Posts from — October 2009

Cool Books

Freedom, Inc.

The problem with many companies is that they judge employees on everything except “whether the job gets done and the customer is happy,” write Brian M. Carney and Isaac Getz in Freedom, Inc., as excerpted in the Wall Street Journal (10/15/09).

The authors draw from the philosophy of Jean-François Zobrist, a former chief executive, who observed that there are two kinds of companies — “how” companies and “why” companies.

The “how” companies “spend their time telling workers how to do their jobs,” while the “why” companies “replace all the ‘hows’ with a single question: Why are you doing what you’re doing?”

Where the “how” approach completely ignores customer happiness, the “why” question has only one answer, which is “to keep the customers happy.” And if you’re keeping the customer happy, the “how” is pretty much irrelevant.

The authors also write about “the hidden cost of top-down thinking,” which refers to a failure to account for “disengaged, stressed out, ill, or even absent” employees. This hidden cost results in “turnover, workplace stress, conflict-ridden labor relations,” as well as “a lack of innovation and slumping organic growth.”

They also call for a new kind of leadership, where leaders eschew status symbols and subordinate themselves to their employees. The key, they say, is to make your people feel like “human beings instead of human resources.”

Delete

It’s becoming more expensive to forget than to remember, suggests Viktor Mayer-Schönberger in his new book, Delete: The Virtue of Forgetting in the Digital Age, reviewed by Adam Keiper in the Wall Street Journal (10/23/09).

This is actually something of a contrarian perspective because some historians are concerned that the digital era is making it harder to keep permanent records: “Archivists and librarians have looked for strategies to preserve digital public records, with mixed success,” and some fear a “digital dark age” ahead.

But Viktor is looking at the issue differently. Observing that “the economics of storage has made forgetting brutally expensive,” he worries that this might inhibit us in a way that imposes on our sense of freedom.

He frets, for example, that our children might not speak their minds online for “fear their blunt words might hurt their future career.” His solution involves a system of data “expiration dates,” on the assumption that “getting people to constrain what they desire to share is difficult.”

Eating the Dinosaur

In his new book, Eating the Dinosaur, Chuck Klosterman frets over the state of American pop culture as he makes “an eloquent defense of it,” writes Michael MacCambridge in the Wall Street Journal (10/23/09).

The book consists of a series of essays, covering a spectrum of pop-culture topics, “from the lasting appeal of Abba to the annoying staying power of sit-com laugh tracks; from the nearly forgotten 1980s basketball star Ralph Sampson to Garth Brooks’ critically dismissed foray into rock.”

He writes a “well-reasoned” essay on “the ethics of time travel,” in which he admits that “there’s an inherent goofballedness in debating the ethics of an action that’s impossible.”

He provides an analysis of the Unabomber’s 35,000-word manifesto, and finds “not the lunatic ravings of a terrorist but something more disturbing: In addition to being an attack on technological civilization, the manifesto was a trenchant media critique that strikes him as more incisive than ever in the age of the internet.”

 Indeed, the recurring theme throughout the book “is that we are so saturated by media that its sheer omnipresence not only alters our sense of reality but also prevents many of us from comprehending the degree to which that omnipresence exists.”

Along the way, he raises questions that help re-frame our view of “media, truth and discourse in the modern age,” such as whether “Bob Dylan is a good singer or a bad singer … That’s the essential question of all criticism, right?”

October 31, 2009   Comments

Leading With Loyalty

Brand rituals build loyalty and drive growth.

By Zain Raj, Euro RSCG Discovery

Like most of you, I travel a lot. Which means I meet a lot of very interesting people. Once they find out what I do, our conversations tend to drift into the issue of brands, business and marketing.

I was travelling from Chicago to the West Coast last week and found myself sitting next to a gentleman; I’ll call him Jim, the CMO of a Fortune 100 company. In a conversation that lasted for about three hours, we talked about the challenges he is facing in his business.

We discussed everything from changes in government policies to the impact of the economic environment; from competitive pressures to pricing disadvantages; media proliferation to media fragmentation; and from consumers being in control to the powerful impact of social media.

Interestingly, the one subject Jim didn’t mention was the changes in the way today’s consumers relate to brands. I found this omission very intriguing. Is this because he did not see this as an issue? I probed him on this.

As he talked, it became clear to me that he was dealing with a significant branding problem. His brand has very high awareness levels. It also has very strong equities. He is at price parity among his competitive set. But he is losing share. How is this possible?

I posit a response: It is because Jim’s brand was built in the last millennium and is still being managed under 20th century marketing principles.

The last millennium was about the traditional marketing and advertising model. The model invented by Procter & Gamble and its acolytes. It was a model built in a different era. As we all know, the consumer has moved on. The business environment, the global economy, the internet, lack of innovation, and increased complexity all make it difficult to succeed using the ways of the last millennium.

Nothing is as it was. We are living in a new reality and we need to understand it, accept it and deal with it. The pressures on the business and the challenges marketers face is resulting in having to do more, deliver more and do this with far fewer resources. Budgets are regularly being cut. People are regularly being cut. Expectations are constantly being increased.

Smart marketers are realizing that they need to move from just doing traditional “branding” that will drive acquisition to a more balanced marketing program. This should include a higher degree of emphasis on understanding and retaining their existing customers and developing a deeper sense of loyalty to the brand.

This is a more efficient model, which is critical because it costs significantly more to acquire a new customer than it does to retain an existing one (a cliché based on fact).

An emphasis on customer understanding and retention is not new; most companies claim they are doing this already. However, I believe that they are only scratching the surface. They are executing tactical add-ons to their mass branding programs instead of leading with a strategy. They are executing a basic version — one that does not work.

With the commoditization of brands and homogenization of value propositions, brands need to create deep and meaningful bonds to generate the kind of loyalty that drives meaningful business success — over time. This means that brands need to deliver innovations, marketing, and product choices — first for the benefit of their existing customers before they do so for new prospects. This is what Harrah’s pioneered in the casino industry.

According to the Harvard Business Review, Harrah’s has the most devoted clientele in the casino industry, which is a business that is notorious for fickle customers. Harrah’s has taken full advantage of its ability to capture the data of current customers to build tremendous loyalty.

Harrah’s uses the data on its customers to enhance customer service. They created Total Rewards, a loyalty program conceptually modeled after the airline industry’s frequent flier programs, but customized for their own business.

These insights improve operations for Harrah’s and tailor its reward program and marketing efforts to appeal to the customers who have the most impact on its business. It helps make the casino’s most loyal customers even more devoted.

This has helped build the business. After years of being a second-tier player in the industry, Harrah’s has become the industry leader and a financial success. As a matter of fact, the program generates $6.4B (80 percent) gaming revenue yearly.

Brand-Bonding Behavior

What Harrah’s has done is to create, among its customers, a set of very meaningful behaviors where the Harrah’s brand is central to their use of the gaming category. For them, no other brand will do.

I call this phenomenon brand rituals.

A brand ritual is a brand-bonded behavior that customers build with certain brands that makes them a central part of their experience in the category. These rituals go beyond habits and routines to create a deeper bond. They become an integral part of people’s lives. They create an enriched experience in a unique way only that brand can provide. This is where the brand gets the strongest levels of loyalty from its core customer group.

We can all name some of the brands that are part of our rituals. Some of mine are: Having coffee at Starbucks; watching TV shows on my iTouch; starting my day with the Wall Street Journal; searching for information on Google; and shopping every other weekend at Costco.

These brands have created a deeper sense of loyalty and bonding than their competitors. Different customers want different things from their relationships and they evaluate, perceive and use brands differently. However, despite all of these differences, making a brand central to their “ritual” results in predictable and sustainable behaviors that lead to profitable growth.

But how do you do it? By fostering a mutually committed relationship with your customer, you create a branded relationship that enhances and enriches your user’s experience. By establishing meaningful connections with your customer, you continue to make your brand more personal in the consumer’s eyes. And that is the essence of a true brand ritual.

Behavioral data is an important component. It provides insights to inform how to effectively create those bonds while instilling the idea that there is simply no other choice or way to do business than with your brand.

It needs to be integrated with attitudinal data for a complete picture. Frequency of use is a necessary proxy, but is not a strong measure of loyalty. Attitudinal, emotional and satisfaction measures are important, but are not great predictors of sustainable behavior.

To understand this phenomenon, we created and tested (and are still refining) a more holistic, predictable measure, which we have dubbed the Brand Bonding Behavior Index (BBBI).

BBBI is a measure of the quality and nature of loyalty. It captures the essence of the brand ritual by integrating levels of commitment, of enriched experiences, and frequent behavior to let us codify various dimensions of loyalty and their underlying drivers. We fielded a study, in partnership with Leo J. Shapiro, a leading research company, among 3,000 US customers of 78 brands in multiple categories from retail to services to packaged-goods and beer.

What did we learn? Here are a few teasers we gleaned as we looked across categories:

There is more than one kind of loyalty. Our study identified nine brand-bonded behavior states with varying degrees of brand commitment, indicating that frequency is not a sufficient measure of loyalty. Every brand has all nine states at varying levels.

Nearly half of a brand’s customers are open to other brand alternatives. Three of the nine brand- bonded behavior states consists of users who are open to alternatives, while some even actively seek them. On average, six percent of brand users dislike the brand they currently use! Just because they’re using your brand frequently doesn’t mean they are loyal to you.

One of the lowest loyalty states is emotionally-based. You can imagine our surprise with that finding, given the emphasis on the need to create a lovemark or trustmark. In this brand-bonded behavior state, brand users find the brand to be friendly, attentive, and accessible but are open to other brands. Supermarkets, gas stations are among the categories that index high in this state. Warning: likability or appeal are not necessarily predictive of high brand commitment.

Brand rituals are the highest form of loyalty. Fifteen percent of the customers of a brand have a bonded relationship with the brand that qualifies as a brand ritual. Reciprocal relationships, dependable experiences, experiences that delight, and a sense of a brand user’s acknowledged value to the brand are essential in brand rituals. As in any relationship, you need to nurture it constantly.

Tesco Gets It

Tesco is another company that really understands the importance of developing customer bonds. Ranked as the largest retailer in the UK, and the third largest worldwide, Tesco has more than 15 million regular shoppers and is the world’s largest online food retailer via tesco.com. But this wasn’t always so.

Just 15 years ago, Tesco was a weak number two behind Sainsbury’s. Threatened by discounters, Tesco had a low share-price and slow growth. So, the retailer looked at ways to retain existing customers, increase frequency and value and broaden customer share. What resulted was the creation of a loyalty program, Tesco ClubCard, which rewarded customers in various ways for shopping at Tesco.

The Tesco Clubcard was tested in 1993/1994 and launched nationally in 1995. The goal was to capture customer data, allowing Tesco to identify customers by name, reward frequency and value, while profiling customers nationally and locally. In addition, Tesco planned to use the data to develop new services and products to serve their needs better than the competition.

Tesco incorporated offers and promotions from partner brands that were targeted based on the customer’s profile. Special interest clubs like Wine, Baby and Healthy Living were introduced to give consumers a more personal connection to the store. And a budget was set aside for rewards that would go back to customers to spend at Tesco each year.

What Tesco did is to build a brand ritual. They showed a commitment to customers by responding to their changing needs and created an enhanced and enriched experience for them. Some of the innovations delivered were Points on Petrol introduced in 1996. Tesco.com launched in 1999 and incorporated the Club Card. The Healthy Living Club and Air Miles Rewards were introduced in 2002. And Green Club Card points were introduced in 2006.

 To keep up with technology, the program evolved from an actual card to a key fob, making it even more convenient for Tesco’s loyal customers. Ultimately, the club itself changed over time and that was a crucial part of the strategy to keep it relevant and grow its members.

There are two dimensions for building a brand ritual commitment and enriched experiences. Commitment is delivered when you understand that you need to be loyal to your customer first for them to reciprocate. You have to deliver enriched experiences to them that are relevant and meaningful. This is possible if you use transactional and behavioral data and fuse it with attitudinal and relational research.

This then allows a larger number of your customers to move up the continuum from habit (where the brand is neutral with possibly good feelings) to a routine (where the brand delivers functional satisfaction) to a bond where the brand becomes central to their behavior.

Our study confirms that for a majority of brand customers, the brand is part of their habit and in danger of being replaced by a competitor quickly and easily. For some 36 percent of users, their brands are part of their routines as long as they perform well.

Many packaged-goods brands fit in here. That’s why they constantly tout how they have improved to maintain usage. But for about 15 percent of consumers, the brand is absolutely central to their experience.

Remember, a holistic, unified approach in your marketing program is very important. This means that you should create synergistic experiences at every possible touch-point. No one experience should be out of context from the rest. If you do this well, you move your brand up the bonded behavioral continuum to a brand ritual.

And it pays. Tesco went from a struggling retailer to the largest in the UK and third largest globally. Harrah’s has gone on to become the largest, most-profitable entertainment company. Apple has been the turnaround darling. Google is worth more than its peer set.

Coming back to Jim: Even though he has good attitudinal measures on his brand, he has been unable to create a behavioral bond. My advice: Build a brand ritual … and change your brand’s trajectory. •

ZAIN RAJ leads Euro RSCG Worldwide’s global retail practice and is CEO of Discovery, the company’s data analytics and customer relationship marketing unit. He can be reached at zain.raj-at-eurorscg.com.

October 31, 2009   Comments

Citizenship Branding

Loyalty grows when brand values and strategy align.

By Scott Osman, Landor Associates

Much has been written and discussed of late regarding the value that sustainability and corporate responsibility can create. Although these terms are defined in various ways, “sustainability” generally is considered the environmental practices of a company, while corporate responsibility is considered the practices that contribute to the social good.

 Most often, these practices are considered from the point of view of the contributions they make to society at large, and secondarily to the business bottom line. I am a firm believer in their importance and their future as mainstays of business. However, we should not lose sight of the benefits that accrue to companies pursuing this strategy when the values expressed align with the brand. We call this approach citizenship branding. Think of it as brand purpose.

 Citizenship branding aligns the brand and corporate in a way that validates and reinforces brand values; it identifies and engages authentic purpose. Citizenship branding brings the brand to life for customers, employees, investors, and partners by leveraging the provision of social benefit and its impact. It creates opportunities for developing new lines of business. Often, citizenship branding applies existing investments to create greater benefit for the company and the causes it supports.

In a world of increasingly commoditized products and services, values are becoming the feature of corporate culture that stands out the most. “Vanguard companies,” as Rosabeth Moss Kanter of Harvard Business School calls them, are already reaping the benefits of integrating well-articulated values into the business. And one of the most important advantages they are gaining can be summed up in a word: loyalty.

This new approach impacts loyalty with customers, employees, community and even investors. Naturally, this will not have an impact on every person; let’s face it, many people are still price shoppers and some employees will prioritize salary above all else. But for those who are interested in being loyal to a brand and are often influencers, vanguard companies are standing out.

Vanguard companies have a sense of purpose, are held to higher standards, and are rewarded for their efforts. Isn’t this always the case? Companies that want to be exceptional are always held to higher standards than their commodity peers. In this new paradigm of good business, the impacts of the rewards are felt throughout the value chain.

