Consumer Spending to Follow Maslow's Hierarchy

Phillip: [00:00:00] Hello and welcome to Future Commerce, the podcast about cutting edge and next generation commerce, whatever that means anymore. I'm Phillip.

Brian: [00:00:07] I'm Brian.

Jake: [00:00:09] I'm Jake, from Klaviyo.

Phillip: [00:00:10] Hey Jake. Welcome. We're finally getting Klaviyo on the show.

Jake: [00:00:13] Yeah. Excited to be here.

Phillip: [00:00:15] I love it.

Brian: [00:00:15] We're excited to have you.

Phillip: [00:00:16] Yeah. You're doing some really interesting work right now. We want to kind of jump into it. But for those who don't know, who are you? What do you do?

Jake: [00:00:25] Sure. Jake Cohen, again. I lead product marketing for Klaviyo. If you haven't heard of Klaviyo, we provide marketing tools to eCommerce brands around the world to help them grow and have more relevant communication with the customers across any channel you desire. I specifically work on making sure that we're listening to our customers, understanding what matters to them, and then creating both the messaging, the content, the stories and then the product that's going to help them succeed.

Phillip: [00:00:54] Awesome. Wow, you've got the pitch in your back pocket.

Brian: [00:00:55] Yeah.

Phillip: [00:00:57] That's great. People ask me like, what do you do? And I'm like, "Uhhhh..."

Jake: [00:01:01] Now you got it.

Phillip: [00:01:04] Well, it's great. And Klaviyo has been a great partner of ours here at Future Commerce.

Brian: [00:01:08] Yes.

Phillip: [00:01:08] For a long time now, better part of a year or so. Love the whole team. Love what you guys are doing. What are you doing right now? I know marketing changed a whole lot in the last couple of months.

Brian: [00:01:18] I've been seeing your face a lot lately.

Phillip: [00:01:22] Yeah. You've been...

Jake: [00:01:22] Thank you for watching.

Phillip: [00:01:24] Yeah. We're paying attention. And for those who haven't been, you should be checking this out. Jake's doing these daily check ins and taking the pulse of what's going on in eCommerce in the world and marketing, especially right now. So, yeah, tell us about that and tell us what you guys were doing to help brands who might be looking for some advice or some guidance right now.

Jake: [00:01:45] Yes. So, gosh, we're doing a lot. And in fact, the listeners and viewers don't know. I showed up a couple minutes late. Sorry. The reason, though, was because we've built this... We basically spun up a news organization in about three days. So we repurposed 15 people internally to go across the globe to figure out what is happening out there.

Brian: [00:02:10] Wow.

Jake: [00:02:10] Because things are changing not by the week, by the hour. And so we're literally all day talking with folks all over the world. We've administered surveys both to brands to understand how they're evolving with the new time and to consumers to try and predict where spending is going, so that we can share that with brands in advance, so they can adjust ahead of time and bring it back every single day. And so I was working with that team, getting that going. But it's been amazing. We started this about 11 days ago when everyone suddenly was working from home and we said, you know, marketing as usual, business as usual probably isn't right. If we're going to be true to our mission and provide value to our customers that help them grow, what can we do differently? And we believe that we had to answer two fundamental questions every single day. Number one, what is going on? What is happening in the world? And number two, what should I do about it? And so what we've basically done is we repurposed half of the marketing team to spend time going out, talking to brands, and collecting insights through a survey, which we hope everyone will fill out every day, telling us things like, "What's happening to your Web traffic? What about your conversion rate? Are you spending more or less on ads? Are you seeing changes in your supply chain? Is your shipping delayed? How are you feeling? What are you worried about?" Things like that. And then we spun up a whole bunch of folks on the consumer side to ask consumers, "What are you buying? What did you buy? Were you planning on buying? Are you spending more or less?" Things like that. And then. So that's one half. And then we repurposed half of our entire support organization to spin up a bunch of content guides, tutorials, of what you can do to practically address the changes that are happening every single day.

Phillip: [00:03:55] Yeah.

Jake: [00:03:55] And I'm actually excited to share with you. I don't know if anyone knows this yet. Literally in the next probably 48 hours, we're publishing a new area of our website, one hundred percent dedicate to this effort.

Brian: [00:04:06] Wow.

Jake: [00:04:07] Which is going to effectively be like a news site where you can see what's been trending day over day, but then you can also go discover content based on how your brand is performing and take advantage of what we're seeing work in the world, so that you can have a better chance of surviving today and thriving tomorrow.

