Is your customer support response time noteworthy? For the right reasons? When expectations are set so low by an industry it becomes easy to delight a customer with a quick and personal response.
What do you do with a customer that comes to your site wanting to buy a product you make? Well, if you are Timex you turn him away. I recently saw a Timex watch in a magazine that I wanted. That’s a strong consumer impulse to make a buying decision off of a print image and act on it. That puts Timex in an enviable position at that moment. All they need to do is give me the product I am coming to them to buy. But the first strike against them was that I knew from experience that their website was a mess of flash animation and endless subcategory navigation. So I followed the print directions to look at “select Kohl’s stores.” Well, my local Kohl’s apparently wasn’t select enough so strike two, and onto the website. After spending far too long searching I resorted to the live help chat. Great feature by the way. Unfortunately, the very helpful woman on the other end of the chat told me that the watch in question was only available in those select stores and not on the company website. She would be happy to report my frustration at being unable to buy from them and I wasn’t the first person this happened to. Apparently it’s not enough of a problem for Timex to decide to actually have their advertised product line available for purchase on their website. Telling the customer in this way that you don’t want his business is the kind of retail conversation you don’t want to have. Strike three, Timex.
Tom Peters points to Consumer Reports picking automotive winners in ten out of ten categories all from Japanese manufacturers. Ironically this was the first thing I read when I got back into the office. I had just picked up my wife after she had to drop the minivan off for an unexpected $600 in repairs. Seems the heater wasn’t working so she took it in to find four other things that needed to be addressed including a transmission leak. Our Ford Windstar has 65k miles. She drove me back to work in my Toyota Camry which has performed reliably for 130,000 miles.
Of course my anecdote doesn’t mean much in the big picture but I think that the U.S. automakers don’t have an image problem as much as they have a perception problem. Namely many U.S. consumers perceive that there is a tangible reason to “buy American” and may be causing more harm than good. A customer market defined by dogmatic allegiance gives us today’s General Motors in the same way it gives us the Chicago Bears. Both perennial underperformers who can sell to the faithful with the fear of what might happen if they don’t buy. A season ticket holder in football country (Chicago, Green Bay, etc.) doesn’t want to give up a coveted spot after a string of losing seasons because he then won’t have it when they start winning. The Buy American crowd won’t buy a Toyota made in Kentucky by American workers because they fear the profit is going overseas and taking jobs with it. So they buy a Ford with a Mazda engine. Or a Cadillac made in Canada.
The essence of a car being American or not is really about jobs. American buyers want to use the power of the wallet in a way they feel is best for the U.S. economy in terms of supporting American jobs. To the extent those buyers view cars as a tangible object that’s bought fully-formed, that image problem is causing tremendous economic waste. Here’s why. Cars are of course a physical object but also are the end result of a long design and development process, a complex global supply chain, and a massive distribution network. At every step of every one of those processes there are jobs. We can easily picture the auto-worker on the assembly line and we may have a strong union orientation, but the bulk of the jobs created by the automotive industry are outside of the manufacturing plant. Americans are employed in car dealerships, advertising agencies, repair shops, and car washes. And those jobs are the same whether the car is a Ford or a Honda or a Pontiac or a BMW.
Truly efficient markets with frictionless substitution will deliver better products at better value. When personal bias or politics props up an inferior product or manufacturer it masks the competitive threat until it is too late for that manufacturer to adapt. It’s like the tectonic plates under an earthquake fault trying to slide but building up pressure. The result can be devastating. The industry suffered one massive quake in the 1970s – are American consumers building up the friction to cause another one?
Clutter is a quick way to tell your customers that you don’t care about them. Grocery Stores and mass merchandisers based in Bentonville, AR are notorious for cluttered aisles and haphazard displays. As a retail conversation, clutter is a way to talk past your customers without regard for their perspective. And as a disturbing trend it’s spreading to more and more of our daily interactions. As I stand in Starbucks I notice it’s becoming more of a retail store, not by having shelves of related products for sale, but by adopting the retail tactic of clutter. There are baskets of merchandise on the floor, displays I have to walk around, and boxes of CDs and mints taking up most of the counter space. Is it a sign that things may be going badly for Starbucks? Or is it, even worse, a sign of the inevitable decline in all establishments retail toward a common clutter look designed to steal your attention? I wrote my early posts in a Starbucks and I’d hate to see the loss of that second office quality.
