Russo: I’m excited to welcome Greg Petro CEO of First Insight. I’m really thrilled because Greg, I, really admire your work. So I’m really glad to have you here. Thank you, Christine. It’s a pleasure to be with you. So let’s start with, voice of the customer. Okay. Okay. So first let’s hear how you define voice of the customer, but before we do that, how is it that you utilize voice of the customer? Right. Our objective at first insight and the work that we’ve done is about trying to understand what the customer wants, but also where they’re headed so that you can serve them.
And I think to answer your question, how do you use data? Well, if you’re looking in the rear view mirror constantly about what people have experienced. Well, it’s helpful. But it’s much better if you could anticipate what they’re headed towards. So there’s a feedback loop that you are passionate about, right?
What I’m passionate about is enabling decision makers to stop making false, false, positive decisions, or perhaps even worse, bad decisions based upon limited data sets I would say without a doubt I’m extremely passionate about is that we as executives in any industry, whether it’s automotive, high tech you know, software, our company or retailers, brands, and manufacturers, we’re here to serve customers. And I use the word perfectly serve in the sense that we have an accountability and responsibility to give them what they want and need and would like, well, I guess the best way to do that is to ask them, but what I find so fascinating in conversations with executives, I ask them, what platform are you using to listen to your customer? and in many cases, they, they will say, you know, they don’t really have one,
Russo: What we’re really talking about is anticipatory information. You sit at the cross section of rear view and forward look, is that correct?
Petro:Yeah. So, you know, it, I would say history’s important, right? Obviously there are things you want to repeat and things you don’t, so you have to learn from that, we have a lot of data, right. Especially about what’s happened and we have ways to figure out. What was salient and what wasn’t,
Russo: so you walk into a C-suite and you say that’s nice. You guys are designing maybe in a vacuum, maybe because of some visionary, right? What would you say to them to say hire us?
What’s the one thing you would say to them.
Petro: Very simple. You’re going to be successful. You have a great brand, but some of the products are going to succeed and some of ’em are going to fail.
What we can do is give you advice and with a probabilistic outcome, that some product will be more successful than others.
And, and more emphatically (if I were just simply starting out) I’ll guarantee three to 9% gross margin improvement. That’s 300 to 900 basis points.
Petro: The reality of the situation is, is that we need designers to create, we need merchants to have a point of view about their customer and what they represent for their brand.
But then we need to use technology as part of all of that, to determine how to make it worthwhile for all parties. So they can create a, a unique set of products and some are going to be more successful than others. However, the question I ask people is: wouldn’t you like to know that before you made the big bet?
Petro: Well simple, you take products that are in design phases, right? In, in their creation phase of product development early on, and you suggest which ones you, as an organization, will suggest which ones you’re going to manufacture and how much, and bring it to market with a financial plan behind it.
Russo:That is the current process. What do YOU do?
Petro: So what we will do is we’ll take those products and we will test them. In the design phase before all the inventory investments are made and we will weight the inventory allocation to higher sell through items and the lower sell through items.
And we will watch the sales data and then demonstrate in a, in a vacuum – pre-market, but then I’ll share with you how had they used our data, they would’ve gotten higher sales, higher margin based upon, understanding which of the products within that allocation or assortment is going to sell better than others.
Russo: What do you mean?
Petro: Very simple: Test in design Yeah, so we’ll test. Right now we are testing. I, I dare to say almost every product category, you know, in, in soft lines, hard lines, accessories, electronics in the design phase as early as a sketch to a silhouette design with an overlay in CAD of patterns all the way through a sample.
If you wanted to create a sample, which is kind of crazy at this point, because you can do it in CAD and get the same result, all the way to a sample, to an actual viable product. And then we’ll help the company determine:
- What to buy or manufacture
- What is likely the best retail price
- To whom it should be targeted
Petro: some of our customers are retailers. Let me, let me just list a couple of ’em that you’ll know. And your, your audience may know, obviously Dick sporting goods Kohl’s all served by under armor, also our customer and then manufacturing it at Li and Fung.
So we, we actually test at each node in the supply chain and can give information. To each of those parties, but also between the parties so that they can help serve the customer better all the way at the end.
Russo: So you have an ecosystem there where there’s like so many checks and balances. That’s amazing. There’s a lot of valuable information in that process. Right. But the most valuable information is from the actual customer.
