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the spirit of the holiday season, or
00:00:02
we'll just say the spirit of the retail
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holiday season will be pretty much the
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same. It's going to be, you know,
00:00:07
doorbuster sales. Let's just get all
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that stuff out there. Let's hope that it
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salvages the year for us.
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So, yeah, we're not seeing a big
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substantial changes. Now, it's too early
00:00:16
and maybe I'm wrong and maybe we'll see
00:00:18
some some companies kind of going
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against the traditional grain of of
00:00:22
holiday marketing, but the early
00:00:24
indications are that we're we're right
00:00:26
back to where we were.
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Welcome to the Ripple Effect, the
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podcast that takes you on a journey
00:00:32
through the minds of Wharton faculty.
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I'm your host, Dan Loney, and in each
00:00:36
episode, we'll be diving deep into the
00:00:38
inspiration behind the groundbreaking
00:00:40
research that Wharton professors have
00:00:42
conducted and exploring how their
00:00:44
findings resonate with the world today.
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Well, the relationship between the
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consumer and retailer is one that's
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constantly evolving and when you think
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about it, especially this time at the
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end of the year, the component of
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holiday sales brings forward other
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expectations as well. Pleasure to be
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joined by Peter Fader, professor of
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marketing here at the Wharton School and
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author of The Customer Centricity
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Playbook, and also co-founder of Theta.
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It's been a while. Great to see you. Dan
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Loney, it's always great to be in the
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studio with you and talking about
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consumers and retail and all that. So, I
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mean, you talk so much about customer
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centricity and the interesting thing is
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it feels like more and more companies
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have bought into it and they understand
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the importance of it, that relationship
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between
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them and the consumer.
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Are we at a point right now where we've
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achieved almost total buy-in in that
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relationship right now? No, not even
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close.
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We have a conceptual understanding.
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That's good, that the real unit of the
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analysis should be the customer and not
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necessarily the product. People kind of
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are on board with that, but executing
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it, building an organization around it,
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being held accountable by it, nah,
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there's still ways to go. Now, we've
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made great progress over the, you know,
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10 or so years,
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and I think it's even accelerating, but
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there's still a lot to be done. So, then
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when you think about retail in general
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and this holiday season,
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how does the element of customer
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centricity play in like in terms of the
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level of importance? Because companies
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realize how important this three-month,
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well, it's a three-month window in our
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history, but it's been lengthened out by
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so many retailers in the last few years.
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And you've hit the nail on the head
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that, you know, I talk to all these
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companies and they want to talk about
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customer centricity and lifetime value
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and customer retention and all that sort
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of thing. And then the conversation stop
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right around now. And literally this
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morning, talking to a big retailer and
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they're they're talking about some kind
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of lifetime value initiative and they
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said, "We got to put that on hold. It's
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the holidays." And I'm saying, "Well,
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wait a minute. This is the time to
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really be doubling down on it. This is
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the time that you really want to figure
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out who your best customers are and
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leverage that and and let that drive
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your strategy." And "No, no, no, this is
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the holidays. We got to focus on just
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selling a lot of stuff regardless of
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who's buying it." So, it's it's that
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kind of frustration. It's this kind of
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conversation that proves that there's
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still a lot of work to be done.
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Well, is it just because they feel like
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they are so busy, so stressed because so
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many companies really believe that this
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is the time that will make or break them
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in terms of the course of the the
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numbers for the for the either the
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fiscal year or the calendar year?
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100%. They got to just push a lot of
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stuff out there. They got to do it
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quickly. They got to do it cheaply.
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And they really are taking their eyes
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off the ball in terms of both who's
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doing that buying and what are the
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longer-term implications of of the way
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that they're they're building or even
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ignoring different kinds of
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relationships. What do you think is the
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impact then by not having that focus?
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Well, we've seen it. And you mentioned
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my newest book is The Customer Base
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Audit. And in that book, we say, "What's
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the difference between the customers
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acquired during Q4 versus customers
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acquired through the rest of the year?"
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You get this great big bump. There's a
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lot of them. That's great. In fact, they
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buy a lot of stuff during Q4. They look
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terrific. But then you watch them over
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the longer term, they're not as good.
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They don't buy as often through the
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year. Yeah, they'll come back and buy
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again a year from now, but only when
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stuff's on sale.
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So, you're acquiring a a less valuable
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group of customers during these times
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and you're paying a lot of money to do
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it. Now, I'm not saying that that
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holiday marketing's a bad thing. You do
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have to push a lot of stuff out the
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door, but you should be doing it mindful
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of who are these customers buying and
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how can we tip it a little bit more
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towards the kinds of customers who will
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bring us lasting value.
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That's a bridge too far for a lot of
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retailers.