Phillip: [00:04:23] Wow. Well, it's to be commended that you can be nimble enough to repurpose a bunch of the parts of your organization to provide value that's beyond just the "Here's the tools in our platform. Go to work." Because I think that's really what people usually... What we usually see from technology assistance in marketing or marketing technology stacks.

Brian: [00:04:53] Right.

Phillip: [00:04:53] You don't usually get the good advice, or at least the gut check or a temperature check of what others are doing or what they're seeing, which I think is a stronger play towards trying to create community among your customers.

Jake: [00:05:09] Yes. Exactly.

Phillip: [00:05:09] Which man, that's hard to do. And you know, it's to be commended.

Brian: [00:05:15] A good chunk of me thinks that this is what we should've been doing as software marketing organizations all along. Right? Going out and getting this data and then making everyone aware about it.

Phillip: [00:05:26] Yeah.

Brian: [00:05:26] I wonder, how do you feel, as we come out of COVID, and I don't know how long it's gonna be. I'm not saying that we are.

Phillip: [00:05:33] Yeah. Nobody does.

Brian: [00:05:35] Nobody does. Right. What do you think this is... How is this going to change your team for the future in ongoing marketing efforts?

Jake: [00:05:44] That's a really good question. The line from politics that everyone jokes about is never let a good crisis go to waste. Right?

Brian: [00:05:53] Right.

Jake: [00:05:53] I think that was, in the context of politics, maybe had more nefarious intent for us. I think it was a motivating opportunity. We've all... Everyone always has, "Oh, it would be great if we could just get the data and share it. Tell people what to do." You know, the truth about humans is it takes triggers to get us to have action. I think that's the fundamental truth of marketing. And so I think for us, what we're doing isn't novel. It's the sort of thesis of what it means to provide value from content. But we had this moment where we're like, "You know what, now is the time. People need our help. We need to go." And so we just did. And I think, you know, I don't know, but I think what will happen is, I think this will work. We'd be getting wonderful feedback from people. We're not perfect. This is so quick and dirty. There're mistakes everywhere. But people have been, you know, forgiving and understanding and giving us great feedback. We're improving by the hour. And I think this is something that, you know, may really last. We're starting to build tooling that is going to dig into our data set of our customers and provide these snapshot views based off what we're seeing. So here's an insight we found, for example. In talking to consumers, it turns out that they're buying... The traditional way of breaking up what they would buy is essentials and non-essentials. Right? It's like I need food. And then there's everything else. But it turns out because everyone's been forced into these new environments, there's actually a category that we're dubbing new essentials.

Phillip: [00:07:23] Love that, by the way.

Jake: [00:07:26] Because their life has changed, they need new things. And so there's like food/bev. Yeah, cool. That sort of essentials. You know, jewelry, luxuries, maybe non-essentials. But there is kind of this middle category of like, "I need office supplies because I'm working from home." "I need health and fitness equipment cause I can't go to the gym." I need pet food to feed my animals." We're actually hearing people want to go buy pets, so they have community at home. There's this whole section of stuff that people are really buying now. And so we're building tools internally to dig through our data, to categorize our customers against these segments, to understand how sales are trending over time, so that we can share with brands. OK. Let's say you were selling key chains that people don't need. Can you, with this understanding of what people are buying today and tomorrow, perhaps adjust how you package that or position that? Could you partner with other brands to build a sort of cohesive package of things that people need in this new world? These types of insights are valuable. So I suspect as we build this stuff, it will exist. We will keep track of trends. They will evolve. There will always be, always be, new strategies to take advantage of as things change. So I hope that we do a good enough job that it continues to provide value, and we can make it the sort of mainstay that people can use day in and day out as they think about how to grow their business.

Brian: [00:08:43] That's incredible.

Phillip: [00:08:44] It's hard to learn to publish content, you know, on a daily basis. It's hard as an organization to externalize the things you're learning and just kind of be OK. Especially, you know, not for nothing, Klaviyo has a lot of customers and you have a not trivial amount of money that's been invested in the business to grow it. And I think the working it out in the open takes a real, takes a certain kind of leadership team to see the value in that. And it takes a certain type of environment in the world at the moment to be OK with that. And so bravo. I think it's just really tough to do. You talk about like this consortium or this idea of brands coming together or businesses coming together in partnership. I know we had, you and I had, recently done a webinar together with the Integrated Commerce Growth Stack, which is YotPo, Klaviyo, Nosto, and you came together to create insights for consumer research so that we can understand, as eCommerce businesses, how to better deliver experiences. But it seems like outside of just doing that as like marketing pieces or ways to engage with new potential customers, this is actually driving real value across your own customer base. And right now is when you're learning to be a media organization. Gosh, when this all passes, that is the differentiator amongst businesses that have like learned something in this time. And I think that I can't keep patting you on the back. I really have nothing to add other than to say good job. {laughter}

Jake: [00:10:22] Thank you.

