe you're finding this, even for people that have done a lot of writing in shorter form, I wouldn't say that's always easy, because it's certainly not for me. But yeah, it's just very daunting to try to be able to carry a narrative and a set of ideas over 200, 250, 300 pages. It is really just a different thing, even if you've done a lot of writing.
Andy Murray: (03:55)
Yeah. Well, let's talk about that. I do read a lot, and the book when I read it, and it came out in 2020, it's the first book I've seen in a long time that really goes into retail with some great principles or essentials. But not only that, I think that what I enjoyed about it is the pragmatism in it. You read a lot of things from consultants and professional services type people about, "You just need to do this. You just need to do that."
Steve Dennis: (04:21)
Yeah.
Andy Murray: (04:21)
But if you have not actually worked in retail and been in that space, you may not appreciate just how hard some of those steps are. So, you're very candid about the difficulty, the dive, facing it. If we want to talk about the book for a second, the first part goes into a great job providing context, case studies, and some history on how we basically got here. But in the second part, you lay out these eight essentials that give people quite a bit to chew on. Perhaps we can take a bit of a walk, a quick walk around some of the early parts. The six probably, or the table stakes that you call them, to highlight some of that and just get your top line high-level thoughts about each of those. Is that okay?
Steve Dennis: (05:05)
Yeah, sure. Absolutely. What I try to do, as you said, in part one, is really set the stage. But the backdrop really for the eight essentials is this idea of the need to be remarkable. That even being very good is no longer good enough.
Andy Murray: (05:20)
Yeah.
Steve Dennis: (05:21)
That's really anchored in a lot of experience I had, both in retail executive roles as well as a consultant, of seeing how product choice was expanding. Access was expanding. Information was becoming ubiquitous, and really it was quite easy or increasingly easy for customers, particularly with the advent of eCommerce, to make it almost seamless to be able to find substitutes for almost any product.
Andy Murray: (05:48)
Right.
Steve Dennis: (05:48)
Or finding a pretty good alternative to whatever it is you were selling as a retailer at a cheaper price or more conveniently. A lot of the scarcity that existed in distribution and choice and so forth for many, many years, has really been evaporating. Again, particularly because of eCommerce. To me, that just upped the bar from a competitive standpoint. Then this idea I borrowed very liberally from Seth Godin and his Purple Cow idea about really being remarkable. In that not only are you offering something unique and distinctive, but something that literally people are willing to talk about. As that became kind of an overarching idea for some of my work over the last few years, what I started to think about was, okay, well what are the elements of being remarkable? What are both the basic foundational pieces, but also the differentiating pieces?
Steve Dennis: (06:41)
As I've worked previously in the industry, and as I worked as a consultant, and then I did some studying, I started to see these common themes across most if not all retailers. My general caveat, or I have two caveats about the essentials. One is, retail is such a huge field. As you know, there's a lot of different types of retailers. So, I hesitate to say that all eight of these will apply powerfully for every single retailer, whatever their situation might be. But I do find that can be pretty consistently applied. The other thing is, I very liberally call them essentials, or you could call them elements, rather than steps. It's not like a recipe, you do one, then you do two, then you do three. The mix of them or the order of them might vary depending on your situation. That's behind the eight essentials.
Andy Murray: (07:38)
Well, that's helpful. For those that don't know, you have a great podcast that's just been launched fairly recently. I think your first episode is with Seth Godin, and you guys talked about Remarkable and how that...
Steve Dennis: (07:50)
Yeah.
Andy Murray: (07:50)
You guys have had a pretty close relationship for some time, actually in school together. Is that correct?
Steve Dennis: (07:56)
Yeah, we've known each other. We were in the same graduating class at Tufts University in a year that I won't mention, but a long time ago. We actually started a business together and found ourselves in business during the beginning of our junior year, and have been friends ever since. It's been a long, long journey as friends, and occasionally collaborating on something.
Andy Murray: (08:21)
There's two types of retailers. You might look at perhaps, the big mass large retailers and those that are a little more agile or niche in growing into how they grow. One of the questions that I had from a macro standpoint on Remarkable Retail is, there's probably a bit of a reason why a lot of people find themselves in this muddled middle. It's probably because of the volume that's there to chase.
Steve Dennis: (08:51)
Yeah.
Andy Murray: (08:52)
To become remarkable for the larger guys. For the niche players and those just starting out, they probably almost always enter into the space from a remarkable perspective and lose it over time as they scale and grow.
Steve Dennis: (09:05)
Yeah.
Andy Murray: (09:06)
Do you find it a bit more challenging on... it doesn't make it any less true that you have to be remarkable.
Steve Dennis: (09:12)
Yeah.
Andy Murray: (09:12)
But there is some empathy for the guy that is stuck in the big middle and perhaps how they got there.
Steve Dennis: (09:17)
Yeah, I think there are a couple of things going on. I certainly think that it is a kind of classic challenge to go from whatever made you unique, remarkable, whatever you want to describe in the early days, and then the demands as a public company to scale.
Andy Murray: (09:35)
Yeah.
Steve Dennis: (09:36)
I use this term advisedly, but to sort of dumb down what you're doing. You can certainly find plenty of specialty retailers, whether that's in the home goods or apparel or what have you, that in order to attract a wider audience had to get into other product categories, or different price points, or what have you, to be able to scale the business beyond its original place. I mean, Starbucks I think is another company that's gone through a couple of iterations where they were very much about the independent kind of coffee start ethos, that's not the kind of business that's going to have 10,000 or 20,000 or whatever locations they had. In order to chase growth, they had to do some different things and make it a little bit less special.
