Posted in Customer Service, Future, Research, Strategy

What type of person are you?

At Ganador it is business as usual, and it is quite usual for us to tinker with our business model. (Regular readers knwo that I do not believe in a business plan (as most people know it), but that does not mean we don’t have a strategy and that we measure our progress accordingly.

As part of this process we are going to to intorduce some changes – but it is too early to talk about those.

In the meantime, we are following a process of innovation – applying ‘design thinking’ to our organisation (a service business) the same as brand creators (say Apple) would do for physical products.

This video links back to the source article that informs some of our intellectual property development. (Astute readers may start picking up where we are heading to, but that is OK 😉

The video expores 4 different types ‘learners’ or participants to the innovation process. As a smaller organisation, the same people must play different roles (not easy given natural preferences) but it helps being conscious of the stages and the various requirements.

Enjoy…

We thought it is interesting

Innovation as a Learning Process from Roger Shealy on Vimeo.

Posted in Research, Risk Management, Strategy

Life and Death

Right now most retailers are worried about the emergence of new channels and the associated raise of social media as an additional / alternative marketing platform.

In truth, this is nothing to worry about – it is the cycle of life (and death) as we have known it for aeons. Whether it is a football team, a tree or a country – the cycle of life applies to everything and retail is no different.

This process can be illustrated by the typical lifecycle curve as per figure 1.

 

The emergence of the abovementioned trends has no doubt shortened a few lifecycles.

Strategy textbooks teach us that the traditional and ideal response would be for a business to use the strong cashflows from the mature stage to invest into growth categories/products or markets.

In this case, the business ‘jumps’ the curve. Figure 2 illustrates the process. The truth is that few businesses actually repeat this process repeatedly. (How many businesses can you think of that have reinvented themselves over many decades – compared to the number that have gone bust?

 

There is a third and scarier curve that we face: the cycle of death.(Figure 3.)

I indicate that there is a disruption that destroys the curve (and it can happen at any stage of the life cycle – not only at the end of the curve.)

And a changing climate is such a (potential) disruption.

We were doing some work in Caloundra on the Sunshine Coast recently (nice work if you can get it, I know) and upon arrival at the airport we were informed of the “Ash Cloud.”

We ended up driving back to our hometown some 1200km and 14 hours away. And besides the inconvenience of having to arrange emergency accommodation for our 13yo, the effect was minimal.

You would argue that the economic effect was possibly even a net gain as people suddenly paid extra for accommodation, travel, cabs, meals etc.

But if you consider that cloud to be just one example of the adverse economic effect  of climate change and let’s imagine if that cloud hung around – permanently.

Let’s play a little what-if game here and maybe you can help me identify all the business that would go broke of Qantas stopped flying:

E.g. What would happen…

–        at Qantas?

–        The little coffee shop?

–        the cabbie?

–        The owner of the surrounding convention centres and hotels?

–        The suppliers to all of the above.

 

Earthquakes and ash-clouds and dying oceans will not respect the country borders.

Globalisation created an interconnected world in an attempt to lower the costs – and now it seems it was a zero sum game because all those costs we saved are now coming back to haunt us.

 

Here are a few thoughts from Paul Gildings (researcher and author): “The Earth is full”. Think about that for a moment.

It is easy to quote many scary statistics, but the truth is that it is almost as easy to quote the opposite. Most people cannot predict what they will have for breakfast, never mind the state of the ecology in 30 years’ time.

But let’s consider just a few facts that are relatively clear”

Based on current trajectories all fisheries in the world will collapse in 2048 – (30% already have.). You may be able to imagine a world without fish, but about 1Bn primarily live of fish. I don’t know whether you have thought about how these people, mostly from under-developed countries, but also including countries like Japan, are going to react when the disaster becomes obvious and imminent?

 

We are facing a Mad Max kinda future. A recent study has identified 9 planetary boundaries (climate, biodiversity, nitrogen levels etc.) which are critical to our long-term survival. The study found that 3 of those boundaries are already past the tipping point – i.e. beyond the point of no return.

You cannot separate the Ecology from the Economy. The US Senator Gaylord Nelson remarked that: “The Economy is a wholly-owned subsidiary of the Environment, not the other way around.”

