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RAPAPORT... Jewelers have tremendous opportunity to grow their operations as long as they do not fail to execute rules of peak performance for customer relationships, according to Milton Pedraza, the CEO of the Luxury Institute. Pedraza defined operating results at luxury retailers so far this year as "dismal" in large part because the industry is "rife with self-inflicted wounds," including clinging to outdated management practices. Retailers that do stand to capitalize on future growth are approaching the business from the customers' perspective and creating systems -- and empowered associates -- that together cultivate relationships rather than a rallying cry for a simple sales transaction. Pedraza created seven "Rules For Peak Performance" based upon more than a decade of consulting luxury brands and leading them through internal transformations. The first rule of performance, Pedraza said, is to abandon the corporate silo mentality and create a company culture and mindset that brings all parts together to achieve strong client relationships. "Luxury brands are broken, literally. Despite all the omnichannel chatter you hear today, brands are broken up into departments and functions more fit for the factories and universities of the industrial era than fashion and luxury retailers of the digital age," he wrote. Even if departments or divisions compete for internal interests, Pedraza advised retailers to place all those silos that touch the client "under one client relationship executive and base compensation -- at all levels -- on achievement of relationship targets such as client data collection, conversion, recovery, retention and referral rates." While competitive benchmarks (and performance metrics) do play a role in business, Pedraza's second rule is to use that data effectively to create "competitive breakthroughs." Any situation that involves creativity and human behavior requires differentiation and efficiency, he said. "One reason that the luxury industry is stalling is a lack of breakthrough innovation. If you want your luxury brand to be highly valuable and profitable, you need to move beyond benchmarking. Luxury brands need to go from continuous improvement to discontinuous improvement, which demands breaking the rules through innovation," he said. The successful retailer of today has adopted Pedraza's third rule of performance and dispensed with "top-down" management in favor of "front-line empowerment." Today's retail leaders actively engage and empower people in the organization to apply their own talent and passion toward the company's goal and they recognize that "strong human relationships harness collective wisdom and innate genius to adapt and shape the future," he noted. Pedraza said that leaders must "relax into success" and trust people "profusely, to adapt continuously. "It is an imperfect process, but it works," Pedraza said, citing three luxury brand executives who trust front-line colleagues to achieve success, while providing the resources needed to deliver: Angela Ahrendts of Apple Inc., Natalie Massenet of Net-a-Porter and Marco Bizzarri of Gucci. Pedraza's fourth rule advised luxury retailers to turn "big data" collection into "actionable wisdom." He posits that data itself is not information -- without human thought. "Wisdom remains the domain of humans. Injecting human wisdom and empowering your store and call center associates to use their judgment, along with data, to create appropriate one-to-one client communications might not be as sexy as developing an algorithm, or pushing a mass campaign button, but it can be far more effective in building client relationships," he said. Leverage staff knowledge and know-how to use data in a way that benefits the client and "finally go from doing the wrong thing right, to finally doing the right thing right." Pedraza said that selling is not human because, in practice, it reduces "associates to being clerks ringing up transactions instead of brand ambassadors building long-term relationships." In the fifth rule of performance, he advised retailers to toss the robotic "sales ceremony" concept and focus on three major over-arching qualities: expertise, trustworthiness and generosity. "Let the mass brands do what they will, but luxury brands should immediately discard the aggressive selling playbook and embrace the art and science of high-performance client relationship building, where value is created not from transactions, but from consistently and continuously outperforming and out-behaving the competition," Pedraza said. "Creating clearly measurable functional and emotional mutual value through a relationship is inherently imperfect, but alternative forms of selling are surely dead." Has your store incorporated elaborate, old-school training programs? Rule number six urges retailers to create master associates. "It is often said that in a college classroom, the only one learning is the teacher, so part of the secret lies in transforming everyone from a trainee into a learner and a teacher. It is also true that online education, when used in a humanistic and empowering way, such as is done by the Khan Academy, combined with daily one-to-one, metrics-based coaching, peer-to-peer learning techniques and inspirational reinforcement, can make learners, teachers and relationship masters out of all your front-line associates," he said. In the seventh rule, Pedraza calls for changing the front-line manager job description to a coach, rather than someone who is just "bossing and selling." He advises hiring an operations manager to handle the back-office chores, while ensuring the store manager is on the floor 90 percent of his or her time observing and coaching associates and engaging top clients. "Coaching is an art and a science backed by research. Coaching relationship building is a craft that requires expertise. "Innovative, empirically based coaching programs need to be developed to educate our armies of store managers in the art and science of coaching for client relationship building. Until that happens, expect your costs to go up while results falter because more of the same won’t work this time around," Pedraza concluded.
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