Strategy

Brand Sales and Distribution 2020: New Ways to Drive International Growth

Overall brand growth remains mostly dynamic in 2019. But as financial reports show, growth rates have decreased for many. Be it in the US or in Europe, especially domestic-bound retailers and brands stumble.

Global expansion in sales and distribution competence has become a lifesaving strategy feature, but allow me a personal question first:

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Good Workmanship & Best Practice Management Are Key to Growth

The speed of global brand growth has been slowing down. While fast-movers pay a high price for restructuring, successful brands continue to grow with brand best practice management.

Whether Tommy Hilfiger wins over Zalando buyers with a digital showroom, Rapha thrives thanks to their tight-knit membership community, or Lululemon enters new markets on grassroots values – brand best practice management enables brands to outgrow competitors. (more…)

Freitag: Brand Development Made in Switzerland

In 2019, shoppers love unique products and great brand stories. If on top of that you sell upcycled products and are a niche company from a small country, you have all the ingredients for a memorable brand story.

If someone had told you in 1993 that Freitag would manage to turn truck tarps into it bags in Seoul by 2019, and create a best practice brand development story in the process, you may have questioned their judgement.

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How to Manage Successful Brand Post-Merger Integration

Far over 100 lifestyle brands are taken over every year. While a majority of post-merger integrations fail, here’s what the successful ones have in common.

As a seasoned CEO and experienced retail executive I’ve been part of my fair share of successful (and less successful) post-merger integrations. In my current role, I advise family businesses and financial investors on growing their brands, organically or via acquisition. Although the backgrounds of individual companies, the company cultures as well as the strategic reasons for takeovers differed widely, clear patterns emerge for both successful and unsuccessful cases.

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Brand Growth Strategy for CEOs & Strategic Planners

How’s your brand growth strategy going so far? Now’s a good time to take stock and prepare for the upcoming planning season! This collection of excellent posts offers some brand growth strategy inspiration for you.

With the first quarter safely under the belt, are you happy with what you’ve achieved and on track to exceed your strategic and financial goals this year? The next round of financial planning starts in six months. That makes now the perfect moment to prepare by reviewing and tweaking next year’s strategy ahead of time!

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How to Improve Your Hit Rate and Make Good Use of Bestseller Potential

When brands need to reshape their portfolio and close stores, they face the challenge of improving Like-4-Like performance at the remaining points of sale. The two product strategies introduced here help improve the top and bottom line of your P&L.

Improving like-4-like performance often focuses on mechanics and triggers that can be influenced by sales staff and a retail organisation. Surprisingly, it often excludes an honest evaluation of the assortment’s performance. This article shows how improving hit rate and using best seller potential can push sell-through, create incremental sales potential, reduce mark-downs and improve the gross margin. (more…)

Culinary Treats & Shopping

The way to a customer’s heart is through their stomach! Culinary treats have the potential to increase conversion rates and average ticket size for retailers. Success isn’t guaranteed, but these factors significantly reduce the risk of failure.

More and more retailers, shopping centres and cities invest in new, attractive and unique food and beverage concepts. These concepts often differ in level of integration between culinary treats and shopping.

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Driving Customer Lifetime Value with Brand Loyalty Programs

Successful brands use loyalty programs for customer segmentation and to increase lifetime value

Zalando has just announced its loyalty program Zalando Plus as one of their key initiatives for 2019, and Amazon Prime has been present in every other US household in 2018. The concept of loyalty programs, however, is not new.
Premium department store Breuninger in Germany launched its loyalty program as far back as 1959. The original aim was to allow customers to buy on credit, which later evolved into a loyalty program with different tiers and membership rewards. As one would expect, today’s card is no longer in paper but integrated into a shopping app.