Here is a picture to that will clear your sinuses:

Imagine the Earth is a pool of Capital. It is finite of course. We cannot make more ‘planet’ even if we wanted to and no matter what you smoke, that won’t change.

Human beings live off the interest that this source of capital generates: that is our sole source of income.

We are currently living at 140% of our capacity. If we take 2008 as our base year, that means that come 25 September 2009, we have spent all our money.

We then proceed to draw from our capital until the end of the year – when the next batch of interest becomes available.

  • What happens in 2010?
  • And what happens to the total amount of interest we had available?
  • What happens in 2011?

Change is sudden and non-linear. Until the day before you run out of money – everything will still seem OK. That is why it is so hard for people to see what is happening.

With Population Growth at 0.8% and GDP Growth at 2.5% and Efficiency Improvements at 1.2 % (all current numbers) – it takes us to a Planet at 500% of capacity by 2050 (and 2x capacity in 2030.)

Does that scare you?

Don’t worry; it won’t happen because it can’t physically happen.

A dam can be 100% full or even 120% full, but it can’t be 200% full because then there is no dam. As Australians we should, tragically, be able to relate to that.

This is Australia, so you won’t be offended if I talk about our BIG CONSUMPTION HANGOVER – the cause of which is pretty evident, particularly in the developed countries:

  • In the US the Average CEO wage is 500x the minimum wage.
  • A Hummer is bigger than 2 shacks in Soweto that would house maybe a dozen people.

I am not a climate change advocate. In fact, I probably lean more towards the sceptical side if you want to know. But as you will see shortly, it does not actually matter which way you lean, there is a massive disruption on the way.

Human beings are very good at filtering out information that does not fit neatly into our vision of the world. “We can’t cope otherwise,” says James Glieck, author of books about chaos theory.

I try to resist that. I understand, and so should you that: everything is just probability. There is no certainty. I cannot predict the future. Scientists cannot predict how much it will rain while it is raining, never mind the likelihood or impact of Climate Change.

What scares me most is that if it is not climate change that will cause the big disruption, then it is us trying to deal with it. I don’t purport to know all there is to know, but I am willing to lay very large bets that Carbon Tax is just the beginning.

Now, let’s talk some more about Facebook and Twitter.

Or we could talk about whether your business is built to deal with real disruption.

Posted in Marketing, Research

A simple research solution

In a previous post, a commenter wrote about how hard it is to solicit customer feedback. Here is a quick and dirty solution. It works well when asking one question at a time.

If you ran a pizza restaurant and you are thinking about changing the menu to add a new product and must choose between Ribs or Pasta or Sandwiches.

Simply put 3 or 4 jars on the counter – labelled according to the 3 options, with a bowl of beans (or whatever) that customers can drop in the jar. (Or one jar with differently coloured beans.)

A small sign behind the jars may read something like this:

We are thinking of expanding the menu.

Tell us which item you would like us to add by dropping a bean in the jar.

Empty the jars daily – because the psychological principle of ‘social proof’ may influence the outcome as people vote for the more popular item because it appears popular with other people.

A critical, ongoing requirement for success in business is that you are solving someone’s needs/ problems. If you insist on selling pizzas because you like pizzas or because you’ve always sold pizzas, you are set on the road to ruin –

and THIS is the bigger issue to be aware of

Posted in Research, Retail Operations

Retail winners, retail losers

US-based research company RSR brought out a research report on pricing strategies. The report compares winners (retailers exceeding the median 2% growth) and losers (retailers below 2% growth) on a range of issues related particularly to pricing.

I suppose the assumption is that it makes sense to copy the successful strategies; which is debatable assumption in my view, but it is interesting nevertheless.

The first finding relates to how often retailers change prices (up or down).

One hundred percent of retailers with annual revenue greater than $5 billion report they have increased the number of item price changes

I wonder if this is a necessity, or a case of fiddling with something because you can (enabled by technology) or possibly a case of not having any other ideas?

My favourite insight, to be trotted out to some of my clients in the near future is:

NO retail winners price match, vs. 19% of average performers and 13% of laggards

Retail winners are more likely to recognize that there has been an impact of channel proliferation.

In fact, 20% have “thrown in the towel” and returned to a single price across all channels, 15% understand that they really can’t even get started with different prices across channels, and a quarter believe that channel proliferation has created conflicts that they cannot resolve.