Take the case of Dow Chemical. A laggard in loyalty and reputation, the company quickly reinvigorated the brand with its Human Element campaign, which demonstrated and activated the brand promise of solving some of the world’s most pressing problems. Dow established Human Element through its actions and then articulated the campaign through advertising, the web and print.

Dow made sustainability, along with innovation and technology, part of an integrated corporate strategy. The company then elevated sustainability, which distinguished the brand and resonated with its constituents. The message is delivered constantly throughout the organization, showing up on office walls, media, and internal communications, even during watercooler conversations.

This message found expression in new product development in desalination and water purification and in other improvements to water systems around the world. As a further expression of this authentic vision, Dow formed a partnership with the Blue Planet Run Foundation to increase awareness of the global need for safe drinking water.

Dow’s goal was clear: The company wanted communities to have a better impression of the brand that would inspire them to recommend it and defend it. Dow wanted to attract the best employees who, more than ever, are looking at the quality of the company as closely as the quantity of the paycheck.

Through clear alignment with the corporate values and brand, Human Element has had a significant impact on those groups Dow cares most about — employees, communities and investors. For Dow, citizenship branding has become a highly effective strategy, clearly stating the business goals and how they are brought to life through purpose.

Transparency Enhances Loyalty

In a March 2006 article published in the Journal of the Academy of Marketing Science, researchers found that brands benefited from their citizenship-branding efforts if they were based on the brand values or if they were aligned with the business strategy. If stakeholders perceived efforts as being done only to please them, then stakeholder reaction to the efforts was negative.

The researchers also found that efforts were even more rewarded if there is a good fit between the core competencies of the company and the causes with which it engages. The researchers concluded that because customers expect companies to seek profits while benefiting society, companies need not hide the strategic aspects of their citizenship-branding efforts. In fact, transparency may enhance the value created.

As citizenship branding moves into the core of the business, it is showing up in many places in the company, so collaboration will be key. Every department has a role to play. It is important to focus and coordinate the effort to deliver value and maintain loyalty.

According to old thinking about citizenship branding, companies should identify causes that were not linked to the brand to avoid the impression that the brand was trying to gain from the relationship. But companies now must fight this “gut reaction,” because when they align the brand and the citizenship-branding effort, good things start to happen.

Causes benefit from increased exposure, long-term commitment and greater involvement. Brands benefit through increased relevance that affects customers and employees and creates new business opportunities. Leveraging core competencies can potentially create value well in excess of the cash commitment.

IBM demonstrates collaboration beautifully when it applies its efforts to great effect during natural disasters. When IBM deploys its global workforce and technical skills, the company can facilitate disaster relief, making the work much more efficient for all involved. As it does so, it is living its values (“Innovation that matters for our company and the world”), reinforcing them for employees and communities while also demonstrating them for customers.

IBM recognized that it could respond to natural (and man-made) disasters using its unique skills when it participated in relief efforts following an earthquake in China in 2001. IBM offered these skills again during its response to the 2004 tsunami that hit India and other parts of Asia.

The impact of IBM’s services far surpasses the impact of any dollars IBM may have contributed. More important, when disaster strikes, local IBM employees live and reinforce the company’s values and take action. This act of personal empowerment and corporate altruism defines IBM to all stakeholders as a company of extraordinary capacity to solve global problems.

Teams of IBM employees immediately get to work on securing communications and data centers, networks, operations and logistics. Their actions have been instrumental in establishing IBM as a company that serves the world’s needs as well as its own business needs. Of course, governments recognize the company’s efforts and turn to IBM to develop and put in place systems in advance of disasters.

These and other actions also informed the IBM brand platform, Smarter Planet. Smarter Planet brings the IBM brand to life by connecting its brand values, corporate responsibility and sustainability efforts, and product offering. By quickly responding to the needs of the community and promoting the contributions of its employees in times of disaster, IBM increases loyalty employees and customers have for IBM.

Authenticity, Not Sainthood

Greenwashing — the term for companies that purport to adhere to sustainable practices but don’t — is not very common anymore due to the harm exposure can cause because of increased advocate vigilance and the speed of communication made possible by the internet. It is worth considering that people seem to know and care when the efforts are honest and when they are not.

However, people are not trying to look into the soul of the company and find a saint. Identifying causes and efforts that are true to the brand values or strategy (or both) is all that is required. The Play Fair Alliance (fairolympics.org) continues to pursue shoe companies to improve their treatment of workers. As much as they promote the change they are making, these companies cannot garner much credit because their actions are forced.

TOMS Shoes has built its entire business on the act of authentic purpose. Blake Mycoskie founded the business with the intention of putting shoes on the feet of children in emerging markets and is committed to giving one pair of shoes away for each pair of shoes purchased.

By linking the cause and the company so tightly, TOMS has been able to generate far more attention, at much lower cost, than traditional shoe companies can. As an illustration of the extent of its ability to generate attention, TOMS, a small company relative to the shoe giants, has, for the past three years, been represented at the Clinton Global Initiative, a prestigious organization established by former President Clinton to turn ideas into actions.

More important, TOMS received the attention of AT&T, which featured the actions of the shoe company in commercials beginning in early 2009. As a result of this and other attention, the company, which sold 150,000 pairs of shoes from May 2006 through Dec. 2008, expects to ship 300,000 pairs in 2009 and has formed partnerships with Ralph Lauren.

When we consider the world of good that all companies provide, it is curious that few people recognize contributions such as those made by IBM and TOMS. Of course, the recognition of what contribution a business makes to society goes back to a time when philanthropy and other cause-related commitments were considered to be more worthwhile when there was no appearance of advantage for the company.

 Now that people are looking to companies to provide social good, all that has changed. Aligning corporate responsibility with brand values validates efforts that are core to the company. As with all things, the ever-present internet makes it easier to know who’s been bad and who’s been good, so be good for goodness’ sake. The vanguard companies are already stating their values and principles and producing citizenship-branding reports to demonstrate their contributions.

The Walmart Articulation

By articulating vision and expressing it openly, companies can have a voice in the conversation. And remember, the small vocal group that cares about corporate-responsibility actions (both good and bad) is going to be influential. Its influence often does not stop with causes and corporate contributions but also may extend to sales.

Consider how Walmart, by articulating its sustainability commitment, has transformed itself into a good corporate citizen and a leader of the green movement. Had the chain store merely made the changes and not articulated them, it would not have altered the community’s impression of the company’s values, would not have had as great an effect on other suppliers, and would not have had much influence on changing customer behavior.

As recently as 2005, Walmart was best known for its low prices and poor treatment of workers. CEO Lee Scott decided to make a major shift in Walmart policies and made green (in addition to low prices) the focus of its efforts. He lured Adam Werbach, the dynamic, youthful former president of the Sierra Club, with the promise that he could have more impact working within the system than outside it.

That promise is well on its way to being fulfilled. Walmart has made major strides within its stores, reducing its energy use, adding solar power and reducing waste. Of course, this all comes with cost savings. A greater consequence has been the greening of Walmart’s supply chain, for example, its packaging and shipping requirements, among other initiatives.

And the company has been perhaps the greatest force in making low energy use more commonplace in the household. The company is currently providing leadership with new green labeling. As these efforts are aligned with the new Walmart brand value — Save Money, Live Better — they ring true, enhance the brand, open new business opportunities, and change the customer’s perception of the company.

This is where engagement with human resources and various marketing departments (internal and external) can increase velocity and value. Internally, companies should find ways to involve their employees with company social activities and engage their customers with a sense of purpose that creates a new kind of evangelism and loyalty.

Consider what Whirlpool has done with its long-term commitment to Habitat for Humanity, activating its employees and customers and communicating its values while promoting its products and their features. The company made a 10-year commitment to the nonprofit, and employees are involved in building many of the homes. This active engagement underscores the brand values and dedication to the community and low energy use. It also creates a sense of pride and opens up conversations that engage around the brand.

Perhaps one of the best examples of a company that puts the idea of citizenship branding all together is Pedigree dog food. The company was looking for a way to differentiate itself in a market where it was being squeezed by store brands. By creating the Pedigree Adoption Drive, the company aligned its brand with a key value that matters to all its stakeholders — caring for animals.

The Pedigree Adoption Drive is a fully-articulated platform that helps millions of dogs in shelters find good homes. The company supports this effort with product and by raising money. Most important, the company raises awareness and creates a social network online and in store to inspire action. This authentic mission is core to the company, good for business and a strong validation.

The company was very clear articulating its objectives and how it would commit to them, and committed the Pedigree Foundation support the program for long term. To quote the brand, “At Pedigree Brand, everything we do is for the love of dogs, from the nutritious dog food we make to the dog adoption drive we support.”

Finally, the company activates the Pedigree Adoption Drive wonderfully in store and online as a marquee for its shared values and commitment to pets and their owners. Statements alone about being a caring company would not have as much impact as this action. In 2005, a German marketing application of this program had a measured effect on the brand, increasing sales by 8.6 percent. It also increased adoption rates by 20 percent during the first year of the campaign.

Companies that have blazed this trail find new business opportunities, grow the communities in which they operate, and create growth in their business. They attract better employees, who are more committed to the company because they hold beliefs in common with the culture. By aligning brand and corporate responsibility, companies are able to open up new areas of strategic advantage that will affect the company internally and externally, actively and passively.

We are living in a hypercompetitive market where companies compete not only with one another, but also with a more tightly closed consumer wallet. Creating loyalty in this environment will require companies to compete on all fronts: price, quality, selection and now values. The first three are fast becoming the price of entry. For the most attractive customers—women and those under 35 — real loyalty to the brand will find a home in shared values and beliefs. •

SCOTT OSMAN is global director of the citizenship branding practice at Landor Associates. Scott previously was with Hachette Filipacchi and Doublespace. He can be reached at scott.osman-at-landor.com.

October 31, 2009   Comments

Stand By Me

A year ago we were angry. Now we’d like some tender, loving care.

By Dori Molitor, WomanWise LLC

It feels like an eternity, but it was just a year ago that our presumptive prosperity crumbled and fell. We knew then what we know now — that the way we view corporations as brands, and ourselves as consumers, was forever changed.

Some Hub readers will recall a nationwide, email survey of more than 200 women we fielded to our Articulate Women network shortly after the economy tanked (A Perfect Storm, November/December 2008).

The survey captured the intense anger and frustration of the moment, as well as the raw sense of fear — of losing jobs, homes, retirement or the means to keep kids in college.

A year later, we fielded the same survey to the same 200-plus women, and it’s clear that much has changed over the last twelve months. While our respondents appear to be no less fearful than they were a year ago, their anger is of a much quieter sort.

In the fall of 2008, the most popular word among our women was “greed.” When we asked what message they’d like to deliver to corporate America, most offered a scolding:

  • “Don’t be greedy!”
  • “Cease the corrupt practices!”
  • “Stop inflating your wallets which in turn deflated ours!”

This wasn’t surprising, given that our survey arrived only days after Lehman Brothers went bankrupt, AIG got a bailout and the stock market crashed. But it’s hard to sustain anger for long. This year, the most popular word used by our respondents was not greed but honesty:

  • “Be honest and forthright with your customers.”
  • “Do what you say you will. Be honorable.”
  • “Lower your prices and be honest.”

And most offered not a scolding but advice. Some of this advice was tactical (“I tend to be swayed by product placement in the store.”) and some of it more strategic (“Find a way to sell premium products without the premium cost.”). But almost all of it was constructive, which is very positive and a significant shift from a year ago.

This doesn’t mean that it’s time to sit back and relax, that all is well and back to “normal.” In fact, this year’s survey not only captured a change in tone from a year ago, it also suggested a change in behavior. In fact, the percentage who said the economy had affected their lifestyle jumped eight points, from 23 to 31 percent.

Most of all, our women revealed a strong sentiment that they now strongly favor brands that demonstrate a true sense of caring about their employees and their customers:

  • “Be honest, authentic and truly caring of your customers.”
  • “Please care about the well being of your employees and their families.”
  • “Your employees are your brand. Treat them with the respect they deserve.”

More specifically, this change in attitude has manifested itself in how our women evaluate brand loyalty. The percentage who said they were less brand loyal increased by eight points, from 47 to 55 percent. The number who said their loyalties had shifted permanently, “in some cases,” increased by 11 points, from 44 to 55 percent.

These changes are reflected both in terms of the stores they shop and the brands they buy. They say they have switched to less expensive alternatives in grocery, drug stores, mass merchandise, apparel and sporting goods. The percentage who said they had not switched to less expensive stores dropped by 12 points, from 30 to 18 percent!

Among brands, our women say they have switched to less expensive alternatives in pharmaceuticals, cosmetics, insurance, food/beverage, health/spa, restaurants and entertainment.

However, where brand loyalties still exist, they remain strong, and sometimes even passionate. Among retailers, the most frequently mentioned loyalties were to Target, Trader Joes and the Gap. Among national brands, Tide, Coke, Barilla, Colgate, Kraft and Dove received the most mentions.

In many cases, the reason given for that loyalty was summed up in a single word: Value. 

  • “Value…is of more importance to maintain brand loyalty.”
  • “Price/value/quality need to be balanced.”
  • “Value your employees.”

However, many of the comments were notable for a lack of mention of specific brand names. Often the comments were general, such as:

  • “I have remained loyal to certain brands because of the quality or taste they provide.”
  • “Certain brands I trust; they perform well. I’d rather spend more on them than waste money on products that aren’t as good.”
  • “I’m cooking more at home, so I want food products I know will taste good; I’m buying more fresh food and less packaged food.”

And, of course, a good number of our women say they’ve tried private label, like it, and there’s no turning back: “At the grocery store, I’m buying store brands.”

So, loyalties clearly are badly shaken, if not broken altogether. The question is how to win those loyalties back. When I addressed this issue a year ago, I quoted Jim Stengel, a former Procter & Gamble chief marketing officer, who at the time was making a case for what he called “purpose brands.” The idea was that the brand should have a mission larger than itself.

This points in the right direction, but it all depends on what the mission is. Our survey found little interest in so-called “green” initiatives, for example. In part this is because of a perception — or reality — that green products cost too much. (“Hate to admit it, but green costs more and money is tight.”)

It’s also because many of the women don’t believe the “green” claims are for real. (“It’s a marketing gimmick for most of them.”) As a consequence, there’s been no significant change in the affinity for “green” brands over the past year, according to our survey.

However, the opportunity to purchase local brands is a related area where we did see some movement, with the percentage of respondents reporting more purchases of local brands increasing by 14 points.

This interest in “local” may well be indicative of the most important message from the survey: Our women are most interested in brands that mean something to them where they live. Literally.

The Social Issue is Us

A particularly meaningful attitude informs views of “corporate social responsibility.” The importance of commitment to a social issue among our women actually declined by 11 points, from 43 to 32 percent (“It is an added benefit, but not the main purchasing reason at all.”).

What they’re saying is, the social issue they’re interested in is not some “cause” cooked up in a corporate boardroom: “The social issue is us. We matter.” They are looking for trust, and crying out for corporations to help them cope with their challenges.

