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Market Movers How Businesses Are Operating Differently Because Of The Economic Downturn

In this interview, Jeff Herrera, CMO of Annex Cloud, chats with Ross Kramer, CEO of Listrak, discuss the changes that have occurred over the last 6 months, how businesses are operating differently because of the economic downturn, and some thoughts on the importance of maintaining loyal customers, especially those businesses are considered ‘non-essential.’

Transcript

Jeff Herrera:

Hi, Ross. How are you? It's great to see you.

Ross Kramer:

Good to see you, Jeff. Nice to be here.

Jeff Herrera:

Yeah. Thanks for making the time. We started the Market Movers video chat series about a month or two ago, just trying to get some really good feedback from lots of market strategists, thought leaders, influencers, to be proactive. Right? Get in front of brands and retailers and manufacturers about all the things that we need to be thinking about in terms of the market economy. And then, what we have to do to try and get through 2020 successfully, and then, of course, look to more positive years as we move forward.

So, listen, let's set the stage a little bit. Here we are at the end of Q2, the US economy contracted at, really, a worst ever, at 32.9% in Q2 calendar year 20. The employment to population ratio plunged to 52.8% in May. It just means that almost half of the US adult population is jobless, so really, it's not the most attractive market condition for new customer acquisition. So, in your opinion, your thoughts, what are businesses doing differently now, given these very challenging market conditions? They've all had to recalibrate, they've all had to reprioritize, but give me a sense from your perspective at Listrak who is one of the key leaders in digital commerce as it relates to the marketing experience and communication and email. I would love to get your thoughts on that.

Ross Kramer:

Yeah, that's great. Well, with 1,000 customers, retailers, and brands, somewhere between 10 million and 5 billion in transactions per year, we get a nice longitudinal view across industries in terms of consumer sentiment from a buying perspective. And when this whole thing happened in early March, we were watching it very closely, and as you could imagine, it took a steep dive as retailers really, let's call it, hunkered in the bunker, as did their customers. As we went through a March, one of the things that retailers and brands determined and figured out was that they could pull on the lever of promotions. It's something that they didn't necessarily want to, but they moved to promotions, and we saw a quick uptick as we compared 2019 sales over 2020 sales. And promotions led them out of that initial shock.

People were sequestered at home, and now it was a little bit like, "Hey, I have money. Convince me to spend my money," in the early days of the pandemic. What we did see once the stimulus checks hit, at least from an e-commerce perspective, we did see an immediate response from those stimulus checks in terms of consumer spending. So, we saw about a 60% increase, and that's held throughout the whole summer. It's tailed off a little bit. We're down into the 50s right now in terms of comps over last year from an e-commerce perspective, but that's an e-commerce perspective. That doesn't include some of the macro trends that you're talking about, big hits to other things that are in that GDP number and other things that are in the retail number, like food and restaurants and some other experiential type of things that you just can't door you've got to do it with a mask and people just don't want to do it.

So, overall, the economy, I think, is reeling in some ways, but in other ways, it's doing really well. Like for example, our customers that were selling seeds were doing amazing during the pandemic. We see this during times of unrest where people tend to recall back into areas where they feel comfortable. You can't buy a bike these days. Right? The supply chain has been interrupted, and for anybody in an outdoor space, they saw demand outstrip supply, which is also creating other challenges downstream. But overall, I think the word of 2020 is going to be uncertain. I think that the phrase of 2020 is going to be, "You're on mute," but it's certainly new territory for a lot of us.

Jeff Herrera:

Yeah, it is. Right? And I think your point around some of the macro trends, think of it in terms of disposable income, right? So, consumers are now faced with some hard choices, right? Those choices are, "I don't have enough income to pay for things that I used to do. I now have to look for more value in order to justify costs," and I think competitors out there are certainly willing to take advantage of that in order to win some highly valuable customers. We, at Annex Cloud, have been really diligent about making sure that we get a proactive message in front of brands and retailers and manufacturers around having a spotlight on your most valuable customers, your most profitable customers, really customer retention in the way that we think of it. And Ross, not just during a pandemic, right? This is ongoing. We think that there is lots of room for prospects and clients to do more around customer retention. I wanted to get your thoughts on that.

And if you could think of it in terms of nonessential versus essential goods, because everybody needs food, everybody needs toilet paper, right? All the things that are essential, aren't going to go away, but a lot of our mutual clients operate in nonessential goods and services. So, we'd love to get your thoughts on, is there enough being done, in your opinion, rather than just our opinion? I'd love to get your perspective on what other things should they be doing as it relates to really focused on maintaining their relationship with their most valuable customers, is you guys are in the heart of that with your marketing technology around email and mobile and SMS. Would love to get your thoughts.

