Learn From Amazon’s Innovations and Walmart’s Blind Spot
Amazon (NASDAQ: AMZN) should be concerned. Walmart’s (NYSE: WMT) resources are enormous. That gives Walmart time to work on their blind spot. Does Walmart leadership understand what makes Amazon so strong? Probably not. If they do, can they adopt it?
Walmart is changing quickly. We’ve all seen all their ecommerce acquisitions and a lot of new initiatives they’ve launched and tested in the last few months. These included Bossa Nova robot in stores, Mobile, Express Returns, Scan & Go, Check Out With Me, and JetBlack premium membership.
Walmart is still the largest retailer by volume. Walmart has stores within 20 miles of 90% of Americans. Yet, they correctly perceive Amazon, and others as a threat.
This image from their shareholder meeting that was shared by Lauren Thomas from CNBC summarizes their concern:
Walmart doesn’t want to end up like Sears. However it might.
For all Walmart’s “digital transformation”, their ecommerce growth slowed down this quarter. Amazon continues to outperform expectations.
Let’s look at two similar initiatives from Amazon and Walmart to understand the differences.
Testing Walmart’s Scan & Go vs. Amazon’s Amazon Go
Cashier-less checkout was a big theme at ShopTalk. Nordstrom, Macy’s and other retailers are focusing resources to reduce this friction point.
Walmart executives presented their Scan & Go initiative at ShopTalk this year. Amazon launched Amazon Go in Seattle and is expanding. In e-commerce, retailers can either help customers increase their motivation or decrease the friction they encounter during a purchase. In retail, checkout has always been a significant source of friction. No one likes to wait.
Walmart’s Scan & Go Test
In January 2018, Walmart announced the expansion of their Scan & Go cashier-less checkout experiment to 100 stores.
Their promotional video looked promising:
This is how it actually worked.
The demo was “smoother” than the actual experience. During the test shoppers could use their phones with a mobile app or a separate device Walmart provided. As you walked through the store you scan the items added to your physical shopping cart. Then shoppers advanced checkout at a special lane near their current self service checkout.
The Scan & Go initiative was cancelled. Walmart executives said they did learn from it.
What did Walmart learn? It seems like they were asking: If you reduce the friction in checkout will you sell more? No surprise! They likely weren’t impressed with the results of their test.
Walmart essentially moved an already not super popular self checkout scanner onto a mobile device. Self-checkout is an extra job for the customer no matter what part of the store they do it in. They tested the same concept but moved it to a different location in the store.
Walmart tested a variation of what they were already doing. Tweaking, improving and optimizing variations leads to a local maxima, a dead end.
Let’s examine how Amazon approaches tests to see what we can learn about innovation and testing.
Amazon Go didn’t waste time and resources testing variations. They tested a variable first.
Amazon knows that customers don’t like to wait. It’s something that will never change.
“ I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. … [I]n our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ [or] ‘I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.” ― Jeff Bezos
Amazon innovates with a central purpose – making things better for the customer.
Amazon, and anyone who visited a store with cashier-less checkout knows, that people aren’t excited about taking over the cashier’s job. You can see that in every grocery store, Walmart, Lowes and Home Depot that have longs cashiered lines and a handful of people struggling at the self checkout. For stores with higher margins sales people can take over the cashier’s job for the convenience of customers.
Amazon, understood that “checkout” is a lousy experience. Checkout is the variable to test.
Amazon didn’t ask how to improve checkout. They asked: would people buy more if they didn’t have to use checkout at all?
Amazon decided to innovate around replacing the checkout experience. Ironically, it was so successful that there were lines of people to try the experience for themselves.
Amazon proved that customers love their no checkout innovation. Only now will Amazon will test many variations to improve on the concept.
Walmart has a serious blind spot
Walmart focused on optimizing store operations with technology.
Amazon focused on innovating on behalf of their customers.