Brian: [00:10:22] I saw this great tweet recently, back to your point about digital transformation, it was like a "Main driver of digital transformation in 2020: CEO, CTO, COVID.

Phillip: [00:10:38] Yeah.

Brian: [00:10:38] It's true. It takes an absolute something to kind of kick you a little bit to get people move sometimes. Pain can casue change.

Jake: [00:10:54] One hundred percent. One thing I can also share, which is kind of a tip of the hat to our team, but it's also something for other people that are seeking to do something remotely similar. These are things that kind of worked and didn't work for us. So one unfair advantage that we had in this is obviously we have incredible people that work at our company who are like stupendous. So that's unfair. The other thing is we recently dusted off our values. And one of the values that Andrew, our CEO, helped sort of accentuate is that we work publicly. And that's more of an internal thing because we want it to be possible for people to see what others are doing and share ideas and get going. But just that ethos of like, look, it doesn't have to be perfect. Just go. Right? Just keep working on it. That helped. And then the other thing is we had a very strong endorsement across the entire organization that the thing to do is like forget our business for a second, our mission is to help businesses grow. What do they need right now? Let's just do that. And we sort of just said "Speed over perfection." Quality? It has to be there, but speed over perfection. Acknowledge that we'll have problems. Acknowledge that we'll have mistakes. Accept that we'll get better every day, but just keep going. And that, establishing that first thing gave people the permission to say, you know what? Let's ship and move on, because everyone knows when you're editing or when you're thinking about writing and you have writer's block and you're like, oh, my God, this isn't as good as that thing that we spent three months on that was beautiful and amazing. I can't let this go out. Well, you have to. Because we got to go.

Brian: [00:12:41] Yes. Yes.

Jake: [00:12:41] And I think the team really embodied that. And it's given us the permission and space to improve. And my God, this started... Sorry, I'm ranting.

Phillip: [00:12:48] No, please.

Jake: [00:12:48] This started eleven days ago with an idea from the team asking the question, "Should we be doing something different?" And we are now on track to be publishing fifteen pieces of content about what's going on. Fifteen pieces of content of what you should do, and then categorize that based on segments of our customers, so that is relevant to them. In eleven days. That is so exciting and fun.

Phillip: [00:13:10] What are some... I know that this will become dated because literally every day is different. And we have experienced it ourselves on the show...

Jake: [00:13:19] That's true. This afternoon it will all be different.

Phillip: [00:13:20] I know. Exactly. So I feel like we have to timestamp things. It's Wednesday, April 1st at 10:00 a.m. or so.

Jake: [00:13:27] Yes.

Phillip: [00:13:27] What at this moment, what are some of the insights that you've seen day to day on those daily surveys that you're distilling? And what is a trend line if you had to pull one out?

Jake: [00:13:40] All right. There are so many. After this, the thing I'm doing is taking the insights from the day and distilling them into the sort of story, so I will literally look at today, right now, and I'll call out what I think the stories will be.

Phillip: [00:13:55] Great.

Jake: [00:13:57] So I'm now looking at... So we have again, we have a brand focused survey and conversations and a consumer focused survey and conversations which I pull and stitch together. So on the... Where am I? I'm on the brand one. So on the brand one, we are seeing number one an increased trend of more brands reporting that sales are going up. So a week and a half ago, it was about 15-20% of brands reported sales going up. Now it's over 25-30%. So that's improving. We're seeing in particular, health and fitness, And beauty and cosmetic brands continue to be strong. I think it's part of this new essential category. People need to feel healthy and want to maintain their routine, which we're hearing the same on the consumer side. And we're seeing a steady increase in brands supporting issues with their supply chain, in particular delays in shipping and delays and fulfillment. One of the things that we learned was when this started, China warehouses were basically shut down and not shipping. They're back up and mostly operational. American warehouses were fully performance and are still open, mostly with the exception of brand owned warehouses sometimes shut down. Kylie cosmetics, ColourPop temporarily closed theirs.

Phillip: [00:15:18] Wow.

Jake: [00:15:18] Fulfillment centers are going above and beyond to keep the lights on and to ship as much as possible. And so we actually did a deep dive on the space last week to figure out from the perspective of fulfillment centers, what is the right thing to do? What do they see? What are they expecting? And like, they're crazy. They're doing wonderful things like taking everyone's temperature when they walk in the door, setting certain quota of how many times you've to wash your hands, setting a limit of how many people can work within a specific brand's inventory, so that it's maintained safe, so that they always have staff who can work. And of course, states are making sure that warehouse and fulfillment centers are dubbed essential businesses, such that you can still have...