In another medium, CNN may be acknowledging that cable news channels have cluttered interfaces by stripping down the look of CNNi, their international channel. Hey, MSNBC, you want to differentiate yourself from CNN and Fox News? Here’s an opportunity to offer a clean look and say to your customers that you won’t insult them with constant onscreen motion and clutter.
Can a Contact Us email link actually do more harm than good? Perhaps yes, if you don’t answer it. You worked hard to bring customers to you. The branding, the advertising, building the website, getting the right domain name, finding your niche, and putting your product in front of customers. Don’t blow your chance to have a conversation with them.
Considering that location is often the key to success for retailers, some stores have taken to unconventional means to increase their visibility. It’s hard to see a building from above unless in an airplane of a nearby taller building. So stores that used their roofs to display their logos could stand out for the novelty of the act. Of course with the constraint that outside of cities with many tall buildings or locations near airports it would likely never be seen. Until now. In another example of how search is changing the game for retailers, satellite images now offer the chance to turn rooftops into billboard advertising for only the cost of the paint.
Here’s an opportunity to stand out. Local search for products and services is going to be huge. Show the early adopters that you get it.
The retail business model has long been based on a simple customer acquisition and retention strategy.
1. Get potential customers to your store.
2. Convince them to pay for your product or service.
3. Bring them to back to purchase again.
Acquire. Convert. Retain.
This works for brick and mortar and online commerce. But retailing is changing from a transactional model to one based on relationships. Your best customers are no longer simply those which spend the most money. Now they are those who reliably and predictably purchase, enabling you to forecast accurately. They are those who evangelize your products and influence others to become your customers. They are those who engage in conversations with you offering useful feedback and direction on where the market is going.
So I am introducing a new focus on what I call Retail Conversations. I will highlight how smart retailers are connecting with their customers in new and innovative ways. How they are using blogs and podcasts. How they create value through free information leading to more informed and loyal customers. How they respond to customer feedback and adapt to the market.
The Internet and related technologies have created a world of opportunity to sell to customers as never before, but even more importantly to engage in conversations with those customers. Retail Conversations will be my look into how and why that interaction works.
Companies as diverse as Wal-Mart, Microsoft, the New York Times, and NBC are concerned about the growing threat from Google. If you are a retailer you need to be aware of what is happening in online search and make it work for you before it works against you. Here’s a quick overview of what’s happening and why retailers need to leverage it to sell more online.
Microsoft Challenges Google
First of all, what does Google really do? Google monetizes your attention. Google uses its clever technology to give you something compelling (relevant search results) and earns revenue by advertising during to process. Microsoft is getting into that game in a big way with two important initiatives. First they created an advertising platform to challenge Google’s stranglehold on targeted ads on a search platform. (Microsoft announced adCenter at ChannelAdvisor’s recent Summit trade event.) And now they are announcing Live.com, an online platform based in part on their Office productivity suite. What the Office Live component will do is offer features based on Microsoft Office but as an advertising-supported online service. By turning a product into a platform users can turn general productivity applications into customized business solutions. And Microsoft can then use their advertising engine to monetize your attention by serving you targeted advertising.
Google Targets Your Phone
Meanwhile Google and Yahoo are pushing fast into the wireless phone market and will be delivering more features wirelessly. I am absolutely convinced of the importance of local search and that EBay bought Skype to create a searchable marketplace for local services. Google Maps has an open API on which developers can build applications showing data from other sources on a map. Now you can not only find goods and services online, you can find where they are on a map. And soon you will be able to find them wherever you are with your mobile phone. The next step will be for goods and services to find you.