Walmart doesn’t understand that they don’t have an ecommerce channel problem, Walmart’s problem isn’t Amazon. It isn’t even technology. Walmart’s problem is a blind spot, a lack of interest in who its customers are. Walmart is struggling to transform from being experts in products, inventory management, supply chain, and logistics to becoming experts about their customers.
To succeed in retail today you need to start with the customer, not the product.
Amazon is beating Walmart, and others, because it knows its customers and takes as an article of faith that if they do right by customers they will succeed.
How about you? Every successful business has a blind spot!
Here’s what often happens:
A business has a unique approach, or a special emphasis that separates them from competitors so they commit to it. It makes them successful.
They eventually reach a plateau.
Most businesses double-down on what brought them success.
They do what they know how to do and improve on the margins. They press down harder on the accelerator..
They get stuck in that gear.
At first their innovation gave them momentum.
And then things began to level off.
They believe in first gear. First gear is where they feel comfortable.
Metaphorically, Walmart is accelerating in first gear.
Businesses don’t have automatic transmissions! All you have to do is look at the top retailers slide at the beginning of this post.
Few companies ever find second gear.
Let us know if we can help you eliminate your blind spot. Let us work with you to innovate your way to success by reducing customers’ friction and increasing customers’ motivations.
Empathy Propels Marketing Past “Optimization” to Innovation
Are Personas Dead? According to a recent blog post on the Convince & Convert blog, they would have you believe they are.
Here’s why that’s wrong:
If I tell you “the king died,” that’s a single-event data point. Information, if you will.
And if I tell you “the king died and then the queen died,” that’s two data points. It’s still information.
But if I tell you that “The king died and then the queen died of a broken heart,” that’s a story.
I’ve taken the two data points and connected them with causality, which makes the data meaningful.
What does this have to do with Personas and Big Data?
All data records events. Little factual tidbits of what happened. At best, sophisticated analytics can record chronological records or patterns of events.
The website visitor did this. Then this. Then that.
Or, patterns: male customers tended to buy this instead of that.
But notice that the reported chronologies and patterns are absent causality and intention. A series of events for a Web or store visit remain nothing more than an itinerary. And a pattern remains nothing but a correlation. There is no visible cause-and-effect relationship. There is no underlying shopper intention, and no meaning recorded by the data itself. That all remains for the marketer to provide via interpretation.
Humans cannot transform data points to insight about causality, intention, and meaning. To do so they must turn the data into a story.
Stories with the buyer as the protagonist.
And “buyer as protagonist” is another way of saying “persona.”
Formal Vs. Informal Personas
Are we really saying that all marketers use personas and tell stories when interpreting data?
The data might be as straightforward as “the all-inclusive bundle is our most popular product,” combined with “A/B testing proves that a satisfaction guarantee boosted conversions by 30%”
And the story might be as simple as “this category of buyer chooses the satisfaction-guaranteed, all-inclusive bundled option because of its convenience and promise of risk reduction.”
Yet as simple as that interpretation of the data is, it still represents the creation of a story centered around a character in the form of a buyer.
Unfortunately, because the creation of the buyer’s persona was implicit and ad-hoc, it was also under-developed.
And that’s where the problems come in.
The Downside of Implicit, Informal and /or Ad-Hoc Personas
So what’s wrong with letting one’s personas remain implicit or unconscious? After all, we process intuitively as we make sense of the data?
Short answer: Our Baked-In Cognitive Glitches.
We have two cognitive biases when we rely on ad-hoc implied personas:
1) We assume everyone is like us. They value what we value, they make decisions like we make decisions, and what appeals to us also appeals to them.
2) We work off of stereotypes and then engage in the fundamental attribution error. When we see someone doing something, we tend to think it relates to their personality rather than the situation the person might be in.
Well-designed Personas help marketers avoid these cognitive biases. They show how a different temperament might engage in a different decision-making process. They look beyond stereotypical attributions to see the context.
The most important reason to use well-designed personas is prediction.
With a well-designed persona like a TV character, you can predict how they’ll behave. Character explains a scenario better than demographic and even psychographic data.