Steve Dennis: (10:28)
I think it's a classic balancing act. It is very hard to preserve those things that often got you to one level at the next level. But I also think people get stuck in the middle just because the world has changed on them. I spent a lot of time on this in the book. If you look at the modern department store space, I worked at Sears a million years ago. But Sears was the biggest retailer on the planet at one time. Sears opening retail stores out of its catalog business and being very intertwined with the growth of the regional shopping mall. At one point, regional shopping malls were remarkable and Sears was the remarkable anchor tenant. But in the last 30 or 40 years, a lot has happened in terms of alternative retail formats and the way consumers spend their time and so forth. Sometimes, either because of shifts in culture, shopping preferences, alternative choices, the world moves away from you. What made you special no longer works anymore.
Andy Murray: (11:38)
Yeah. Probably you could almost call it Remembering Remarkable Retail. Because I bet in some people's DNA, especially if you've been in a company for a long time, it felt more remarkable in the past when you were starting out. It's a bit of a return to that maybe at times. You mentioned Sears. That was one of my first jobs in college, was working in Columbus at the distribution. This monstrosity of a distribution center. You might have been there.
Steve Dennis: (12:04)
I have been there, yes.
Andy Murray: (12:05)
In Columbus. It was quite a great experience, but I don't know where Sears was on the charts in '81, '82. It definitely was still a pretty big player.
Steve Dennis: (12:18)
I think in the early '80s, I think Sears was... I think in pretty much all the '80s, Sears was still the biggest retailer. I think it started to foot in the early '90s maybe, when Walmart passed them. It's one of the points I make in the book, and particularly I think in the current COVID situation, is that it's easy to see, particularly this year but even in the last 10 years, all this massive disruption. The ascent of Amazon and others most obviously. But retail has been a pretty dynamic industry. There have been different waves. Certainly the mall area, then the discount mass merchant era, Walmart, Target, etcetera. Then big box specialty. Home Depot, Lowe's, Best Buy, Circuit City in the day. And Cole's, those off the mall department stores. While the pace of change I think is absolutely accelerating, and Moore's Law hasn't skipped over retail, it's always been a very dynamic industry. I just think now, things happen more quickly. Obviously the more that things are digital and less anchored in big brick and mortar, it's got a lot of different dynamics.
Andy Murray: (13:38)
Yeah. You know what? In 1991, I was working for Procter & Gamble calling on Walmart. At that time, P&G I think was bigger than Walmart. I mean, who would've thought? In one of the top-to-top meetings, I had an opportunity. We were talking about some things like pricing on diapers. Walmart wanted it cheaper. They could get more traffic, right? Out of stocks and cosmetics. I can think back in '91 to the three or four items that were on the agenda. I fast forward to meetings I might have been in last year at Asda in the UK. The variables don't... we're still talking about the same things in a lot of ways. Inventory flow. The variables themselves are pretty consistent in retail. It's not that complicated. But the dynamic of how they interplay with each other is just really dynamic. No two days are alike. Is that your experience?
Steve Dennis: (14:39)
Yeah. It's funny, I'm actually working on something now where I'm talking a little bit about my journey from Sears to Neiman Marcus. Which I sometimes mockingly call going from the outhouse to the penthouse. Part of the obvious superficial things I noticed right away was obviously the Neiman Marcus customer, much wealthier. Price point is much higher. My colleagues dressed a lot better than my former colleagues at Sears. There were some pretty obvious differences. Dollars per square foot spent on [crosstalk 00:15:15]
Andy Murray: (15:16)
Sure.
Steve Dennis: (15:16)
Superficially, a lot of things were the same. But after a few weeks sitting in operating reviews, staff meetings or whatever, we're still talking about sell through rates, and gross margin, and inventory turnover. And are we taking care of the customer or not? Maybe our view of customer service certainly at Neiman's was different than it was in Sears. But the guts of what makes for a great customer experience is I think pretty common. It just has to be versioned to the particular purchase occasion or customer segment. That could be quite different. But I also advised them on several advisory boards of tech companies that served the retail industry. When they're talking about how to send their offering to retailers, I said, "Well, almost regardless of what you're selling it still comes back to, are you getting way more traffic? Are you helping me convert the traffic? Are you helping me convert the traffic at a higher average order value or margin?"
Andy Murray: (16:19)
That's right.
Steve Dennis: (16:20)
Are you driving repeat? There's a retail formula and certain levers that are pretty much ubiquitous, whether you're... I mean, obviously it operates differently on a website than it does in the store. But the mechanics or the underlying engineering of the profit equation, the guts of it, are really similar across category and type.
Andy Murray: (16:43)
They are, and I think that makes it pretty exciting actually. It makes every day a bit different because it's where you put the emphasis on the metrics. One of the shifts I've seen that's been a bit challenging, and I understand how we got there, is looking at store labor productivity. How you measure store labor. Depending on how much of a microscope you put on that, there is where you see some of the evolution of poor customer service. Because customer service, if you're doing a case rate type labor evaluation of how you're looking at store laboring, and labor is really now very expensive in the grand scheme of the total model. Where do they go to pick up hours to get the monthly... Because every measure has this gamification a bit of the unintended consequence that's hard to mitigate. If a service desk is... you're not measuring those hours in the productivity of the core store, that's where you go to get surplus hours to make up perhaps.
Steve Dennis: (17:42)
Right.
Andy Murray: (17:43)
Right, so it's the unintended consequences that we have with some of these metrics. They've been there. They're very similar dynamics, but it's how you put the emphasis on which ones that drive certain behaviors that almost always get you an unintended consequence.
Steve Dennis: (18:01)
Yeah. I feel like it's been complicated. I mean, there's an aspect that's always somewhat complicated. I think it's been especially complicated the last few years. One because I think if you're a retailer, this goes back for a while or it goes back a while when I was at Sears. But I've seen this same dynamic played out whether we're talking about Penney's or Macy's or whatever. But if you're a retailer that's having a hard time driving sales, and the only thing you can control or you feel like you can control is expenses, then that's the way you're going to improve profit. You put so much pressure on your expense base. Again, if you're having a hard time getting revenue going, then you cut back on store hours. Or maybe you cut back on investing in the store. Which then tends to have a longer term impact of making matters worse.
