E62: Mike Provance

Richard Hill:
Hi there. I'm Richard Hill, the host of eCom@One. Welcome to our 62nd episode. In this episode, I speak with Mike Provance, the CEO of 3x3. Mike works with over 1,400 retailers across the US in the beer, wine and spirits industry, and runs a location-based digital marketing platform for retailers that want to target specific households and new customers within their local market.

Richard Hill:
In this episode, Mike and I talk about Mike's predictive marketing model and how does it target customers, what he thinks the changing role a physical store plays with the evolution of digital, his opinion on customer loyalty and how to ingrain it into your business. If you enjoy this episode, please make sure to subscribe, so you're always the first to know when a new episode is released. Now, let's head over to this fantastic episode.

Richard Hill:
How you doing, Mike?

Mike Provance:
Doing great, Richard. Thanks for having me.

Richard Hill:
Well, thanks so much for being on the show. I'm looking forward to this one. Now, I think that's just get straight into it. What is the 3x3?

Mike Provance:
3x3 works with the independent packaged liquor stores in the US, where they fight an uphill battle against big box and grocery stores, and even online sellers like Walmart and Total Wine and Amazon. We're trying to help preserve the place where people go to discover new alcohol.

Richard Hill:
Okay. So if I was a bit more of an independent liquor, alcohol seller, we could speak to you guys in your business.

Mike Provance:
Exactly. We would help you with finding the right shoppers, and being able to bring those shoppers in the store to discover products that they typically would have a hard time finding in these larger places. And to be able to extend what used to be the traditional way of selling, which is waiting for people to walk in the store. But now in the digital era, being able to identify and target those people with the right message, and work with the brands that you sell. So the brands want to reach those same people with unique targeted messages.

Richard Hill:
Yeah. I think obviously the liquor industry has had huge changes, like a lot of industries this last 18 months or so. And obviously having a model that's specifically for our industry must've been a bit of a lifesaver for a lot of brands, either brands that are newer to eCommerce, or the brands that are already in eCommerce. What sort of things [crosstalk 00:02:32]?

Mike Provance:
It's been an interesting time here for the brands. And in the US, as you may know, the laws and regulations prevent brands from working directly with retailers, or selling directly to the consumers when it comes to things like spirits. And so, as a result, the retailers are really essential and critical.

Mike Provance:
But at the same time, because of lockdown, because of the pandemic, the distributors started only carrying the bigger brands. And people started only asking for the bigger brands, because they weren't walking in the store, they weren't going to tastings. And that completely changed the economics and dynamics of the product mix for retailers. And it impacted craft distillers, it impacted craft wines and beers, and it affected small retailers.

Richard Hill:
So if I'm a small batch gin distiller, as an example... We work with quite a handful actually, here in the UK.

Mike Provance:
I can imagine, yes.

Richard Hill:
Yeah. I can see the problem that's been, that as a small batch producer, you rely very heavily on local events potentially, or a lot of local tastings and going to fairs, shows.

Mike Provance:
It's just awareness, just getting your name out. And if distributors aren't carrying your product, because they're squeezing down and trying to control costs, and make sure they're selling products that will sell, they're not going to take a chance on something new.

Richard Hill:
So the 3x3 helps.

Mike Provance:
Yeah.

Richard Hill:
So explain that a little bit more then.

Mike Provance:
So what we do, we work with brands and retailers to reach the right shoppers, who shop in this independent mom-and-pop, small retailer channel. And the reason that's important is that's where all of the shoppers go to discover products.

Mike Provance:
What we've worked to do now is help those brands and retailers move discovery from being purely in-store, walk-in, brick-and-mortar to starting digital, starting further up the shoppers' decision-making funnel. And getting those stores and those brands into their consideration set, while they're doing their social media, while they're doing their searches online, while they're reading content about cocktails. And being able to expose them and get them from there, to let me go to this store and buy this product.

Richard Hill:
Yeah. Yeah. Love it. So moving on then, obviously doing our research on the brands and the beverage industry that you work in, tell us a bit more about the predictive marketing model and how does it target customers?

Mike Provance:
Right. So we focused our efforts on, like I said, moving that shopper from what products they're considering, to how do we get them in to buy a particular product, or at least get them in the store in a particular category? And we built our audience models, and our shopper models by using transaction data from the retailers. So we started our business by building a network of 1,500 plus retailers that share their point-of-sale receipt data with us.

