In this video, Jeff Herrera, CMO at Annex Cloud, sits down to chat with Mike Mothner, Founder & CEO of Wpromote, about some of the hurdles companies have faced so far, what we learned from during this pandemic, and what kind of proactive steps companies can take to ensure a successful future as markets and consumer expectations begin to shift once again.
Mike, how are you?
I am great. Great to be here.
Really thankful for you to be here. Obviously Wpromote has been a long time partner. I've had the benefits of working with Wpromote for quite some time. Really appreciate the work that you guys do with a lot of brands and retailers out in the space, and I'm glad we can come together like this to talk about how do we get through some of the challenges and what do we look forward as we move on? So anxious to have this discussion with you.
Yeah. Excited to be here. It's funny when you reached out a few weeks ago, it was like, "Hey, we talk about this every day, all day." So this is a very easy conversation to have.
That's right, and that's the whole point of this. We want to make sure that we're providing some proactive... That's the keyword, right? What's the proactive value that businesses should be thinking about as they look at the challenges, and most importantly, the successes that they need to achieve at the end of this year as well as in 2021? So let's dig in a little bit and chat about some of the things that we've learned in 2020, in the five months that we've had to take on this very challenging pandemic. None of us saw it coming. But we're trying to manage through it, and we think that there's some upside for us as we start to think of the ways in which we can be successful. So we'll talk about that as well.
But I thought it'd be important to just lay a foundation. Look, we've been five months into this pandemic. What are you seeing from clients? Let me give you an example. What we've learned is that when this thing first hit, our clients were paused. They had to recalibrate their business priorities. They had to restructure. They had to reformulate their budgets. And nobody knew how bad this thing was going to be. So there was a lot of that rejiggering so to speak.
And one of the things that I saw that was really impactful was our client, Mackenzie Childs, where they emphasized the importance of loyalty. I thought that was really important. They actually came out and said, "If we had to cut down to two to three services that we pay for, loyalty would be the one that we would keep." So that's a key learning from their standpoint. After all that recalibration, they landed the fact that loyalty and customer retention was going to be key to their business.
What were some of the things that you guys had seen and that you've heard back from clients as it relates to some of those key learnings?
Yeah. I'll even take it a step back. When things started happening, when the word was in the peak of uncertainty in the end of March, beginning of April, yeah, there was total paralysis and daily huddles, existential threat. Is the world going to go to zero? I mean, where am I going to get toilet paper? You put our minds back, it seems a long time ago. Shockingly, it was only a few months. We looked at our pretty diverse group of clients. We have funded startups, enterprises, lots of mid-market growth. Really a pretty interesting diverse set of clients, and we looked at them and said, "Hey, where's the risk and opportunity among them?" And created these crude three buckets, and interestingly we carried forward this way of thinking about them because the learnings and challenges are really different in these buckets.
So one was what I call direct hits. We had airlines and hotels and waterparks. I mean, these are direct hit potentially existential threat, devastated, and could be at best a medium to long run recovery. And maybe not even a long run recovery I would argue. Business travel may never reach previous levels because businesses have realized maybe we were getting on planes more than we needed to even if there's a vaccine that everyone takes. So there's a direct hit.
There's what we called strong but wounded, and I think we used different wording but that holds still pretty true, which is like, "Hey, we're going to make it." But there's uncertainty. There's a lack of confidence. Unemployment is on the rise. Hey, I want to buy a car. Maybe I shouldn't buy it now. May of 2020 seems like not a great time. Fundamentally there's not a change in behavior that concerns us, but it's challenging times.
And then you have the other end, the other side, which is maybe inversely affected, like positively affected. Like any at-home fitness and a lot of skincare and cosmetics, things that you can do at home instead of going to a salon. Anything that helps education, kids toys, puzzles. All these little bizarre areas. Every barbel's sold out in the universe in April of 2020, right? Who would've known?