Over the past year, there’s been a lot of price-cutting, but have there been any quality improvement along with the price-cutting? Are they treating their employees any better? Are they treating us any better? In too many cases, our women think it’s just the opposite:

  • “Quit shrinking the size of the item without shrinking the size of the packaging. Consumers aren’t dumb or unaware.”
  • “It’s frustrating to waste your money on something that doesn’t last or do the job.”
  • “So many corporations are trying to think of crazy products that most don’t use on a regular basis.”

One of our women singled out Hyundai for special praise:

  • “I find a growing interest in organizations that understand the economic situation and speak to and offer their audience alternative ways of purchasing their product … Even after cash for clunkers ended, Hyundai offered a similar program to their consumers. Chances are, when I buy a car, I will look at Hyundai first.”

It’s no coincidence that while much of the rest of the automotive industry is struggling, Hyundai is doing relatively well. According to the Wall Street Journal, Hyundai’s U.S. sales “increased .8 percent over the first eight months of this year, while Ford’s dropped 25 percent and GM’s 35 percent.”

This is especially remarkable considering Hyundai’s reputation for quality problems when it entered the U.S. market in 1986. But starting 10 years ago, following its acquisition of Kia, Hyundai not only addressed those problems but also backed them up with extraordinary 10-year, 100,000-mile warranties.

It wasn’t just a publicity stunt either, because Hyundai’s quality improved dramatically and now tops the J.D. Power rankings for non-luxury cars. Earlier this year, during the depths of the recession, Hyundai also introduced an “Assurance Program,” which allows its customers to return their cars if they lose their jobs within a year of purchase.

So far, only 50 cars have been returned, but the message is clear: We care.

Unfortunately, it’s harder than it should be to find examples as good as Hyundai (if you have one, please email it to me at dmolitor-at-womanwise.com).

In this issue of the Hub, Zappos CEO Tony Hsieh talks about the importance of empowering employees as a key to building loyalty from within (link). And Joe Dobrow, chief marketer of Sprouts Farmers Markets articulates a philosophy of loyalty that’s all about making shoppers feel personally connected to the store and the people who work there (link).

Another supermarket, Fresh Market, is impressive for its efforts to define loyalty where our women say it means the most — at home. The chain is based in North Carolina, but as it stretches North, its customers would be hard pressed to find evidence that it is anything but a local store.

Walk into a Fresh Market store, and once you absorb the wonderful sensory experience of sights, sounds and aromas that say “fresh,” you can’t help but notice that little signs dot the store, flagging a good number of items as “local.” The store’s staff underscores this with a warmth and friendliness that says, “Hey, we’re your neighbors and we care about this place, and we care about you.”

What ought to worry national brands is that there really is only one brand that sticks, and it’s the Fresh Market brand. The retailer is consciously building loyalty to itself, and doing so in new and refreshing ways that truly align with the idea that loyalty begins at home.

What is striking is the simplicity of the concept, which when you think about it is at the very core of what marketing is supposed to be about: putting the customer first. It’s amazing how often we lose sight of this.

And so it’s a year later — so much has changed and so much remains the same. Women are not ready to forgive, and they certainly do not forget. Their values have changed, and they are watching and waiting to see what’s up with ours, as marketers. What have we done?

Women are saying, “we matter.” They’re saying, “the social issue is us.”

Whatever we do, we need to make it highly relevant to their values because our ideas of “corporate social responsibility” might not be working for them, and therefore it won’t work for us. What women want from us is not only to support causes but also to support them.

The perfect storm is over, much of the anger has subsided, and there’s calm after the storm. It’s all about insight. Listen carefully and we can find our way back, if only we hear their voices:

  • “We are in this world together.”
  • “Help us…we will remain loyal.”
  • “Remember the little people.”

DORI MOLITOR is founder and CEO of WomanWise LLC (womanwise.com) a WatersMolitor Company, a hybrid consultancy-agency specializing in marketing brands to women. Dori can be reached at dmolitor-at-womanwise.com or (952) 797-5000.

October 31, 2009   Comments

Six Appeal

Marketing can help build strong shopper-strategies six ways.

By Chris Hoyt, Hoyt & Company LLC

One of the issues that is inevitably creeping-up on marketers is the need to get brand marketing involved with shopper marketing, regardless of whether these companies have already created a shopper marketing function that they think is doing the job for them.

We can assure you that if your marketing department is not involved with understanding how your consumers behave as shoppers, and providing the balance of the company with a framework for leveraging this intelligence straight up to the point-of-sale, you are making yourself vulnerable to any of your competitors who are doing this.

In this context, we suspect that many of you have repeatedly heard really irritating phrases like the following:

  • “Our company views shopper marketing as brand marketing in a retail environment!”
  • “Brands now need to communicate along the  entire path-to-purchase — both in-store as well as pre-store — right up to the point-of-sale!”
  • “If you don’t understand your consumer as  shopper, you don’t understand your consumer!”

The problem with these types of broad-brush statements is that they can unwittingly be turn-offs for marketing executives and product managers who feel their plates are already always full.

Because of the massive potential additional work that these phrases can conjure-up for marketing department decision-makers, it becomes easy to rationalize jettisoning the responsibility for these functions to some other department within the organization that appears to be inherently better equipped to address “retail.” So why not Category Management or Sales? “Shopper” = “Retail” = “Sales.” What could possibly be more logical, right?

Result: No marketing-trained perspective or input and therefore no truly differentiating or meaningful insights for either the manufacturer or retailer. There is almost no linkage between the category folks responsible for shopper marketing on the ground and the brands they represent.

Try as they might, category managers cannot escape the fact that category-based insights are relatively narrowly focused while shopper-based insights incorporate the whole enchilada. And it is the whole enchilada that gives one’s competitors big time indigestion, not the individual ingredients. But to dish-up the whole enchilada requires marketing expertise because only marketing has all of the ingredients and skill sets to blend them properly.

From a business standpoint, the reasons for the marketing department to get involved with consumers as shoppers keep piling up on an almost daily basis. Outside of the obvious — fragmentation, consolidation and consumer “tune-out” — loyalty has literally tanked.

In addition to the oft-repeated and somewhat self-serving POPAI research contending that “up to 70 percent of purchase decisions are unplanned,” we now have more current, independent, affirmation from Consumer Reports (no less!) which finds that unplanned purchases are now up to 84 percent (CRNRC, Aug 1, ’09).

Because this is not “new news” to the experienced marketing executive, why aren’t more marketing departments becoming involved with shopper marketing, even though a shopper function may already exist in their companies?

The biggest roadblock that we see at present is the lack of definition of just what this involvement entails for the marketing department — or, more specifically — where its responsibilities begin and end, and where the hand-offs occur between marketing, shopper marketing and customer-team marketers.

If one understood this better, one might be motivated to move on this. In addition, the good news is that, based on the advantage of many years’ hindsight, these responsibilities are not nearly as foreboding as the uninitiated might imagine. In fact, they can be relatively easily integrated as extensions of current skill sets.

The way we see it, the marketing department’s role in shopper marketing can be boiled down to six responsibilities. Taken together, these responsibilities are meant to establish a strategic framework for more detailed planning and implementation by the shopper-marketing department and customer-team marketers respectively (as one moves to the right of the table, planning becomes more detailed).

Specifically:

1. Ensure marketing expertise extends across the entire path to purchase. Shopper marketing is called shopper marketing because it cannot be effectively planned and implemented without marketing-trained input. The underlying idea is path-to-purchase (or “touch-point”) marketing — i.e., creating a predisposition to buy, maintaining top-of-mind awareness at each juncture along the shopper’s journey, and then bringing all resources to bear on triggering purchase at the point-of-sale.

While many elements are involved in this — creating awareness, understanding shopper needs, overcoming purchase barriers and leveraging one’s equities — one cannot maximize the potential of this strategy without proactive marketing-department participation.

Best-practice companies ensure this by assigning brand-trained people on a rotating basis to either their shopper-marketing department or to one of their customer teams as part of their career training.

Those assigned to the shopper-marketing department act as the interface between shopper marketing and the product groups, while those assigned to customer teams provide marketing-trained input to customer plans and continuity of thinking from brands to the point-of-sale. To maintain the integrity of this thinking, customer-team marketing managers report directly to the shopper-marketing department.

Action item: Identify best prospects for rotation and begin the process as soon as possible.

2. Profile target consumers as shoppers. The whole idea of shopper marketing is to understand how one’s core target consumers behave as shoppers and use this intelligence to win at the point-of-sale in different channels and retailers.

The premise — since validated over and over by hundreds of studies — is that once your target consumers decide to go shopping, they morph into a mindset that traditional demographically based segmentation approaches do not anticipate or encompass. Some call this mindset “shopper needs” or “need states.”

The reason it is so critically important for marketing people to understand their consumers as shoppers is that shopper needs often become the motivation of the moment. This frequently overrides the consumer’s predisposition to buy. In addition, these needs will often dictate what shoppers will buy, where they will buy it and why.

Obviously, the more one understands these needs, the better one will be prepared to provide guidance to one’s customer-marketing agency, shopper-marketing department and customer-marketing managers on what types of messages and triggers are most effective with different shopper segments in different channels and retailers. Alternately, continuing to leave this to chance in an environment where 84 percent of purchase decisions are unplanned is obviously not working well.

Action item: Profile your consumers as shoppers. Include behavioral data as well as demographics and psychographics. Share findings with shopper marketing to ensure maximum relevancy and targeted initiative development.

3. Understand what target shoppers are “solving-for.” What are shoppers trying to solve when they buy your brand? If the list says “something easy for Tuesday night’s dinner” or “snacks for soccer practice,” your competitive set can be very different than what shows up on your syndicated, point-of-sale data report.

What is your shopper’s decision process? This means more than the classic consumer decision-tree. This means understanding what influences your targets at the point-of-sale — how much time they are willing to invest in finding the right product, what information they need to make a decision, why they will trade up (or down) and what triggers will activate their purchases.

Why does the shopper choose your brand when confronted with a plethora of choices on the shelf? Understanding the equities that resonate most strongly with your target shoppers can help them cut through the clutter and make the difference between winning and losing at the point-of-sale.

Action item: Identify information gaps and add questions about your target shoppers to all research initiatives. Communicate findings to the shopper-marketing department, customer-marketing managers and other appropriate departments.

4. Identify and address universal purchase barriers. Purchase barriers are elements of either the brand or the retail environment that prevent shoppers from choosing your brand. Universal barriers are not store-specific and need to be addressed by the brand itself. The most common universal barriers are:

Low brand awareness. Are target shoppers familiar with your brand and what they can do for them? If not, are you effectively communicating this via packaging or in-store messaging? If your brand comprises many flavors, colors or forms, can shoppers easily distinguish and find what they want?

Choice confusion. Does your package “pop” on the shelf or is it “lost?” Are points-of-difference communicated clearly? Do target shoppers have enough information to determine that your product is right for them? Can they determine this quickly —  without having to “work” for it?

Poor value perception. Does your brand clearly communicate its value when compared to competition on the shelf? Do shoppers understand the differences that justify a premium price for your brand?

Action item: Conduct store checks in different channels and formats to assess the in-store health of your brand versus your competitors’ brands. Observe how shoppers interact with your brand and which barriers might be preventing purchase.

5. Ensure your brand message is sufficiently broad and flexible to translate in-store.

The fact that 95 percent of shoppers shop for packaged goods in five or more different channels or formats every month is a pretty good indication that different stores address different needs of the shopper at different times.

A shopper’s choice of store on any given trip is often an indicator of his or her mindset and expectations — quick in-and-out at a drug or convenience store, healthy choices at specialty food stores, value at a Walmart, full family shop at a supermarket, etc.

To leverage this understanding, shopper marketing crafts messaging that is as relevant as possible to shopper mindsets when they shop for your brands in these different channels or stores.

To be effective for shoppers, these messages are rarely direct translations of the national copy. They are frequently truncated and abbreviated to cull-out what is important to shoppers when in a particular mindset. Therefore, it is obviously important that the brand’s over-arching messaging platform be sufficiently broad and flexible to accommodate these variations.

Action item: Review the brand message or communications idea for in-store flexibility.

6. Integrate into annual brand plan and establish a discrete budget. To maximize the potential of one’s shopper-marketing function, it should be integrated into one’s annual brand plans — complete with objectives, revenue projections and budget allocations — just as any other communications channel.

In reality, most shopper-marketing start-ups are funded from a corporate brand tax until they are well established. The end goal, however, is to incorporate them fully into the brand plans as quickly as possible. Only when shopper marketing is incorporated into the plan does the brand have enough “skin in the game” to provide shopper marketing with the information and cooperation it needs to be truly successful.

 Incorporate meaningful metrics for shopper marketing. Unlike traditional in-store promotion, best-practice shopper marketing is not measured on lift and ROI alone. Longer-term marketing metrics like share growth, source-of-revenue growth and increased household penetration can and should be included where data is available so one can accurately judge shopper-marketing investments against other options in the brand plan.

Action item: Meet with shopper marketing during annual planning to discuss objectives, opportunities and metrics.

So here’s your decision: You can truly market your brand all the way along the path-to-purchase if you can carve out time to: 1) identify best marketing prospects for rotation into shopper marketing; 2) profile your consumers as shoppers; 3) add shopper questions to brand research; 4) assess the in-store health of your brands; 5) review your brand message; and 6) meet with shopper marketing during planning.

Or … you can let those irritating phrases continue to rent space in your head for free. Your choice.

CHRIS HOYT is president of Hoyt & Company, a Scottsdale, Arizona-based marketing/sales consulting and training organization that specializes in shopper marketing. Chris may be reached at (480) 513-0547 or at chrishoyt-at-hoytnet.com.

October 31, 2009   Comments

Real-Time Loyalty

Green Hills Market builds loyalty where the shopper, product and store converge.

By Richard Guha, Max Brand Equity

Green Hills Market has never settled for running with the pack. This independent grocery retailer in Syracuse, New York, has led the way in creating and sustaining customer loyalty in the most competitive of markets and the most trying of economic times.

With 23,000 square feet of space, this single store generates more than $18 million in revenue each year — twice the revenue per square foot of almost any other grocery store in the country. This level of productivity and an unsurpassed use of retail technology to achieve it have earned Green Hills admiration from all over the globe (see sidebar).

So now, when economic pressures are impacting everyday grocery spending as much as discretionary spending and touching consumers in every market segment, retailers and manufacturers can once again look to Green Hills.

While most retailers are grappling with making loyalty a two-way street, Green Hills is going beyond the traditional methods of creating loyalty.

Gary Hawkins, the great-grandson of the Green Hills founder, is doing so by using technologies to capture the three-way intersection where the shopper, the product and the store converge. This creates the connection that leads to the perfect moment in retail — the purchase.

Capturing that moment and recreating it over and over is the new art of in-store retailing that Gary, who launched one of the first loyalty programs in the U.S., is now pioneering at Green Hills. Knowing that this moment is not the same for every shopper in every store is the key to building a successful operation that can keep pace with its customers.

Utilizing the most advanced in-store business intelligence system available today to deliver aggregated data about shopper behavior, Green Hills can now understand everything about how its customers spend their time in the store.

This advanced shopper insights system tells Green Hills not just who comes in the door and what they check out with, but everything that happens in between.

