What’s Jeff Reading? Buying by Algorithm and Spoofing the Customer as a Marketing Tool

Back in July, I read an article called, “High-skilled white-collar work? Machines can do that, too.”  It talked about companies (Stitch Fix among them) using algorithms to design product and decide what and how much to buy when.  Here’s the link.

Two days ago my research department (whom I always hear from if I don’t give her credit) sent me an article on how the discount shoe retailer Payless, as marketing stunt, tricked people into paying up to $600 for pair of Payless shoes “…through an elaborate — and expensive — advertising prank to attract new customers and change the perception that the company sells cheap, unfashionable shoes.”  The article notes, and I want to make it clear, that Payless didn’t actually make anybody pay those prices and let them keep the shoes for free.  Here’s that link.

I try to take some time to think before writing.  That’s why you’ll often see a reaction from me well after an event happens.  My brain seems to require time to process outside of the urgent frenzy that can accompany an event.

I’d thought the Buying by Algorithm article was important, but it took the Payless article to give me focus on why.

Stitch Fix (and the other companies discussed in the algorithm article) are trying to use data to respond quickly and accurately to figure out what their customers want and give it to them.  It has the added benefit of controlling inventory and probably reducing some costs.  It is the appropriate- and as far as I’ve figured out the only- way to go in a “the customer is in charge” environment.

Payless wanted to trick people.  There’s some value these days in this kind of publicity, I guess.  But apparently the “customers” who were invited to the launch party were as far from Payless’ typical customers as can be imagined.

Stitch Fix is trying to follow its customers’ lead.  Payless is trying to get its customers to think about Payless differently.  It’s marketing from the days when brands had more opportunity to control customer perceptions through advertising.  I’ve been through a Payless.  It is a place that sells cheap shoes.  As to whether they are unfashionable, I’ll leave that to people more likely to know than I.

Let’s remember that around a year and a half ago, Payless filed for bankruptcy and closed 400 stores.  Their issues go beyond anything a marketing stunt is likely to solve.

It’s dangerous when you try and change the perception of your customer group or to grow too far beyond it.  You could ask various brands in our industry.  Or you could ask JC Penney.  The article doesn’t mention any customers who were angry and/or embarrassed by Payless’s ploy.  I hope some were.

Both Stitch Fix and Payless are trying to respond to emerging market conditions.  Stitch Fix, and the other companies mentioned, are being responsive to their customers in a strategic way.  Payless, to judge from this one marketing stunt, is resisting the changes.  But at a higher level, both have business models easily duplicated (not sure anybody will want to duplicate Payless’s) business models and are selling product not fundamentally different from their competitors.

We are still over supplied and over retailed.