For example, suppose a white, middle-aged, middle-classed, white-collar New Yorker found a lost wallet, stuffed with cash. What would you predict he’s likely to do?
Well, based on that, you’d have no clue, right?
There’s no way you can confidently predict behavior based on the demographics provided unless you assume that the person in question would do what you think a typical person would do. Which is to say what you’d do.
That’s exactly the situation with implicit personas that are usually drawn from demographics or based on our own intuitions of how we or typical person would behave.
Now, if instead of giving you demographics, I told you that George Costanza found that wallet…
Now you can picture exactly what Costanza would do, even though it’s probably not anywhere near what you — or even a typical person — would do in the same situation.
That’s the kind of prediction those properly designed personas bring to the table.
And when it comes to crafting and optimizing customer experiences, that’s all the difference in the world.
Increased Data = Increased Need for (Better) Personas
Data and advanced analytics don’t and can’t change our hardwired need for a story as a sense-making tool.
In fact, the more complex and unstructured our data sets become, the more robust our storytelling chops need to be to help us not only analyze, but make sense of that data.
The disadvantage of structured data is that the structure limits the answers you can pull from it. The advantage of structured data is that the structure suggests the questions the database is capable of answering.
So while unstructured Big Data presents greater opportunities for marketers, it also increases the burden of coming up with and framing the right questions to ask.
The better designed the persona, the easier it is to interpret the data as narrative. Personas help frame and ask questions about intent, motivation, and cause and effect. These questions can then be posed to the data sets for not only answers but insights.
This is the only way to move from having data to being able to use that data to increase sales, market share, customer loyalty, etc.
Personas Increase Empathy and Move Marketing Past “Optimization” to Innovation
Without personas, marketers can certainly optimize what already exists to a local maximum. You don’t have to generate deep insight into the customer to run multivariate tests on different alternatives to the established patterns. Different color buttons. Slightly different calls to actions, hero images, page layouts, etc.
But you also can’t move past optimization to true innovation without thinking seriously about customer drives, frustrations, motivations, etc. Great customer experience design requires empathy.
And for empathy to be predictive, it requires fully fleshed out characters with which to work, just like you experienced with the Costanza example.
You can’t do customer design with just data alone and advanced analytical methods alone. In fact, neuroscientists have proven that analytical thinking inhibits empathy.
Your mind can do either one of these things, but it can only do one of them well at any given time. A marketers ability to generate customer insights come to live while in emotional storytelling mode, but fall dead while in number crunching analytics mode. And vice versa of course.
The point is, good marketers need both sets of skills, as well as advanced, rigorous processes for supporting and exercising those skill sets.
No one would ever argue that marketers don’t need or benefit from accurate and advanced customer data. Or sophisticated methods of statistical analysis aimed at sifting and sorting through that data, looking for patterns.
But that same level of rigor and defined tool sets also need to be brought to the storytelling side of the equation. Meaning that implicit and ad hoc personas just aren’t good enough.
And the more context-sensitive the situation, the more important simulation through storytelling and the use of formally developed personas becomes.
In other words, personas aren’t in opposition to data, they are the other half of the coin. Personas are a contextual tool for making data relevant and actionable. They are a bridge to understanding customers at a human level.
Without this, marketers are doomed. Without well-designed personas, it’s difficult to focus on customer experiences, rather than just products, price points, placement, and promotions.
So are personas still relevant in an age of data-driven companies?
Not only are they “relevant,” they’re becoming increasingly necessary for survival.
Is there a right and wrong way to be customer-centric?
I really like how Lynn Hunsaker of ClearAction explains this with her concept of “well -being”.
Some managers view customer-centricity as bending to every customer’s’ whim. Customers are not so irrational. They want you to succeed so you can continue to help them. The transactional customers that don’t, likely shouldn’t be your customers.
Customer-centricity means that your actions are centered on customers’ well-being as it promotes your well-being.