“This in-between time is where the golden opportunity lies,” says Gary. “Knowing where they go and how they engage within the store is the key to understanding when, where and how my store can be managed better and ultimately become the store-of-choice for meeting their needs. This is something much deeper than getting the right coupon in their hands in time for their shopping trip.”

A New Ecosystem

To seize the opportunity to create that connection to the store and the product, a new way of measuring shopper behavior is paramount. While some great technology exists today to measure human action and behavior, very few are optimized for analyzing behavior in a retail environment.

Getting technologies out of the research labs, packaged and optimized for the retail store environment, is key to bringing these kinds of capabilities to fruition. The nuances particular to shoppers are the golden nuggets that help retailers and manufacturers truly affect change and create loyalty.

For example, knowing when a shopper is “thinking,” “engaging” or “comparing” is critical to determining how to package, present, message and display a product. These attributes are usually, at best, gathered through observation studies or other temporary efforts that only look at small sample sizes for short periods of time.

Gary notes that purchase decisions for consumables are moving away from the home to inside the store. Like most informational needs today, the new world of “don’t give it to me until I need it” information has caused the concept of the shopping list to be replaced with the “I’m here now, so what should I buy?” shopping mentality.

To meet the needs of this new type of shopper, Gary draws on his years of experience in retail technology, shopper loyalty and business success to get the blueprint right for the next wave of running a successful retail business. He knows it means being on top of what is going on in the store every hour of every day.

The key to truly capitalizing on this kind of information is to use technologies that live in the store 24/7, producing insights weekly, daily and hourly. Creating true loyalty and customer value doesn’t come from taking an occasional snapshot view into the behavior of a few customers.

“The challenge in today’s dynamically changing customer and product landscape is to keep the data and insights coming every day from every store. Even if you could afford it, the answer isn’t in hiring more consultants to capture data,” says Gary.

Gary refers to his approach as Retail 3.0 and has published a series of white papers about the concept and the various technologies he is employing to make his vision a reality.

For example, Green Hills uses computerized video analytics to get accurate, objective, ongoing, actionable information about shopper behavior. This system employs some 35 fixed, state-of-the-art IP cameras to bring the kind of highly granular shopper behavior data found in the on-line environment to the retail store.

Shopper behavior is tracked through analytics and is integrated with in-store data sources such as point-of-sale data. The result is ongoing traffic and conversion-rate analysis, not only for the store, but also by aisle, display and down to the SKU level.

These data allow a retailer or manufacturer to optimize layout, shelving, displays, and packaging based on real data, minimizing the guesswork that has long been an art form in the retail business.

Green Hills has also implemented a technology that provides employees, suppliers and shoppers
with detailed access to transaction data. Shoppers actually can log in and view their purchases online, giving them a window into their expenditures that they appreciate.

Vendors, meanwhile, can open a different view of this transaction data so they can see, in real-time, how their products are moving in-store, and re-supply the store as necessary.

Yet another technology triggers email and text messages to vendors, alerting them when promoted items sell a specific quantity within a specified timeframe. Other solutions include the first on-shelf availability and inventory tracking technology available in the U.S.

“The answer lies in an ongoing automated capability, that’s affordable and powerful enough to aggregate across millions of data points,” says Gary.

Systems that provide insights from both a macro and micro level, and do it in an ongoing way as part of an operational imperative, are most valuable to the retailer-manufacturer partnership. This type of capability provides the brand manufacturer with real-time insights into if and when a shopper can be influenced by displays, packaging, messaging and product placement.

This, of course, strengthens the brand part of the connection. It allows the retailer to know who those shoppers are, when they come in the store and how they engage. This means they can manage staff, space, promotions and assortment to optimize the shopping experience and build efficiencies in the store while creating an emotional connection that deepens shopper loyalty.

Green Hills demonstrates that the best technologies for the retail store are those optimized specifically for it, and those that automate data and insights to ensure daily operational use.

The rewards are undeniable. Even though its customers have many choices for their shopping needs, Green Hills continues to bring in new shoppers every day while retaining existing customer relationships.

As the loyalty deepens, the business grows and the right products are moving off the shelves. For Green Hills’ shoppers, the products and the store itself seem to rise up to meet them, creating that perfect moment, where connection creates loyalty. •

Sidebar: The Green Hills Story

Green Hills started 75 years ago, in 1934, when Carrie Hawkins opened a summer farm stand on Route 80 in Odondaga, New York. At first, it was just a sideline to the Hawkins’ dairy farming business, with Carrie selling corn and extra vegetables from her garden and the farm.

But in 1948, the family’s large dairy barn burned down, and Carrie’s son, Clifford, decided to forget about the dairy business and run the farm stand full-time. Within a few years, Clifford’s son, Keith, joined the family business and began expanding it into a full-service supermarket, one department at a time.

Still located on the site of the original farm stand, Green Hills continued to grow through the decades, and today still has customers that shopped the store as long as 50 years ago.

Keith’s son, Gary, followed in the family tradition shortly after finishing college in the mid 1980s. At the time, he began to see other retailers in the marketplace growing rapidly and expanding their fresh and perishable food offerings while placing greater emphasis on price.

Before long, Gary launched one of the first frequent shopper programs in the United States in 1993. He envisioned the program as a way for Green Hills to mitigate the leverage that larger retailers had enjoyed.

Over the ensuing years, Gary constantly searched for new and different ways to use technology to serve its customers more efficiently and effectively, on a one-to-one basis. Green Hills steadily evolved into a “laboratory” to test different technologies and marketing initiatives.

In the mid ‘90s, as word began getting out about Green Hills and its success, Gary was invited to speak at various industry events in the U.S. and around the world. This led to Gary forming a consulting practice, Hawkins Strategic, for both retailers and manufacturers, which he now runs full-time with his son, Sterling.

Over the past five or six years, their focus has been on the use of shopper data not only as a management tool, but also leveraging that information to move away from mass promotion and marketing. The goal, says Gary, is to create loyalty through personalized, relevant and individualized marketing.

RICHARD GUHA is president of Max Brand Equity, a consulting firm focused on company valuation growth. He is also an advisor to BVI Networks, providers of in-store intelligence platforms. Email: richard.guha-at-maxbrandequity.com or 203-659-0285.

October 31, 2009   Comments

Happy @ Zappos

Tony Hsieh whips up a happy culture and enviable loyalty for Zappos.

A bell rang and applause rippled just as Tony Hsieh began answering a question about his future with Zappos. Either his staff was really happy with his answer or something else was going on.

If his staff could hear him, they probably would have applauded since Tony said he planned to stay with Zappos for many, many years. Some trepidation about that would be understandable, given Amazon’s recent acquisition of the company for $847 million.

But they couldn’t hear him and, as it turned out, the commotion was just part of the prevailing élan at Zappos, the online emporium whose fortunes do not depend on selling things so much as spreading happiness from its employees to its customers (see sidebar).

It’s hard to imagine anyone happier to fulfill that vision than Tony Hsieh, who, about 10 years ago, sold his first dot-com for $265 million, at age 24. Don’t you hate him already?

After that, Tony became a venture capitalist, and at first Zappos was just another of his investments. But he soon saw the company as a platform to deliver extraordinary customer service and became its chief executive.

Most famously, Zappos has a 365-day return policy, with free return shipping. But the deeper story is about science — the science of happiness — which infuses the Zappos culture and explains its astonishing success.

That bell rang because a tour group was visiting the Zappos offices, headquartered near Las Vegas, and someone decided it was a good moment to ring it, make a confession and hope for some applause. This is perfectly normal “fun and weirdness” at Zappos.

Tony said he couldn’t hear this particular confession, but volunteered some of the top confessions posted next to the bell: One of them was: “I forgot my deodorant.” Another was: “I keep my phone in my bra.” And: “I slept in four beds with three guys this week.”

What does the “science of happiness” do for Zappos?

There’s this whole field called “positive psychology” that did not exist before 1998. Prior to then, all the psychology was pretty much about how to make people who had something wrong with them feel more normal. But no one really studied how to make normal people happier.

So, over the past 10 or so years, there has been research into positive psychology, and some of the findings are pretty interesting. Probably the number-one most important finding is that people are very bad at predicting what will bring them happiness in the long run.

There have been studies of lottery winners, for example, where you look at the happiness level right before winning the lottery and then a year later. Most people would think that if they won the lottery a year later they’d be happier, when actually their happiness level drops right back down to where it was before winning the lottery, or sometimes even a little lower.

Isn’t that also true when something bad happens?

Yes, that’s true. So, given that people are bad at predicting what will actually make them happy, you can’t just rely on asking employees what would make them happy. The same thing is true of customers.

A few different frameworks have come out of the research in terms of what actually matters when it comes to making people happy. It’s a purposeful approach that’s backed by research.

How has that been applied at Zappos?

Some of this we stumbled into accidentally, but now that we have the frameworks we understand why it works.

One of the frameworks is that happiness is about four things: perceived control, perceived progress, connectedness (meaning the number and depth of your relationships) and being part of something that is bigger than yourself that has meaning to you.

For example, for perceived control, we used to give our control center and warehouse workers an annual raise; they really didn’t have much control over it. Then a few years ago in the call center we implemented what we call “skill sets” — it’s kind of like merit badges in the Boy Scouts. There are 20 different skill sets they can train for, acquire and get certified on. Associated with each skill set is a small bump in pay.

So, it really puts employees’ pay and training under their own control. Employees who have a higher interest in making more money can go after all 20 of those skill sets. If they are perfectly happy staying at the same pay and not learning any additional skills, that’s fine too.

How about perceived progress?

For perceived progress, in our merchandising department, for example, we hire people at the entry level. A few years ago, you’d come in as a merchandising assistant — we call that an MA.

You would do that for 18 months and get certified. Along the way you’d become an assistant buyer, which we abbreviate as AB, and do that for 18 months. Then you become a buyer.

It’s a three-year process and we did it that way for a while. But then we ended up breaking it down so that instead of just being an MA for 18 months, you were MA1 for six months, an MA2 for another six months, an MA3 for six months and then AB 1, 2, and 3 for six months.

It was the exact same certification — nothing really changed. But we broke it down into six-month chunks instead of 18-month chunks and found employees were much happier because there was that sense of perceived progress.

What’s the story on connectedness?

In terms of the connectedness, our number-one focus and priority as a company is company culture. If you come into our offices, you’ll see that this whole team and family atmosphere that we have here really contributes to employees being more engaged and happier.

There’s plenty of research that employee engagement leads to better productivity. One of the best predictors of employee engagement is whether they have a best friend at work or how many friends they have at work.

And the larger vision is?

For the first few years, we were just about becoming the number-one online retailer of shoes, and then we decided we wanted to be about customer service.

We found that once we shifted into something that was more meaningful and a larger vision for employees that they were a lot more passionate and engaged about the company.

We’re expanding that now to where our company believes in delivering happiness, whether it’s to employees or customers or even our vendors.

Is it really just the sum total of those four things that makes Zappos a happy place?

I think it’s the sum total of those four things, but ultimately the number-one thing is the culture, which we’ve formalized into ten core values. It’s about making sure that we only hire people whose values match the corporate values.

Don’t you sacrifice creative tension when everyone conforms to that culture?

That’s a possibility depending on what the values are, but one of our values is to create fun and a little weirdness. That’s just a fun way of saying that we believe everyone is a little weird somehow. We really recognize and celebrate each person’s individuality and creativity, so that’s how we get around that.

What is the right amount of weirdness?

Well, if you’re at zero or one then you’re probably a little bit too uptight and straight-laced for us. If you’re a ten, you might be a little bit too psychotic.

Is the Zappos culture entirely homegrown?

It’s entirely homegrown and it continues to evolve as the company grows. It’s literally homegrown because I sent an email out to the entire company a few years ago and asked them what our values should be. I got a bunch of different responses back and compiled them.

Can a happy culture be rehabbed or does it have to be built from scratch?

I definitely think it can be changed. Ultimately, it just comes down to a complement of values. A lot of companies have values or guiding principles that read like a press release or that you see on a meaningless plaque on the wall. Maybe you learn about it on your first day of orientation and then that’s it.

So, what books like Good to Great or Tribal Leadership have found is that it doesn’t actually matter what your values are as long as you commit to them. Committing means you’re willing to hire and fire and do the performance reviews based on the outside of what’s typically considered your normal job performance.

What would someone have to do to get fired at Zappos?

One is just job performance like any other company, and two is not living up to our core values.

Do you also fire customers?

We do shut down some customers’ accounts if they are verbally abusive to our reps or if they have a consistent pattern of returning items that clearly have been worn. We make sure to educate our customers that we are a shoe company, not a shoe-rental company.

Some say that your most loyal customers are also the least profitable.

I don’t know that I would make a blanket statement like that. But I do know just anecdotally that the customers who are the most vocal are not necessarily the ones who are the biggest spenders, and vice versa. I don’t know why that is. Maybe it’s that people who spend a lot of money just have a higher expectation of better service so they’re less wowed by their interactions with us.

Is your focus on customer service the ultimate in branding?

Not necessarily. Walmart is a brand that’s all about low prices, and last I heard they were doing just fine. Apple’s primary benefit is design and they are doing well. Service is just what we want to build our brand around, but I don’t think it’s the only possibility.

Are there other branding concepts that intrigue you?

I think all of them are intriguing. There are probably different values or cultures that would be more likely to succeed. I don’t know what the Apple culture is like, but I’m guessing it’s a culture that really celebrates design and product innovation, which is different from our culture.

Do shoes trigger more happiness than most other product categories?

I know for a lot of women, at least, shoes can be a very emotional product. I, myself, am probably the wrong person to ask because I’ve never really been into shoes.

How often do you buy from Zappos yourself?

I probably buy running shoes once or twice a year and then Ugg slippers once a year, and maybe a pair of dress shoes once a year.

Do you ever worry that you’ve created something that you can’t sustain?

Our whole philosophy is that there are always financial constraints on what we can deliver to our customers. The very best service you could possibly imagine would be if you ordered a pair of shoes and an employee hopped on a plane, flew them to you and you got them three hours later. That would be better customer service than we’re delivering today but it doesn’t make financial sense, so we don’t do it.

Why are you a fan of the telephone as a medium?

I don’t know, probably for the same reason you wanted to interview me by telephone.

I find there are fewer distractions by telephone.

Yes, that’s part of it. It’s also much easier to build a personal and emotional connection with someone remotely by telephone than by email, for example.

Are there any other media you think are underrated?

I would say meetings in casual environments, like dinner, or at a bar, or camping trips or hiking, or whatever. We encourage our employees to do that a lot, not only with each other but also with their vendors. We try to train our managers to spend 10-20 percent of their time outside the office.

Why don’t you like the term “social media”?

I think it puts the emphasis on the wrong thing. It’s also the latest buzzword that consultants like to use and I’m generally anti-consultant.

The best social media is the telephone and yet that’s boring so no one wants to talk about it. People tend to refer to “social media” as a technology, but that skips over the actual benefit or purpose of it.

For us, it’s more about forming personal and emotional connections.

You’ve personally embraced Twitter in a big way.

Twitter is one example of how I connect with people, but people also put Facebook and MySpace under “social media” and I don’t really use either of those.