Interestingly, the learnings across these three groups, in the beginning, were very, very different because they fundamentally survival, play defense, play offense. What we've learned though that connects them all, really all, and even fast forward five months, I think those ones that are doing well are flourishing and actually figuring out, "Okay. When is this good wave when people return to work... Is this bad?" When gyms open, is my barbel sales, home fitness sells going to fall? That's a concern.
But I think the collective, all three of them had to accept what got us here what get us there. The exact tactics and the way we thought about budgeting and tracking and measurement and the value of a customer and client and what they think of loyalty, those things that may have felt like they're working, you have to start over and say, "We need to relearn normal." And even the customers that we acquire, we've talked about these amazing stats. 40% of American households bought from a brand they had never bought from before starting in the pandemic. And almost the same number, similar to 40% say that they will continue buying from a brand that they... Once this has ended. That's incredibly inspirational for every brand, but the giant staples that may just assume that "Hey, we can turn off our advertising and pause. And when we unpause it, all of our customers will come back." I would argue they won't all come back because some of them have discovered new brands that maybe they like better because they resonate more.
But I think the ones that have accepted that putting our heads in the sand and waiting for the storm to pass because as I realize now, it's not a very defined beginning and an end to the storm. This is a new life that we are living in. So if you're waiting for the storm to pass, you might be waiting forever. And that the ones that don't, that say, "Where are our customers, and where is the value? And how can we be impactful and answer questions and do all of these engaging things to create a relationship with them?" We will be rewarded in the immediate and the long term with loyalty and revenue from them. That no matter where you sit in these three buckets or however you want to think about the differently effected businesses, that is the universal truth that we have found. Mindset, that if you have that mindset, you're at least positioning yourself to end up a winner in the big picture.
Right, right. I know that's well said. You touched on a couple of really good points there. Let's talk about some of the histories that we've learned because this is important. We are in a really bad recession. We all get it. Half of the US adult population is unemployed. Disposable income is at risk. Consumers are looking at ways in which they can have more value. Less disposable income means that they're not going to be able to afford like they once. And you mentioned essentials versus nonessentials. And we're in that business. We're in the nonessentials business. You mentioned health and beauty and cosmetics and fashion/apparel and home goods and all the things that become questionable because times are really difficult.
The other element that we learned going back to the last great recession in 2008 was that it was a great study done by Catalina Marketing, the CMO Council that highlighted in a research survey that was 32 million consumers, 685 brands in the high loyal bucket in 2007. Brands were only able to maintain 48%. 52% actually defected or actually switched. So those are lessons that we have to learn, and I think what we're saying is this is a time...
And I always like the challenger mindset of Wpromote. The challenger mindset is looking, now's the time to play offense. Put stakes in the ground, place some bets, come out of this thing as best you can, and focus on the things that are certain in your business. Your employee base is certain once you've gone through a recalibration. Your existing customer base is certain, and you've got your analytics that you can rely on to help you get through these difficult times.
So those are all key elements as we think through how does this new-age takes place. And speaking of that, now that we've got this big rush to online, whether you were planning for it or whether you had to just now accelerate it, it's here now because this is where you're living and breathing. So that's another element that you guys have done so well in is working with brands and retailers and understanding what is that right digital experience for customers so that they remain loyal, they buy as much as they can be given the constraints of their income, but have that really good connected experience. Because in those elements, it's got to be about communication, value, trust. How are you guys thinking through that with your existing clients to make sure you optimize that digital experience because they had to rush to get there?
Yeah. It's so interesting. You eluded to an acceleration that we've chatted about, which is the, I think Mackenzie put out a study and Google. And intuitively, we all know this. There are tens of millions of households that were forced to learn a new way of shopping and acquiring goods, which is through eCommerce, through Amazon and directly from brands and so forth. If I can't go to my local... If the Sunday morning routine of going to the eight stores to shop for the week is an impossibility, tens of millions of households were forced to at least temporarily acquire goods and shop in different ways. And a significant majority of those are not going to go back to their old ways partly because they might found the new way is more convenient. They're like, "Hey, this is what Amazon Prime is. Who knew this is great?"