Phillip: [00:15:59] Oh. We lost Jake. Jake is rejoining us from the phone, because Zoom is very fluid at the moment.

Brian: [00:16:04] Because they're overwhelemd... {laughter}

Phillip: [00:16:04] But you were saying that there is essential businesses... Designating warehouses as essential businesses.

Jake: [00:16:11] Yeah, exactly. And so what that means is, you know, one of the concerns that we heard from a lot of brands in the last two weeks is, "Hey, what happens if my warehouse goes away? Like I'm screwed?" And the reassuring point is they're not gonna. And so we did a deep dive on this last week, published a long form piece. We're doing two or three long forms each week where we're diving into related sectors that affect brands, so they can anticipate what's coming. And we did one on shipping and logistics and interviewed the CMO of ShipBob, and talk to shipping providers to understand from their perspective, what are you seeing, what are you doing, what should brands do to partner well with you? So an unexpected insight that we derived from that was if your sales are going up, which roughly half of brands are, and when they're up, they're up like 200% to a 1000%. It's not small. It's like huge. Your volume will go up. If your volume is going to go up, call your warehouse, call your shipping providers, and tell them, so that they can make sure that they balance their staff and their resources to support you. Otherwise you will have delays because they're not prepared for it right now. I'm not in it every day, so perhaps every brand already knew that. But I thought that was an interesting sort of tactic and tip to be aware of. On the consumer side. We have some very interesting cuts that are coming, so spending on apparel and accessories has been one of the hardest hit categories over the past two weeks. We heard reports of brands that were down, you know, 80% month over month.

Phillip: [00:17:46] Wow. Holy cow.

Jake: [00:17:46] And we're seeing spending on... Oh yeah. We're seeing spending on apparel and accessories come back. In particular, if it's accessories and apparel related to fitness or workout clothing, and in particular if it's like comfortable clothing, sweats and things like that. Why? People working from home. It's the new essentials. So what's also interesting about that is we're starting to ask consumers where they buy. Is it Amazon, major retailer or independent retailer? And among apparel and accessories spending, a majority of, or I should say, the largest bucket, about 50% of people who report spending on apparel and accessories, are buying it from independent retailers, not Amazon, not the big retailers. There's a lot of reasons why that could be true. But regardless, that's a different trend than we see in a lot of other categories where people tend to go to Amazon first because they know exactly what they want and they want to get it fast and whatever else. We're also seeing, you know, initially in the first week, over 50% of people reported spending more than double what they normally spend. And we're seeing that that increase in spending is starting to subside. We think that was a frenzy to buy essentials. And we think now that people are still spending the same or more, roughly, but they're moving to more, you know, new essential categories. They're helping their lives at home be more comfortable.

Brian: [00:19:08] Yeah, we have to remember, it's only been a few weeks since we've been in this.

Phillip: [00:19:11] Yeah.

Jake: [00:19:11] And so... Not even two. Not even two.

Brian: [00:19:15] Yeah.

Phillip: [00:19:15] March is the longest year of my life.

Brian: [00:19:17] Oh, my gosh. Yes.

Brian: [00:19:19] April's going to be...

Phillip: [00:19:20] It's April, everybody. March is over. It's a trending Tweet right now. Twitter is like, "It's not March, everybody." {laughter}

Jake: [00:19:27] Yeah. Right.

Phillip: [00:19:28] But those are kind of the trends as you see them now. We are called Future Commerce, and we've got a couple of minutes left. We usually ask folks like you to look into the crystal ball a little bit. And I know that this is hazardous at the moment and will not hold up or age well. But what do you think we can expect to see in the next week or two as things kind of unfold? And, you know, let's say that the social distancing order here, at least in the United States, certainly is extended now until the beginning of May. What are things that we could prepare for on the brand side?

Jake: [00:20:08] So I've spent, as you might imagine, a ton of time thinking about this. I've built models, I've got all sorts of crazy stuff, which on another time we can really geek out. I have a driving hypothesis on how spending is going to work. And I only have the most dorky way to describe it in the world. So I would love help figuring out how to describe this in a way that makes more sense. But I'll tell you in the way that words in my head. Are you guys familiar with Maslow's hierarchy of needs?

Phillip: [00:20:33] Oh, yeah, sure.

Brian: [00:20:35] Yeah.

