Last night at City Hall a small handful of the faithful gathered to hear exactly how Buxton Marketing, a consultancy hired with a considerable amount of CRA dollars, would redefine our downtown and help remake it into a retail environment that is not only more economically sustainable (so to speak), but also in tune with what the community wants. Something that apparently, and especially in the opinion of those who hired Buxton (or, as one wag put it, Buck$Ton), the usual market forces, local retailer wisdom and consumer demand have not done for us. This being a matter for the experts instead.
A Market Demand Study in such economically parlous times such as these might seem like an odd pursuit to some. With City Hall claiming to have cut budgets and making due with less, it would seem to be an inappropriate time to be spending $30,000 to find out what variety of vichyssoise sells best in this part of the SGV. Particularly when you consider that some of the City Hall service reductions that have been made, such as cuts to after school care at the YAC for the children of working parents, have hurt some people in town.
Of course, this is also the same City Council that thought nothing of sending itself to a 3 day League of California Cities convention in San Francisco on the our dime, so there is that cause for skepticism as well.
But why dwell on any of this? We do have a City to save here (I guess), and trying to figure out from what in particular is hardly going to move any product downtown. Let's get down to business, shall we?
Buxton apparently is not your usual survey and tabulated results kind of market demand consultant. Those attending were not handed a clipboard and asked to check the boxes next to those products that they would most like to buy here in Sierra Madre. Nor do they seem likely to send people out into the streets looking for consumers to discuss shopping preferences with. Instead they do it with information gleaned from the data banks of the more successful businesses in the area. This is a very modern approach we're talking about here. You can understand why our somewhat pokey City Hall might have been impressed.
Below is how they describe what they have to offer on their FAQ site, Buxton FASTFacts (click here). And yes, they do say "best practices."
Best Practices - Turning Customer Data Into Dollars: Many retailers have no shortage of customer data. What do you see as the best uses for customer data to enable (the) retailer to maximize their marketing strategies?
Collecting customer data is the basis of today's marketing plans. Using it to tailer media placement, model prospects for new customer acquisition, and more efficiently circulate ongoing retention efforts is becoming essential to drive marketing ROI. We recommend to our clients multiple best practices around using data. These include:
- Use transaction RFM to target customers who warrant ongoing investment - screen out best customers from those who won't shop, period.
- Use merchandise data to tailor inventory and selection by store and channel for less waste and higher sell through.
- Analyze customers against external data to identify key characteristics. This will help to optimize promotions and drive specific customer behavior.
- Count customers by month / year and channel to determine customer churn.
- Count annual sales by customer frequency and ask yourself - what percentage of customers is driving what percentage of sales?
Well there you go. Just so you are aware, ROI is acronymic for "Return On Investment," and I am fairly certain that RFM denotes "Recency, Frequency, and Money." Consultant-speak meant to describe people who just keep coming back and spending. The kind of folks all retailers would love to get to know better.
But I am a little worried about the whole "screen out best customers from those who won't shop" thing. Sir Eric, who is famous for having alligator arms when it comes to paying for anything, still likes to go into stores and look at stuff. I hope this means they won't be stopping the purchasing challenged from entering downtown.
Anyway, so here's the skinny. What Buxton does is it buys data from various sources in the area, crunches the numbers, and then issues a report. Every credit card purchase, swipe of the debit card, and what is actually bought during the transaction itself, is all recorded and tabulated. Stores collect this kind of stuff because bundling and selling such information is a very lucrative, low overhead business. Companies like Buxton will pay handsomely for this kind of data, which they then repackage and resell to places such as the City of Sierra Madre's Community Redevelopment Agency for tens of thousands of bucks.
Of course, when Buxton resells this stuff to towns like ours, they artfully repackage it to make you feel like you are being let in on something very special. I personally love marketing jargon and hype, I work with it every day in my line of work. And Buxton has a couple of great terms that I just have to share with you.
Psychographic Segmentation Profile: This one is kind of along the lines of "separating the wheat from the chaff." Where do you find the best areas to do business, and how do you identify the needs of the best possible customers (people who buy), rather than catering to the alligator arms set? Sierra Madre apparently has a strong PSP, but is currently not taking advantage of it. And why is that? Our "Leakage Surplus Analysis" shows retention weakness.
Leakage Surplus Analysis: The Buck$Ton lady threw out a figure of $173 million as the "leakage" Sierra Madre suffers on a yearly basis. Which seems like a lot until you divide it by the 6,400 households here in town and come up with the figure of $27,000 per wickiup. Which is basically a year's worth of groceries. What is meant by LSA is a figure that represents all the spending that is done by Sierra Madre as a whole that is not done here. It is leaking out beyond the Michillinda Curtain and going to the unclean.
As any small city Chamber of Commerce can tell you, it is very hard for downtown shops to compete on a range of products carried or prices offered with the likes of Wal*Mart and Target. The rise of this kind of box retailer is what has decimated small downtown shopping areas all across this great land of ours. The mix of restaurants and other food vendors, coupled with nail salons and similar niche style businesses we have here, is typical of what has been left behind by the big box revolution. And we actually do this better than most.
But I really do not believe that Buxton will supply our existing pizza and liquor store based economy with the kinds of data that will turn our downtown into something it is not. Despite what you might have heard. Rather what this information is intended for is to attract big retailers to Sierra Madre. By identifying what the more affluent consumers in this town purchase through data gleaned from area retailers, the City will now have a set of verifiable statistics and analysis to show to some of the retail corporations who might be willing to give downtown Sierra Madre a look.
Which, if I am right, would be yet another instance of our tax money being used to push for things that most people here in town won't be all that crazy about. Unless it is a Whole Foods, of course. But where would that leave the Farmers Market, I ask?
An interesting statistical analysis would be to compare the $30k cost of this study with our current sales tax take of around $180,000 a year. In order for this study to pay for itself we would need to see an increase of around 4% in sales tax generated revenue.
During my ill-fated run in the 2010 City Council election there was a debate where the issue of what is best for Downtown Sierra Madre came up. During this debate I attempted to make the point that we have something very unique and desirable here in town, that being our downtown shopping area and the independently owned businesses there. And what I said is that while there are always things that can be done to make things even better, our downtown is an attractive asset for the community as a whole, and should be nurtured and protected.
While I was walking out of the place I noticed that Nancy Walsh had gathered a small group of little souls about her, and was intently discussing something. What that was, I later found out, was my little spiel about our downtown. What she took my earnest little rap for was proof that "they" are against bringing big retailers into town.
This, in my opinion, is what the Buxton deal is all about.