Steve Dennis: (18:58)
It's easy if you're not understanding the interrelationship between expenses, and revenue, and loyalty, and all that other good stuff, to keep tightening the screw. It's what I call in the book optimizing to extinction. Just slowly, slowly doing things. Then I feel like the pilot is coming on the intercom saying, "Okay, ladies and gentlemen. We're about to begin our initial descent." It's a descent that many retailers don't seem to be able to pull out of. But I think the other thing, and I think we're absolutely seeing that is accelerated by the pandemic, is the changing role of the store. This has been true prior to the pandemic, but I think this has become much more obvious, that stores are playing a broader role in the whole ecosystem of the brand. Or store associates are not only sometimes helping depending upon the type of store it is. It could be more or less. But the store associate might be helping a customer who is then going to transact online at a later date. Or they may be running product for curbside pickup, or fulfilling an online order.
Steve Dennis: (20:11)
I think it's getting more complicated for brands to understand the interrelationship between the digital and physical channel, as well as managing labor in sometimes very different ways than simply, "I'm filling the shelves and I'm at the checkout. I'm offloading boxes on the dock," or whatever. I think the labor equation is getting a little bit more complicated [crosstalk 00:20:39]
Andy Murray: (20:38)
And I think when we look at this customer centric idea, and I know you touched on it in several of the essentials. It sounds easy, or it sounds like it should be intuitively easy to execute. But some of the realities of retail get in the way. For example, in my experience from grocery and produce, you could absolutely get to 100% fresh in produce. But the waste you would drive from that would be so expensive. You're trying to optimize, how fresh do you want to be? Versus the waste that you're going to generate, which has cost in it, but it's also not great to throw away that much produce.
Andy Murray: (21:21)
You're always trying to optimize to get the counter balance. Anything you try to push as a lever, there's always a counter lever, it seems, in retail that has a negative consequence if you go too far. A classic is mark downs. One of the challenges or way to diagnose I think a retailer is to look at the question, who authorizes mark downs? Is it the store who can authorize a mark down, or does it have to be through the merchant? If the store has that power, then they're probably going to move that out pretty quickly. You know this better than anybody from a department store. If a merchant has that power, they might want to hold on a little bit longer. All of a sudden, the store experience gets a little crowded. Talk about that particular dynamic because that's a great illustration we hear back around department stores. How do you solve that markdown question and still be customer centric?
Steve Dennis: (22:13)
Well, I feel like at one level, and maybe this is overly simplistic, it's kind of the epic battle between effectiveness and efficiency. Understanding what problems you're trying to solve for. Because there's certainly lots of things you can do from a near term perspective or a financial metric only perspective that might be shooting you in the foot.
Andy Murray: (22:36)
That's right.
Steve Dennis: (22:37)
From customer loyalty and brand differentiation, and all those kinds of things. I think a couple big things. One is, I think it's very important to have very good segmentation so that when you're talking about the customer, you get more clarity and granularity about what you're talking about. Because very few brands had a customer in a very generic way, right?
Andy Murray: (23:06)
That's right.
Steve Dennis: (23:06)
They have multiple segments that value... well, are of different values to the enterprise. But also value different things in terms of their needs, wants, and stories they want to tell about themselves. I think you have to have some sense of, which customers are we talking about? Which purchase occasions? To try to get it a little bit more focused.
Andy Murray: (23:26)
On that point, you mentioned the book, and I've used it as well, RFM. It's been around a while, but Recency, Frequency, and Monetary. Being able to tie that perhaps to the call center so that when that person is on the phone, who are you really talking to? I still think most retailers haven't connected those dots yet.
Steve Dennis: (23:44)
No. I mean, certainly technology is enabling...
Andy Murray: (23:49)
You can do it, yeah.
Steve Dennis: (23:49)
A lot more of the ability to not only do the value modeling, customer lifetime value assessment. Also, to operationalize that at point of sale or the call center or whatever. But yeah, there aren't that many retailers that are really actively doing it. It's also very, very complicated. I think this is a little bit off your question. But I think one of the things I've seen be so powerful in the last few years in particular is to not only have an actual customer segmentation, and understand customer metrics at a deeper level, but to be doing customer journey mapping so you understand where you have the biggest opportunities to fix underlying issues. Or hopefully do something really remarkable that you can amplify. That information informs, I think, part of your question. Which is, where do you care the most about taking markdowns? What financial lever you're most trying to pull. Because if you're focused on your most valuable customers and prospects, you might make some different decisions for certain customers than just the broad brush rule of...
Andy Murray: (25:02)
Yeah, interesting.
Steve Dennis: (25:03)
You're making this mark down.
Andy Murray: (25:04)
That's right.
Steve Dennis: (25:05)
On this day just because that's what our system, our markdown optimization system, tells us we should do. There should be some, I think, overlay around customer value and broader brand true north to inform those decisions ideally. But it gets into a level of complexity that a lot of retailers are not.
Andy Murray: (25:23)
And that complexity often carries cost of investment to get that complexity.
Steve Dennis: (25:27)
Absolutely. I always joke around that it's easy to do everything based upon the averages, right?
Andy Murray: (25:37)
Yeah.
Steve Dennis: (25:41)
Generally speaking, if you do a distribution, nobody actually represents the average, right?
Andy Murray: (25:45)
That's right.