If you are marketing to consumers this is great. But if you are a retailer you need to be aware of the future in which consumers are empowered to know where the best deals are at all times. How would your business be affected if a customer in your store could glace at her phone and see that a better deal is available at your competitor two blocks away? Could you differentiate yourself enough to overcome that threat?
Yahoo Talks to Your TiVo
Yahoo has announced new functionality for its online calendar, part of the popular My Yahoo portal, that will allow TiVo subscribers to schedule upcoming recordings from its online TV listings. Why is this important? Because by extending functionality Yahoo is gaining more of your attention.
The Retail Angle
Now if you are in the retail business all this is important to you for several reasons whether you sell online or not. First it blows the advertising business wide open. You can now reach potential customers at more times, in more places, and when they are most interested. But more importantly it creates an attention platform that you can leverage to enhance your customer relationships. Google, Yahoo, eBay with Skype, and Microsoft are building online platforms and services to monetize your attention. They will pay for it through advertising. If you sell products then this is represents new opportunities for you. Use the opportunity this new attention economy gives you to build conversations with your customers. Reach them when they are most interested and you will be an advisor. The old broadcast model makes you a distracter.
Search empowers the consumer. It discounts the benefits of location and threatens to disintermediate retailers. But by embracing search first you can highlight your differentiating factors and bring consumers to you in way not possible before. The big guys are spending billions to build the engines. You can be the fuel or you can ignore the coming changes and risk becoming roadkill.
EBay + Skype = Local Services Marketplace
Here’s why I think that Google’s threat to the world’s largest online marketplace is overblown, plus my opinion on eBay’s plans for Skype.
The benefits that Google Base appears to offer to online buyers and sellers is first that it’s free, and second that it is searchable via Google, whereas eBay and craigslist are not. Two great benefits to be sure. But beyond that nothing is clear and Google is predictably cryptic as to its plans for the service. As I mention below, I think this is simply an attempt by Google to make more information searchable and to make its results more locally relevant. Enhancing the ability of consumers to find things is a laudable ecommerce goal but free listings, even with a Google-sized audience, do not make a market. In addition to a list of things you can buy, eBay offers a secure online payment system, feedback ratings on buyers and sellers, extensive anti-fraud efforts, search via categories and attributes, and policing of the behavior of its members. The effectiveness and implementation of each of those is up for debate, but the bottom line is that eBay is a total marketplace offering distinct advantages for both buyers and sellers.
Google has earned respect as it enters new markets and Google Base certainly represents a new angle on participatory ecommerce. But all this discounts how consumers actually shop at retail. Most of us are browsers focused on the items we are interested and not on the technology used to present them to us. When you are in a mall do you care about the total square footage, the construction techniques used to support the glass dome over the food court, or the volume of air moved by the air conditioning system? No, you probably never thought about the physical infrastructure. If you are an eBay buyer do you care that the seller had to pay a listing fee? Not your problem. The seller will pay that fee for access to the buyers. Right now, and for the foreseeable future the buyers are on eBay. And since most eBay users are buyers and not sellers the critical mass to move to another marketplace will not be there.
Local Advertising
That said, I do see eBay and Google converging onto a new ecommerce market – local services. This is where eBay’s Skype acquisition and Google Base will become strategically relevant. Let’s start with the numbers.
According to Borrell Associates, online local advertising amounted to $2.8 billion in 2004. That’s an increase of over $600 million from 2003, but still represents only about 2% of all local advertising spending. The physical yellow pages still rule as the dominant medium for local services advertising. But it seems that consumer behavior is changing faster than advertising budgets. The Kelsey Group reports (Feb. 2004) that 25% of online buyers’ searches are for local merchants. That’s surprising to me and apparently double what analysts had predicted. So the trend is clearly that buyers are increasingly turning to online searches for local services.
Local merchants and small businesses account for the lion’s share of the $15 billion in annual yellow pages advertising spending. It has proven effective as a search vehicle for local products and services but it has the disadvantage inherent in physical media of not providing a quantifiable return on investment. Online marketing provides this benefit by tracking click-through. This is a key reason why ad spending through Google is now around $500 million a month.