Evolution of Breuninger Membership Rewards Program with different cards and App on Smartphone; Source: Breuninger; WikiCommons

Evolution of Breuninger’s customer loyalty program (Source: Breuninger; WikiCommons)

Reward and Focus on Your Most Valued Customers

The goal of having a brand loyalty program is to better serve and focus on the most valued customers, eventually driving Customer Lifetime Value (CLV). Amazon Prime members spend USD 500 more per year compared to non-prime customers. And there is good reason for Net-a-Porter to invite the top-spending 2% of their customers into the EIP (Extremely Important Person) membership rewards program, as they account for more than 40% of sales and shop on average 12x more than the average customer. Focussing on those 2% of customers and increasing their buying frequency by just 3% would lead to an increase of 1.2% in the overall net sales of the business.

The Journey from Acquisition to Retention

Providing incentives such as free shipping or free alterations can be a strong tool in acquiring more members into a customer loyalty program. Keeping members engaged after the first transaction or sign-up is often more challenging. Leading marketing or ‘growth hacking’ teams know when to reconnect with new members with the goal to drive engagement, which at a later stage can lead to the second sale transaction.

Tiering Members is Key

While all customer loyalty or membership programs are using some sort of tiering, a brand needs to decide whether to openly tier and thereby create the feeling of exclusivity to the customer. One advantage of this approach is the ability to nudge members to move up to the next level, for example by the means of monthly point statements or by informing members how close they are to reaching the next tier and thereby stimulating additional sales. However, traditional customer segmentation is typically based on annual spend per customer, which does not take ‘share of wallet’ into account. A better metric is customer lifetime value (CLV or CLTV), which incorporates expected future spend and potential.

Harrods Membership Rewards Tiering and Benefits for Customers, Customer Segmentation; Source: https://secure.harrods.com/account/en-gb/harrods-rewards

Membership program tiers and benefits at Harrods (Source: Harrods)

Paid Memberships are Strong Loyalty Drivers

A powerful way of keeping a loyal customer is to convince her to pay for membership in the customer loyalty program. Multi-brand and product stores are at an advantage here, as customers can leverage the fee over a higher number of transactions.

The average active Zalando customer, for example, orders 4.4 times per year and is charged EUR 7.90 for premium or same day delivery per order (read here for a detailed review of the benefits of same day delivery options). A Zalando Plus membership at an annual fee of EUR 15 includes free premium or same day delivery, among other benefits, which makes it an attractive offer for frequent shoppers.

Most importantly, the incentive for members to shop with a different online retailer decreases, as the cost for the same premium services would be very high for just a single transaction. As a result, Zalando management expects their brand loyalty program to be key in increasing the gross merchandise value per customer spend by approximately 20-25% in 2019.  The increase on customer lifetime value (CLV), which is calculated over several years would be similar.

Zalando Plus Program Customer Lifetime Value (CLTV; CLV; LTV) and Share of Basket; Customer Segmentation; Source: Zalando Investor Relations

Zalando Plus membership drives shopper spend (Source: Zalando Capital Markets Day Presentation 28 Feb 2019)

Opportunity to Focus on Value Rather Than Discount

While product discounts and rebates dominate the most-valued membership rewards, it is worth noting that millennials place a higher value on service, experience and customer recognition.

This is especially interesting for premium brands aiming to use their loyalty program to increase the brand value perception of the consumer. Nike, for example, offers their NikePlus members access to member-exclusive products. Net-a-Porter allow their EIP members to shop new collections earlier than everyone else and offer them a personal shopper. Online supermarket Albert Heijn Online provides its loyalty club members a personalised dashboard that suggests healthier substitutes for previously purchased products, which can have significant positive impact on personal health.

Having worked with a client on a project in Retail/Health Tech in China last year, I’m convinced that the trend to personal health and well-being is one of the strongest drivers for loyalty, but comes at very high level of complexity for brands.

For brands with a smaller budget, a more focused approach to a brand loyalty program can be an option. Cycling wear brand Rapha, for example, has created a cycling club with frequent member bike rides and services tailored to the needs of race bikers in large metropolitan areas. The focus of the stores (called ‘Rapha Club Houses’) is to provide the best member experience, featuring racing bikes for loan and a café. They become places for the member community to connect after organised bike rides, which start and end at Rapha Club Houses. The selling area dedicated to cycling merchandise in store is surprisingly small.