Jake: [00:20:36] Ok. So just as a quick recap for listeners out there, a) Maslow was a psychologist and sociologist from the middle of the 1900s. Wonderful. He coined this philosophy, which was the hierarchy of needs, which is seeking to drive, for normal humans, what prioritizes what we care about. And at the bottom of the rung is security, safety, food, shelter, things like that. And the topmost rung is what he calls self-actualization, which is when we feel comfortable enough to be ourselves and do what makes us most happy. And so that's that. So the way I've been thinking about spending is actually following Maslow's hierarchy of needs. Because our environment's changed, we've started working from home. The more dramatic way of looking at it like what if there was a giant meteor, and all the buildings went away. What would you do? You need to find a home, right? And so obviously, thankfully, that was not so bad. But people immediately sought to establish food, shelter and security. Very first thing. And so what happened? Toilet paper. You couldn't buy in the store. Run on water. Grocery stores, huge lines out the window. Purel sold out. Now going for $70 for travel size. Right? All those things that people needed in order to feel good. Then what happens? A surge of Zoom. Everybody wanted to understand, you know, what everyone else is doing. And they wanted to connect. Belonging is the next rung. They wanted to be associated with each other and feel like they're part of a community. And so people started buying office equipment to make sure that they could connect and do their work from home. They started buying whatever. They spent time that way. The next rung is about esteem. And I think we're seeing that spending happening right now. This is where health and fitness comes in. I want to feel good about myself. This is where daily routines come in. This is beauty and cosmetics. This is where, frankly, working from home, too. I want to still feel accomplished and like I can do something. All of that spending is happening now. Now, now, now, now, now, now. And increasing. Consumers keep telling us, "Oh, man, all I want to do is like maintain a normal life." Right? The next thing that's going to happen, we're starting to see a little bit of this, comes into self-actualization, which is creative projects and entertainment. And so we're seeing an uptick in spending on toys and games. We're seeing an uptick in spending on, you know, to some extent electronics. We're seeing an uptick in spending on housewares for cooking because people want to try more complex dishes. Basically, all of these things that are more creative endeavors that basically help you feel less bored. We're seeing more spending on that. If you don't have kids. Now, if you have kids, different ball game. I have a kids. Different ball game. You're basically in survival mode the whole time and making sure that your kids are entertained. But if you don't have kids, which is the majority of population, you want to be entertained. And so I came up with this idea about a week ago, and I'm like, how does this work? But it feels like it's starting to pan out. So my predictions are apparel and accessories are going to continue to go up in fulfillment of esteem based things. So I want to feel comfortable. I want to be able to work out. I think health and fitness is going to continue at home, maintaining traditional regimens of beauty and cosmetics or supplements, whatever that's all going to maintain. Spending will be solid there. I think we see an uptick in toys and games. I think we're seeing an uptick in entertainment. I think we're going to see an uptick in people being online, engaging with brands if it's fun. So if you're not selling something that people want, but you're creating content that's fun to engage with and interact with, I guarantee you're going to see more engagement, more people staying connected. It's an opportunity to grow your list. So when you come out and people free up their spending on different categories, they're going to come back. That's where I think all this is going to go in the next like three weeks. And I'm, this is a little pessimistic, but I'm not so sure that we're going to be business as usual on May 4th when all this stuff shuts down and maybe a little bit longer than that, which is going to just further accentuate this trend up the hierarchy.

Phillip: [00:24:38] Yeah, I tend to agree with you, and I really appreciate how transparent and honest and open you guys have been. I really appreciate you coming on the show in such a hurry. We put this together in like 24 hours, which is unusual for us. And I appreciate that you're willing to sacrifice perfect in pursuit of transparent and openness and fast, quicker insights to merchants who need that kind of information right now. Where can people find you, Jake? Where can they get that content in those daily briefs?

Jake: [00:25:17] Yeah. So if you go to Klaviyo.com, there's a header bar right at the top that you can click on, it's going to take you to the dedicated site where all this content lives. And if you wait five seconds on the bottom right, there's gonna be a little pop up where you can fill out the survey and tell us what's happening with you, so that we can aggregate those insights and share them back. I'll also say my email address is jake.cohen@klaviyo.com. I would love, I would kill for feedback. I've been asking everyone, what's one thing you like about what we're doing and what's one thing you think could be better? And if we could get one great idea every day that we put into practice, it's just gonna get so much better for all of you. So again, Klaviyo.com, you'll see all the pointers you need. And please, please feel free to email me or I'm pretty active on Twitter. My handle is @jfcCohen. You know, we'd love the feedback. We'd love to keep getting better every day for all of you.

Phillip: [00:26:09] Thank you so much.

Brian: [00:26:10] Thanks, Jake.

Phillip: [00:26:11] Jake Cohen from Klaviyo. Thanks for joining us.

Jake: [00:26:14] Thanks, guys. Appreciate it.

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