This leads to a rich market in local services advertising to be tapped by a service that can deliver the quantifiable results of pay-per-click model on the web with the usage pattern of the print yellow pages. This is where I believe eBay is heading, and where I think Skype fits in.
The Skype Angle
The initial criticism I read of eBay’s purchase of Skype, beyond the seemingly astronomical price, was that connecting buyers with sellers through IP telephony was not something their users wanted. In fact sellers were pretty vocal that they did not want a way for buyers to be able to call them. They prefer to keep them at arm’s length by using only email. Fair enough, but that underestimates the Skype potential by focusing solely on eBay as it exists today. If we look at local services as a future market yet to be tapped by the proper technology, then eBay has a huge potential market for connecting (local) buyers to sellers (of local services). And if that market is now served by the yellow pages then the model for connecting those buyers and sellers is clearly voice phone calls.
So, here’s what I see happening. Say for example that you have a service need. Typically it is a one-time occurrence where you have a leaky pipe or a broken garage door. Maybe you need to book a band or order a wedding cake. In these cases you need someone local and you need to communicate with them to explain the situation. You probably pick up the yellow pages and call a few companies based on the size of their ads. In some cases you may do a web search, but you are less likely to find relevant local results and even if you do you will probably still call them on the phone. This is not like ordering a book that can be shipped from anywhere. Especially if you have something broken and you need it fixed!
EBay can step into this market by providing a local services marketplace with the ability to click to call by using Skype. All the components are there for eBay to make this happen – the market need, the financial viability, the technology, and the market leadership position to establish it. The hurdle is disintermediation, but that’s a topic for next time.
Your Friendly Neighborhood Google
While the subject of Google Base is hot I thought it a good time to step back from divining what Google may be doing and look at where search as a whole is going. Right now when you search on Google you are generating much more than relevant search results. You are minting money. According to the figures in Google’s just-released results for Q3 2005, you and your fellow searchers are delivering $4 million in profit per day. You do that by generating relevant situations into which Google inserts targeted advertisements. The situations are so relevant that advertisers pay handsomely to show just a small amount of text and a web site link to you.
Here’s why. Search has become the online equivalent to the retail shelf. It is the moment of decisive customer interaction. When I type “HDTV” into a search engine I am doing so for a reason. And online retailers will line up to show me ads for HDTVs. In fact they will bid on how much they are willing to pay Google if I click on ad ad generated by that search. Why? Because based on that search I am signaling an intention. Sellers of that particular product are prepared to pay for my attention of that signal was in fact my intention to buy.
Now here’s where it gets interesting. Consumers are spending somewhere north of $100 billion online in the U.S. That’s exciting and the growth rate is fantastic and all. But it represents less than 2% of all consumer spending. Most consumer dollars are spent locally. And that will always be the case. But commerce-oriented search isn’t only about online fulfillment. I may buy that HDTV online and maybe from an online retailer that served me an ad with the results of my search. But I am more likely to buy it locally. And that’s the holy grail for retail search. Not just relevance, but local relevance. That’s what Google, Yahoo, MSN, and the rest are cooking up.
Go ahead and type “muffler” into a search engine. Ask yourself why anyone would want to search on the word muffler. The only time I would ever be interested in a muffler was if I needed one. And if I need one I probably need it immediately. And I also probably need it to be installed on my car. With the “HDTV” query I could reasonably have been simply researching. But with “muffler” I want to buy. So the right ad here is a local ad. The situation screams for an ad from the Meineke down the street, not meineke.com.
Getting back to Google Base (is that like “data base”?), if it really is a service allowing you to “Post your items on Google” then how much more local can you get? It’s the concept that made craigslist so popular. Peer-to-peer commerce started on bulletin boards and has grown into eBay. But the urge for buyers and sellers (and barterers and swappers and hagglers) to interact locally is still strong. If Google Base is real then Google is about to launch a new weapon in the battle for the local search market - all of us!