The next finding is particularly interesting. Where do you stand on this?

Winners are driving most of the opportunity shifts away from margin as the focus. Winners are much more aware of improving their competitive price image and the opportunity to increase market share, while peers remain focused on sales and margin.

The final finding to share is a difference between large and small (not winners and losers) that is particularly interesting. (Or maybe I am just a geek.)

In a world where consumers have near-perfect information on prices, how can a retailer compete? One is by focusing on promotions; particularly targeted promotions. One finding that the larger retailers have adopted but are NOT followed by smaller retailers is how aggressively they promote.

Only 23% of retailers with annual revenue under $250 million report they have become more promotional vs. 62% of retailers with revenue over $5 billion per year.

Do your strategies match those of the retail winners or losers?

Why? Why not?

 

Dennis

 

PS: If you want to approach pricing systematically, and need some clarity on some of the key concepts and factors, you can get the book here.

 

Posted in Marketing, Research

Seduced by statistics

As a manager or an owner of a business, you are likely focussed on metrics, right?

My favourite demonstration of the stupidity of statistics is to ask people to imagine standing with one foot in a bucket of boiling water and the other in a bucket of ice water.

ON AVERAGE you would be very comfortable…

People are easily seduced by numbers.

  • Do you think research works?
  • Do you think strategic planning works?
  • Do you think business plans will ensure the right outcomes?
  • Do you believe in the power of the rational mind and a diligent approach will ensure success?

Consider Marketing for a moment:

  • Nielsen reports a 95% new product failure rate.
  • The University of Michigan discovered that the average cross-industry customer satisfaction score has fallen below 75%.
  • The Marketing Science Institute determined that a 100% increase in advertising expenditures yields just a 1% increase in sales.
  • ROI measurement firm Marketing Management Analytics found that major media advertising for consumer packaged goods brands returns 54 cents on the dollar and campaigns for non-consumer packaged goods brands, 87 cents on the dollar—two losing propositions.
  • A Deutsche Bank study of packaged goods brands found that just 18% of television ad campaigns generated a positive ROI in the short-term; less than half (45%) saw any ROI payoff over the long run.
  • Copernicus (the company) observed that brand equity is in decline in 48 of 51 categories where buyers perceive the leading brands as more similar than different

This is not a new symptom.

Lord Lever said:  “I know half my advertising isn’t working, I just don’t know which half.” It was true then. It is truer now.

Does this mean we don’t do marketing any more? Of course not. It simply means that we need to keep things in perspective. Not get seduced by the apparent certainty offered by a set of numbers.

In this brave new world of business, there is no certainty. There is only effort. Not diligent planning, but diligent application.

In a world where information increases exponentially and the rate of change is mind-numbingly fast, there is no time to plan. Fail(ing) forward – a term probably coined by John Maxwell – is the new business plan.

I will say that again: Fail forward is your business plan.

 

 

Posted in Management, Research, Strategy

The problem with numbers

Australia is said to have a 2-speed economy, the mining/resources sector that is booming and the rest of business which is, to put in mildly, not booming. But that is wrong.

It is a 3-speed economy. As above, plus whatever is happening in your business; which may be booming more or less or struggling more or less.

This does highlight an issue with numbers though.

Australia’s average GDP growth indices are marginally positive (as politicians are quick to point out.)

But this hides a huge problem, as many businesses know first-hand. I have clients that are up and down by 30% or more, and sometimes it is the same client.

Averages are like that: you stand with one foot in a bucket of ice water and one foot in a bucket of boiling water, and on average you are comfortable.

Our average growth rate is the same and this no consolation for many, many businesses.). I am still to meet the marketer that knows what to actually DO with that amazing statistic of 1.7 kids per family. It sounds very accurate, and it sounds very useful. And if the neighbouring suburb has 1.36 kids per family, we know that suburb has – ahem – 20% fewer kids per family. That is a big difference – but what do you actually DO with it? (The same principle applies to demographic data of course.)

This brings us back to the 3rd speed of the ecomomy: your business.

These statistics do not change anything in your retail mix. And it does not necessarily account for the customers who visit your shop. It does not predicate your success or failure, because there may well be enough families with 1.7 kids in your area (if that is what you need) to make the business viable.