Steve Dennis: (25:45)
The interesting thing, I'll just pick on Bed Bath & Beyond for a while. Bed Bath & Beyond's promotional strategy for a long time has been the 15% coupon. Pretty much all you know is that lots of people won't buy anything unless they have the 15% coupon because for them, that's become regular price. Other people will not buy because 15% isn't enough. Since it's applied to every category, you can just say, "Well, 15% off in some categories is not a particularly good deal if you were to price that on Amazon, let's say."
Andy Murray: (26:21)
That's right.
Steve Dennis: (26:21)
In other categories, it's excellent. The way they solve for that is by eliminating a lot of products from the 15% discount. Which just causes customers to go, "Well, this is a con." They've managed their business from this average mark down strategy and this, "You're an idiot if you don't use the coupon." All they've done really is not been able to do markdowns in a very precise way. Left money on the table for some customers. Not created enough of a discount for others. And then just pissed off a bunch of people because they have so many exclusions. But it's a very simple to execute program, right? It's very simple.
Andy Murray: (27:02)
I think you make a great point.
Steve Dennis: (27:04)
It just doesn't work.
Andy Murray: (27:05)
Yeah. Well, a lot of the customer data you look at in retail, historically it's been there to serve merchandising and help think about category planning, and do that. But more recently, turning toward the customer and really understanding the customer segmentation is a bit newer. And getting an RFM model that can be used, or a sum value model that can be used in business decision making. Whether that is markdown optimization. You don't have to go all the way to personalization of customer data to get those benefits back to be more customer centric.
Steve Dennis: (27:39)
No, no. Yeah, my experience with more targeted marketing broadly is they're... I mean, it's certainly a nice idea. Conceptually, I buy into the idea of one-to-one marketing. I talk about that in my book. I was a huge fan of Don Peppers' and Martha Rogers' work 20 years ago. It sounded fantastic to me. I think they were a little bit ahead of their time in terms of what culturally and what could be done technologically. But certainly, the closer you get to one-on-one with a customer, the better chance you have to serve them well. But I don't think we have to let that be a barrier to doing some things that can make whatever you do more personalized and relevant. It doesn't have to be exactly a segment of one.
Andy Murray: (28:29)
Exactly.
Steve Dennis: (28:30)
A/B testing can accomplish a lot. At Neiman Marcus, we developed some fairly straightforward models that greatly improved relevance, but we're not literally one-to-one. I had 32 segments or a combination of variables and emails or something like that. I think it's about getting progressively more customer relevant. And with any luck, developing that learning relationship with a customer so that when you put something out and it isn't getting a good response, that you can learn from that and apply that to your models, and make it progressive and more relevant. I think there's lots of fairly simple targeting strategies that you can do that will make the customers feel more seen and appreciated. And at the same time, get you a better marketing ROI.
Andy Murray: (29:22)
It does take a bit of a leadership mindset shift to create that test to learn culture, or more importantly protect that culture. You and I both know from how the retail grind at an exec level and throughout, it's an intense, full on experience. When I was doing consulting at a brand level on the agency side, I never appreciated what the six years at Walmart and Asda has taught me in terms of the retail true atmosphere of what you have to do to drive that business. It is a full on, intense experience.
Andy Murray: (29:56)
It takes a bit of a top down leadership mindset to say, "We're going to protect some test and learn space, head space. We're going to invest in that talent, and we're going to make sure that that is always on," almost that test and learn. Whether that's even store prototypes or making sure you've got something new in the pipeline. My guess is with COVID coming that those that had good tests already in play were accelerating those tests. And were in a better position, than those that weren't testing in some of the areas that they needed to testing and were caught a lot more flat-footed, a lot more difficult.
Steve Dennis: (30:30)
For sure. I mean, I know one former client, and one other company that I happen to know that was not a client, where I had visibility to things they had in their pipeline. I'm not exactly sure why they didn't launch them prior to the pandemic because they were good ideas, I believe, that would've resonated well with the customer. But in any event, because they were developing an innovation pipeline and were doing a lot of testing, and honestly had, they don't call it this, neither one of them, but what I consider an RND budget. Because that was part of what was built into their system and they have that pipeline, yeah, they were able to get things ready. Whereas lots of other companies had been scrambling to catch up or doing things in a very jerry-rigged way. Which in some cases has been okay.
Andy Murray: (31:23)
Well, that was survival.
Steve Dennis: (31:25)
Yeah. I mean, survival will... Fear of imminent death is often quite a good motivator, it turns out.
Andy Murray: (31:33)
One of the things that I'm seeing with COVID retail especially is it picks up your number two essential about being human centered. Perhaps because of how things feel more local now with retail. Even if you're a mass retailer, now you kind of know your store manager a bit more maybe than you might have in the past because of all the localization of what's happening. Which seems to be part of human centered. Do you see that as something that's going to stick, of the role of retail in their local communities?
Steve Dennis: (32:06)
I hope so. Again, I think in this dichotomy between the art and the science or the left and right brain that's part of a lot of retail. What I try to get to, well if anything, maybe there's too many ideas in that chapter. But part of what I try to get to in that chapter is this idea that, when we think about how to be more remarkable, it's absolutely important to understand the customer better. Part of the argument I make is, we really need to understand the customer fundamentally at a more empathy driven level. Not just features and benefits, or at least toggle both of those in. But it's also about expanding what we're doing as organizations and brands to the world more broadly. The most obvious being our associates, or vendor partners, our agency partners, or what have you. But I think the role that retailers play in local communities and in the world at large.
Steve Dennis: (33:12)
I think the COVID situation, for a lot of folks, is engendering more empathy. As much as it's a cliché to see that in lots of cases, we are all connected or in this together. I'd like to think that that will persist. But we also, even before the COVID crisis, certainly had brands that were making their local involvement for what they're doing for the world and the community very much part of their brand proposition. Whether that's say Nike with their local stores, and designing their stores to be more of the neighborhood they’re in. Both in terms of product, but also service and who they're hiring, and how the stores are designed. Brands like Patagonia.
