Before Changing Your Business Model, Consult a Direct Marketer
At the end of FY 2003 Zale stock was at $47.55. A year later the stock was selling at $27.14. As of yesterday the price was $24.13.
After a poor holiday showing in 2004, CEO Mary Forté instituted radical changes by eliminating 30 percent of Zale’s mainstay, low-end diamond jewelry in favor of upmarket bling bling with higher prices and better margins. She ditched the traditional holiday sale events that customers had come to expect—Valentine’s Day and Columbus Day—which generated a lot of cash but at poor margins. Forté also revamped its holiday catalog leaving out information about monthly payment plans, and even fired Zale’s advertising agency after a 50-year relationship.
The result: a considerable loss of regular customers to Wal-Mart and other discounters without bringing in any new ones.
All of this was done company-wide without testing.
Many years ago I briefly had as a client QVC. My visit to its headquarters on the outskirts of Philadelphia is etched in memory.
The place was humming with seemingly hundreds of telemarketers peering into computer screens and taking orders. Elsewhere was a brightly-lighted sound stage with live talent urgently hawking merchandise and taking live calls from viewers that were heard over a loudspeaker.
Meanwhile a legion of technicians was monitoring a vast array of electronic wizardry that measured incoming calls, average length of calls, abandoned calls and sales. In addition, they were able to project in real time total sales and total profits in relation to the cost of talent and airtime based on a matrix of prior product sales going back in history.
If sales began to flag, another sound stage would be lighted and different product would be offered.
At the time I was a writer and analyzer of junk mail where testing takes at least six weeks. Yet with all this technology, QVC had the most miraculous testing mechanism I had ever seen.