Mike Provance:
The discovery data sit inside those receipts. When you take a receipt and you look at a list of bottles on the receipt, what you're really looking at is a bundle of flavours, a bundle of taste preferences of the shoppers that came in to buy. So we take that $20 billion worth of turnover in alcohol sales over several years, and many stores and states, and turn that into models of taste preference, flavour profiling, shopper behaviour. So we can look at dynamics about frequency of shopping. We can look at patterns of shopping across time and space. And also, then what are those preferences? Which products do they tend to buy together? What's in the basket? And we use that to build models of predicting future behaviour around a category.

Mike Provance:
So you brought up your craft gin example. A craft gin distiller might come to us and say, "We want to reach a super premium, ultra premium gin audience." And we'll work with them to build the right model, to reach that audience. And then either run through their agency, or run through our own platform content to reach those shoppers, and get them in the store to purchase. And then on the back end, give them the tools in many cases, to be able to measure at some level the conversion.

Richard Hill:
So I've got to ask. I know we have listeners all around the world, but do you have that ability in the UK here? I know we've got about 60% listenership in the UK.

Mike Provance:
We don't yet. It's something certainly on our roadmap. The UK and Europe are different in their structure of how alcohol is sold. And consequently, brands can do more direct with shoppers and with the retailers. But the concept of using the past, using behaviour to predict purchase applies across models. So we'll find a way to make it work in the UK too.

Richard Hill:
So coming to the UK soon.

Mike Provance:
We will, we will. Now that everything is coming back to normal.

Richard Hill:
That's it. It's exciting, isn't it, at the moment?

Mike Provance:
Yes.

Richard Hill:
Exciting times. I think we were chatting just before we came on, weren't we? Saying that we're managing to get out a little bit more, obviously we would still be very, very cautious as we need to be. But things are opening up as we know, which is great, especially for the liquor industry and the alcohol industry. It's obviously taken a blow.

Mike Provance:
Definitely. We're excited that people will get back to discovering new, smaller products and craft products.

Richard Hill:
Yeah. I know we've signed up for various subscription services and whatnot, but obviously I can't wait to be able to go out more and sample.

Mike Provance:
Yeah. Exactly.

Richard Hill:
Yeah. Okay. So I know you've noted in the past about consumer's tendency to buy larger baskets less often, and that hurts independent retailers, because consumers are potentially sticking with bigger brands. What do you think can be done to counter that?

Mike Provance:
Well, there's a few things in there, and let me unpack that. And then we can talk about how to counter it. But what we saw at the beginning of COVID, before that 2020 period, online sales of alcohol, other than wine, which has a direct to consumer capacity in the US, were three to 5% of liquor store sales. Most sales occurred through walk-in to the brick-and-mortar store. And that jumped immediately to 45%, where people are shopping on a website and then either having it delivered or picking it up, versus phone, curbside, that kind of thing.

Mike Provance:
But what we saw happen was people would basically buy the stock. And so they'd buy bigger baskets, and then you'd see it burned down and then they'd come back and buy again. And so you actually saw this fluctuating model of consuming it and then doing another big buy. And so that was different. And you would see baskets in the order of 120, $130 being purchased. When people shopped in the store, they tended to average about $30, obviously with a long tail of higher baskets as well. But you saw it more frequently. That was more indicative of people coming in and looking for one or two things, and being able to try a lot of different things.

Mike Provance:
The other dynamic about consumer behaviour that occurred in that same window was when you're shopping online, most of the systems behave like catalogues. You tend to go to brands you recognize, or you recognize because your parents drank it, or for whatever reason, which means you're not looking around for things that are new and different. And you saw this whole sale shift in the kinds of products that were being purchased. And you saw these older brands that were actually on the decline, suddenly have a resurgence, because people remembered their name. And stock was a challenge, so they would buy whatever they could get.

Mike Provance:
That petered off after the middle of the summer, and went back to more normal behaviour. A little elevated, because restaurants and bars weren't open. But I think digital and online shopping is still here to stay. And the way that we can counteract that is we have to get the ability to discover into the shopper's mindset, while they're in that digital mode, while they're searching, while they're reading content, while they're starting to think about buying.

Mike Provance:
And then when they get onto the eCommerce sites themselves, making discovery more accessible to them, or making it more immediate. So one of the things we do with our brands, rather than driving shopping necessarily to an eCommerce site, when you're in that moment and you're thinking about it, you're reading content and you're like, "Yeah, I want to try this." Make buying accessible right in that moment. The concept of an eCommerce site is an older model in the eCommerce space than the click-to-buy-now model, where you're in your content and you want to purchase.

