What Innovation Means for Brookstone

As a robot rolled down the aisle welcoming attendees of NEMOA's directXchange conference to yesterday morning's keynote presentation, it was clear what the theme of Jim Speltz's speech would be: innovation. The unusual entrance for Brookstone's president and CEO — he followed shortly behind the robot that was broadcasting his voice to the crowd — exemplifies the culture of innovation embodied at the omnichannel retailer of unique gifts.

Speltz went on to spend the next hour detailing why innovation is at the heart of every decision Brookstone makes. It's what gives us a competitive edge, Speltz said, noting that Brookstone sells products that you can't find elsewhere. That's due in large part because the company designs and develops its own products. That differentiation enables Brookstone's products to be price stable — it doesn't have to worry about competing on price with itself — and rank highly in organic search.

In addition to product differentiation, Brookstone prides itself on having an attribution model that helps it get "the best bang for its marketing buck." As an omnichannel retailer — Brookstone sells its products via brick-and-mortar stores, an e-commerce site and catalogs — knowing which marketing vehicle (e.g., email, search, catalog) is responsible for a sale in any channel is critical to the brand's success. Using a statistical model it developed in-house, Brookstone leverages fractional allocation to attribute credit to orders. While far from perfect, the attribution model has helped Brookstone make better marketing decisions.

Speltz cited a recent A/B test Brookstone ran as proof that its attribution model is working. The retailer evenly split a catalog mailing list, with 193,000 people on the list continuing to receive catalogs throughout the year and the other 193,000 people on the list not receiving catalogs for a year. The result: The group that continued to receive catalogs generated an incremental profit — after the postal, paper and printing costs associated with mailing catalogs — of $282,000 to Brookstone's bottom line.

That test was validation for our use of fractional allocation, Speltz said. It proved that there was interplay between all of our channels.

Intelligent Targeting
Even with innovative and unique product, you still have to create traffic and demand for it, Speltz said. You can't sit there and do nothing. Brookstone uses both push and pull marketing tactics to create and capture that demand. Its push tactics — email, online video, website optimization — are designed to create demand, while its pull tactics — paid search, marketplace partnerships — are intended to capture that demand. The two strategies complement each other nicely, Speltz said.

The goal of every Brookstone marketing effort is to create hyper-relevancy, Speltz said. Here are examples of how the retailer tries to accomplish that:

• intelligent targeting, including merchandising its products based on geography and weather events;
• product device compatibility, which Speltz explained as recommending products to consumers based on the device they're using to shop Brookstone's site (e.g., selling iPad accessories to a consumer shopping on an iPad);
• "thinking outside the text," Brookstone's version of the oft-quoted phrase "thinking outside the box," with ideas such as using animated GIFs in its emails and on its website; and
• a finger-friendly tablet site that makes it easy for users to type, which has resulted in a increase in conversions on the mobile device.

Experiment and Learn
Never stop thinking differently and experimenting, Speltz advised. Brookstone puts this philosophy into practice — to varying degrees of success. Its winners include e-gift cards and a partnership with Vat19, a source for "curiously awesome" gifts. Vat19 creates videos for Brookstone, for which Brookstone cedes complete control. One video went viral and generated 1.5 million YouTube views.

The losers? Brookstone was one of the first retailers to partner with Facebook for its Gifts program, a feature that allowed people to send actual and virtual gifts via the social network. The program was cancelled last August. Another loser for Brookstone was its partnership with Sears to put branded kiosks in the department store. It didn't work, Speltz said bluntly, noting there wasn't enough demand for the service.

Since Brookstone develops its own products, it has the advantage of being able to listen to its customers’ feedback and make changes on the fly. We can dynamically react to customers’ needs, Speltz said.

With the barrier to entry in retail lower than it's ever been, Brookstone decided to dramatically increase its SKU count in recent years. It's done so by leveraging a drop-ship network and complementary brands. However, that doesn't mean you compromise your brand's integrity or your customers. Again, Brookstone has had its hits (e.g., Fitbit) and misses (e.g., Penbo) with its expanded product assortment. Always have a backup plan, Speltz advised the audience.