Andy Murray: (34:04)
Sure.
Steve Dennis: (34:04)
The whole resale, circular economy market is speaking to societal issues, climate change, sustainability. I think those trends have been building for several years. I certainly think, again, even before the pandemic, we were seeing more consumers say that the social agenda or the impact on the community or the planet is important to them. And they're selecting brands that reflect that, or there's more pressure on big corporations like Walmart to have sustainability and other aspects be part of what they do. I think the momentum was already going in that area. Doubt that there is any real going back. Actually, with any luck, there's an acceleration.
Andy Murray: (34:54)
I don't know where it was in that chapter around human centered, but one of the thoughts that struck me was, I think my calling customers customers, that is such a transactional description of a relationship. It didn't really occur to me until recently that, what if we called it people? When you start looking at it, you're really serving people.
Steve Dennis: (35:17)
Right.
Andy Murray: (35:18)
You get it more human centered pretty quickly than thinking about customer. There's this little wall of transaction when you think about people as customers, don't you think?
Steve Dennis: (35:28)
Yeah. No, I absolutely agree. Sometimes I feel like that was the hippy section of my book where I was a little bit, what's so funny about peace, love, and understanding? But I do think it's aside from my own spiritual view of the world or something. I do think there is something powerful from a branding standpoint, particularly for premium brands to say, "Look, we're not just selling you a product and engineering features and benefits for you. We are solving a problem for you, or we're creating a story for you that goes above and beyond simply this product." In some cases, I think this is a big part of human centered design. We're solving a higher level problem. I think in that chapter, I talked about what Harvard Business School Professor Ted Levitt said was, "People don't buy a drill because they want a drill. They buy a drill because they want a hole." What is that outcome, customer jobs to be done, as others have called it? What is that thing we're doing for you?
Steve Dennis: (36:39)
If part of what we're doing for you is solving a higher order problem like being a good citizen, or feeling part of a movement, or finding people in your tribe, like minded people that like the same products, or like the same causes, or want to go running or hiking. You can imagine all those things. I think from a very selfish business standpoint, we are connecting with people in a deeper way. We are building loyalty. If they really feel passionate about what they're doing, they're going to tell the others. That's the most powerful marketing of all. I think from a very selfish, practical business standpoint, thinking about people more broadly and about their emotional connection to our brand is good. I also think it happens to be a better thing for society, but that's a different puzzle.
Andy Murray: (37:38)
For sure. If you're going to go down that path, back to your point on customer journey mapping. You'll want to make sure that if you do have a problem, and you end up in the call center making a call, you're not going through a call tree that puts you on hold for an hour telling you you're a very important customer. You have to stay harmonized with that purpose through even your weakest touchpoint. It's going to be judged. Especially in today's social context where it's easy for a customer to talk and share their brand experience on some of those touchpoints that are just miserable for a lot of people.
Steve Dennis: (38:11)
Yeah. I think, not that this is good, but I think if you had a really bad customer experience 15 or 20 years ago, the people that heard about it was your family or your neighbor, or a person you golfed with or went to church with or whatever. It could be fairly contained. Now, it can blow up on you very, very easily. Particularly if certain people are willing... I mean, I had a very bad experience with a national retailer. It was so antithetical to... and it is going to show up. I'm not going to name them, but it is going to show up in a future piece of writing of mine.
Steve Dennis: (38:49)
The experience was just so egregious and almost so comical that I almost felt like I just had to talk about it on social media. I showed uncharacteristic restraint, but I easily could have. Certainly, there are people with way bigger followings that get very vocal about a bad customer experience. Aside from you should take care of the customer and live through to your brand promise, things can go really south for you quite quickly [crosstalk 00:39:16]
Andy Murray: (39:16)
Quite quickly, and I think that's what's different versus five, 10 years ago. How quickly it ends up being a letter to the CEO. People would be surprised to see how many letters the CEO of a retailer gets.
Steve Dennis: (39:31)
Oh yeah, right.
Andy Murray: (39:33)
It's a lot on a daily basis. That does have a big impact. That's human centered. Other things, other essentials that you have that I think link back to customer centric would be essential number five, being personal.
Steve Dennis: (39:52)
Right.
Andy Murray: (39:52)
Is that really about one-to-one, or is that a different concept than actually one-to-one marketing?
Steve Dennis: (40:00)
Well, there's a few things. The core of it I think is really a customer insight, or being customer led in your strategy. Which is to really push to deepen the levels of understanding, and then acting on those insights. That could come from exhaustive customer journey mapping or other forms of research to really understand how to be intensely customer relevant. I do talk a little bit about getting closer to one-to-one. So, some of that is more from an analytics standpoint of campaign management, and a lot of the things that... a lot of marketing technology companies have been pushing for years. There's also the aspect of curation, of being able to go out and say the more common or historically traditional customer service personal shopping thing of, well, if I understand you as an individual personal shopper or as Netflix, I can go out and find things for you and curate them. So, what I'm showing you is much more likely to be to your liking.
Andy Murray: (41:13)
Got it.
Steve Dennis: (41:13)
Stitch Fix. There's services that aren't literally one-to-one, but try to understand you as an individual and bring stuff to you in an edited or curated fashion. Then there's also the aspect of purely custom products. It is becoming a lot easier, through technology, to either literally make something for you on a one-to-one basis or have enough permutations and combinations, like some of the custom sneakers guys support that. It's not technically one-to-one, but there's enough variety that it feels built for you.
Steve Dennis: (41:49)
I think the underlying idea or the outcome we want is the customer to feel like, okay, you really get me. You know me. You understand me. You value me. Therefore, my experience with you, whether that's email or shopping in your store, or going to your website, or signing up for a subscription, feels very personal and relevant. Because the more intense the customer relevant we become, the more we enroll people in our brand. That can play out in a pretty wide spectrum.
