I recently discussed this convergence and its implications in a debate with Bob Phibbs, The Retail Doctor, on the floor of the 2012 National Retail Federation conference in New York. Alert Technology was kind enough to host the event at their booth. Here is the 2-part video of the debate.

Retail Trends at NRF 2012: A Man's Phone Is His Castle [Debate] Pt1

Retail Trends at NRF 2012: Pt.2 - A Man's Phone Is His Castle [Debate]

The key disciplines involved in this convergence have a convenient acronym: C.L.A.M.P.: Coupons, Loyalty, Analytics, Mobile Marketing, and Payments. Alone, each of these areas is a critical pillar of business-consumer interaction. Integrated, they will fundamentally change the nature of how we shop, how we are marketed to, and how we engage with retailers. The best of breed in each area is rapidly emerging:

Coupons (and other deals) drive shoppers to take action - to buy products they otherwise wouldn't have (or to buy more of the ones they would), to try new items, to spend more per basket, to shop sooner or more often. And the new wave of social buying (think Groupon, Living Social, and their ilk) are fundamentally changing the nature of shopper behavior. To support coupons and deals, the mobile wallet of the future will depend on:

• Load-to-card of deals, to enforce redemption limits, allow for personalization, and enable true traceability;
• Seamless redemption, with no action needed by the consumer to get their discount other than buying the promoted item; and,
• Digital clearing on the back end so that there is no paper to count, track, and store.

Loyalty programs are the basis for true behavioral tracking over time, and for targeting messages to shoppers based on actual buying preferences. Without a unique shopper identifier, retailers are forced to treat each transaction as a one-off event, each consumer as a first-time visitor. By providing continuity and relevant incentives, well-designed loyalty programs enable retailers to communicate with each person informed by the full richness of past interactions, to personalize messages based on what each person responds to, and to reward shoppers in ways that strengthen the ties to the retailer. In the context of the mobile wallet, loyalty means communications will be:

• Relevant to that consumer's preferences and tastes;
• Behaviorally Targeted based on what the consumer actually buys and the way they have responded to marketing in the past; and,
• Measurable through their ongoing purchase patterns, so retailers can truly tell what is working and what isn't.

Analytics provide a window into the inner workings and performance of complex retail businesses. Unfortunately, all too often analytic software drowns the user in data without illuminating the important information. But done well, analytics can be simple, easy-to-use, accessible, and actionable. To get the most value from the consumer's use of the mobile wallet, retailers will need access to analytics that are:

• Shopper-centric, so that instead of focusing only on dollars and cases, the consistent unit of measure is the impact on shopper behavior;
• Interactive and easy to use, so that marketers and merchants are drawn to ask "What if?" questions and follow their "I wonder..." moments to the often-surprising insights they can yield; and,
• Closed-loop, so that each customer interaction can be traced all the way through to its true impact on the shopper's subsequent behavior.

Mobile Marketing provides the first real opportunity we have ever had to simultaneously know the Who, When, and Where of the person we are marketing to. That means that we have more information than ever before to target and personalize the message to exactly that person's interests, tastes, and likely state of mind. And the modern smart phone has the capabilities to support full-color, rich, interactive, immersive communication, not just static, generic messages. The best mobile marketing will be:

• Personalized to the recipient, based on every available piece of information about that individual's preferences and identity;
• Hyper-local so that the consumer sees messages for nearby retailers, or retailers along the anticipated route of the trip, or even for products in the consumer's current section of the store aisle; and,
• Time-sensitive to ensure that the message is most likely to impact immediate behavior.

Payment may be the most "solved" issue in this list, since most consumers carry around (at a minimum) cash, credit cards, and a debit card wherever they go. Nonetheless, there is room for improving the speed of a transaction, reducing the number of steps involved, and enhancing the security of the payment process. And once the act of payment can be divorced from needing a cashier, the possibilities for on-the-go checkout and pre-paid pickup could fundamentally re-shape the floor plans of many retailers. The mobile payment of tomorrow will be:

• Cashless, through direct ties between your mobile phone and your credit or bank accounts;
• Speedy, requiring only a tap, photo-snap, or click-to-confirm; and,
• Secure, through the use of PINs, facial-recognition, or other authentication mechanisms to prevent a stolen cell-phone from becoming a bottomless ATM.

In the coming years, the convergence of CLAMP will permanently alter the way retailers and brands interact with consumers. Yet, as disruptive as this technology will be, embracing it does not need to be a massively disruptive project. In these early days, now is the time for progressive retailers and brands to start experimenting with new tools and technologies, learning from small-scale tests and experiments, and building the expertise and understanding of the consumer that will serve as the foundation for larger projects down the road. You don't need to be the first company out of the gate to succeed, but you will never make the successful transition to the new world order if you don't start experimenting and learning now. The only question is which companies will understand and embrace the new technologies and which will falter, fumble, and fail.

The discussion questions were: "Do retailers have the tools to understand what the wide range of discounting is doing to their margins? Do technology vendors offer retailers adequate tools to deal with today's promotional environment? How might retail's promotional pricing model have to be re-assessed in the years ahead?"

Here is my response:

This conversation needs to be turned 90 degrees. The article and ensuing discussion have focused on price elasticity, margin, and market share. When you are framing the conversation that way, then Ian's point is exactly right -- all you need is math to answer the questions in terms of profitability.

But "The Market" is an illusion, an abstraction. "Markets" don't shop in stores, shoppers do. And so the questions around whether discounting makes sense should be framed in terms of shoppers, not markets. Which shoppers bought discounted items in my stores? What else did those people buy? Were they cherry-picking the unprofitable items or were they buying the profitless $600 TV and then throwing in $70 of cables that only cost me $20 at wholesale? Did my best shoppers respond to the price discounts with increased shopping frequency or higher basket ring, or were they going to buy anyway?

Gaining market share is easy: give away everything below cost to every shopper you can. But that's not how you build a successful retail business. To win in the long run, you need to grow the frequency and spend of your best shoppers, get them to buy at least some product at profitable price points, and convert more secondary shoppers and cherry pickers into long-term profitable shoppers.

You can find all my RetailWire BrainTrust comments on my RetailWire blog.

Source: BrainTrust Query: But We're Building Market Share (http://www.retailwire.com/discussion/15718/braintrust-query-but-were-building-market-share) by Bill Bittner - "But we're building market share." It seems to be the standard answer of many of the largest retailers as discounting has taken the profit out of selling merchandise. But how many more retailers ended up shooting themselves in the foot this holiday season?

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