So what we've seen is, and then the statistics back this up, something like in three months, in the crazy, crazy three months of spring of 2020, there was an equal amount of eCommerce adoption as the proceeding 10 years combined. It went from zero to 20% of US households as regular eCommerce shoppers. It took 10 years to get there. It took three months to double again. Mind-boggling to think about even if some of those end up returning to their previous ways of shopping.
So to me, that's acceleration. It also trumps any other deceleration. So we found that even in this, hey, there's a lot of unemployment and uncertainty, we look inside of brands that are selling directly to the consumer. And interestingly, you wouldn't be able to look at their numbers and discern that there's some rampant unemployment. Not to take away from the macro challenges, but it's almost essential to say if you're just growing at 10% from last quarter, which was a very low point trough, I would argue you are not growing fast enough. You're leaving an opportunity on the table.
So it's hard to say what the benchmark should be, but our clients, outside of the ones that are directly affected, travel, hospitality, those sort of in their own challenging space and will be for a while, you should be growing fast. And I think from what it takes to get there, and it's interesting, one of our clients, I wouldn't name them, but you can take a guess. They're a super large manufacturer of appliances. They're tens of billions of dollar revenue company, and one of the biggest accelerations that they are seeing is-intuitively, we would get this-is people are not walking into Home Depots and Best Buys to buy their large appliances. They're buying online, and so eight months ago, their direct to consumer efforts were truly a rounding error out of $20 billion. And suddenly, they are much more than rounding error because their whole pie shrank, and so what they're shaft, which we're seeing present in a lot of other marketing, and we're having these conversations among small and large companies alike is, "Hey, these dollars going to performance marketing, these dollars going to loyalty, these are not marketing dollars you should pull back. These are the ones you should double down on because they're providing a return today. They'll help you get out of this whole." So sure, cut all over here. To use this giant appliance company as an example, their $20 billion of revenue globally might shrink to $15 billion. I'm making up numbers. But the $100 million in direct to consumer can grow to $1 billion. And not only that, that could be a profitable growth to $1 billion.
So we have to have some new conversations. They have to learn some new muscles to say, "Hey, these marketing dollars or these re-engagement dollars or loyalty dollars or dollars to improve your customer experience, this isn't some wishful thinking for the future. This is driving revenue today. This will actually help prop up the retail part of your business that might be in shambles." In terms of new conversations and some challenging conversations, CFOs and people that control the purse strings and companies are having to rethink the way they think about costs in a period where the assumption is, "Hey, reel it all back in. Cut any cost that's not essential for survival." And we're like, "This meter over here, for every dollar you put in, you're taking out two. It doesn't matter if you're bailing water over here. You should be feeding that meter."
Right. Right. Yeah, no, no. That's exactly right. And some of the things we've highlighted on this is looking at your existing customer base, understanding that these are real opportunities, real opportunities now because everybody's had a chance to get through the rough spots. But I think what we're saying, I think you would agree, that you place those bets, you double down. You position yourself to come out very successful because we are going to go through this recovery. It's going to happen. It's going to happen, and you want to be prepared for it. But with these opportunities, with the customer experience and the digital online and be able to demonstrate real value and empathy too. Empathy and communication is really important because we want people to understand that we get it. We understand these are challenging times, and these customers, these clients, these brands, these retailers are there to support you and be there and make things as easy on you as you can. And those are the things that create that level of loyalty and stickiness that everybody wants.
So as we think about moving forward in 2021... Well, actually the holiday season. We should talk about the tips for the holiday, which is right around the corner. Just a quick comment on how are you seeing things differently for this Q4 because it is uniquely different.