Andy Murray: (42:24)
Yeah. Do you want to talk about the methods of how you get that understanding? Clearly on an online pure play, you've got different tools there to get that understanding of what customers may or may not want. But when you get into physical stores, I still think there's a place for behavioral, observational research of a [crosstalk 00:42:42]
Steve Dennis: (42:41)
Oh, sure.
Andy Murray: (42:41)
People might take, and that you just cannot... you're not going to see it in a data aside. You just have to be in that store and see it. Is that still your experience?
Steve Dennis: (42:51)
Yeah. I mean, I think what's fantastic is that, and I think in reality, as much as it gets marketed pretty heavily, there aren't a lot of companies that are really applying AI machine learning.
Andy Murray: (43:05)
No.
Steve Dennis: (43:06)
Maybe in their investor deck, but when you actually look at what's being applied, it's still pretty limited. But there is certainly lots of technology that is evolving pretty quickly that allow you to make inferences from various observations. I think that's more outbound marketing or in support of things. But absolutely, there's lots of I guess ethnographic research, whatever you would call it, that can inform your overall strategies. There are some pretty cool advances there. Cameras being put in stores, tracking heat indexes and things like that. Some of which has been around for a while, but it's being taken to the next level. I have never found, and I've been involved with customer insight and retail for 30 years or so and tried a lot of different techniques. There is, generally speaking, no one approach that's going to get you to where you need to get to. I think even some of the companies like Stitch Fix that are very, very dependent on data science are having an overlay of human beings and conversation.
Steve Dennis: (44:13)
I think some of that actually helps their prediction. Some of that is being responsive to consumers wanting to talk to another human being sometimes. Whether the robot can do a technically better job or not, there's a need for connection and feeling heard. I think we have to look at all the techniques that are out there and find the ones that work best for us. Things are constantly changing. It's worth staying on top of. [crosstalk 00:44:41] It's understanding the customer that's going to get us the input we need to be more relevant and remarkable.
Andy Murray: (44:49)
Some simple things we could do is just go sit at a call center on the phone for a day. It's surprising what you hear and the challenges they have. It creates a lot of empathy for the customer challenges they get. The call center reading customer letters, go out in stores.
Steve Dennis: (45:07)
Absolutely.
Andy Murray: (45:07)
It is a portfolio, a smorgasbord of tools you have to put together to really get dialed in on the customer, I think.
Steve Dennis: (45:15)
I feel like merchandising, store operations, customer insight, they're all a mix of art and science.
Andy Murray: (45:22)
That's right.
Steve Dennis: (45:22)
Certain situations will lead you more to the science side or the art side, but I think you need both. There are some obvious limitations to even the most advanced, sexy technologies that will get you there. I mean, I had a job a bunch of years ago where I had a call center reporting to me. I used to listen to calls all the time. It was probably the most amazing research. I would listen to calls and then sometimes I would take calls. When I would take calls, it gave me an opportunity to actually get into a dialogue. Even though it was a relatively small sample size, it just added to understanding in a way that our pretty large sample quantitative surveys just didn't. There aren't too many businesses where you can sit in the command center and [crosstalk 00:46:22] things and read reports. Particularly certain kinds of retail, which are just fundamentally more emotional, tactile. Things that are just harder to capture in bits and bites.
Andy Murray: (46:36)
What people may not understand about retail is just how diverse the skill sets required to do it well, if you talk about a total retail, can be. I found it to be one of the most exciting career spaces to be in. If we shift gears just a little bit and talk about the talent pipeline.
Steve Dennis: (46:54)
Got it.
Andy Murray: (46:54)
And specifically perhaps what's coming out of universities today. A career in retail. If you're a student, a freshman, or sophomore, may have some misbeliefs about what it really is. There's a large part that feels like it's holding sweaters in a department store. But actually, if you look at all the areas of logistics and the things you could get into from a retail career, what would be your pitch to a college student that might be trying to understand, should I get into retail or not? Hopefully it's not, "Don't get into retail."
Steve Dennis: (47:33)
Well, first of all, I mean, it's really amazing. I think it's been true for a long time that there is a really wide range of skills and talents that are needed across different retailers. If anything, I think it's gotten even more diverse because there's this whole engineering advanced technology skillset that's becoming more prominent. I think the first question is, do they see... I hate to be too black and white about this, but are they more attracted to the left brain or the right brain side of retail? I still think that there is plenty of art driven or artist driven creative pieces of retail. Whether that's visual merchandising, site design, aspects of certain kinds of merchandising fashion, merchandising certainly. There's maybe a little bit of a fork in the road. But if they're more like, "I'm not sure or balanced..." One of the most interesting things I've seen develop over the last few years, and I was fortunate to set this up when I was at Neiman Marcus, was really the bridge between the traditional merchandising or store operation side and the more analytics side.
Steve Dennis: (48:48)
They're called a lot of different things, but business analysts or strategy analysts that are doing really interesting problem solving. But they're sitting in my cases between the technology, or the PhD statisticians, or data scientists, and the people more on the front lines in different roles. And trying to figure out how to bring those two sides together and problem solve. I think that often takes somebody, whether they're an undergraduate or MBA or master's or what have you, it takes a more generalist business skill set. Maybe some of the disciplines you learn academically on the more technical side. And applies them in a really, really powerful way. I think companies are in different stages of bringing that sort of talent in. Whether it resides in strategy, or marketing, or what have you, might be different by company. But I think in many cases, you're really bringing in a very interesting mix of skills. It's the leading edge of where applied business is in the retail setting. I think there's a tremendous demand, so I'd like to think that there's an upside in terms of career progression and growth.