Do you see value in Twitter that others haven’t?

I’m sure there always will be some “next big thing,” but ultimately what matters is just embracing whatever it is that you would use naturally, even if it wasn’t for business purposes. I was using Twitter myself — just with my friends — for a year before I got Zappos involved with it. I see the value in it because we use it just out of the enjoyment of using it.

That’s why our interactions come across as authentic and not annoying. A lot of other marketers are trying to figure out Twitter but they don’t really use it themselves; they are using it just as a way of marketing their business.

Some of your Tweets are pretty funny.

For each of the Tweets I’ve sent out, my goal is to try to do one of four things with my followers: inspire them, connect with them, educate them or entertain them.

So, trying to make my Tweets funny falls under the “entertain them” part of it. But my focus is more on how is this going to benefit my followers as opposed to how this is going to benefit me — which is how I think most people approach it.

Is there anything brick-and-mortar retailers could apply from the Zappos model?

Oh, definitely. There’s so much opportunity in person. Stores have the total upper hand in terms of bringing personal and emotional connections. It’s also about creating a “wow” customer experience.

There are kinds of innovation that we haven’t even seen or thought of yet. If you think about the circus, for example, which was basically done the same way for maybe 100 years, and then Cirque de Soleil came along and reinvented the circus.

Would Zappos ever open stores in malls?

I wouldn’t rule it out. We do have an outlet store in Kentucky to get rid of our old inventory at the end of the season. While the outlet store is effective, we launched 6pm.com, a sister site that’s been much more effective at liquidating inventory.

Is it true you spend almost nothing on marketing?

It’s true that most of what we would have spent on marketing we put into the customer experience. But we do buy keywords online and we have an affiliate program and so on.

We do a little offline advertising, but generally our whole philosophy toward marketing is that if it pays for itself in the first sale, then we might as well do as much as we can.

But the biggest driver of our growth has been through repeat customers and word-of-mouth. That’s why we’ve put most of the money that we could have spent in marketing into free shipping both ways, and running our warehouse and call center 24/7. We let our customers do the marketing for us.

What is your greatest frustration at Zappos?

I would say probably just wishing that we could do things faster, but I think that’s probably true for every company. I’m the impatient type. I want to think of an idea and have it live in an hour or so. That’s not really practical.

How big can Zappos get before it gets bad?

As long as everyone here sees it as part of their job to aspire to the culture, then it can scale.

What will change following the Amazon acquisition?

I can’t comment beyond a letter I sent to our employees, posted at: http://blogs.zappos.com/ceoletter.

What are you thankful for?

A lot of things. At Zappos, it’s all about the friendships and relationships. Even if Zappos were to go under tomorrow, everyone here would have at least gotten great friends and relationships out of it. •

Sidebar: Viva Los Zappos

Tony Hsieh “once described Zappos as ‘a service company that just happens to sell shoes.’’’ In fact, Zappos no longer just sells shoes — it has expanded into “clothes, consumer electronics and other items.”

But the point is that Tony’s “goal is to create a corporate culture that allows Zappos to prosper no matter what business it is involved in … He reckons Zappos can cultivate a reputation for outstanding service to the point where it, too, can become a springboard into several markets.”

So far, Tony has done well right where he is, last year recording some “$1 billion in sales even as other retailers were struggling.” He’s done it by creating a distinctive culture based on 10 values, starting with “deliver WOW through service,” and including “create fun and a little weirdness.”

That’s why the Zappos headquarters is festooned with “jungle creepers that hang from the ceiling” and its employees “rattle cowbells, shake pompoms and bellow greetings as visitors pass their desks” (if you’re interested in a tour, you can sign up on Zappos.com).

There’s also $2,000 for any employee who quickly decides this zappiness isn’t for them and quits. The idea is to weed out cultural misfits, but so far, only three employees have cashed out.

“Zapponians” also get lots of training so they can solve customer problems without managerial guidance. “You have as much power to help a customer as Tony does,” an employee says.

Such sentiments are compiled annually in a 500-page Culture Book, “in which many of the firm’s 1,400 staff explain what its culture means to them” (you can request a free copy by emailing ceo@zappos.com).

The bottom line is that “three-quarters of Zappos’s sales come from repeat customers, and its revenues are still growing this year,” even though it sells most of its goods at full price.

[Source: The Economist, 4/18/09 ]

TONY HSIEH is ceo of Zappos.com, where he has grown merchandise sales from $1.6 million in 2000 to more than $1 billion in 2008 by focusing on customer service. Tony also co-founded LinkExchange, an advertising network that was sold to Microsoft in 1998.

October 31, 2009   Comments

Precision, Passion & Prudence

A study of multichannel shoppers yields valuable insights.

By Masha Sajdeh and Nick Jones, Arc Worldwide

Let’s dispel the misnomer that shopper marketing is just in-store marketing. A growing number of shoppers “shop” in more places than just the store. So, contrary to popular belief, shopper marketing must be viewed as more than just marketing in-store.

People used to walk into a store and buy a television, but times have changed. Today, a shopper may research TVs in magazines and online, browse a store circular delivered in the mail, go to the store, and while there check for online prices on a smartphone, maybe even order the set online, and pick it up in the store.

Forrester Research predicts that by 2012, nearly 50 percent of transactions will be executed with the consumer crossing channels. This trend represents a fundamental change in the way people shop, but there has been a dearth of insights for marketers to leverage.

Arc Worldwide recently completed a research study that uncovers new insights into the multichannel shopper. This study provides a look at cross-channel shopping across a broad scope of categories studied, including durables, services and consumer packaged-goods.

The study was conducted online, and included 60-minute interviews with more than 5,600 respondents in the United States, United Kingdom and France. Their shopping behaviors, attitudes, motivations and barriers were studied across 10 channels such as stores, online, phone, catalog and flyers.

The research illuminates who multichannel shoppers are, why they shop across channels, what role the different channels play in the shopping process, and how these shoppers behave in 20 specific categories and industries.

An Engaged Shopper

Multichannel shoppers are driven by a need to make an informed purchase decision and put in due diligence to ensure they are getting exactly what they want. They are driven to get the best price possible and will shop around to find it.

For them, it’s worth spending the time and they enjoy the hunt. Shopping is not a chore for multichannel shoppers; it’s, in fact, quite a delight. They enjoy immersing themselves in the experience and are on a constant lookout for great deals and new trends.

Whether they are shopping everyday consumables or the occasional big-ticket item, heavy multichannel shoppers spend more time shopping, and shop in many more places than light shoppers. While the store is a common place for both heavy and light multichannel shoppers to shop, differences emerge depending on the category. Light shoppers stick to the store for packaged goods, while heavy shoppers also shop alternative channels such as online, circulars and infomercials, tripling the time spent shopping for packaged goods. When shopping for high-ticket durable goods, both heavy and light shoppers spend more time online than in the store. But heavy shoppers go the extra mile, shopping around in different channels.

Categories Drive Behavior

There is no one-size-fits-all approach to multichannel marketing. To truly grasp the complexities of multichannel shopping you must examine it from three dimensions: the category, the shopper and the channel.

Different categories experience varying degrees of multichannel shopping. Depending on the category being shopped, different patterns of shopper archetypes emerge. Once you determine which type of shopper dominates your category, understanding the channel mix they use proves to be uniquely relevant for your category.

While multichannel shopping is a rapidly growing occurrence, it is not equally established across all types of categories. There are varying degrees of multichannel shopping and buying behaviors.

Shoppers are prone to multichannel shop durable categories such as computers, automobiles and appliances more than they are for packaged goods. But not all packaged goods are alike; certain categories like skin care and pet supplies have emerging multichannel shopping behaviors. As people shop in more places, they generally are more open to buying in more alternative and emerging channels.

The behavior in categories that are likely to see a prevalence of multichannel shopping tends to be quite different from those that don’t. To a large extent, this behavior is explained by a risk/reward model developed by Leo Burnett that illuminates the involvement, approach and mindset that people have towards a category.

Multichannel shopping is more heavily affected by risk than reward. When risk is eliminated from the process, multichannel shopping diminishes because people no longer feel the need to shop around.

Risk helps explain why durables are heavily multichannel shopped while packaged goods are not. Because durables cost more, the risk of failing to find the “perfect” product is higher and shoppers are motivated to save big dollars. Durables are also purchased less frequently and are more complicated to shop, so shoppers need to research them more. In contrast, consumables are purchased routinely and require little effort to shop.

Just as risk is a factor in multichannel shopping, reward also draws people to shop in certain categories more than others. Certain non-durables such as books, CDs and designer jeans are multichannel shopped because people treat these as a leisure activity and hence enjoy shopping for them. This is in contrast to other categories that may be viewed as burdensome or routine.

Similar shopping patterns don’t necessarily translate into similar purchase patterns. Although durables are shopped one way and consumables another, purchase patterns don’t necessarily align. Computers and accessories are purchased online or in an alternative channel, but autos are not. Books and music are purchased online, but designer jeans are not.

To a large extent this phenomenon is also explained by the risk dimension. Products that shoppers need to touch and feel before purchasing won’t be purchased in an alternative channel unless the uncertainty is mitigated. Music and books have both successfully enabled people to sample the product, and overcome the barrier to purchase. However, shoppers don’t yet feel comfortable buying designer jeans without trying them on.

The Packaged-Goods Question

The inevitable question for packaged-goods marketers is, how will the multichannel shopping phenomenon affect their categories? We see that certain packaged goods — like skin care, pet supplies and packaged organic foods, are experiencing higher levels of multichannel shopping and buying than others.

This is because categories like skin care are becoming more complex as new products emerge, making it difficult to navigate selection at the shelf. Skin care has relied on more informative channels like direct sales and infomercials to address the complexity and intimacy of the decision.

Similarly, unfamiliar categories, such as packaged organic foods, have a need for research. In the case of pet food, shoppers rely on more information sources because they’re often unable to make a choice themselves.

Marketers have enabled people to indulge their passions for their pets and now shoppers embrace social media networks to celebrate their passion. In each of these instances, shoppers are willing to put in an extended effort to make an informed selection.

What are the barriers holding back other packaged goods? Why is cereal any different than pet food? Why are shoppers willing to shop more channels for their pet’s food than their own? Several reasons prevail.

Well-established, low involvement, routine and unplanned purchases primarily take place in-store. Limited channels to purchase also restrict multichannel shopping. If packaged-goods marketers want to engage multichannel shoppers, they must create more opportunities for shopper involvement through more engaging experiences in alternative channels.

Multichannel Shopper Archetypes

To engage multichannel shoppers in your category, you need to understand them. In examining multichannel shopping behavior across the 20 categories, we also uncovered six shopper archetypes based on their overall attitudes and motivations to multichannel shopping.

Among these general shopper archetypes, two dominate among heavy multichannel shoppers — the Strategic Savers, Opportunistic Adventurers and Savvy Passionistas are about average — representing motivations driving multichannel shopping — precision, prudence and passion.

 Strategic Savers are committed to doing due diligence to find exactly what they are looking for at the best possible price. Opportunistic Adventurers get a thrill from treasure hunting and discovering unbeatable deals, and Savvy Passionistas enjoy shopping around to find the latest and greatest.

Among the other archetypes that emerged: Quality Devotees are highly discerning and need to experience products firsthand; Efficient Sprinters readily pay more for convenience; Dollar Defaulters use price as their primary decision criteria, sacrificing both brand and experience.

 When we apply the category lens, different archetypes dominate in different categories. For example, within packaged-goods categories like laundry detergent, Dollar Defaulters and Efficient Sprinters skew highest, and represent the prevalent price-driven, low involvement behavior.

 Within emerging packaged goods, such as skin care and pet supplies, Dollar Defaulters and Efficient Sprinters still over-index, but Opportunistic Adventurers and Savvy Passionistas also emerge as these categories have become more engaging to shop. Finally, within durables, Strategic Savers and Quality Devotees are both over-represented as these are high-ticket items that require research and involvement to find the right product at the right price.

The type of multichannel shoppers that dominate in your category determine the mix of channels that should be used to meet their unique shopping needs. The store is used equally by all types of shoppers. Online is also a popular channel among many archetypes, but the heaviest multichannel shoppers — Strategic Savers — tend to use online more to research and price compare.

 Magazines are preferred among Savvy Passionistas and Opportunistic Adventurers because they offer a fun way to browse for new trends. Catalogs are a favorite among Savvy Passionistas for gathering inspiration, but Strategic Savers also use them for comparison shopping. In contrast, the Efficient Sprinter and Dollar Defaulter are relatively less engaged across channels.

Different channels serve different needs. Different archeypes use different channels because each channel does something different for them. Television, magazines and catalogs are used for inspiration. Online, flyers and circulars are employed to save money and find the best deal. Stores, customer service and sales reps help with experiencing a product first-hand. Circulars are part of a routine and so are stores. Shoppers haven’t defined a clear role yet for mobile phones; this is an emerging channel.

Decoding the category, shopper and channel tri-factor is at the core of uncovering the multichannel story for marketers. What should you do? Ask yourself these key questions:

  • How prevalent is multichannel shopping in my category?
  • Which multichannel shopper archetypes dominate in my category?
  • What channel mix do shoppers use in my category?

The answers may well lead you to harnessing the power of the multichannel shopper and fueling their passion for shopping.

MASHA SAJDEH is chief shopper strategist and leads the insight group at Arc Worldwide, the marketing services arm of Leo Burnett Group. She may be reached at masha.sajdeh-at-arcww.com.

NICK JONES is executive vice president, retail practice lead and account director at Arc Worldwide, specialists in shopper, digital, promotion and direct marketing. He may be reached at nick.jones-at-arcww.com.

October 31, 2009   Comments

Shopping for Value

Let’s give shoppers more value than they pay for.

By Al Wittemen, TracyLocke

When I think of loyalty, I don’t think of brands. I think of people. I think about what it is that a person does that makes him or her so special that it makes me loyal. It’s the intellectual, spiritual and emotional connections that make the difference. For me, loyalty is having lunch with my friend Tim at the Little Kitchen in the Compo Shopping Center on Route 1 in Westport, Connecticut.

Mitch Albom had his lunch with Morrie, which had an impact on his life, and my lunches with Tim do the same for me. Our lunches are always about making people think, smile, and realize that sometimes there’s a different way of thinking that can lead to a more creative solution.

These lunches are always about the truth. They always begin with what’s new with shoppers and retailers and their collaborative relationship. In years past, when we talked about brand loyalty, our assumption was that whatever you wanted to do at retail could be done.

That’s not true today. We now also have to consider what can be done with the retailer, and that affects what we can do to build brand loyalty.

The second issue concerns the difference between what retailers and brands say, and what they do. This dichotomy intrigues me. The reality is that some marketers develop plans based on who they are, how they live and what they do, versus whom they are marketing to and what they can do for them.

Last but not least, when Tim and I have lunch, we’re always looking for who’s doing it best and the results achieved, because it’s always about keeping it real.

So, we’re having lunch, and as usual, I always get around to asking Tim about the next issue of the Hub. It’s not like I shouldn’t remember. But this time the issue is going to be about brand loyalty. And my first thought was, “Hey, piece of cake.” Hell, that’s who I am and what I’ve done my entire life.

