A recent report from Deloitte Access Economics, commissioned by Salesforce, revealed three digital trends that small business can’t afford to ignore: an evolution of the digital environment, the expectation of personalised services from new-age customers and an upsurge in customer-centricity.
In line with these trends, the Big Red Group set itself a mission of becoming the leading ecommerce retailer in Australia and shifting the way people experience life by serving an experience every second somewhere on Earth. Such a lofty goal required us to know our customers on a deeper level and have the ability to truly nurture supplier relationships.
Having moved our strategy forward this year, we are focusing, increasingly, on developing our experiential marketplaces. In FY19, the Big Red Group will double its revenue over FY18, and we'll achieve that through acquisition as well as organic growth.
You'll see us bring some more brands alongside RedBalloon in the coming months to support that growth. The FY19 vision for the group is to serve an Australian customer an experience every minute, and over the next five years we anticipate growing that to a global statement.
The challenge for us was that customer acquisition costs had grown exponentially, to the point where the business was becoming untenable.
RedBalloon historically acquired most of its customers digitally. From its beginnings, it had tried different ways to acquire customers, seeing its customer competition costs grow from just a few cents to around $50. We needed to find a way to drive the costs down, so we brought the marketing back inside the business.
But we also needed to get closer to the edge. So, we trialled Artifical Intelligence (AI) in the second half of last year by employing our own AI marketing technology. We saw an immediate and very significant reduction in our customer acquisition cost (CAC) – down from about $50 to about $15 initially, and now, from time-to-time to around $7. At a $50 CAC, it was not possible to grow the business. By shifting the cost needle, we’ve been able to move away from growth planning on the basis of historical budgets to a responsive digital market strategy.
We’ve become much more dynamic about the amount of money we spend (at any moment in time) in the market, acquiring customers based upon demand at the time as opposed to historical performance. That's the exciting thing about our marketing funnel and that's why the autonomous AI platform makes sense to us to run over multiple brands.
But the use cases for technology don’t stop there. We have a huge opportunity in broadening consideration – and that’s all about connecting emotionally with our customers. As our brand has grown older, the demographic we appeal to has aged simultaneously. With our biggest target market now being millennials, we need to extend our brand to the younger generation.
We’re doing that through our content strategy – creating authentic content that appeals to the millennial generation. The first step is knowing and segmenting our audiences. Data means we can do this, and we can target the customer at the right time with the right content.
We need to have a single view of our customer across our marketplace portfolio, and that was one of the absolute pillars of our technology stack implementation. We had significant technical debt, and data was highly fragmented; we had no view of the lifetime value of a customer and we were buying customer one-by-one, over and over again. We are starting the journey over the next 12 months to shift this.
We now have a rich opportunity to become more sophisticated about how we target, access and engage with new and existing customers, and ultimately, how we nurture them to drive lifetime value in a way that we were unable to before.
There are basically four retail levers – value, intimacy, convenience and differentiation. Every retailer, whether you're an ecommerce or a physical retailer, needs to consider their position to market in each of those different areas and determine which levers they are going to compete on.
For us, it’s all about intimacy and convenience. There are very few organisations we see ourselves competing with that are willing or able to make the level of technical investment we're prepared to make to move these levers on intimacy, and we see it as an absolutely critical part of our strategy. From a convenience perspective, we’re focusing on a frictionless mobile experience.
We have seen, and are seeing, an enormous drift to mobile in terms of traffic; yet all brands face the same issues of conversion rates. The conversion rates for mobile traffic are a third of the conversion rates for desktop. So, as well as driving more (value) traffic, we need to improve our conversion rates. Otherwise, we’re putting ourselves under enormous pressure without the payoff.
Business intelligence has been an amazing by-product of digital transformation – particularly, the insights we’re gaining by having a single view of all of our suppliers and relative margins. This enables us to identify opportunities for margin and relationship development.
It has also enabled our suppliers to spend much more time in market. And so, we've seen margin improve as a result, and volume improve for key suppliers. It helps us to understand how we might tier our suppliers and decide which suppliers to chase after.
This has allowed us to serve 3000 more customers in April this year, compared to what we served on RedBalloon in April last year. We have double-digit growth in a business that had been relatively flat for the previous three to five years.
Looking across the business, there are many opportunities for improvement. We've decommissioned 15 applications that were used across the business. Our average sale per call last week was $34, which is an all-time record high for this time of year. We wouldn't associate these entirely with technology, but technology has enabled us to be more efficient and get rid of some frustrations that we’re measuring and managing better. And as we're doing a better job of measuring, we're doing a better job of delivering a great experience to our customers.
Everyone uses the words innovation and agility all the time. But what does that really mean to us as a business?
I think the number one thing we've committed to, as a business, is to fail fast. In fact, it’s one of our three core values. We would rather make 20 $50,000 mistakes than one million-dollar mistake. We do a lot of ‘do-analyse-do’ in this business and if you're not allowing yourself to fail in projects, you're probably not pushing yourself enough in a market that is innovating and changing as quickly as ours is.
Naomi and I also talk a lot about customer obsession – the absolutely critical success factor for us. We've learnt this year that our customer is changing, and that the way they will buy from us in 12 months will be fundamentally different from today.
The marketplace, in this space that we're in, is evolving and transforming incredibly rapidly. The only thing we know in the middle of it all is that we had better be listening. That applies as much to consumer audiences as it does to business partners – supplier expectations are as high as ever.
If I had to do one thing really well in the next 12 months, it would be to embed customer obsession in the business. But huge trends are also coming at us, so we need to ensure we create a platform that allows us to genuinely evolve as we scale.
To find out more about how SMBs can drive revenue and growth with digital technologies, check out the new Deloitte Access Economics’ ebook Small Business Imperatives for the Digital Age.