Yeah. I mean, listen, Q4 of 2020. If I thought I didn't have a crystal ball, I now definitely know that I don't have a crystal ball. I mean, you take uncertainty in literally every area. There's where's the virus, the actual health concerns. International/domestic travel-what is that going to mean? What is it going to mean on economies reopening unemployment? We then have a super monumental presidential election. And by the way, I don't even know which way... It's going to have some impact, and I couldn't even guess which way has what impact. So when you combine five pieces of giant uncertainty, I don't know how to weight them in a way that makes sense.
That said, overall, we are approaching it with a pretty optimistic viewpoint. We think that in general, this recovery is continuing. We look at a lot of data points. I mean, we look at conversion rate and order value, macro data and microdata, and what's driving behavior. If you disconnect from the news, which we find to be a very not a good place to get a real read on society and temperament and really the economics driving purpose and purchase behavior, you won't learn that by watching the news for obvious reasons. That's not what they're doing. Better or worse, not what they're there for.
We see generally all positive trends, and that we anticipate a Black Friday and Cyber Monday and the holiday season that's going to look very different, but that overall we are anticipating a significant recovery with a lot of X factors thrown in. But I'm hoping that the X factors to a certain extent will balance each other out. There's going to be some positives, some negatives, some unknowns. And a lot of the uncertainty, I mean, so many things, presidential election. Regardless of the outcome, uncertainty becomes a certainty, and generally people like certainty even if the certainty is... Regardless if the certainty is great or not great, which is such an interesting psychological thing.
So we're putting a lot of time to make sure that our clients and our brands, and I'm sure you guys are doing the same, are going to have the best possible recovery in Q4 because I don't want to look back and in Q1 of 2021 and we're like, "We were kind of playing defense for these brands." They could've taken market share and accelerated their recovery. And instead, they played it alight. They said, "Okay. We don't want to put too many dollars at risk. There are unknowns so we're going to sit back and watch." I don't want to look back and be like we missed an opportunity to take market share from competitors. And so again, that challenge or mindset of let's be cautiously optimistic, aware of the risk, watch things in real-time so we're not over-committing to a bad course of action.
But overall, I think we're feeling a lot of excitement tempered with a good amount of uncertainty.
Yeah, no. That's very true. I think we're actually dealing Q4 as being really the Q1 of the foundation for Q1. Right there. That's the foundation. That's your Q1 now because we're pretty excited about it. We like the fact that... In fact, Gardner just came out with its budget, CMO budget survey, and they emphasized the fact that spending the dollars on your existing customers is the right thing to do as it relates to your most valuable and profitable customers. Those are the ones that are going to ease your path to a successful recovery, the things that we start to see happening. Of course, we'd like to see more emphasis on putting those stakes in the ground for Q4 because the earlier you get a jump on that, the more you're going to be able to achieve. And that's what we're hoping for. And with working with good partners like yourself and talking to a lot of brands and the importance of the digital experience and the value-oriented messaging and the ability to retain your most valuable and profitable customers to help you get through the rough spots.
And this is equally important too, Mike, I want to make sure that we get your comments on this too is sure, we want to manage through this difficult time. But we're setting the stage that businesses should always be mindful of nurturing their existing customer relationship. You don't wait until things get worse. Don't wait until things are bad. Don't wait until we have another recession. There always has to be this element of, "Hey, 20% of my existing customer base is making up 80% of my revenues. I got to make sure I'm maintaining those relationships." And sure, when things get better, and the economy starts to boom, and you can do other things, for sure. What we're saying is that you should always have a mindful eye on the fact that your existing customer base is the most powerful asset that's going to get you through good times and rough times and set you up for success.
So I know we're getting close to the time for us to conclude. But if you could, highlight a couple of things in 2021 that you're looking forward to and some of the things you've heard from your clients about, "Hey, we're going to try and accomplish these three things and get us to a successful conclusion in 2021." What are some of those things that people should be mindful of as well as they go into that foundation of the Q1 and what we call Q1 for Q4? But just really setting themselves up for 2021.
Yeah. By the way, I like that. Let's end 2020 early on September 30th. Let's just have 2021 start early on October 1st. It'll be a five-quarter year.