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How do you think then the pandemic
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factors into this mindset around
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the relationship between the customer
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and and the retailer? Because obviously
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it was a dynamic that we'd never really
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gone through before. It changed
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obviously in the scope of what we could
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and couldn't do, how retailers reacted
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with that relationship, and it made me
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wonder whether or not there were
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elements that changed or were tweaked
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during that time that companies have
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kind of run with and they understand how
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much value there is looking back at it
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as you move move ahead. I I I was
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thinking the same thing during the
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pandemic because we really saw huge
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changes to holiday buying. We kind of
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saw basically the disappearance of of
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Black Friday and and all that for for a
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while there. And I went on record
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wrongly saying that this is going to
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change forever. This is going to be the
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wake-up call that a lot of companies
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needed to realize that this isn't so
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good and we should really be trying to
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smooth things out. And again, to the
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extent that we're we're doing some some
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heavy-duty activity during the holiday
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season, we should be doing it with our
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best customers in mind. Well, that
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appears to have all gone out the window.
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And all indications are we're right back
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to where we were in December or fall of
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of 2019 where it's just let's push stuff
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out. We'll deal with the which customer
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is which when January comes around. I
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don't think we've made any progress. So,
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a couple of other things that I wanted
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to throw in in terms of that
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relationship is one from an economic
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perspective where we are right now with
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the level of inflation. And and does
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that factor in to it as well?
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It should factor in. Certainly it is
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factoring in just to to the way the the
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retailers are are staging their plans.
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It's going to be inflation. It's just
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going to be other kinds of economic
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uncertainties. So, that we're just going
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to see some some tactical differences,
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but but the spirit of the holiday
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season, or we'll just say the spirit of
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the retail holiday season will be pretty
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much the same. It's going to be, you
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know, doorbuster sales. Let's just get
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all that stuff out there. Let's hope
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that it salvages the year for us.
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So, yeah, we're not seeing a big
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substantial changes. Now, it's too early
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and maybe I'm wrong and maybe we'll see
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some some companies kind of going
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against the traditional grain of of
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holiday marketing, but the early
00:06:51
indications are that we're we're right
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back to where we were.
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Then there's the technology side and
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we've obviously added so many elements
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of technology to our daily lives. And
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obviously retail with e-commerce
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has played a big role with that. But now
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we're in this mode of everything's got
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to be AI and factoring in AI in in so
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many aspects of our business. I think
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well, I'll ask you it this way. Are are
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we still in a time where we're learning
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where that's that place is going to be
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in terms of retail?
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Totally, and that's very exciting. So,
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what we're seeing right now, or at least
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my prediction for we'll see through the
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holiday season, is using AI to do the
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things that we were going to do anyway,
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but to do them a little bit more
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effectively, a little bit more
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efficiently. So, whether it's it's using
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AI to maybe to design the kinds of
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products that we're going to be selling,
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to fine-tune the messaging, to do a
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little bit of to to kind of help improve
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some of the the supply chain aspects.
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So, we won't really see it big time.
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It's just going to it's going to be
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woven into the things that we're doing.
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Maybe that's all it should be. But I
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think we might see more substantial
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changes in the years ahead
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as not just retailers, but as as all
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managers just just find
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more
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dramatic ways to deploy it to do things
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that we just wouldn't have been capable
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of doing before. So, maybe a little bit
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more of a subtle impact as we move
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forward. And I I ask it that way because
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I think the the the theory or the theme
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that's out there is that there will be
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impacts in different ways
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other than just on the bottom line of a
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company's
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profit sheet. That's right. So, we'll
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see some some slight different
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operational changes. Now, we're going to
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go back to the point that I've been
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harping on, which is it's the holiday
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season. And even though that AI stuff
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might be our future, you know, we have
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the playbook here for the holidays. And
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so, we're going to follow it. Now, to
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the extent that we can use AI in the
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playbook, we'll see that. But we're not
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going to see anything really really bold
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with it until we rewrite the playbook,
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which is something that sorely needs to
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be done. You've talked in the past with
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me about that relationship between
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customer and retailer and when something
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goes wrong,
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does that dynamic change at all or is it
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enhanced even more to the downside
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during this holiday retail system
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season because all of these companies
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are so worried about getting the stuff
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out and and getting it into the hands of
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people?
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Sure, there's a couple of factors going
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on. And one would be the economic
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uncertainty and we really have to
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protect ourselves from the downside. And
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the other would be just a a lot of the
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backlash that retailers have been
00:09:30
seeing, whether it's now related to, you
00:09:32
know, different kinds of so-called woke
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activities and and so on. I think a lot
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of retailers are just kind of more
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worried about saying something, doing
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something that could just open up some
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kind of trapdoor. So, they're going to
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play it a little bit safer in in in
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these terms. And I understandably so.