If you are a retailer there are three important steps to maintaining and improving your business. You must get consumers to your store, get them to buy your product, and get them to return as a repeat buyer. Here’s how blogging will help you accomplish two of those objectives.
A growing percentage of consumers, especially the young and the members of Generation Specs, are going online to find and research products. I personally begin nearly every purchasing decision with an online search and a scan of reviews. Many people I know are so plugged in during their day I wonder how they would even find something at a retailer without web access. And soon, smartphones, wireless networked devices, and improved local search will enable online search from anywhere. While you no doubt know the importance of having an online presence you may not realize how much blogging can add to your visibility.
Blogs are remarkably search friendly. They are frequently updated and linked to, so they tend to get higher search result placement than static web pages. They also speak to the younger generation in the more informal language they expect. If you want to be found online, and believe me you do, then a blog will help. This is not about gaming the results of search engines. It’s about creating the type of online presence that gets found and gets viewed. It’s a way to bring customers to you.
Blogs also do something very important to help you retain loyal customers. They create a sense of community. While we’ve long been in the age of the big box retailer and seen the near demise of the neighborhood store, and online community can bring back some of the sense of chatting with the knowledgeable local store owner. A great example of this is MenEssentials, an online retailer of skin care products for men. Through open and candid conversation about products the carry and even those they don’t, plus the welcome participation by market insiders and experts, the owner’s postings and the discussion forums have created measurable loyalty. New customers offer testimonials, and repeat (satisfied) buyers discuss the incremental purchases they made from suggestions they read on the site.
Community can’t be faked or forced. It has to begin with genuine desire, openness, and honesty on the part of the owner. And I believe that a blog is one of the fastest and most effective ways to communicate that you are different than other retailers. Since a blog is an addition to your regular web property it takes nothing away from what you already have and it will only be found by those who are interested in it anyway. If nothing I have said is compelling to you then a blog is probably not the right thing for you. You have to get it before you can communicate it. But if it makes sense and you can see the benefits of communicating to the connected generation, then get started. Start talking in your own voice not that of a corporation. Openly, honestly, and candidly. Be smart if you officially represent a company, but be yourself and have fun. Customers will find you and reward you for it.
I’ve commented earlier on my disappointment with consumer goods retailers putting their private label products between the facings of like branded products. This may seem trivial, but I am talking about the broader issue of using the physical appearance of a section to direct consumer behavior. One of the strengths of effective shelving strategy is the development of subcategories. When my job was developing planograms I focused on moving the consumer up to higher priced premium items. I positioned them in such a way as to draw the consunmers’ eye while they reached for the popular standard items. I shelved items together in a block to build a premium subcategory.
Let’s take a look at what a new large-format Kroger is doing in the cereal section.
I find that less than asthetically pleasing, but even more importantly I find that it undermines the segment of adult complex cereal that Post is trying to create. We all know that the shelf belongs to Kroger and that they can put their private label cereal any where they want. We also know that they make a better profit margin on their own product. But, let’s look at the reasoning behind this little subcategory.
Ready to eat cereal (the kind you pour in a bowl and add milk) is a $7 billion market. It appeals, and is marketed, mostly to kids. Today adults are increasingly skipping breakfast or eating on the run. So cereal manufacturers are trying different methods to appeal to adults and increase consumption. They try adding benefits, in the form of vitamins, antioxidents, fiber, etc. They also try developing more complex flavors to appeal to grown up tastes. In the case of the Post Selects (formerly Post Morning Traditions) line, these are cereals with complex adult tastes and are shelved at the top of the section with the shredded wheat. They carry the sub-brand Selects and have similar packaging elements. Shelving them together in a block is a method of visually drawing the consumer to a subcategory. Shelved haphazardly they would get lost in the section. But to the extent that they can draw the consumer’s eye they can increase awareness and ideally create a cereal customer out of an adult that was only buying cereal for the children.