Richard Hill:
Yeah, yeah. Fantastic. Yeah. I think I have to admit, I see a lot of these, going back to that small batch or the independent local, they're popping up more and more, because I think... Well, for all different reasons, whether that's a company that's pivoted and decided to do something new, or they're adding another. They might be doing X, and now they're doing gin as well, or whatever it may be. But to then go and try those, though it's harder... When you're out and about, you're open to and seeing more options. You are more likely to try stuff.

Richard Hill:
Whereas I don't know if it's like, I've been looking at some brands where they've got these tastes, the smaller bottles, there's three or four. They're typically say 40, £50 pounds for a higher-end gin. But then they've got a sample pack with for 14.99, where you've got three or four different shots, or four or five different shots, which obviously gives you a real feel for them, "That's really nice. We'll buy a bottle that."

Richard Hill:
Well, obviously if you're in the store, you quite often get a little taster, don't you? Or if you're in a bar or a restaurant, "Oh, we've got a promotion on this one, do you want to try it?" Oh yeah. We'll have a double on that one, and then we'll buy a bottle two weeks later or whatever it may be.

Mike Provance:
Yeah. Precisely. Those are the tricks and trade of the craft distiller. It's getting on the bar menus, it's getting tastings going in the store, and it's those smaller sizes that let people not take too much risk.

Richard Hill:
Yeah. No, great. So how do you think the role of physical stores is changing with digital speeding through things, especially in the last 18 months? How do you think the role of physical stores is changing?

Mike Provance:
Yeah, that's a great question, because I think it comes down to what the retailers themselves, the owners want their store to become. I see it going two different directions, depending on that answer. The unfortunate one, or the one less oriented toward growth is that they simply become fulfilment centres for online shopping. Drizly, Minibar, places you can aggregate that shopping experience, and then have the local retailer deliver it.

Mike Provance:
And retailers don't build a business that way. The revenue will continue to grow, but they'll get squeezed on margins. So it'll be a different kind of retail experience in the future, on that path. But there's another path where the retailer actually embraces technology, embraces digital. And what it means is shifting how they previously worked, where they would sit and wait for shoppers to come to them. And they become more progressive, more proactive about engaging the right shoppers, bringing them into the store, giving them a reason to come versus the grocery or the big box store.

Mike Provance:
That is about experience. The thing you don't get when you buy alcohol in a grocery store is an experience. The thing that the local retailer, the liquor store retailer can create day-in and day-out is a better experience.

Richard Hill:
Yeah, totally.

Mike Provance:
And that begins online, so they have to be able to do both.

Richard Hill:
Yeah. Yeah, definitely. So the move to digital purchasing has taken away some of the magic of discovery. I know we've touched on that, that ability to be able to, "Oh, I'll just try that," or whatever it may be. How can independent retailer reimagine this dynamic? Is it possible to do so using an online method that is innovative, yet initiative and familiar? What would you say to that?

Richard Hill:
I know we've touched on a bit of that already, but what would you say? I'm sitting here as an online retailer, what can I do? What can I do as a small, independent retailer maybe? Or I've got my e-com store, I've got everything I own in the shelf, in the warehouse at the back. What can I do to really re-imagine this dynamic of the physical store?

Mike Provance:
Well, as you touched on, anytime you're being innovative, whether it's branching out into a new way of engaging the shopper or new products, you have to create familiarity to get people to want to try something. They won't take a risk on something they don't understand. But if you can make it comfortable, familiar, easy, take the friction away, you'll get the shopper to at least give it a try. And that's really what we're talking about when we talk about shifting from physical to digital.

Mike Provance:
The way to re-imagine discovery in that environment is to recognize first, the discovery isn't about the juice that's in the bottle. It's about the experience and it's about the occasion that the person's choosing it for. And then being able to craft your business, your store, not as a way to sell bottles, but as a way to sell experience and a way to sell occasion. And to begin that conversation with the shopper, when they're looking at social media or digital.

Mike Provance:
If I'm searching for a wine to go with a dinner I'm making for my boss, it's going to be a very different kind of purchase than if it's a bunch of my friends from college, and we're all hanging out and we figure it's going to be a long night. So you have to focus the discovery around the experience, and craft the content they see around that experience. The end product ultimately is a bottle in a bag, with a receipt. But the reason I came in to buy wasn't for the bottle or the liquid inside.

Richard Hill:
Yeah. So it's about coming back to this experience word, or this experience. We're not just going to a site and just clicking and buying, obviously.

Mike Provance:
Yeah. And that's frankly what makes the better, more progressive retailers better. It's that they've recognized that the reason people still come to the store to shop is because of the experience they have when they're doing it.