In fact, my career was built on making people loyal to brands. So, whether it’s Heinz ketchup, Finlandia cheese or Swift beef, it’s all about creating brand loyalty, and I know how to do that.

But the truth is that there really is no such thing as true brand loyalty anymore. Almost nobody buys the same brand all the time. Even fewer people will bother to find a different store if their favorite brand isn’t available. That’s the real acid test of brand loyalty and it’s a test few brands, if any, can pass every time.

Loyalty is bull when you apply it versus those definitions, especially in consumer packaged-goods, ever since the Great Recession. Never before have we seen life in general — not to mention ingrained purchase behaviors — so disrupted.

And yet, everyone has an answer to the question, “Which brand are you most loyal to?” Often, it’s a food item. Some people are addicted to the taste of Tabasco sauce, Heinz ketchup or Diet Pepsi. Others are hooked on personal items, like Dove soap or Head and Shoulders shampoo.

So, this isn’t just another Hub issue about loyalty, or another time in space where we’re going to talk about brand loyalty. This is really a watershed moment where never has the concept of brand loyalty been so important to achieve, and yet so difficult to accomplish.

There is no “normal” where loyalty is concerned today. There’s only a new book, yet to be written, on brand loyalty.

I decided that the only way to attack brand loyalty in a fresh way, is to go back to the three things Tim and I talked about at lunch: The truth about shoppers and retailers; the reality that brands have more price pain; and the fact that, despite all of this, people still believe they are loyal to certain brands even though those loyalties may have shifted.

A Matter of Trust

The truth about consumers and customers can be summed up by this quote from Kelton research: “This recession has accomplished what markets spend lifetimes trying to do: disrupt ingrained purchase behaviors and encourage change.”

 We marketers used to make a living on creating demand through increasing impulse purchases, for example. That’s not as easy anymore. One recent survey found that 74 percent of shoppers have changed their shopping behavior and are making fewer impulse purchases, using more coupons and buying more private label.

I saw this with my own eyes while doing in-store intercepts last Saturday. Most shoppers had their heads down, reading their shopping lists, clutching their coupons, and checking their circulars. Nobody looked particularly happy.

It’s not just at the supermarket. You could pick almost any brand in America and it is at risk. General Motors used to be a brand everyone aspired to. The Gap used to sell what everyone was wearing. We all remember the Marlboro Man. And who didn’t want an account at Merrill Lynch?

Most people don’t even mention these brands in polite company today, much less trust them enough to be loyal to them. This collapse in consumer trust has dramatically changed shopping behavior.

Whom do we trust anymore? We used to implicitly trust brands, but now it’s almost as though brands are guilty until proven innocent. A few have held onto their equities — Walmart, McDonald’s, Nike and Apple, come to mind. But most others are slipping.

To restore trust, marketers have to think about re-framing value differently. They have to think about the cost-to-benefit ratio. The challenge is that it used to be easy to identify the number-one attribute of a brand, develop a positioning based on that, and communicate it.

But today, it’s harder than just identifying an attribute; we have to create value and do so on a consumer’s and shopper’s terms. That’s not necessarily what we think the attribute is, but it’s not that complicated, either: It all comes down to value. Shoppers will shop less unless we’re providing them with value. However, often that’s a category decision, not a brand decision.

Retailers are Responding

The truth is that retailers, more than brands, are responding to these shopper changes. Just look at their ads. My most favorite thing on Sunday morning, after going to church, is pulling out the newspaper ads and analyzing what retailers are doing. There’s a difference today.

Traditionally, retailers lowered prices to clear inventory. You could almost predict the ad, year after year. Today, they’re cutting prices because consumers are demanding it. They’re just not buying unless they see the value and many retailers are providing it.

You know, I always thought Kroger had too much private label, but now I think Kroger doesn’t have enough, even though they’ve increased their private-label line by 15 percent. Kroger’s private label is selling and why wouldn’t it? A “Big K” Kroger-brand soda sells for about half the price of a name brand.

There’s a big difference between 10 percent and 50 percent when it comes to prices. It is the difference between thinking you have brand loyalty and living in the real world. Some marketers, such as Procter & Gamble understand this.

P&G had forever dismissed the idea of cutting prices for its brands, whether it’s Tide or anything else. But in September they announced price cuts across 10 percent of their global line. They’re going to increase promotions and emphasize value benefits, and are introducing a value offering through a new line called Tide Basics.

Unless your brand is making a difference in terms of how that shopper and retailer defines value, it won’t be around very long. It probably doesn’t even deserve to be on the shelf.

To bring this reality to life, suppose your brand is in the pain relief category. How can you build loyalty in a category where the fastest growing brand is retailer’s private label? The retailer’s own pharmacist recommends the store brand as just as good and lower priced. Whom do you trust more than your pharmacist?

So, you come up with a new positioning, complete with advertising and digital campaigns. You go about this classically, based on insights and research. It all looks perfect, except for one thing. You don’t make your numbers.

What to do? Try this: Go shopping for a week’s groceries for a family of four, on a budget of $100. Dinner for seven nights. This is no joke: Most of America makes just $45,000 a year. When you look at what they’re spending on other things, that’s what they have left for a week’s worth of groceries.

By Tuesday, you’re going to have a headache and you’re going to need pain relief, so that has to come out of the $100. Would you buy your own brand? Not a chance. You’re going to buy the value brand, the private label.

The conventional way of building brand loyalty isn’t working. If we want to get real about building our brands, we’ve got to get real about what shoppers think not only about our brands, but the brands they’re buying. That private-label brand, to them, is more important than ours; they’re more loyal to it because they see the value in it.

Clearing Purchase Hurdles

I did a few store checks to help me think through how loyalty has changed, and saw several purchase barriers. The first one is quality and performance. Shoppers think the private-label brand is just as good as ours. That’s what they think. When it comes to cost, they cannot afford a branded product even if it did have a slight advantage. They have $100 to buy seven meals for the week.

From a sentiment standpoint, they are seeing two products on the shelf that, based on the appearance of the product and package, seem similar. But one brand is charging $4-$5 more than the next. From a business standpoint, shoppers do not like a brand that charges so much more for no apparent reason.

From an ethics standpoint, this kind of price gap makes them angry. They see it as borderline illegal or immoral for a brand to charge a higher price with no apparent difference in quality. Actually, sometimes the private-label brand looks better. The package is easier to read. Sometimes it’s easier to find store brands on the shelf, giving them an advantage in terms of “shoppabilty.”

In fact, the retailer’s private label is not necessarily a “price” brand; it might be part of its “health care” brands. Some retailers are building reputations for education and information. They have tools and diagnostics. I got my flu shot while I was doing my store check at CVS. That demonstrates a patient advocacy that says they care.

If branding today is trust, then we’ve got to be the trusted brand whenever, wherever there are shopping decisions. We’ve got to create that relationship along the path to purchase, and we’ve got to take away the de-selection barriers. We’ve got to give them reasons to buy our brands.

If the purchase barriers are quality and performance, we need to differentiate. If the barrier is cost, we need to sell our product benefits, expertise and service. We need to build a brand affinity program, or cause marketing. If there’s an ethics issue, we need to create confidence around the research.

If there’s a problem with “shoppability,” we’ve got to make solutions of our products, very similar to what retailers do with their brands at the store.

Lastly, from a communications standpoint, we need to join the conversation as health-care experts.

To be successful, we have to understand how and why consumers buy our brands in our categories (the path to purchase) and what our brand equity really is. Then we have to take the purchase barriers away and offer shoppers more value through expertise and service.

Whole Foods Rocks

Since loyalty is personal, I’d like to share that Whole Foods is the brand I’m most loyal to today. I drive right past Kroger, Walmart, Tom Thumb and an Albertson’s to go to my Whole Foods.

I’ve always loved Whole Foods, although I did shop at other stores before the Great Recession. As a retail expert, I’ve watched Whole Foods since they began. But I look at them through a different lens today. Now I only shop at Whole Foods, and I’d like to tell you why.

After the Great Recession hit, and the national discussion turned to health care, I started thinking about things differently. Like many others, I believe that what we need is more health and wellness, and less health care. If we had more health “well” as opposed to health “care,” we wouldn’t be having such a big debate about health care.

So, I went back to the basics. When I think of health care, whom do I rely on as an expert? The truth is that I started thinking about Whole Foods. The reason I shop there is that I fundamentally believe that health care is as much about healthy eating and exercise as anything, and I can control that.

I can control that, in part, by shopping at Whole Foods, eating less sugar, more fresh foods, organics and a Mediterranean diet. I now see Whole Foods as my best chance at improving my health, which is my best chance at controlling my health-care costs. Whole Foods is a great example of a retailer and a brand coming together to understand my needs and provide benefits that help me live a better, healthier life.

True, the cost is higher. One of the raps against Whole Foods is that it’s expensive, and it’s true that I can’t buy what I need for $100 a week. But go in there on a Saturday now. It’s almost like a Costco with samples and meal solutions that offer surprisingly good value.

But Whole Foods solves my problem, and therefore earns my loyalty. So, to me, the value of being healthy outweighs the few extra dollars I’m paying. If you think of branding as the ability to charge a little bit more for a solution, then Whole Foods is a great example.

The bottom line is that because of the Great Recession, power and control has shifted to consumers and shoppers as never before. It’s up to us to give to consumers more innovation and more value than we’re asking them to pay. That’s what we need to create loyalty now. Let’s write a new book on brand loyalty (see sidebar).

By the way, if you’ve never had lunch with Tim, I’d highly recommend it. The chicken curry is great! I hope you enjoyed this article … start writing your own new book on brand loyalty! •

Sidebar: The Book of Loyalty

Let’s write a new book on brand loyalty, based on three things:

  1. Prove our value every single day. If we want brand loyalty, we need to give loyalty, and we need to give loyalty in terms of what the shopper wants in terms of value.
  2. Meet the basic needs of your shopper. In the past, we tried to create wants through impulse purchasing and demand creation. Today, people want what they need, nothing more and nothing less.
  3. Communicate how our solutions solve their problems within budget with better packaging, displays and most of all, a better, higher-value product.

AL WITTEMEN is managing director of retail strategy for TracyLocke. He has 35 years of experience in marketing, sales and shopper marketing of consumer packaged goods. Al can be reached at al.wittemen-at-tracylocke.com or (214) 259-3531.

October 31, 2009   Comments

Think Big!

Embrace strategic planning as the great opportunity to build loyalty that it is.

By Jim Doucette, Henry Rak Consulting Partners

Building strong consumer loyalty to your brand represents the Holy Grail for marketers. Strong consumer loyalty gives the marketer the ability to do all sorts of things that we marketers — and our firm’s shareholders — love! Strong loyalty enables a brand to grow through line extensions and new innovation, to price against weaker competitors, and employ other strategies that deliver ever-higher levels of volume and profit.

When should we start down the path to this land of brand nirvana? Well, in a word … now! Now is the time of year when many marketers are creating their strategic business plans, which is the essential starting point for creating a stronger consumer proposition and, ultimately, more loyal consumers.

The bold executives among us will plot a course for dramatically accelerated growth. That is certainly the intent of the “strat plan.” Too often, however, strategic planning becomes a derivative exercise. The last strategic plan is dusted off and developing the new plan essentially becomes a process of making incremental changes to the prior one.

The results of strategic planning processes are certainly not adequate. Fewer than 50 percent of senior executives are satisfied with their current strategic planning processes and fewer than 25 percent think they yield actionable plans, according to the McKinsey Quarterly. At the heart of this dissatisfaction:

  • The approach to investment prioritization is not systematic.
  • Growth targets are not driven by consumer or category realities.
  • Growth strategies are overly reliant on white space, acquisition, etc., versus “controllables.”
  • Growth options are not systematically quantified, making comparisons across franchises and operating groups difficult, if not impossible, to make.
  • The financial plan is often disconnected from the strategic plan, leaving the most carefully crafted strategies starved for implementation resources.

It is easy to see the path that leads to such dissatisfying strategic plans. A good strategic planning process should be a dynamic, creative discussion about discovering the possibilities to grow consumer loyalty and take your brand to new heights.

However, when you are embroiled in a business, it is hard to get “out-of-the-business” and challenge conventional thinking. Further, the breadth and depth of consumer insight needed to drive the strat plan is often not present. How can you make sure not to fall into this trap? There are two fundamental steps for creating a successful strategic plan and, consequently, strengthening consumer loyalty to your brand: 1) Understand consumer behavior and the drivers of behavior in a precise, detailed way and use the behavioral foundation to organize everything else you know about the consumer (i.e., needs, attitudes, etc.) and 2) Build a plan upon this behaviorally-based foundation.

A comprehensive understanding of consumer behavior starts with an in-depth analysis of consumer usage and purchase patterns. There are two very powerful analyses that allow marketers to understand, validate, and leverage these behaviors empirically: A usage domain that analyzes the largest viable set of competitive/substitutable products; and a purchase structure that defines the drivers of purchase behavior in close-in, specific, product categories.

Each one provides distinct and vital insight into how consumers behave. The combination of usage and purchase behavior gives you the foundation to develop much clearer strategic decisions to make your brand the one that best meets consumers’ needs.

When integrated with targeting, need state, product performance, brand benefit and brand-equity information, you have the insights to create a framework for accelerating the growth of your business. The framework should define a future in which your brand is more differentiated versus your competitors and creates stronger loyalty with a wider consumer base.

Where should your brand compete to establish a competitive advantage? Your brand’s strategic positioning should answer that key question. For example, does the brand compete in soup or simple meals; OTC medicines or pain management; isotonics or refreshment beverages?

Furthermore, do you have a strategic brand positioning that is clearly articulated and precisely defined? Is it understood and embraced by the entire business unit and your business partners? Does the positioning enable your brand to stand apart from your competition in a highly relevant way?

Answering those critical questions with a consumer behavior-based approach is the key starting point for strategic planning. In addition to providing clear direction for each brand, defining the strategic brand positioning ultimately allows you to define the roles for each brand in your portfolio.

Against the newly defined competitive frame, you will be able to evaluate each brand’s ability to grow revenue and deliver on margin requirements by assessing the brand’s competitive effectiveness and the attractiveness of its core categories.

You are then able to calculate the expected future value of each brand. The results are role definitions for each brand in your portfolio in a way that is rigorous, quantitative and rooted in consumer’s actual behavior.

Once consumer behavior is well-understood, the second key is to balance strategies and activities between the core business, new innovation and acquisitions/divestitures across the portfolio.

A Growth Action Plan

Before we get to balancing activities across the portfolio, it’s time to create growth action-plans at the brand level in six areas:

Marketing Strategy. Two critical questions need to be answered: What is the right strategic positioning for my brand and how should the positioning be communicated to my brand’s target consumers?

If the consumer behavior analysis determined that your brand’s actual competitive frame is broader than previously imagined, your new strategic brand positioning should reflect this broader competitive set. The strategic brand positioning should be very specific with regard to competitive frame, target, benefits, reasons-to-believe and brand personality.

A well-defined positioning easily lends itself to a copy strategy that is the linchpin to making sure your brand’s messaging is synchronized across all marketing, public relations and selling touchpoints. Even marketing and sales programs that sometimes have more of a short-term, tactical objective (such as many consumer promotions and in-store promotions) should be linked to the strategic positioning to reinforce the brand’s new message.