So just to confirm you have that feedback from the customer in it’s the main piece of, of the information, is that correct?
Petro: Yeah. That’s exactly correct.
Richard Marcus has been on our board and, and his father Stanley Marcus, who started Neiman Marcus Richard one day said to me: “My Dad used to say designers propose and consumers dispose.”
And the idea of that quote that Stanley had said was……We’re going to make decisions regardless of where we are, but ultimately the consumer is going to decide whether we were right. And I think there was some, a great deal of wisdom in that.
Let’s take the most complicated supply chain– which is: you have a retailer who is working with a wholesaler who is creating product with a different manufacturer or a group of manufacturers, There are distribution points beyond that and each node of that connection is dislocated from the end consumer to your point.
And each node has biases about what the consumer wants. And so consequently, each bias creates a refraction point of what actually the consumer wants. And so ultimately, perhaps you get it right? Perhaps you don’t? Ultimately, the consumer decides whether or not they like it and they will vote with their wallet.
And you’re gonna know whether you were right or wrong. What we’re doing is connecting all of those dots in a singular view of the customer. We have the ability to inform each of those nodes along the way.
So think about Apple as a product. It’s a pretty simple problem and yet very complex.
They sell an iPhone in six permutations, meaning designs, you know, the 12, the 13, whatever, the mini, the non mini the pro and then they have color combinations, but they sell it through apple stores. They sell it through T-mobile stores, Verizon stores, Walmart, and all the other providers of their product.
Well, getting the permutations of what a Walmart or Target customer wants from an Apple product right is really, really important, but it’s different than the Apple brand. It’s a very complex problem, but it’s very simplified by providing each of the players in that supply chain, the information they need to be successful to serve their customer.
Russo: The information they need, what might that look like?
Petro: Yeah. So first. The first thing that most organizations need to understand is what do I invest in? Right. So what is the breadth of the assortment? What are the permutations? The colors, if we’re looking at blouses, how many blouse design, silhouettes colors, et cetera.
Which ones do you want and how are they going to interact? So that’s the first data point. If you add a new blouse, will it give you more customer reach and acquire more interesting customers in your brand? Or is it gonna dilute your brand? Are you gonna lose some existing customers?
Second, we’re gonna give you pricing. We’re gonna actually forecast the average unit retail of the product over its life cycle. That way you can manage the profitability of the entire supply chain. Next we’re going. This is all out of a single insight, by the way, next we’re gonna give you information around segmentation.
Hey, here’s my existing customers. Here’s net new customers. How are they reacting in different pricing models against these different product permutations? And then last: The full breadth of what we call Interactions Analysis, which is the dynamic nature of adjusting that assortment by either segment, price, or product grouping.
So all of that comes in an Interaction that we have with a consumer base that you profile and decide: This is who I want to listen to. And we’re able to do that in less than 24 hours. We get the information back to the client. It’s available online and decision makers can then go out and say, okay, I have some critical decisions to make.
Russo: Okay. So what you do are those four data points and more, but you have identified four core ones. And how you do it is interaction with the customer base
Petro: We can give a profile of any customer persona that fits within roughly a hundred million that we have access to that could say, I don’t have this customer.
He, or she looks like this. This is what I want you to go find out and survey or collect information against those individuals. So we can augment their own database.
Petro: Two things that I would like to share with you — We’ve spoken a lot about the platform in the four areas and how the technology is used, but we also do more than that. That’s on the product side. On the brand side, we do brand collaborations understand how companies’ imagery and brand resonate with customer bases. So we’ve done a lot of work on Instagram with video case studies and testing of brands and how it resonates with let’s say a millennial group versus a baby boomer in doing brand testing. We also do customer engagement around case studies that we have documented on our website around visual representations within the store: representations of products and brands and also packaging, (which is really related to sustainability). We have a company that saved over a million dollars just in folding versus hanging their product and the cost related to that. And the waste related to it.
And then last, on the employee side engaging employees – clients use us to understand benefits and, and other things that a company or brand want to offer the employee base. So those are the four overarching areas that we at First Insight serve.
Our tools are being leveraged in ways to figure out silhouettes and pricing. And how products or product designs, different product designs are going to resonate with different customer segmentations. As you can imagine, if there are going to be products that are currently in the existing format and then design differently and wanting to re.
You know, it’s certainly something that we, as an organization have been involved in with companies throughout their product design cycle, from the inception. .