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And I kind of wish that we'd see bolder
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moves as far as what retailers were
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proposing to do and and how they did it.
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But but right now it's it's play it safe
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time. So, what you're talking about and
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correct me if I'm wrong, but it seems
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like that's part of what seems to be a
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greater focus on companies brand right
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now. That they are so concerned of
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making sure that that brand is as
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pristine as it can be so that they don't
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have any negative impacts.
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That's right. And it's the brand itself,
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but it it but it it's even just even
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kind of specific messaging
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companies are are they they don't want
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to take chances right now. They want to
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be very very careful about how they how
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they choose their words. You know, we we
00:10:30
we sometimes see some kind of edgy
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Christmas advertising or even
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different kinds of promotional campaigns
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and we're just not going to see a lot of
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them now cuz we're just worried that
00:10:40
someone might take that the wrong way.
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But it almost makes you wonder what if
00:10:44
maybe the time of the year and kind of
00:10:45
the history of the time of the year
00:10:48
people are kind of geared into what they
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believe it's going to be and it's a more
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relaxed and toned down time of the year
00:10:55
in comparison to any other time of the
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year that maybe it all
00:10:58
it just kind of moves right into
00:11:02
uh
00:11:02
you know, potentially not making some of
00:11:04
these moves. Right. And and and it
00:11:06
should be the case. That would that
00:11:07
let's fall back on kind of traditional
00:11:10
values and traditional thinking and and
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so that that that's great. But every now
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and again you'll see a firm wanting to
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kind of break out of the pack and and do
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something to get people to say, "Whoa,
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you know, just to kind of get their
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attention."
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And it's nice to see that, but I don't
00:11:24
think we're going to see much of it
00:11:25
right now for for all the kind of
00:11:27
obvious reasons. There are a few other
00:11:29
things I want to bring up. One being how
00:11:31
companies think about returns these
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days.
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And certainly that's been a focus
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especially in the last year or two.
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And it's always a focus at this time of
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the year because people will buy
00:11:42
something for a loved one and it may not
00:11:44
fit or it's the wrong color whatever it
00:11:45
might be. But companies really are
00:11:48
focusing more and more on trying to
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lower the level of returns
00:11:51
because that's a cost impact to them.
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That's a big problem because it it has
00:11:56
been a Christmas issue
00:11:58
because you know, I don't want this. I'm
00:11:59
going to return it. I'll get something
00:12:00
else. But now we see it's a 365 day a
00:12:03
year issue where you know, I'm going to
00:12:05
buy a pair of shoes. Well, I'm going to
00:12:07
buy eight pairs of shoes to make sure I
00:12:08
have the right color and size.
00:12:10
That's become much more rule than
00:12:12
exception these days.
00:12:14
Companies are really really struggling
00:12:15
with it. So, you know, in a way the good
00:12:18
news is that that that there's no good
00:12:21
news, but the the silver lining is that
00:12:23
companies are kind of used to dealing
00:12:25
with that now and and during the
00:12:27
holidays it might happen at a slightly
00:12:29
greater volume. Everything happens at
00:12:30
greater volume, but I don't think that
00:12:32
that problem will be particularly acute
00:12:34
during the holiday season as much as it
00:12:36
is that every day of the year. But
00:12:38
there's we need a solution for it. We
00:12:40
need to come up with a way to create
00:12:42
just better incentives both for
00:12:44
companies to put the right stuff out
00:12:45
there, the right messaging, the right
00:12:46
sizing
00:12:48
and and for people to not abuse the
00:12:50
system as much as they do now.
00:12:51
Okay, so the abuse part is obviously an
00:12:54
important component because there are a
00:12:55
couple of retailers out there. I can
00:12:57
think of one specifically. I won't give
00:12:58
the name, but they've kind of made their
00:13:00
brand or part of their brand because
00:13:03
they accepted returns all the time. It
00:13:06
didn't cost you to send them back and it
00:13:08
was something that connected them with
00:13:10
the consumer. But obviously that mindset
00:13:12
is changing right now. Takes us right
00:13:14
back to customer centricity. I think we
00:13:16
have to make tough decisions for which
00:13:18
customers are we willing to have that
00:13:20
kind of very generous return policy and
00:13:22
for which customers it's going to be
00:13:24
basically take it or leave it or you
00:13:26
know, pay say a 10% restocking fee.
00:13:29
The companies have to get smarter, they
00:13:30
have to get bolder, they have to be just
00:13:32
more responsible around these kinds of
00:13:34
behaviors. These are conversations that
00:13:36
are just now starting and we're seeing
00:13:39
every now and again
00:13:40
a little experiment that a company might
00:13:42
be running, but we're not seeing any
00:13:44
broad application of of this kind of you
00:13:47
know, returns oriented discipline. I
00:13:50
think we are going to start seeing that.