Getting the positioning right, and consistently reinforcing the positioning through the entire brand’s messaging, is a key to strengthening loyalty. And, once you have the right positioning, stay with it! A good positioning should last for years: Tide’s In— Dirt’s Out; and It’s Not Delivery, It’s DiGiorno — are examples of positionings that grew those brands for many years.

Spending Strategy. A precise positioning also yields efficient growth for established brands because you can calculate the profit-maximizing point of marketing spending — across advertising, consumer promotion and trade (or customer) promotion — against your brand’s new competitive frame.

In cases where the competitive frame for your brand is much larger than previously imagined, the brand likely should be spending more on marketing to reach the broader audience with your new, more relevant message and build consumer loyalty to your brand.

The Goldfish brand has increased its marketing spending behind its tasty, fun and wholesome treat positioning, which allows the brand to source volume far beyond the kids’ crackers category. With the ‘mom appeal’ of being a baked (not fried) snack and its fun-for-kids message of the “snack that smiles back,” the brand has enjoyed rapid growth in recent years.

Innovation Strategy. In addition to growing the base business, growth through innovation is part of the lifeblood of any successful brand. The key question to answer is: How and why will the new product replace consumers’ existing behavior with a new behavior?

While creativity is important in any innovation process, it should be directed after a thorough understanding of the existing consumer behavior that must be changed, the benefits consumers seek through this behavior, the attributes that support the behavior, and the parts of their current behavior consumers are willing to change and not change. All of these facets should be understood by the consumer behavior foundation you built at the beginning of the strategic planning process.

Once the V8 brand clearly understood its unique vegetable nutrition benefit within the world of juice, it allowed the brand to expand into vegetable/fruit blends, such as V8 V-Fusion, as well as soup, with V8 Soup. Each new product contributed to the overall V8 trademark’s position of “another delicious way to get your vegetables.”

Comparing the innovation opportunities you have defined with your company’s in-house development capabilities also can form the basis of an acquisition strategy. On the other hand, if segments of the business no longer fit well with the brand’s competitive frame, you may want to consider divesting those segments.

Each strategy — smart innovation rooted in actual consumer behavior, strategic acquisitions, divestiture of non-strategic assets — sharpens your brand’s relevance to the consumer and strengthens loyalty.

Financial Strategy. The essential questions to answer at this stage are: What activities truly drive profitable volume growth and what is the optimal pricing for my brand?

A thorough brand “due-to” analysis will identify the activities that truly drive growth for the brand. This is an especially important step. In our experience, activities that are within your control often play a large role in determining the success of your brand.

A clear and precise understanding of your brand’s competitive frame identifies the competitors consumers are likely to switch to and forms the basis for a brand pricing strategy. For a more accurate measure of price elasticity, consider brand (not item) elasticity within the context identified by the competitive frame.

Once the pricing architecture has been determined, the final step is to identify the “right” spend back that maximizes revenue and earnings while protecting volume and equity, which in turn drives loyalty.

Several years ago, the Tylenol brand was able to grow profits while maintaining volume by understanding the brand’s true competitive frame and pricing within that competitive context.

Selling Strategy. Even well executed, great marketing strategies cannot be fully realized unless the consumer concept is taken all the way to the point-of-sale.

At this point, you need to translate the brand’s consumer strategies to category leadership platforms with shelving, assortment and promotion strategies that reflect consumer behavior and are tightly linked to marketing strategies.

For example, by bundling the right items together, a promotion can address a larger set of consumer needs, different users or different usage occasion,
so it will tend to be more incremental. For example, a pain relief promotion might include headache, body pain and muscle pain remedies, or powdered soft drinks could be packaged in stick or multi-serve canister forms.

In an era where many consumer purchase decisions are made at the shelf, getting selling strategies right is often the critical link in driving loyalty to your brand.

Portfolio Strategy. After brand-level strategic plans are developed, it is time to integrate the brand plans into a portfolio plan. This is where the brand roles, which you determined earlier in the strategic planning process, come into play.

Meshing brand roles with the brand-level core business (marketing/selling/financial), innovation and acquisition/divestiture plans should lead to the right blend of activities that are sequenced to deliver accelerated top-line growth while delivering bottom-line commitments.

Strategic planning season is the time to step back from the day-to-day activities of managing the business and assess your business in a holistic, yet in-depth manner. This is the time to be bold and create a plan that strengthens consumer loyalty to your brand and puts your business on a new, higher-growth trajectory. •

JIM DOUCETTE is a managing director with Henry Rak Consulting Partners, a growth strategy consulting firm. Jim can be reached at jdoucette – at- hrcpinsights.com or (203) 698-7712.

October 31, 2009   Comments

High Fidelity

Creating loyalty is a multi-layered challenge.

A Roundtable Featuring:

Richard McDonald, Fender Musical Instruments
Steve Rotterdam, DC Comics
Peter O’Reilly, National Football League
Joe Dobrow, Sprouts Farmers Market
Spencer Hapoienu, Insight Out of Chaos

How do you build loyalty in the store?

Richard McDonald: We look at retailers more as business partners than just outlets for our products. It’s really about long-term relationship building and it can’t be a one-size-fits-all approach. We equip the salesperson to communicate our message, or else they won’t talk about us.

This includes product descriptions, photography, packaging, web tools, videos, staff training, cool and innovative promotion ideas — and the more turnkey it is, the better. Brands need to take responsibility to empower retailers with the tools they need.

Steve Rotterdam: Retail is where our brand comes alive. This is where the over-the-counter debates happen over what’s exciting and what’s really rocking people’s interests. It is a place where you can have conversations amongst peers who have similar interests. With very, very rare exception, our retailers are also fans themselves.

When a comic or graphic novel sells well it’s because the retailers have expressed their confidence in what we are doing to support the books. It’s really a business built on hand selling and the care and feeding of the customer along the way.

Peter O’Reilly: We’ve tried to take advantage of our retail opportunities by giving our fans the type of selection and personalization opportunities at retail that allows them to customize their apparel and products and then connect that with the game.

We’ve also expanded our product line to hit our female, youth and urban fan base with product lines that are fresh and unique. It’s about making sure that the intensity and meaningfulness of the NFL and individual teams connect with fans at retail.

There is such a social dynamic around our game, around bringing people together both at home and at the stadium, that we need to make sure that our retail and our licensing portfolio taps into those elements of our brand essence.

Joe Dobrow: The question is whether you can use programs, advertising or customer service to build something that’s bigger than your four walls. I think loyalty programs help, and I’m a strong believer in them. They keep some customers shopping because they’ve built up some points, but that’s more affinity than true loyalty.

I try to use words and language to generate a deeper connection. If you can create a certain tone with the language that you use, you’ll get customers who recognize it because it resonates with them. They will perceive that there are some real people behind that store and they are their kind of people. And then you’re in business.

Spencer Hapoienu: Retailers have a big advantage over every other industry because they have the opportunity to talk to the customer on a regular basis, one-to-one. They can build a behavioral transaction database that can tell them what their customers respond to, what their customers like and don’t like.

It’s an enormous advantage that most retailers don’t tap into. But I think that’s starting to change because those companies are having so much success in a very difficult marketplace.

More and more companies are taking advantage of retailers that have data on what their customers do, and are using that to be much more relevant.

How can technology promote loyalty?

McDonald: Fender is unique in the sense that we’re creating tools for musicians to make music. We’re known for our vintage tube amplifier technology that’s still the choice of most professionals. It’s a lot of the same technology that we developed in the ’50s and ’60s, but at the same time the needs of the contemporary artist may be completely different.

As a result, we’ve had to evolve technologically within the company from a product development standpoint and offer digital products to meet the needs of new players. So, sustaining loyalty is about evolving with technology to fill a latent need that musicians have to create something new.

Rotterdam: Technology has changed the dynamic. It is no longer a situation where you can expect your consumer to find you. Consumers expect you to meet them where they are.

Those brands and channels that ignore the tools miss out on opportunities for growth and to build loyalty. They are losing that core customer who will continually come back to your brand even when it’s not convenient or financially conducive for them to do so.

O’Reilly: Across the history of the NFL, great technology has made the fan experience better or more convenient. This September we launched our new Red Zone Channel, which allows fans to watch every touchdown of every game on Sunday afternoons.

Our NFL Mobile Live product with Sprint enables streaming of NFL Network games and provides every stat and every play of every game. We also continue to look at in-stadium enhancements — whether that’s ordering food or seeing replays —we make sure that our most loyal fans that go to our games have an incredible experience.

We also have a very sizeable database, compiled across all of our different touch points. We use that to connect to fans on a one-to-one basis and customize our communication by favorite team. We’ve got so many fans whose favorite team is not their local team. So, our database and other forms of online communication help keep them connected.

Dobrow: I’m a lifelong believer in database marketing. In the past, you had a lot of little mom-and-pop stores and they knew who their customers were. And that was really the relationship on which commerce was built.

Today, we use technology to identify and get to know our customers. The trick, of course, is that you don’t want to cross the line of privacy. But we do want to be able to serve up relevant information or offers to people, so that they will have an affinity for our stores.

Now, Sprouts is a little bit unusual because we have an over-representation of senior citizens among our shopper base. So, we’ve got a lot of customers who don’t want an in-store kiosk or a mobile app. For them, ironically, what’s generating some loyalty is that my store is not techno-heavy.

Hapoienu: As the ability to store, analyze and interpret large volumes of data has accelerated, it has become easier to use technology to talk to customers on a one-to-one basis.

You can produce printed materials that talk to customers one-to-one, and you can reach the customer in the store with vehicles on a targeted basis. You can use the internet, email and Twitter.

There’s another opportunity to build loyalty by putting new technology into products. For example, Nike put a chip in its sneakers and then attached that to an iPod. That’s a huge advantage when you integrate technology into the product and then tie that back to everything else you’re doing.

How can social media influence loyalty?

McDonald: Fender is all over social media. We are directly linked to Facebook, Twitter, MySpace and YouTube. We also have a very active community section on Fender.com. We’ll post a question on our social media networks as if we were sitting with each other, and I might ask you: What’s your favorite guitar?

We’ll get thousands of people, literally, in hours — and that creates loyalty. If you measure loyalty through engagement and retention of our customers — which is a great way to grow your business — social media is a great way to do that.

Rotterdam: We include Comic-Con and other fan conventions in our definition of social media. Such events are not just opportunities to bring our talent and fans together, but also serve as forums in which to break news that radiates out to fan press and mainstream media.

Our daily blogs are also key elements of our communications strategy. They, in turn, feed information into our Facebook and Twitter efforts.

This ensures that our message gets out to those who might not partake of blogs or conventions, but are still plugged into their own social network communities. When our consumers are having a conversation, we’ve done 80 percent of our job.

O’Reilly: Delivering information in real time, whether that’s through Twitter feeds to communicate the “inside” information our fans want on what’s happening at the league and with our clubs, is critical. We’re really staying on top of how our fans want to connect with the game and the league.

The other thing — and this is not something you traditionally see from a sport league — is that we’re really digging into the youth space and focusing on our next generation of fans. For example, we’ve created a virtual world, NFL Rush Zone, which is a great home for NFL kids to connect, to chat with their friends across the country.

Dobrow: With social media, you can’t look like you’re marketing — and you can’t look like you’re trying to look like you’re not marketing. What you have to do is consider what this technology has done: It’s brought us back to an old way of doing business where humanity and transparency, sincerity and honesty actually matter.

But when you think about the language used in social media: you follow somebody on Twitter, you link with someone on LinkedIn, or you friend someone on Facebook — that’s not deeply felt stuff.

True followers of the Grateful Dead followed them around from venue to venue. That was loyalty! That’s not what we’re talking about here. The challenge is to figure out how to bring substance to it to get that longer-term affinity, or loyalty.

Hapoienu: Twitter is going to be a huge opportunity for a lot of businesses to drive people to their products based on a sense of urgency. If you can create an affinity with a group of customers because you know what they buy, you can create an environment that people are drawn to.

Once you know who your customers are and how they divide themselves up in various segments, you can create affinity groups through social media that really provide that segment with interesting information or opportunities. Then it becomes a platform to build retention and sell more product, but in an indirect way.

How about loyalty among employees?

McDonald: Everything that we do as employees at Fender is for the customer because that’s the only thing that matters. It’s not for your boss or the CEO; it’s for the customer. That is emphasized from the top to the bottom every day here; it is a mantra of the company. When you do that, then your mission is pure and people appreciate it.

The other thing that works for me is that I hire my customers. I hire people who dig this brand, understand it, love it and know what the experience is like for the dealer, distributor or the consumer. We bring those people in and it gets into our tribal gene pool. Customer service needs to rock as hard as our guitars and amps. That’s our culture.

Rotterdam: One of the first questions I was asked when I met our sales team here had nothing to do with where I’d been or what my plans were. The question was: So, what are you reading? I rattled off titles of comics I read regularly and I distinctly remember one guy saying to me, “Okay, that’s acceptable. Pedestrian, but acceptable.”

Turns out I wasn’t reading enough independent stuff. But I am now. With comic-based literature, you have to have that level of personal engagement if you hope to have any credibility with your fans, creators and staff.

O’Reilly: Commissioner Goodell is building an innovation culture at the NFL, and giving everybody a voice.

The whole organization is part of a team — from the folks on the business side to those out on the field — the NFL is one unit with one mission. It’s an organization with incredible loyalty among its employees, and that culture of innovation that the Commissioner established is one of the core reasons that it remains so strong.

Dobrow: Shopper expectations about employees are now so low that even a little bit of a customer service spark can make a huge difference. Of course, it cuts the other way, too; a little bit of a customer service problem can be devastating.

I like to spend time training the cashiers before a store opens because that’s my marketing department! I want those cashiers to know what kinds of questions customers might ask about our marketing programs, and to interact with those customers so they can give — and get — feedback.

Employees are just a unique kind of consumer who happen to see the company from inside and out. They are blogging and Tweeting when they’re not at work so their perspective can be a source for building tremendous consumer loyalty.

Hapoienu: Developing strong relationships with customers energizes employees and makes them more comfortable with the products they are selling. It galvanizes them to be more creative and find ways to create more relevant relationships with customers, whether that’s in the store, on the web or on the phone.

If you’re a salesperson at retail and your company has given you tools so that you know who your top customers are, to recognize and acknowledge them, that’s a great way to build loyalty.Anything that makes the employee feel more satisfied and gratified about their role makes them much more interested in staying with that company.

It also creates more energy for the store owners because they’ve got more control over the business, and have more confidence to do more merchandising, to expand, and to remodel. It’s about giving the employees tools to make them better at what they do as it relates to the customer.

How does social responsibility create loyalty?

McDonald: When we talk about social responsibility, we’re talking about the responsibility of being honest in our communications, the brand promise we make and how we keep the brand promise. That kind of responsibility returns in loyalty. So, if you treat your customers like you treat your friends and you treat your family (hopefully you do that well), you’re making it.

Now, if you have a cause that’s pure, it should be something that’s aligned with your business. For a company like Fender, that’s going to be music education, especially with the arts under siege in the schools.