Andy Murray: (50:04)
Well, if you are interested in data science, it's hard to find an industry that creates so much data to analyze than a retail environment.
Steve Dennis: (50:13)
Right.
Andy Murray: (50:13)
I mean, you could quickly accumulate millions and millions of data fields on a daily basis.
Steve Dennis: (50:19)
Absolutely.
Andy Murray: (50:19)
But the challenge has been taking that data and applying it to a real business challenge in a case study or user story that you're really trying to connect the dots on. I think it's a rich field with a great base of data to start working on big data. Like you said, I think it's still early days for us to get the whole power of that data science capability applied to real business challenges that create value creation for the business. In most cases, it's still in front of us instead of with us today.
Steve Dennis: (50:50)
Yeah, absolutely. I've seen various studies Forrester and others have done about which companies are on kind of this digital or data insight maturity. I haven't independently validated those studies, but I trust...
Andy Murray: (51:05)
You trust Forrester, okay.
Steve Dennis: (51:07)
These companies. I think, yeah, they show 70%, 80% of companies are still relatively immature in really applying data science in a super impactful and meaningful way.
Andy Murray: (51:18)
Well, I have the privilege of working with the Walton College of Business. The always proactive professor Molly Rapert in the marketing department heard you and I were going to speak today. She gathered a few questions from her students. Do you mind taking a few of those questions?
Steve Dennis: (51:32)
I'd be happy to.
Andy Murray: (51:33)
Excellent, excellent. The first is from Trevor [Mayhu 00:51:38], and he is a marketing major.
Trevor: (51:42)
Mr. Dennis, I watched your video titled Omnichannel is Dead and the Future is Harmonized Retail. I was wondering if you could talk about some examples of retailers that are really achieving harmonized retail successfully during this time of COVID.
Steve Dennis: (51:56)
Sure. Well, first, the reason I like harmonized over omnichannel is really this idea of all aspects of the customer journey really singing beautifully together. I think there are quite a few companies that are doing well at this. The easiest ones to point to are a lot of the digitally native vertical brands. So, the Warby Parkers or Untuckits. But these companies that started online and then moved into retail. I think they had two important advantages at least. One was because they were rooted in a digital experience, they just translated that physical store. They never created this siloed thinking. I think they just got that the customer was the channel. It needed to be all one shopping experience. Customers are going to sometimes transact in a store, and some transact online and sometimes get served in the store or with a product. They just saw it as one thing.
Steve Dennis: (52:57)
Then the second advantage they had is they weren't burdened by a lot of legacy systems or legacy thinking. They got to design it in a harmonized way as they grew and deployed it. Lots of those retailers I think do it very well. But I think companies like Walmart and Best Buy and Nordstrom are getting pretty darn good at this. I think they have largely broken down the silos. I think they have seen that the integration between digital and physical is important, and have put a lot of the steps in place. I think if you point to some of the success, not just during the pandemic because they sell essentials, but some of the success prior to the pandemic among those companies. A lot I think can be attributed to enhancing their eCommerce capabilities. But I think more importantly, seeing their stores as assets when they are well-integrated.
Andy Murray: (53:58)
You picked a great word with harmonized. I think that word applies also to harmonizing, merchandising, and store operations.
Steve Dennis: (54:05)
Yeah.
Andy Murray: (54:05)
It's not an or. It's easy to get caught on pendulums if it's all about digital, all about physical. But harmonized is a great word that probably is more important to retailers than anybody else because of the competing things that you have to balance all the time.
Steve Dennis: (54:20)
Yeah. Not to get too hung up on the semantics, but I also felt like a lot of the lexicon that had been developed... If you want to be literal about it, omnichannel is all channels. They're everywhere, right? I don't think it's so important to be everywhere. I think it's important to show up powerfully in the ways that matter to the customer in that moment.
Andy Murray: (54:41)
Right.
Steve Dennis: (54:41)
Or seamless. But I don't know many customers who say, "I'd really loved Sears if they didn't have so many seams."
Andy Murray: (54:50)
I love it.
Steve Dennis: (54:51)
To me, it's not a customer-friendly word.
Andy Murray: (54:54)
No.
Steve Dennis: (54:56)
Not that harmonized is normally used in retail, but I think lease is more evocative.
Andy Murray: (55:00)
Yeah.
Steve Dennis: (55:01)
And speaks to a positive.
Andy Murray: (55:02)
Right.
Steve Dennis: (55:03)
As opposed to eliminating a negative and kind of an inside baseball of talking about [crosstalk 00:55:08]
Andy Murray: (55:08)
Exactly, exactly. Our next question comes from Bailey [Stetmier 00:55:11]. She is a marketing major.
Bailey: (55:14)
Mr. Dennis, I enjoyed listening to your video Making Retail Memorable. If you look at the retailers that are really doing an effective job in making retail memorable, what are three common characteristics that you think account for their success?
Steve Dennis: (55:31)
Sure. That's a great question, Bailey. It's maybe not so easy to boil down. But I think generally, when it comes to being memorable, first of all, it has to be very unique and distinctive. I draw heavily on Seth Godin's work in Purple Cow. If you think of those cows being brown, the purple cow is the one that really stands out. I think minimally, it needs to stand out in a powerful way. The second thing though is, you can stand out and not be useful or relevant. What is it that you are doing in a powerful way for me that really solves a problem or connects with me?
Steve Dennis: (56:18)
Then I think the third, and this is the hardest thing to do, is not only are you unique. Not only do you solve a problem for me, but do you give me a powerful story to share? Because I think the brands, and again, drawing on some of Seth's work, the ideas that spread are the ideas that win. How is what you're doing for me giving me more than just a product? More than just something I'm going to keep to myself, but something I'm going to say to my friends on Instagram, "This is amazing. I can't believe how fantastic this product is or how good this service is, or how they treated me." Whatever, but something that literally causes them to remark upon. That's what I mean by remarkable, is not just that it's different and distinct, but literally people will spread the stories of your brand.