Ross Kramer:

Yeah. That's great. One of the big disruptions that the pandemic brought was that a lot of the events just disappeared. And so many of our shared customers are in the apparel space, and apparel is largely driven by events, and whether it's a wedding or whether it's a graduation or it's a date, right? And all of those things just stopped, and the whole market recoiled. So, the thing that I really look at, and I think one of the things that have really stood the test of time, no matter what customer analytics program that you run, is this concept of the Pareto principle, the 80/20 rule. And the one thing that your loyalty program can really shine a light on is who are your most loyal customers? And focusing on those customers is absolutely key.

I think many business people are shocked to understand that just 20%, or maybe just 15%... Heck, my very first e-commerce customer when I was right out of college in 1999, he was a cataloger, he had a 98/2 percentage, where 2% of his customer base drove 98% of his volume. So, I think the big thing that a lot of brands and retailers have found, especially the ones where they had stores and the stores were shut down, and that the large streams of income that they really depend upon were constricted, the marketing mix has changed. So, the marketing mix has changed in 2020, and I think the marketing mix change is going to have a lasting impact in the similar ways of how people work, in the work from home type of thing.

And I think marketers are really taking a close look at some of the top of funnel things that they did to acquire customers and really wondering, "Hmm, do I spend all that money on the broadcast? Do I spend all of that money on maybe broad terms? And do I focus more of my effort down in the mid and lower funnels, really work on experiential things?" Speaking to the heart of what you were talking about, can we have a more authentic dialogue in channels where we can be more intimate? At Listrak, post-pandemic, we signed up over 50 accounts in our SMS program, as it's a very intimate channel, and it's an emerging channel. And it's a channel it's been tough to sell into, but for guys like me and you, and for any marketers that are listening, SMS is really the only channel that exists today that's going to get her to pull her phone out of her pocketbook. Right? It's the only one. For an old school email guy like myself, all of my mail that I'm sending to her is going into the Gmail promotions tab. Right? So, she's going to see it eventually, and she'll probably see it after her Instagram feed, she might see it after Facebook, and then she heads over to Gmail and scans through there. So, SMS is this super engaging channel, super intimate channel, where you can take it, really, from things like transactional messaging in your product to ship, or you have N number of points that might expire or other surprise and delight things that you can use to pivot on from your loyalty program. But we've been really excited about the revenue that that channel's driving. Our Black Friday and Cyber Monday numbers for SMS were 25 cents. We were driving 25 cents for every piece of SMS we delivered. So, if you compare that to email, which has maybe 5 cents, 6 cents, 25 cents was really fantastic. It's more expensive, it's more heavily regulated, there's a lot more nuance to it, but that's an exciting channel.

Jeff Herrera:

Yeah. That is, and those numbers are remarkable, for sure. It's funny that you mentioned that intimate connection with SMS, because we'll talk about that, as well. I did want to underscore your point a little bit with an actual client quote of ours that we've learned coming out of this pandemic. This is from Mackenzie Childs, identifying how they've had to recalibrate, they shifted some budget resources, they've had to cut some things, but they learned, they learned very clearly. And this is a quote from their CMO, Larry Shaw. Ross, you'll love this. "If we had to cut down to two to three services that we pay for, loyalty would be the one that we would keep." That's key learning coming out of the challenges that were immediately faced in the March, April timeframe. So, it really underscores your points and you're maintaining that relationship.

Ross Kramer:

Yeah. And if you think about a company like Mackenzie Childs, that would have historically been a wholesaler selling through places like department stores, and you think about our work from home, work in an office, that's going to be disrupted. Do I go into a department store, or do I just use this thing now? That's going to be disrupted. And brands like Mackenzie Childs that would have historically depended upon that wholesale channel, a Macy's, Nordstrom, a Neiman Marcus, or something like that, to be able to provide that, as they transition... And we've seen a lot of companies do more digital transformation in one week than they did in one year. Right?

Jeff Herrera:

That's right. That's right.

Ross Kramer:

I think it's going to underscore that the work that we're doing, and there's a lot more work to be done as well, and I think that's what gets each of us up early every morning.

Jeff Herrera:

It does. It does. That's exactly right. It sure does. Right? We're all living to support our key stakeholders, our customers, our clients, our prospects in a very big way, and we're doing that so, that's how this partnership community works. So, let me get you the last question before we run out of time, which I think is pretty powerful. We set the stage with the state of the state around market trends. We talked a lot about the things tied to connecting with customers, the experience, the customer retention part of this. We're now moving into that period of the holiday season, right? It's here, Ross. Can you believe it? Be ready to go into the holiday season, which is going to be unlike, and to your point, uncertain as to what's going to be expected in Q4.