The typical retailer approach to shelving is to stick the private label item directly next to the item it is designed to take customers from. That’s fine from a profit-per-item approach, but short-sighted from a category strategy approach. Let’s take a look at what Super Target is doing in the same section.
You can see a different strategy here. Target has expanded the concept of the adult complex cereal into a comprehensive subcategory. Post Selects are still located on the top shelf where the consumer would expect to find them. But now there is an entire block of similar items shelved below. This is a private label subsection influenced by the successful strategy of Post cereals.
While Kroger is eyeing tenths of a percent of market share with dollar signs in their eyes, Target is actively building the category. I propose that retailers work together with manufacturers for the benefit of the entire category. Finding ways to bring more consumers to the section and giving them something to buy is the right strategy. Shifting market share from one product to another is not the path to growth.
There’s no mistaking the increasing importance of having an online strategy in retailing. And it’s actually about to increase faster than many are predicting. It’s common for market researchers to extrapolate future trends by mixing recent historical patterns with some educated guesswork. But when Gartner, Jupiter, Forrester, and the rest predict how important the Internet is going to be to retailers they might not be looking at the looming sea change in consumers. I’m talking about the rise of Generation “Specs.”
These are the young consumers who have grown up in a connected world. Who methodically research the specifications and features of products before they buy. Who readily share their preferences and experiences. These consumers are the future and they are going to change the way goods are sold. Savvy manufacturers will embrace them through access to the information they seek and through dialog the way they prefer. In other words, online.
Generation Specs wants to know everything about your products and wants to decide on their own which of those features matter to them. They want to feel that you are communicating openly. They are going to use every means available to compare prices and features and they will buy on value. So the opportunity is to present a sophisticated value proposition to these consumers now while you competition is still using last year’s theme of marketing with irony. Tell them truthfully why they should shop at your store and why it might even be worth paying more with you than somewhere else. If you are right, and you engage them where they are – online – you will be rewarded.
Data analysis is the new retail arms race. Smart retailers have moved beyond the concepts of location, market positioning, and product segmentation to now focus on the effective utilization of data. Retailers once knew their customer base personally, but grew beyond that into far-reaching corporations. Consumer goods manufacturers, seeking to get closer to consumers, embraced analytics and category management to take control of the retailers’ shelves. Here’s a look back at how those manufacturers and retailers began using transactional data and consumer research and where we are today.
I’ve been fortunate that most of my jobs have had a field component that enabled me to work outside the office. To me the customer environment is my classroom. All of my major career accomplishments began with direct customer contact in their own environment.
If you are in an industry with a retail component you have a fantastic opportunity to understand consumers – observe them in the retail environment. They will tell you nearly everything you need to know about product assortment, pricing, packaging, shelving, and merchandising by their actions. Other industries have to pay a fortune for the type of market research that’s readily observable by retailers and consumer packaged goods manufacturers.
Dear Grocery Retailer,
I believe that retail environments are designed to send a message. From the overall look of the store to the lighting to the arrangement of products on the shelf, it all says something to the customers. Well, I’ve spent a lot of time in your stores and I think I have figured out the message you are trying to send to me. That message is, “We’re greedy.”
(more…)
The Apple Store is one of my favorite retail environments. It’s bright, open, and cleanly arranged. The limited selection of products is very approachable. The people are very helpful. But, most interesting are the features in the back of the store. Each Apple Store has a “Genius Bar” staffed by experts who can answer your questions and fix your Mac. It even has a red phone that’s a hotline to Apple headquarters in Cupertino, CA. Next to the Genius Bar is the theater area where free workshops and demonstrations are held.
Apple Stores are profitable, but their real goal is to bring the Mac experience to retail traffic areas. And with these unique features they have created a retail destination, not just a store.
I make a lot of trips to my local Super Target and buy a wide variety of products there. I’m a fairly self-sufficient shopper and tend to research things before I buy. But sometimes I have questions about various products and leave without purchasing them. So, here’s an idea. Why can’t Target have its own equivalent of the Genius Bar?