ANA Annual Meeting

RadioShack's Journey to Bring Back a Forgotten Customer

Lee Applbaum Tells How "The Shack" Went Back to its Core DIY-ers

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RadioShack knows how to eat humble pie.

In a candid presentation at the Association of National Advertisers' Masters of Marketing conference, Chief Marketing Officer Lee Applbaum described how the marketer abandoned its core do-it-yourself customer, in a bid to embrace mobility. The retailer embarked on a journey to turn things around, dubbing itself "The Shack" in 2009. That shift was successful, with mobility as a percent of sales climbing from 35% in 2009 to 47% in 2011.

"Bravo RadioShack, we've done a great job in mobility, but unfortunately, that 's only part of the story," Mr. Applbaum admitted. An April 2010 article in Wired magazine summed up RadioShack's new problem. "The last nails are being hammered into the coffin of the little electronics hobby shop they once loved. And the cellphone seems to be an apt symbol for the superficiality and ordinariness they feel are taking its place," the magazine wrote of "tinkerers."

"We completely pissed them off," Mr. Applbaum said of the retailer's DIY customers. "We had turned our back and were ignoring them. We had alienated the very consumer that had given us that core credibility in electronics."

As the mobility business grew, the "signature" business, which includes things like accessories and power products suffered, falling from 38% of the business in 2009 to 32% in 2010. It was a decline that shareholders and analysts took note of , considering the category has very high margins, drives frequency and encourages loyalty.

Initially, RadioShack told itself that people just weren't buying those products anymore. But, as evidenced by the Wired article and a slew of blog posts, it quickly became clear that wasn't the case. "As a CMO you get rewarded for change. The more things you can say are wrong and broken and fix, the better. In our haste to change, we forgot this core component," Mr. Applbaum said. "For all the work around the rebranding, we didn't spend ample time understanding our customers."

Once RadioShack acknowledged the problem, it moved quickly to re-establish connections with the DIY shopper. The married 55-year-old Caucasian male, who is likely employed as an engineer and is admittedly is "not that sexy" makes up more than a quarter of the retailer's consumer base. RadioShack began asking those consumers what they wanted, reaching out via its blog and social media. The response was swift.

A program called "The Great Create" leveraged RadioShack's roots and attracted 110 million impressions in the first 30 to 45 days. The retailer is in a quiet period, prior to releasing earnings next week, but Mr. Applbaum said sales have been positively affected.

"We're delighted that these customers have welcomed us back with open arms, because it was a real possibility that they'd just give us the middle finger," Mr. Applbaum said.

As for the moniker "The Shack," Mr. Applbaum says that it may have run its course. In recent advertising, references to "The Shack" have been scaled back, not because it was a failure, he said, but because it's accomplished what it was meant to do, get people talking. "The litmus test for 'The Shack' isn't how many people say 'The Shack,'" Mr. Applbaum said. "Love it or hate it, people did and do talk about The Shack."

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