But we want to be able to, again, proactively get out in front of this thing and talk to brands and retailers and manufacturers about what are some of those recommendations that they should be doing right now to get that first-mover advantage, start thinking about, "How do I win when this recovery takes place?" And I both know, it is, we're going to have a recovery, and those lined up first are the ones that are going to really benefit. Not the ones that have been paralyzed by this thing, but the ones that are making smart investments in customer retention and customer lifetime value, and making sure they maintain those relationships. But what are some of the things, and y brands and retailers manufacturers should be thinking about and doing Q4 to really take advantage of the recovery and propel them in 2021? What is your take?

Ross Kramer:

Yeah. For better or for worse, just given the timing of the year, and when the pandemic happened, unfortunately, if you didn't start a big project in Q1 or in January or February, it's not going to get done. In fact, we're now talking here in the latter part of August, and a number of our mid-market customers have already gone into holiday code freeze. And we would have historically not seen that until maybe September, early October, but they've already gone into code freeze, which means they're switching into holiday promotions mode because they've got to drive that revenue.

Some of the good news is that the guys that, the Targets, the Walmarts, those types of guys that were essential and were open, they're not going to be as dependent because they've already hit their numbers for the year and into next year. You saw that with Walmart, and I believe now Target giving Thanksgiving off for their staff. And I think that's really a lot about, "Listen, guys, take the day off. You worked hard through the pandemic." They've hit their number. That could open up some airway, some air cover, for some mid-market brands, our constituents, to come in and drop some additional marketing messages during that time when it's not going to be as noisy for some of the bigger publicly held companies that absolutely need that revenue to hit the numbers that the street is dictating.

So, I think if it isn't baked, you're probably not baking it. I think it's focusing on the bottom of the funnel because your marketing budget's been constricted because you haven't been able to borrow from earlier months, and you're going to want to be leveraging every low-cost opportunity to make that happen. And that's probably going to mean email. Our email volumes are definitely up. If there are any email marketers that are listening in, one of the misnomers of the email industry, it is a thing, are we tend to send emails to people who have opened recently. So, if you've opened recently, you'll get an email. If you haven't opened recently, then you're not on the file.

One of my tips for everybody would be, think about and go back and use your CRM, or use your ESP, to see who has placed an order during holiday times, irrespective of whether or not they're opening emails right now, and begin to warm that group because that's a group that you may be able to get another order from during holiday mode. And we know people have been conditioned to use e-commerce and leverage the e-commerce channel, so I think we're going to see fewer people driving out to stores and more people leveraging the eCommerce channel for holiday 2020.

Jeff Herrera:

For sure. Right? Always taking advantage of this as much as possible, right? That's the sweet spot for people. Well, as long as it's relevant and meaningful and has real value, people will understand and react positively to that, so for sure and we're up against it. I just wanted to personally thank you so much for spending this time. Listrak has always been a very, very high valuable partner for Annex Cloud. We appreciate all the hard work that you guys do with our joint clients, our integration, everything that goes through just means so much. Right? And we're providing real value to our clients and prospects, and we just really appreciate it.

Ross Kramer:

Absolutely. Jeff, great to be with you.

Jeff Herrera:

And where can people find you? Well, just go to annexcloud.com, LinkedIn, all the above. Right?

Ross Kramer:

Yeah. Yeah. LinkedIn's a great place to find me, and it's a box that I monitor personally.

Jeff Herrera:

Awesome. Thanks so much. Let's do it again, Ross. Appreciate it. Take care.

Ross Kramer:

You bet. See ya.

Jeff Herrera:

Bye-bye.

Featured Speakers

Jeff

Jeff Herrera

CMO, Annex Cloud

mike-profile

Ross Kramer

CEO, Listrak

Annexcloud Logo

Since 2010, Annex Cloud has provided industry leading loyalty solutions to more than 250 leading brands and retailers, including Jenni Kayne, Hewlett-Packard, Bed Bath & Beyond, e.l.f. Cosmetics, Olympus, Sugarfina, Mizuno, MacKenzie-Childs, VF Corp., with the ability to engage tens of millions of their customers one-to-one at scale.

The Annex Cloud platform provides fully integrated Customer Loyalty, Referral Marketing, and User Generated Content (UGC) solutions that seamlessly work together to optimize the customer journey and deliver a unified customer experience that is designed to accelerate revenue growth, retain valuable customers, increase average order values (AOV) and drive repeat order frequency.

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As an established leader in the multi-channel marketing industry, Listrak works with more than 1,000 retailers to accelerate growth, drive engagement, and deliver significant incremental revenue.

To learn more about Listrak, visit https://www.listrak.com/