Richard Hill:
Yeah. You don't walk into a wine shop potentially... You walk in, you expect that they're going to be very knowledgeable, that they know their products inside out. You're going to obviously try to find out about, "Oh, well, is it for a special occasion?"

Mike Provance:
Correct.

Richard Hill:
Like you just said, is it a boy's night in, or is it a romantic evening meal with a new friend? It's like, "Okay. I might put an extra 10 pounds into that one, maybe." But then obviously, understanding the background about the brand, the owners, the story behind it, where it's coming from, the pedigree, the history potentially.

Mike Provance:
Yeah. And being supportive, not being condescending. A lot of shoppers are scared away from upper-end wine stores, because they don't want to look like they're idiots and be condescended to. They want someone who comes in and supports their need to find whatever price point wine they're looking for, and to get the best value.

Richard Hill:
Yeah. I love it. Okay. They've come to the store. They found the store via potentially a lot of content around the different experiences that they're trying to deliver in their life, whether that's to have a dinner party, obviously all sorts of things. They've been to the site. They've made that initial purchase.

Richard Hill:
But like all e-com, loyalty and repeat business, lifetime value of a client is so, so important. How do you instil customer loyalty in your arena, in the beverage, alcohol area, or have you got any tips on how to do that?

Mike Provance:
I think the biggest tip, especially for retailers that they need to recognize, is if they want that sustained loyalty, the experience for the shopper doesn't end when they leave the store. That's actually the beginning of it. That's when the retailer that really is focused on that longer term, total life value of the customer is going to be in touch with them, is going to be following up with them.

Mike Provance:
So being able to give them a reason to share, give them a reason to give you their phone number, their email address, so that they can receive more information. And then being thoughtful about the kind of content that comes back. People will share information when they feel like they're getting value, they're creating some sort of meaningful relationship that adds value in their life, which is a weird thing to say about a liquor store.

Mike Provance:
But in reality, the things that we do day-in and day-out, that are our habits, really are representative of the relationships and the values that we have, and what we want to be able to do. And if I enjoy a good bottle of whiskey every so often, I want to be going back to that same place and be the person they remember. When I walk in the door, being like, "Hey, I've got this new one. You ought to give it a try." That makes us feel good. There's a power that we get as shoppers when we feel like someone remembered us and paid attention, and knew what we wanted and keeps us in mind.

Richard Hill:
I remember we went... This is a few years ago now. It was my wife, so I won't say which birthday, but a special birthday. And we were in a nice hotel, a well-known hotel in London, and I'm quite a Jack Daniels fan. They had their whiskeys and rum and various bourbon menus, if you like. And I was like, "Oh, there's a Frank Sinatra Jack Daniels." I didn't even know that this existed. This was probably six years ago.

Richard Hill:
I asked the waiter about it. And he knew everything about this particular whiskey. And he obviously has got this history around Frank Sinatra back in the day. I think it was £50 a shot at the time. I was like, "Oh my gosh, this is crazy." But you know what? It was a special birthday. I had a shot and it was like, "Oh my God, this is incredible." And I came home, obviously Googled the box. And it's actually, I thought it might be £600 a bottle, it wasn't. It's about 150 quid a bottle now. So a couple hundred dollars a bottle. I know when I've been to the US, they sell it in a lot of the airports. It's a little bit cheaper at your end than it is at our end.

Mike Provance:
The closer to Kentucky you get, the price goes down.

Richard Hill:
Yeah. Yeah. I mean, we were talking about, I was in Tennessee not too long ago. I brought a few bottles back as well, of different stuff. But after that initial five minutes with this waiter, he sold me the experience. I tried it and now, actually every now and then, when something special has happened at work or in my life... I actually just got a bottle, actually. I got a bottle last week. I've not opened it yet. It's sat in the kitchen, in the cupboard there, waiting.

Richard Hill:
I've got a bit of a weekend coming up, where we're having a bit of a few friends get together on Saturday night. And I probably will open it on Saturday night. But that experience of that day, but it's trying to recreate that online, via content. It's a similar thing. Obviously, you've got to get quite creative. You've got to be front and centre.

Mike Provance:
Well, I think you hit on it though. You're holding it until Saturday when you have friends over, because you want them to love it as much as you do. And that is what happens online today. All the social sharing, it's a replication of what we do when we're around each other on a weekend. And people trust it, which is important.

Mike Provance:
Ask that question about discovery, brands and retailers need to get their shoppers being their advocates, their champions in the social channels, to create that sense of trust, and convey that sense of trust across people.

