The Chumps Are Smartening Up
A fascinating new development is being chronicled in the media. It seems retailers are taking a cue from what direct marketers have known all along. Instead of driving as much traffic into stores as possible, the newest trend in retail marketing is to reward the angels and punish the devils.
Best Buy was a pioneer. CEO Anderson estimated that of the 500 million annual customer visits, 20 percent were unprofitable. He hired on as a consultant Columbia Graduate School of Business Professor Larry Selden, who came up with the revolutionary theory that the company should view itself as a portfolio of customers rather than a portfolio of product lines. Duh.
All kinds of retailers are jumping on the bandwagon— Guess?, Inc., Staples, KB Toys and others.
According to Gary McWilliams' story in the Nov. 8, 2004 Wall Street Journal, the centerpiece of this revolution is software called Verify-1, a product of Return Exchange in Irvine, Calif. It maintains a database of customers' buying and returning proclivities, much as the old Hooper-Holmes tracked credit risks. Serial returners are denied return and exchange privileges or, at the very least, are forced to pay hefty restocking fees. The result: profits where losses used to be.
At the same time, Larry Schwartz and Pearl Sax of The Fraud & Theft Information Bureau have announced the Ultimate U.S. Address, Zip Code and Phone Fraud-Blocker Database, "enabling every direct response advertiser, credit card company, bank and credit grantor to screen credit cards and check data as it is received and warns them of every mismatch, thereby stopping fraud and preventing chargebacks before they occur."
The noose is tightening on the bottom end of the consumer food chain. The chumps are smartening up.
DENNY HATCH is a freelance direct marketing consultant and copywriter. He is the author of three marketing books and three published novels. You are invited to visit him at www.dennyhatch.com.