Rapha Clubhouse with Customer and Members of Brand Loyalty Program Customer Lifetime Value

Rapha Club House Tokyo (Photo: Rapha)

Drive Your Member Strategy Now

With many brands already having a customer loyalty or membership program in place, 2019 will be the year to evaluate the impact on customer experience and lifetime value (LTV). To start, brands should measure ROI and engagement across the channels. An end-to-end calculation, including supply-chain and/or labour cost, is especially relevant when calculating the ROI for lower margin brands or product groups. The second step is to calculate customer lifetime value (CLV) per member and start customer segmentation to budget future marketing spend. For many brands this can mean a shift from member acquisition to retention and increasing spend per member.

Driving customer experience for the most valued members requires having the same top-level standards across all customer touchpoints, from front-end to operations to last mile delivery or stores. Setting up a matrix membership team structure with experience beyond just marketing but also in store operations, supply-chain, merchandising and finance can be a powerful way of driving this end-to-end experience across digital and retail channels.


About the Author:

Maximilian Gellert gets excited about transforming a range of digital options into pragmatic every-day solutions for retailers. Combining consulting experience with industry functions in premium apparel and online grocery, he supports retailers and etailers in their digital challenges and last mile innovation. Get in touch with Max via email or connect with him on LinkedIn to discuss your own plans for a membership program and other challenges related to customer loyalty.

Online Customer Acquisition: Challenges and Opportunities for Brands

Building a successful e-commerce business requires a strong online customer acquisition strategy, especially when the competition are big platforms like Amazon or Zalando. How can brands leverage their strengths to compete?

A brands’ ability to operate a successful e-commerce business clears the path to bigger margins and critical access to customer insights compared to wholesale channels. If you are an executive working for a ‘traditional’ fashion brand and want to better understand the marketing of your online store, ask your e-commerce director this simple question:

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Brand Development for the Future: Back to the Basics

Successful brand development relies on getting three key factors right: having a unique selling proposition (USP), working with the right people, and creating simple and lean processes.

The brand and retail world has grown in size and sophistication, but also in complexity. Every one of the 20 odd years I’ve worked in this industry has made clearer what allows some companies to succeed and what others lack. New distribution channels and fashionable management philosophies notwithstanding, focusing on these three success factors is essential.

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Update Your Brand Management Reading List

As the summer holiday season kicks in, we’re here to help you get your brand management reading list for all those long flights up to date.

Choose from our curated reader favourites from this past quarter for topics as diverse as the latest trends in edited retail, high and low tech fashion size finders, an update on fashion retail in India, creating memorable store experinces or Adidas’ Global Cities strategy. We’re sure there’s something for everyone. (more…)

Amazon on the Road to Omnichannel Retail Success?

While most brands and retailers are building and expanding their online stores, Amazon is investing in brick & mortar: a surprising update on Amazon’s omnichannel retail status.

Let’s imagine for a moment that you’re running a billion-dollar brand. Last year’s net expansion of stores was negative (not counting a recent acquisition) and your share in online sales remains below 5%. Can you already feel how analysts and journalists rip you to shreds over your unconvincing omnichannel retailing?

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Adidas Best Practice Brand Distribution Strategy

Aiming for the world’s most affluent consumers in highly competitive environments: Adidas’ ‘Top City Strategy 2020’ is at halfway, what is best practice and what can you learn for your business?

It’s widely known that consumer markets and brand distribution channels have fundamentally changed over the past 25 years in more ways than anticipated. Fact is, the internet as a brand distribution channel grew from 0 to commonly 8-15% of sales. But far more relevant from a commercial and strategic perspective is that many formerly emerging countries, especially China and countries in the Middle East and Central Europe, grew to 30-40%  of total sales and profits in lifestyle brand distribution.

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