Richard Hill:
Yeah. Great stuff. So obviously working with a lot of brands, I think you are working with a lot of clients, like we are, similar types of clients. So I think it'd be good to get your take on what's the one thing you see time and time again, and the things that you see that hinder growth. What are some of the things you think our listeners need to avoid? Maybe you've worn the t-shirt, or you've seen people wear the t-shirt.

Mike Provance:
There's a couple of lines of thinking there. The first is simply that humans and entrepreneurs are inherently subject to counterintuitive biases. Meaning we see something, it looks completely different than our expectations, and so we disregard it or downplay it. And we're in a period of not just great turbulence in the market, but the technologies that are coming out to support the retail world are in a battle for supremacy.

Mike Provance:
I'm not a retailer by trade. I spent my life with technology innovation. And when you look at innovation, you see these intense periods of battle, and then long periods of adoption of technology. Then more intense periods of battle of new technologies. So we're in one of those right now, where there's a lot of competing companies, models, technologies, all trying to figure out where they fit. And that's causing retailers and the companies that support them to not necessarily accept the world is changing rapidly. And you have to get past that as a retailer, and step into this very scary world of technology, and adopt things that you typically wouldn't do.

Mike Provance:
We work with retailers all the time, who want to get into it, but they can only take on one technology at a time. That stretches out their ability to adapt their business to change into the dynamics. The other one I would say is related is you've got to get past any fears you have about bringing technology into the business, around control, around privacy. Learn how to do those things, but that's here for the future. You can't be a retailer today and into the future, and not adopt technology.

Richard Hill:
Yeah. Great takeaway. I think we've got our snippet right there. So how does an eCommerce store improve its omni-channel experience in-store and online? What would you say to that?

Mike Provance:
Well, I think the biggest thing is they're not disconnected activities. You can't be one thing in your store, and then have a different personality online. You have to understand who you want to be, and then figure out what does that look like in the store? What does that look like online?

Mike Provance:
You have in-store, out-of-store, and then because of mobile phones and mobile technology, you have people moving to the store. So you can engage those people, those shoppers, those consumers at every point. And it should be consistent. And it should be a message that is progressively driving toward the goal you have, which is get them to shop at your store and not somewhere else.

Richard Hill:
Yeah. No, I think that's great advice, Mike. I think the amount of people that you go in a store potentially, and then you look on the site and it's very disjointed, you're just like, "Hey," trying to get that personality. I see a lot of people that have got great stores, and then they maybe almost go a template approach to their eCommerce. And it's like, "Hey, this doesn't represent you guys." They've, I think to put it bluntly, done it cheap.

Mike Provance:
Yeah. Or just simply thought about, "Well, I'm going to get all my products online." Versus saying the thing about online is you really invest in user experience to be successful, not how you present the products. If people can't engage with it, they don't like the experience, they're not going to spend any time there and you've lost them. It can be the best product site out there. But if you haven't thought about how they use it, then you've lost the opportunity.

Richard Hill:
Yeah. No, I think that's a fantastic finish there. So Mike, we like to end every episode with a book recommendation. So what book would you recommend to our listeners? It can be anything. It doesn't have to be on choosing the best Scotch whiskey.

Mike Provance:
I'm going to give you an odd one, but it is actually tied to what we've been talking about. I'm right now in the middle of a book called And I Was There, by Admiral Edwin Layton. And he's infamous for being the admiral who was working intelligence before the Pearl Harbor attack, and told the US government that Japan was going to attack Pearl Harbor and everyone ignored him. And a lot of infighting in the government convinced people that he was wrong.

Mike Provance:
And it highlights for me, A, I'm a World War II history buff. But B, it also really reaffirms that when you ignore intelligence, when you don't use the data you have at your fingertips, bad things happen.

Richard Hill:
Love it.

Mike Provance:
That's a book I'd suggest. Hard to find, but an interesting read.

Richard Hill:
Yeah. I've not heard of it, but that sounds right up my street. Yeah, absolutely. Yeah. Right, we'll get that linked up in the show notes. So for the guys that are listening that want to find out more about you, Mike, what's the best way to do that?

Mike Provance:
The easiest way, our website's 3x3.us. And that's spelled 3x3.us And I can be reached at mike@3x3.us, or on LinkedIn.

Richard Hill:
Yeah. Great. Well, thank you for being on the eCom@One podcast. And I look forward to catching up with you again soon. Thank you.

Mike Provance:
Thanks, Richard. Appreciate it.

Richard Hill:
Thank you for listening to the eCom@One eCommerce podcast. If you enjoyed today's show, please hit subscribe, and don't forget to sign up to our eCommerce newsletter and leave us a review on iTunes. This podcast has been brought to you by our team here at eComOne, the eCommerce Marketing Agency.