Our total customer total revenue is about 750 billion – it’s about a quarter of the global retail market. We have a number of examples of companies that we, we serve that have benefited greatly.
And we’re appreciative of that and glad to be a part of it, but we see ourselves as only a piece, right? Those decision makers are the people that are responsible and accountable for their results. And I think a lot of them are great leaders who want data who want to understand how to leverage that data to make improved decisions.
My favorite article written about us was when we were called the black ops of retail!
Petro: The one that I always go back to actually has been around for quite some. Which is David’s bridal an iconic brand. Interestingly enough has been a long term customer of ours. And I like it because it’s been documented and written up quite a bit, but also was written up by Gartner.
We were able to not only help them in their process of creating and designing wedding gowns, which if you think about it, what more intimate decision does a person make than a wedding dress? Not only helping them figure out which products are going to resonate best.
And they’ve said we’ve helped them define the number two dress of all time. That was actually never gonna be brought to market, but more interesting, we were able to save months out of their design cycle based upon testing products early in the design and figuring out which dresses to bring to market.
Russo: I do believe that software is a tool. It really it’s like air conditioning. When it’s comfortable and it’s working, you’re great. And when it’s not and it’s 90 degrees, you’re very unhappy.
Retail is, is as you know, it’s a brutal industry. The shelf life is getting shorter and shorter leaders that don’t use data will not their brand, their, their retail space won’t be around.
And it’s just getting faster and faster. So here we are, you’re at 25% of the global retail market, you know, I think you should work harder- ha!. I mean, that’s quite an accomplishment.
Petro: We do a lot of other categories We do travel, leisure and entertainment now, and experience can mean a lot of things to different people, This is the definition from our perspective of what experience management means. It can be encapsulated this way. Experience is something that you can view and review and has a value associated.
What we’re trying to help companies figure out is when that person engages with your website, your brand, your products that you’re selling, the transaction, the pick up the return, the holistic pieces from end to end, are they likely to pay more or less for that experience?
Right. Think about the final mile that companies are investing in millions in some in some cases, billions of dollars to get it to you today. Well, does that matter to you? Are you willing to pay more for that? Because there’s a cost associated with it Is that actually going to increase your customer loyalty, your satisfaction to the brand and bring it up?
If you’re a millennial or a gen zer and you’re getting 16 boxes as opposed to one a day later, is that preferred? So we did a lot of work in around sustainability with the Wharton school of business, the Baker Institute, about generational understandings of experiences related to sustainability and are people willing to pay for it.
So from our perspective, the concept of experience management comes down to a very simple concept for us. Are people willing to transact on it? And what’s it worth? Because business is about the transactional cost. It has to be measured. So the investments of people are making around in-store experiences sustainability experiences, whatever it is.
Are they actually worth it and are, how are you going to benefit from it?
Russo: So what, what you’re saying is let’s take sustainability. Let’s focus on not product development. Let’s talk about packaging. Okay. Mm-hmm so let’s say we have a, you know, a brick and mortar scenario store spend a lot on tissue paper.
In the packaging actually, right? Yes. So the question would be since it’s, it’s a, there’s a cost to it, to the customer. Is, would your experience be diminished if we remove the tissue paper because it’s a sustainable decision or would you actually be willing to pay for tissue? Right?
Petro: Or ask yourself this question around a luxury brand, as an example. Let’s take a hypothetical LVMH Louis Vuitton bag, right. Comes in a beautiful box in a beautiful bag with beautiful tissue and then a wrapping cetera. Now, the question that you might ask and the stuffing inside the bag, when I received that.
Is that the presentation I want. Okay. And by the way, it comes in a carton and the carton’s been wrapped and maybe it has a bow tie on it. Cetera, I don’t know, in a gift card, et cetera. Here’s where I would add to the complexity and maybe the interesting data that may be true for a baby boomer because that’s something they are accustomed to, for a Gen Zer let’s say, and someone is buying their first one and they really want an eco bag. And the brand wants this customer, hopefully, for a long period of time. What does the brand do?
Russo: Really great points.
Petro: Our responsibility is to help our customers be successful.
And by virtue of doing that, we will win every time.
Russo: Thanks for coming to what’s just happened because that’s where people learn.
They learn with me about solutions that help grow retail businesses. So I really appreciate your time, Greg.
Petro: Yeah. Thank you for having me, Christine.