Little Kids Rock is one of our philanthropic programs. We have the Fender Foundation that gives grants to everything you can imagine that results in people giving the gift of music.

How do I keep a 60-year-old brand relevant to a group of young, emerging guitarists who, in defining themselves, are going to dismantle everything their parents thought was cool? The only way I can do that is through loyalty. And the only way I can get loyalty is through honest, sincere, authentic engagement with my customers, the people who use our products and depend on them for a living.

Rotterdam: Our characters have a long history of being utilized for good causes. Dating back to World War II, Superman, Batman and Wonder Woman enlisted kids to get their parents to support various bond efforts. We’ve also put them and the rest of the Justice League to work on behalf of many social, civic, health and fitness related organizations.

As a company, we’re supportive of an initiative called the Comic Book Legal Defense Fund, which addresses various issues related to censorship in our industry. And, where we can, we will also support cause-related efforts of local retailers, especially those concerning literacy.

At the end of the day, our costumed heroes are champions of good. These are characters whom parents and grandparents can feel good talking to their kids about, and that builds loyalty as well.

O’Reilly: About two and a half years ago, we looked at everything that we’re doing in the corporate social responsibility space. We were doing a lot of things well, but that audit led us to going deep in areas where we knew we could have the most impact, and that were very authentic to who we are as a major sports brand.

That has led us to a major commitment to youth-health and fitness under our NFL Play 60 campaign. The goal is to encourage kids to get at least 60 minutes of physical activity every day.

We’ve gotten tremendous traction — nationally, across 32 clubs and with employees, as well — because it is so authentic to who we are as a brand.

It is something that our athletes live every day, and it has given us a major impact with kids, families and schools. So, whenever we think about social responsibility,

it needs to be so core to our overall mission and part of our business. If we go deep into areas that are authentic to our brand, we’ll have the most success with building fan loyalty.

Dobrow: Social responsibility is the fourth leg of a table on which consumers make buying decisions, after selection and quality; value; and the shopping experience. But a table can stand on three legs, and while social responsibility provides stability, it’s not yet critical for building loyalty.

For example, up until recently, 99% of the bags we gave out at Sprouts were plastic. Now we offer paper bags that cost four times as much, but it was the right thing to do. No one came up to us afterward and said, “Thank God you made the switch. Now I’m not going to shop anywhere else!” But over the long haul, it will help build loyalty.

Hapoienu: Too often the ideas smack of transparent marketing on the coattails of a charity. Developing ideas that are either borne from the DNA of the retail brand or the culture of the customers are the most effective.

Saks is running a program to sell coats by providing 25 percent off a new coat if the customer brings in an old coat that Saks can donate to the appropriate local charity.

While that promotes coat sales at Saks, it is possible that many customers might not think of donating an old coat and now would. Or, they might not have thought about buying a new coat and now would. Either way, charities will get the benefit of coat
donations and Saks and its customers have done something for the local community. •

RICHARD McDONALD is svp of global marketing for Fender Musical Instruments Corporation, responsible for marketing, advertising, product development, artist relations, product education, promotions and events.

STEVE ROTTERDAM is svp of sales and marketing for DC Comics, running both the direct and book trade sales departments, supervising marketing and publicity while also overseeing advertising-sales and custom publishing.

PETER O’REILLY is vp, fan strategy and marketing for the National Football League, and also leads the NFL’s corporate social responsibility initiatives. He previously was a director of marketing for the National Basketball Association.

JOE DOBROW is vp, chief marketer and “tofu” peddler at Sprouts Farmers Market, a 40-store, Phoenix-based chain of natural foods stores. He previously led marketing at Whole Foods, Balducci’s and Flexcar.

SPENCER HAPOIENU is president and co-founder of Insight Out of Chaos, a database and direct marketing company. He can be reached at spencer -at- iooc.com or (212) 935-0044.

October 31, 2009   Comments

Crock of Loyalty

Is there any such thing as brand loyalty at the supermarket?

Earlier this year, the CMO Council and the Pointer Media Network came out with a study reporting alarming erosion of consumer loyalty to brands bought at the supermarket.

“For the average brand, 52 percent of highly loyal consumers in 2007 either reduced loyalty or completely defected from the brand in 2008,” the study said.

Wow — and this was before the recession kicked in. So, we thought it would be interesting to ask our readers — predominantly senior-level marketers — if they thought brand loyalty was BS where supermarket brands were concerned.

The survey seemed to generate more than its share of comments and controversy. Some of the controversy surrounded the questions themselves, particularly one where we were trying to get at degrees of loyalty in various product categories.

The critics had a good point. We simply listed 20 popular categories and asked respondents to select those in which they usually purchased more than one brand. Some respondents noted that an unchecked box might mean they didn’t shop the category, not that they were loyal to a particular brand in it.

That said, out of the 20 categories, only nine — ketchup, colas, deodorant, toothpaste, frozen dinners, laundry detergent, toilet paper, canned vegetables, and yogurt — registered as die-hard, single brand, “loyalty” categories by more than 50 percent of respondents.

Based on respondent comments, it’s possible that ketchup and colas made the cut because Heinz and Coca-Cola dominate their respective categories. It is also possible that frozen dinners, canned vegetables and yogurt scored well because these categories might be less popular than some others.

Other respondents also took issue with our definition of loyalty as “a brand that you buy at the supermarket every time, without fail, and to which you have an emotional or rational attachment.”

Some said they didn’t buy the same brand every time because favored brands weren’t always available. Others said they were on a loyalty hiatus from some brands because of the recession. Still others said they were loyal to more than one brand in a category and liked some variety.

An open-ended question, in which we asked respondents to name the brands to which they were most loyal, was notable for intense “loyalty” across a large number of brands. As one respondent put it, “Loyalty, not monogamy.”

So, perhaps the prevailing definition of “loyalty” is different in marketing than it is in ordinary life, where loyalty usually means long-term emotional devotion beyond reason, sometimes at odds with one’s own best interests.

Maybe marketers (and shoppers) have their own definition of loyalty that’s a step or two removed from its traditional meaning. Could be that’s a result of so many years of marketers defining “loyalty” as discount programs whose real objectives, ironically, can be to promote disloyalty.

In fact, although a solid majority (67 percent) of respondents said they use a loyalty or retailer charge card at their favorite supermarket, a nearly equal number (64 percent) said that their supermarket’s loyalty or charge-card program did not make them more loyal.

Meanwhile, our survey also found remarkable stability in levels of loyalty with 41 percent saying they were loyal to “ten or more brands” today, versus 42 percent a year ago.

And despite conventional wisdom that private-label brands have enjoyed a sales bonanza during the recession, 59 percent of our respondents said their loyalty to private-label brands had “stayed the same” over the past year. Respondents also said they were more loyal to brands (54 percent) than to the supermarkets where they buy them (46 percent).

Finally, to the bottom-line question of whether brand-loyalty is BS, a whopping 86 percent said, “no.” But don’t get the idea that just because we’re “loyal” to your brand means we’re going to buy it.

Respondent Profile

A total of 203 survey respondents included brand marketers (24%), consulting firms (19%), and agencies (16%). Twenty percent worked in packaged goods firms, 13% in media/entertainment and seven percent in retail. A majority were senior-level executives with 72% reporting more than ten years of experience in marketing.

Survey Results:

http://hubmagazine.com/survey/loyalty_bs

October 31, 2009   Comments

Cool News

Amoeba Music

“Big chains went under because they lost track of core customers,” says Marc Weinstein of Amoeba Music. Virgin Megastores, says Marc, “were almost like banks or something . They didn’t showcase the product. It was always just so sterile.”

Amoeba, which Marc co-founded in 1990, bills itself as the world’s largest independent record store, with its flagship located “in the heart of Hollywood on Sunset Boulevard.” It is anything but sterile.

Offering “a massive collection of diverse new and used vinyl LPs, CDs and DVDs,” Amoeba “also doubles as a popular live performance venue, hosting the likes of Paul McCartney and Elvis Costello.”

Marc says the real difference is that Amoeba has “so many people who love music on both sides of the counter. We don’t have a real corporate hierarchy. People really get the passion when they come in the store. It’s an infectious feeling.” He also attributes the store’s success to its multilayered connection to the local culture.

“A lot of collectors come in and buy hundreds of records off the wall, and lower-income families come in and buy VHS tapes. All kinds of culture is being recycled,” he says.

Meanwhile, Marc is planning to launch a digital store early next year. His idea is to “create the ultimate indie version of a digital store with a lot of data and ways to look things up.”

[Source: Amy Kaufman, The Wrap, 8/20/09]

Glazier’s Marketplace

A single-store supermarket in Las Vegas is betting that a distinct personality will win shopper loyalty.

Perhaps most notably, Glazier’s Food Marketplace “will try to lure shoppers partly by moving front and center some of the fresh food preparation normally done behind the scenes.”

The store will also stock “a broader-than-average assortment of items, such as mustards and seafood, a salad bar and a sit-down dining section with a player grand piano.”

Glazier’s will also have classical music in the store, hoping it will “calm shoppers into taking their time and perhaps picking up a few more items.”

The retailer has no plans “to join the pile of fliers stuffed into mailboxes,” but does intend to “try some community-relations tactics, such as making a meeting room available to local groups.”

“What we have attempted to do is take into account all the things we found that we did or didn’t like about the supermarket,” says William Glazier, the store’s founder, who had previously built and sold four stores near Philadelphia.

[Source: Tim O’Reiley, Las Vegas Business Press, 9/28/09]

Ford Lately

Ford Motor’s marketing chief, Jim Farley, thinks people are no longer brand-loyal to cars because quality has become a commodity. “Brand loyalty has shrunk because of widespread improvements in the products,” says Jim. “The ‘trust factor’ is more or less the same for most cars.”

But Jim also thinks winning us back is more about the future than the past. “I can’t tell you how many car clubs I have been to where they own old Mustangs and vintage T-Birds, but they drive Camrys,” he says.

At least for now: “So far this year, only about 20 percent of car shoppers stayed with the same brand when they purchased a new vehicle,” according to CNW Marketing Research. That’s quite different from the 1980s, when “nearly four in five Americans were repeat buyers.”

Some suggest that automakers invested too heavily in advertising that promoted corporate brands rather than individual models (e.g., “Have You Driven a Ford Lately?”). But Toyota found, for example, “that the rock-solid quality that made its Camry sedan the top-selling car in America did not lure many buyers to its full-size Tundra pickup.”

Jeremy Anwyl of Edmunds.com says the focus these days is on “value,” and cites Hyundai as having done a particularly good job with that message. Hyundai and Kia, not coincidentally, have replaced Chrysler and Pontiac in the top ten of the best-selling cars in America.

[Source: Bill Vlasic, The New York Times, 10/21/09]

Jeffrey’s Meat Market

“I’m a piece of antiquity, kept alive,” says Jeffrey Ruhalter of Jeffrey’s Meat Market. Jeffrey was born into the butchering business, 54 years ago. His early memories include being wheeled on a handcart “through hook-hung sides of beef.” He has very definite ideas about what it really means to be a butcher, too.

“A butcher is a member of your family,” says Jeffrey, “who makes sure that what goes into your children’s stomachs is fresh, healthy and precisely what they need to survive.”

He also thinks being a butcher means being part of the community. And so he lectures, offers food tours, writes recipe books, teaches classes and hosts art shows. He once fed steaks to 100 people at local hotel, for free. He’s also now starring “in his own pending reality show on TV.”

The show will chronicle Jeffrey’s days behind the counter and also follow him as he ventures out into the neighborhood. “There’s no such thing as ‘just being a butcher’ anymore,” says Jeffrey. “Community. That’s what I mean.”

[Source: Alan Feuer, The New York Times, 8/20/09]

Kroger Customers

“We don’t need to draw in others who don’t shop with us because the biggest opportunity is with our loyal customers,” says Kroger chief executive officer, David Dillon.

David says Kroger realized this almost ten years ago, and has been on a path ever since “to put the customer first, and permanently.” Most famously, Kroger engaged with London-based dunnhumby to build a database of 45 million shoppers.

Kroger’s loyalty program has avoided turning its “customer into someone always looking for the next deal” by creating “anticipation and excitement over savings, letting its customers experience great value,” says Chris Allen of the University of Cincinnati.

The database has also taught David Dillon “that even Kroger’s best customers are still buying many items that the retailer sells somewhere else.”

So, Kroger pays attention to small details, “such as sending a Jif peanut butter coupon to a mom who buys only Jif,” for example.

Kroger has also grown loyalty by building “larger stores with more products at cheaper prices … cleaner aisles and short lines … $4 generic prescriptions, organic food selections … and a 3-cent reward for using a reusable shopping bag.”

It has further tightened bonds by “launching breast cancer awareness campaigns using local women, and giving away its Deluxe ice cream to loyal Twitter followers.”

Ultimately, David says creating loyalty is all about “the importance of honesty and accepting feedback,” saying, “You can’t grow if you don’t recognize the need for that … We were not as good as we thought we were.”

[Source: Laura Baverman, Cincinnati Enquirer, 10/8/09]

Glass Asda

The U.K.’s second-largest food retailer plans to open its first “transparent” supermarket in South West Wales. The store will have glass walls instead of the usual brick, “to expose areas of the supermarket normally kept out of view.”

It’s part of a larger effort by Asda Group Ltd. to build shopper loyalty. Andy Bond, Asda’s president and chief executive, also plans to “try to gain customers’ loyalty by giving them more say in how the stores are run.”

Beginning in January, 18,000 regular Asda shoppers will be given access to products before they are launched in its stores.” Andy says he wants to “lift the lid on how we do things, and enable our customers to help make decisions that have an impact on what we sell and how we sell it.”

Asda plans to “reward customers who come up with the ‘brightest idea’ that saves the business money. If a suggestion is implemented … a customer could be in line to receive a check for … five percent of the first year’s savings.”

As Andy explains: “It’s about entering a new partnership, working with customers rather than simply working on behalf of them.”

[Source:Lilly Vitorovich, The Wall Street Journal, 10/2/09]

October 31, 2009   Comments

Pivot Point: Truth, Lies & Loyalty

Loyalty is what we make it.

Let’s just get this straight once and for all: There is no such thing as brand loyalty.

Each of us likes certain brands and may even love them. We may buy them most of the time, or perhaps even every time. But the idea that we have a true bond with any brand, like the kind of commitment we have in real life with our friends and family, is a farce.

This doesn’t mean we shouldn’t try to create that kind of loyalty; most of us tell ourselves that’s the end game and it’s always important to aim high.

What it does mean is that we should take a harder look at how we go about creating what we call loyalty.

We need to admit that coupons, discounts, points and prizes are just beanbags. We ought to spend more time thinking about the stuff that really matters to people, and serve that up each and every day.

That means products and services that really and truly solve problems and help people live happier lives. Providing a helping hand when someone really needs it, and smiling because we truly mean it.

It’s not because the customer is always right (nobody’s perfect). It’s because it’s up to us to make it right.

We may not get the same kind of loyalty we enjoy with our family and friends, but we’ll have more fun, and so will everyone else.

Tim Manners
@timmanners

October 31, 2009   Comments