“Well-being” is a balance of generosity and discipline. The well-being of a child requires a balance of recreation, learning, and structure. When customers’ well-being is great they make fewer demands on your company and they are eager to engage in mutual value creation.
Recently at Whole Foods they ran out of nutritional yeast in their bulk products section. I was delighted that they gave me a complimentary packaged nutritional yeast instead. It sounds expensive, but I didn’t need to visit another store. They considered my well-being, valued my time and understood that I was a relational long-term customer.
Customer well-being requires a balance between the benefits they receive from your company and the collective costs they incur: money, time, effort and stress.
If you are looking for more examples of being customer-centric, make sure to get your preview copy of our new book Be Like Amazon: Even a Lemonade Stand Can Do It.
Optimize for people not technology
In order to future proof your optimization efforts, remember the focus should be on the people not the technology. That is the one constant that never changes. Our job is to help people buy no matter where they are, what device they use, if they browse by mouse, touch or voice.
Recipe For Buyer Legends (takes ~2 hours)
The Buyer Legends book is your best guide to creating a quick Buyer Legend. There are even more in-depth instructions in our posts that you’ll find in the Recipes For Practical Customer Experience & Optimization.Design series.
What you’ll need to write a Buyer Legend:
- Buyer Legends: The Executive Storyteller’s Guide it’s a $2.99 investment and it takes less than an hour to read.
- Once you’ve read the book you’ll need approximately 1 1/2 hours to write your first Buyer Legend.
You can prove to yourself how powerful Buyer Legends are in under two hours.
The 5 step Buyer Legend process:
- Select your perspective – remember that deeper insights produce better results
- Perform a pre-mortem – remember Murphy’s Law, if something can go wrong it will so plan for what might go wrong
- Outline the story backwards – this forces the why of the previous chronological step and it helps you measure the steps afterwards
- Draft the Buyer Legend – the better the story the more money you’ll make by improving execution, communications and testing
- Execute – improve, rinse and repeat
The 10 essential ingredients of a Buyer Legend:
- The personas
- The persona’s purpose & objective
- The persona’s rationale
- The persona’s key decisions
- A pre-mortem for the persona’s buying journey
- The persona’s drama (emotional struggles)
- A reverse chronology of the persona’s buying journey
- The persona’s constraints & considerations
- The persona’s reasonable alternatives
- Measurement of the Buyer Legend in the real world
Making the Buyer Legend remarkable:
Please keep in mind that Word-of-mouth is triggered only when your customer experiences something far beyond what was expected, for better or for worse. Slightly exceeding their expectations just won’t do it. So incorporate the remarkable into your customer experience.
There are four ways you can be remarkable:
- Architectural – the way it is built is remarkable, think about how beautiful Apple’s packaging and products are
- Kinetic – when the performance is exceptional, think about how Google dominates search by providing relevant search rrsults
- Generosity – the way you exceed customers expectations with unexpected add ons or large portion sizes
- Identity – the way you build a connection so that people think of you as part of their tribe
With Buyer Legends you will:
- Improve communications. Your whole team will “get it”, they will see and understand the bigger picture.
- Improve execution. You will turn big directives into purposeful and more effective actions
- Improve testing. You will understand how to plan and implement more effective tests
- Make more money. You will see improved conversion rates that make the up-front planning worth the time and effort
We encourage you and highly recommend that you try this yourself, but if you need help, please let us know.
What A Used Car Salesman Can Teach You About Empathy
He pushy pushed his way up towards the stage. I had just finished presenting the keynote at Driving Sales, an automotive dealers conference. He thrust out his hand and eagerly shook mine; saying “thanks … blah blah blah…. “ And then I heard him clearly “…too often I am obsessed with pushing customers through sales and I’m not helping them buy!” Really!?! That forced me to pay attention. I hope that he didn’t notice me picking my jaw up from the floor. It isn’t everyday that a car salesman genuinely expresses deep concern for a customer. Most of us would rather have a no anesthesia root canal than be escorted to the manager’s office in a car dealership. … Please read the rest of this post at BryanEisenberg.com