Andy Murray: (57:07)
That's correct.
Steve Dennis: (57:08)
Easier said than done.
Andy Murray: (57:08)
It's a story, it's a shopping experience we're sharing.
Steve Dennis: (57:11)
Right.
Andy Murray: (57:12)
Boy, I'll tell you, that also stacks up against what I've seen in terms of the best ROI on your media spend is that shared... earned media that gets shared. It's got a lot of truth to it all the way through the line.
Steve Dennis: (57:24)
Absolutely. I mean, I think it's an older idea. I think what I try to do in the book is to just really say that it's so hard today with so much competition and so much noise to be that signal amongst the noise. Part of that is, yes, having something different. Having something that solves a real problem. But what gets amplified? That's the thing that breaks through.
Andy Murray: (57:51)
That's right.
Steve Dennis: (57:51)
And carries forward. Yes, is amazing ROI, if you can make it happen.
Andy Murray: (57:58)
Excellent. Last question, a bonus question from Jonah [Rapert 00:58:01]. He is a Walton honors senior and a major in marketing. He's actually a double minor in economics and legal studies, so here's Jonah.
Steve Dennis: (58:12)
Jonah sounds like a busy guy.
Jonah: (58:13)
Mr. Dennis, in your book Remarkable Retail, I found it interesting to see the chart of the top 10 retailers by decade. And to learn that Doug McMillon keeps a copy of this with him on his phone to remind him how quickly retailer fortunes can change. Given all that has happened with COVID this year, what retailers would you expect to see at the top of this list at the end of 2020? Noting that Walmart, Kroger, and Amazon topped the 2017 list.
Steve Dennis: (58:38)
Well, I haven't looked. That's a great question. I haven't, and it's actually something I need to update. I haven't looked at where some of these retailers stand this year. But certainly Amazon, Walmart, and Kroger will be near the top. Some of that is just their sheer size. Some of that has been, for better or worse, one of the things that COVID has done has tilted the fortunes toward those brands that are selling essential merchandise. It's also given, and I hesitate to use this word, a gift to certain very strong digital retailers like Wayfair, for example. I don't think they'll make the top 10, but they will have some huge growth because of stores being shut down. And just the tendency to be digital first in a lot of products.
Steve Dennis: (59:34)
I don't know how dramatic actually the 2020 list will change from 2017. I think it's a little bit of the rich getting richer, and the winners and losers, and this kind of bifurcation effect. But yeah, Home Depot, Lowe's, Best Buy. The big supermarkets, Walmart, Target, Amazon, have all done disproportionately well during the pandemic. But they were already on a good trajectory. Certainly outside of Amazon, the brick and mortar guys have really improved their digital capabilities, which has served them well also during this time.
Andy Murray: (01:00:13)
Great perspective. Boy, this has been fantastic, Steve. Any last sharing thoughts either to students or to faculty that are working diligently in this space? What gives you hope about... even though I could be quite cynical, I imagine you could be as well. As you look out to the future, what gives you hope?
Steve Dennis: (01:00:34)
I think the main thing that gives me hope, and in fact I was just working on some writing on this, is I think clearly the pandemic has had some very awful effects. Most obviously on people's health and economic wellbeing. It is hard sometimes to be hopeful when we see so much trouble and destruction. But I think one of the things we've learned from other crises is that when there is a lot of change, there is also a lot of opportunity and innovation that's created. I think some of the more agile innovative companies are being stretched to try things because business as usual is not working for them. And probably won't work going forward, even if we have a good recovery. But I think the other thing, and I saw an article the other day about how the rate of business formation has really spiked in the last few months.
Steve Dennis: (01:01:29)
I think it seems like these times bring out entrepreneurs. Maybe that's because they lost their job and they're scrambling to find something new to do. Maybe because rents have dropped, and some physical space suddenly makes their idea workable because the rent is half the price. Or maybe a company has gone out of business, but there's still a market opportunity if they're well-capitalized. I just think there's lots of innovation that happens in this period of time. That will create new and different businesses next year and beyond that will be pretty exciting. I think it's exciting if you're a student, or just an entrepreneur, or maybe somebody who is working for a big company that wants to go do something new. And this is the thing that gives you the push, even if it looks pretty tough right now.
Andy Murray: (01:02:17)
Great work. I found retail to be a very exciting space that it seems like you can get your idea into action pretty quickly and see results almost instantly. It's one of the fun places to work even though at times it can be quite challenging. Steve, thank you so much. I'll be sharing more in the notes around how to access your book, and make sure people have a chance to get connected to your podcast. You've got some great guests in there and some great insights. Again, congratulations on getting that launched and being a thought leader in this industry that desperately needs people to provide that direction. Thank you.
Steve Dennis: (01:02:50)
Thank you. Thanks for having me on. I appreciate it.
Andy Murray: (01:02:58)
Thank you for listening in to a powerful conversation with Steve Dennis. My takeaway is that no matter how difficult the dive is, there is no escaping the elephant in the room that retailers can't really thrive in the long run by optimizing and cost cutting. Especially if the proposition isn't remarkable. Time has proven that to be true over and over. The answers for becoming remarkable can always be found not by copying competition, but by listening to the customer. That's it for this episode of It's a Customer's World. If you found this helpful and entertaining, I would be so grateful if you could share our show with your friends. I'd be super happy if you subscribed so you could be updated as we publish new episodes. If you really want to help, leave us a five star rating and a positive review on Apple Podcasts or wherever you listen. It's a Customer's World podcast is a product of the University of Arkansas Customer Centric Leadership Initiative and a Walton College original production.