I love it. Let's end it early. Let's go to 2021.
Yeah. I think it's a great question. I think a couple of thoughts that I think very congruent with the way that you're thinking about this is one, don't apply the exact same playbook that you did before. The way that you would think about, "Oh, we do this type of holiday sale, and we do this on these days." I would say not to say all of those things are wrong, but I think this is a different time and I want to recognize that. It doesn't mean that my ad creative needs to be like, "In uncertain times," like we've seen those. Enough of that generic COVID ads.
But I think really thinking about the way that the different mindset and different concern, uncertainty, ways that people are actually engaging, communicating. Just be there in the right way. That people are spending their time differently engaging with media differently, making purchase decisions differently. Spend time thinking about what those differences are and recraft a plan that matches that. I will totally agree I think the... It's shocking coming from us because we do so much customer acquisition of net new customers, but absolutely positively we joked months ago loyalty is the new customer acquisition. Retention is the new acquisition. And I think it's true.
Everyone's always heard and spouted for years, "Oh, it's cheaper to keep an old customer than find a new customer." That's been true forever. I think even more important today, especially if there's been a disconnect with some of the disengagement for one reason. Maybe you've spent less on marketing. Maybe you've just been focusing on survival. I think that those are fine, but that type of really smart re-engagement is timely right now. I think it'll lead to a really successful Q4 if there's seasonality or just a generally positive trend, even if you're not a Q4 holiday seasonal company.
We're spending-I'll just say for our clients-a ton of time making new creative and really thinking about messaging and what the promotional opportunities are and the timing that we want to engage. And really reinventing the customer journey using everything that we knew but also re-weaving in a lot of what 2020 has brought in challenges and opportunity because it is a unique time. We've said this; it’s not unique because it's the worst ever. I mean, it's bad in many ways. From a marketing and customer acquisition and growth, this is, to use another metaphor, there's a global reshuffling of the decks in brands and consumer behavior. Customers are trying new things from new places and new cadences, and so most of our clients are not the giant incumbents. They're the ones that are trying to take market share. This is a phenomenally exciting time in that context. We're excited to help them make the most of this. Really interesting, challenging, exciting time. Not a boring year.
Definitely, well, let's end it there. Listen, I just want to say thank you. And of course, with anybody that goes on Annex Cloud Market Movers and looks at this videotape, they can always go to Wpromote and find you. Your website, on LinkedIn too. You're really good on LinkedIn. They can find you that way, correct?
Yup. They find us on wpromote.com. I'm Mike at Wpromote if you want to shot a note. Super happy to do this. This is always, as you can see, these topics, it's what I do. I sit here, and I'm on video calls all day basically having variations of this conversation.
Let's do it again soon. I appreciate it very much.
All right. Thank you so much, Jeff. Appreciate it.
CMO, Annex Cloud
Founder & CEO, Wpromote
For more than 10 years, Annex Cloud has been the worldwide leader in technology and service solutions that transform customer loyalty experiences for organizations, extending valued customer engagements, ultimately making beloved brands. Powered by the modular, comprehensive and scalable Loyalty Experience Platform™ solution suite, Annex Cloud customers capture and use zero- and first-party data to seamlessly deliver value-based individualized experiences across the entire customer journey—from awareness to purchase to retention, loyalty, and advocacy. This one-to-one engagement helps enterprises accelerate growth by increasing average order value, repeat purchase frequency, and customer lifetime value. Annex Cloud is recognized by respected industry analysts and integrates with more than 100 market-leading technologies to seamlessly integrate loyalty across the tech stack.
Wpromote helps clients Think Like A Challenger through innovative digital marketing strategy, superior execution, and data-driven insights. Our talented team of nearly 500 manages brands such as Marriott, Whirlpool, TransUnion, Zenni, Adobe, and Frontier Airlines.
To learn more about Wpromote, visit www.wpromote.com