Sep 10, 2012 | Change, Marketing, retail, Sales, Strategy
Would you rather do business with someone who knows a lot about you, and demonstrates they have your best interests at heart, or some stranger, enriching themselves?
Pretty obvious answer, so why do so few retailers seem to be able to respond?.
The ability to collect data is no longer much of a competitive advantage, everyone can now do it, the advantage has moved towards the analysis of the data, development of a customer proposition from the data, and most importantly, the capability to deliver on that proposition.
In Australia, both major FMCG retailers are busily copying international retailers, particularly Tesco in the UK. Tesco’s analytical and customer proposition development capabilities has driven the huge success of their category marketing initiatives. They have collaborated with researcher Dunhumby, leveraging the data emerging from their loyalty card to tailor their offers down to the level of to individual consumers, rewarding loyalty with compelling offers. The Aussie FMCG duopoly and other major retailers are still in the dark ages. The retail offer is still all about price, and a race to the bottom, but there has to be a limit, as costs are squeezed out of the supply chain at the expense of the weakest links, and on-line sales explode.
Tesco has, by contrast, moved beyond the numbers, and is concentrating on delivering to their customers, particularly their loyal ones, and the results over the last few years have been pretty good. They are managing by customer, not number, and other retailers have a lot to learn.
Listen up Gerry, stop whingeing as the business model that made you a billionaire becomes redundant, and make the changes that can keep the money rolling in by redirecting your efforts to your customers.
Aug 21, 2012 | Customers, Management, retail, Sales
Without sales, all the rest of the stuff that goes on in an enterprise is irrelevant. All the lofty strategies, policies, and well intentioned platitudes are dependent on the delivery of sales for their oxygen.
As a senior manager in a large enterprise, I used to annoy, sometimes terminally, marketing personnel by insisting they all spend periods of time, particularly during the annual peak sales periods, out in the field, carrying a bag, talking to the retail personnel of our customers, and interacting with consumers in the retail space.
Most came back energised, engaged and motivated, some did not, and they usually found their career prospects better elsewhere pretty quickly.
Often other functional management also benefitted greatly from seeing how the product they made, counted, delivered, or engineered lived in the sales environment.
50 interactions with intelligent customers and consumers, and those who preferred our competitor products may not be a statistically significant sample, but you will learn more from those interactions than you will from reading expensive research reports behind a desk.
Jul 20, 2012 | Branding, Customers, Marketing, retail, Sales
Amidst the moans being heard from bricks and mortar retailers, you can still see in almost any store you choose to enter, opportunities to make the experience of shopping easier.
If it was more social, friendly, service oriented in stores, it follows that shoppers would find it easier to part with their money. Human beings are social animals, we herd, and congregate around things that interest and engage us, so it seems possible to dream up strategies that enable that behavior in a store, to make it an attractive occasion to go there, even if it is to your local supermarket, there are opportunities to reconstruct the experience.
Many consumers in high value categories, from furniture to electronics and whitegoods, are “showrooming”, doing some research on-line, then going into showrooms to have a look at the short list in the physical state, then go out and buy on line. Notice the disconnect there, sales people let them out of the showroom not just without a sale, but without permission to continue the nascent relationship.
On the other hand, I wandered into the Apple store last week, seeking information for a client, went back the next day for an information session targeted at the specific questions I had, and yesterday got a targeted email offering solutions to the problems I outlined in the session.
No wonder the Apple retail stores are breaking all retail records, and they are bricks and mortar, with a huge difference, they work at creating a relationship, recognising that it is the precursor to a sale.
Jun 13, 2012 | Change, Customers, Management, Marketing, retail
Data mining as it is evolving in retail is a fascinating exercise in identifying behavior characteristics that apply to very small percentages of the shopper population, and doing something with them. Progressively retailers are getting better at leveraging the data, and as the penetration of cards increases past a critical mass, so will the effectiveness of the marketing and promotional programs. Of course, consumers are well aware of this, and have well developed “relevance meters” built in.
Consider the category management of potatoes. Pretty dull stuff? no, fascinating stuff. I am making these numbers up to illustrate the point, but consider, of 100 customers using their cards at the checkout, perhaps 10% have potatoes in their trolleys, and 10% of that 10% have a particular variety, and of that 10% (now down to 0.1%), they also have sour cream and chives in their trolley. Pretty reasonable guess that the potatoes will be cooked in their jackets, with sour cream and chives garnish, particularly if the shopper is single, no kids, and also buys steak. An opportunity to offer the consumer a deal on a bottle of red wine on her way out of the shop, or in the associated retailer across the way? Multiply that by 5 or 6 million cards, and you have a pile of data to mine.
The gold standard of retailer card data mining is Dunhumby, now owned by UK retailer Tesco. They did such a great job in the development stages of the Tesco loyalty card, that the retailer bought them to keep their competitors away from them. In a move that recognises the future, Dunhumby is now crowdsourcing ideas via Kaggle, a fascinating startup that turns data mining into a competition for data nerds.
This is Category Management on steroids, and represents a monumental change in the skills needed by FMCG suppliers deal with dominant retailers. In the Australian context, very few FMCG suppliers have any idea of the power of the data tsunami coming at them, and how this will impact on their brand marketing strategies. It is also the realisation of the vision of category management the few of us who were playing with this stuff 30 years ago had when the data was warehouse withdrawals, we had a bit of U&A consumer research, and managed it all with calculators.
May 7, 2012 | Branding, Marketing, retail
30 years ago when housebrands were making their first inroads into Australian supermarkets, I took over management of Fountain tomato sauce. At the time it was a runaway market leader in NSW, but was being badly hurt by emerging cheap housebrands, priced a few cents less, 0.69 cents Vs 0.73 cents. Clearly to consumers there was not much difference in the products, they may as well take the few cents for themselves.
We lifted the price of Fountain significantly, the shelf price difference was then sufficient to suggest to consumers that Fountain was substantially better than any cheap housebrand, which was in fact, the case. Lo and behold, not only did our margins improve, so did our volumes.
The perception of the value delivered by Fountain overcame the rational response that sauce is sauce. Test yourself on this next time you walk into a liquor store, and consider a purchase of wine. Obviously, the greater the price, the better the wine?
In this great TED talk, Rory Sutherland, a big cheese in British advertising makes the point beautifully that decision making has three components.
- The technical considerations
- The cost/benefit considerations
- The psychological considerations.
The first two have a range of widely used and well understood models, whilst the third is often the province of the mavericks, creatives, and other assorted ratbags, and is therefore often dismissed as having a valid role in decision making. However, the best decisions are made at the intersection of these three perspectives.
May 2, 2012 | Category, Demand chains, Operations, retail
The word sustainable holds connotations of farming practices, and environmental sensitivity, all true, but only half the story.
A sustainable chain must also be commercially sustainable, and one without the other is by definition, unsustainable.
The characteristic that drive both are similar, transparency, and connections through the chain, both facilitated by the collaboration tools of the web. The outcome is increased productivity of the whole value chain.
The price deflation being experienced in the value chains supplying Australian retailers are testing the limits of Australian suppliers, and those that are surviving are dedicated to the implementation of chains that are commercially sustainable, and increasingly environmentally sustainable as consumers interest in product provenance increases.
Quietly, out of a home office, GFAP, a small chain consultancy that supplies a customised web based tool that manages value chains, to this point largely around horticulture, is flourishing. Very few pieces of produce arrive at Woolworths or Coles without being touched in some way by this system, but few have ever heard of it.