00:13:51
We're going to start seeing it soon, but
00:13:53
we're not going to see it during the
00:13:55
holiday season.
00:13:56
What's been your reaction to all of the
00:13:58
conversation in recent months around
00:14:01
quote and quote shrink of the concern of
00:14:03
the level of theft and loss that
00:14:06
seemingly retailers have dealt with for
00:14:08
decades, but now is getting more and
00:14:10
more publicity whether it be to the
00:14:12
level that's going on right now or just
00:14:14
kind of the news cycle that we seemingly
00:14:16
are Oh, it's real. It's real. There's no
00:14:18
no question. It's getting a lot of
00:14:19
publicity, but A, I think it's
00:14:21
appropriate that it get publicity
00:14:23
because it's a real problem. But B, the
00:14:25
the nature of shrink, it's no longer
00:14:27
just you know, a a kid does taking a
00:14:29
comic book. It's organized crime. It's
00:14:33
it's it's a real problem to the point
00:14:35
where so many stores are closing down.
00:14:38
It's
00:14:39
has to be dealt with. What's going to be
00:14:41
interesting is to see if if it gets
00:14:44
worse or if it gets mitigated during the
00:14:45
holiday season. You know, it might be
00:14:47
that there's just so much so many extra
00:14:49
employees in the stores, so much traffic
00:14:50
in the stores. It's just a harder to see
00:14:53
that kind of thing going on. On the
00:14:54
other hand, that might provide cover for
00:14:56
some of that nefarious activity to take
00:14:58
place. Hard to tell, but it's a problem
00:15:02
maybe even bigger than the returns
00:15:04
problem
00:15:05
where we're not at an equilibrium with
00:15:07
it. It's just a
00:15:08
a real real issue and we better be in a
00:15:11
in a better place with it a year from
00:15:13
now, otherwise it could really drag down
00:15:15
the whole retail sector. Then you also
00:15:17
have a lot of retailers that have to
00:15:18
think about
00:15:19
some of the issues that we're seeing
00:15:21
play out in cities across the US where
00:15:24
theft in their stores is at a higher
00:15:26
level and as a reaction companies are
00:15:29
shutting stores down in some locations
00:15:32
because the potential impact and threat
00:15:35
to their employees has grown in in
00:15:38
recent months. And then when we start
00:15:39
interacting that with the holidays when
00:15:41
we have fewer outlets, less convenience
00:15:43
for people, it's going to you're going
00:15:44
to have even you know, bigger crowds at
00:15:46
the big mall stores.
00:15:47
So, you don't think about some of those
00:15:49
consequences.
00:15:50
Again, it's hard to blame the retailers
00:15:53
for taking some of those drastic
00:15:54
actions. Which is why we really need to
00:15:56
have come up with with different kinds
00:15:57
of of of policies, laws, just just ways
00:16:01
of of displaying and distributing
00:16:02
merchandise in stores
00:16:04
that's going to
00:16:05
attack this problem cuz it cannot keep
00:16:08
going on as it is.
00:16:09
So, what do you think are the themes
00:16:10
then for retail during this holiday
00:16:12
season coming up? Well, again, there's
00:16:14
the theme there's the prediction of
00:16:16
what's going to happen and there's the
00:16:18
kind of what I wish would happen. The
00:16:20
main theme is let's just sell a lot of
00:16:23
stuff.
00:16:24
Let's get those big boxes out of here.
00:16:27
Let's let's turn from from red to black.
00:16:29
I mean, it's it's the usual kind of
00:16:30
narrative. I think that that will be the
00:16:32
the overwhelming theme. Okay, maybe
00:16:34
there's something good about it. Maybe
00:16:36
if if companies are missing the
00:16:38
opportunity to be more customer centric,
00:16:39
missing the opportunity to to use their
00:16:41
data to make better decisions that will
00:16:43
lead to to better long run outcomes. On
00:16:45
the other hand,
00:16:46
there's something about just maybe
00:16:49
indeed putting all that aside. Let's
00:16:50
just you know, have Christmas in a
00:16:52
traditional way. Let's enjoy the holiday
00:16:54
season
00:16:56
and then we'll kind of you know, get
00:16:57
back to work on on January 1st and and
00:16:59
then hopefully make a 2024 not only a
00:17:02
better year, but a smarter year
00:17:04
as we use data, as we understand our
00:17:06
customers and run our businesses more
00:17:07
effectively.
00:17:08
Peter, always great to talk with you and
00:17:09
get your insight. Thank you, sir.
00:17:11
Thank you, Dan. You got it. Peter Fader,
00:17:12
marketing professor here at the Wharton
00:17:14
School.
00:17:16
Thank you for listening to the Ripple
00:17:17
Effect. We hope you found this episode
00:17:19
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00:17:21
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00:17:23
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