Executives can be seduced by numbers. Sometimes the wrong numbers. And it is dangerous.

By all means measure. At least measure everything that matters. I am not against numbers; just against the religion of numbers. They often provide false security, but we are sucked in by the pseudo-science.

Many decisions you have to make require instinct. Taking risk. And decisions can’t always be reduced to numbers. If it could, a monkey could be the executive, right?

 

 

 

This video illustrates some of the problems about finding your typical and your average. I am a sceptical users of research. Only some times and with great caution.

I have been precviously criticised for it – and it is possibly a strange position for someonw who is also a marketing academic to take. But the older I get the firmer I stand on this.

 

Posted in Future, Research, Strategy

Is it smart if it sounds smart?

Frequent readers of this blog will know that I am not a great fan of research. IMHO it is usally a way for indecisive managers to postpone making a decision, or it is commissioned to become a scapegoat in anticipation of failure.

I realise this is a sweeping statement that you may well disagree with. And it is true that there are some types of research that it is (or may be) very useful. But very few. (And I am specifically fererring to what passes for Research in the Social Sciences.)

For each of the questions & findings below, I can easily find an example of why it is limited or wrong or risky to use. This is not always the fauilt of the researcher because they would have spelled out their assumptions and limitations; it is how the consumers of this research conveniently turn facts into sound bites of understanding that is easily digestible as sexy one-liners in a Board presentaion.

Question: Does a loss leader pricing strategy work with the prevalence of cherry-picking customers?

Answer: Extreme cherry pickers are customers who seek price deals and excessively avail themselves of deep discount offers, which generates negative profits for retailers. Extreme cherry picking segment is small (about 2% of all shoppers), and a loss leader promotional strategy adds to retailers’ bottom lines, despite the pure loss generated by extreme cherry pickers. (Journal of Retailing-2010)

Question: Is there a relationship between CVSA (centrality of visual aesthetic design) and consumers’ intentions, such as loyalty, satisfaction, minutes, item, and $ spent inside store?

Answer: There is a positive relationship between CVSA and consumer satisfaction, loyalty, items bought, minutes visiting the store, and $ spent; and that consumers also evaluate, beyond products, visual aesthetic components in retail and that it plays a moderating role on consumer intention. (Journal of Consumer Behaviour, September/October-2010.)

Question Does seeing the word “sale” make you less likely to comparison shop?

Answer: Subjects search less in both treatments with discounts (using the word ‘sale’ or simply offering a discount); therefore we conclude that retailers can use this framing effect in order to reduce the competitiveness in their market, since decreased search intensities dampen competitive pressure. (The University of Adelaide School of Economics, Research Paper, October 2010.)

Question: Does assortment size affect your choice?

Answer: Assortment size has been shown to influence whether consumers make a choice, but could it also influence what they choose? Five studies demonstrate that because choosing from larger assortments is often more difficult, it leads people to select options that are easier to justify. Virtues and utilitarian necessities are generally easier to justify than indulgences; consequently, choosing from larger assortments often shifts choice from vices to virtues and from hedonic to utilitarian options. (Journal of Consumer Research, 2009.)

Question Can the music playing at a flower shop affect how much you spend?

Answer: An experiment in a flower shop, played love songs and romantic music (congruence condition), pop music (music usually played in the flower-shop) and no music (control condition). The mean amount of money spent was significantly higher in the love songs and romantic music condition compared with the other two, whereas the pop music condition did not lead to an increase in the amount of money spent compared with the control, no music, condition. (The International Review of Retail, Distribution and Consumer Research, 2009.)

Question: How can you make someone think they’re getting a discount when they aren’t?

Answer: Consumers perceive yellow price tags as presenters of discounts. A comparison of the mean values showed that yellow price tags influence the reference price and, moreover, a yellow price tag increased the reference price. As a practical outcome, the results of the study indicated that companies have the opportunity to increase the consumer’s reference price and thereby to raise revenues by changing the colour of the price tag without offering an actual discount. ( University of Tartu, Faculty of Economics and Business Administration.)

Your challenge:

Each of these ‘factoids’ are subject misinterpretation (as is all research) because people ignore or forget the context, limitations and assumptions that informed the project. Think about whether these apply to you. Why? Why not?

And, of course, just because it sounds smart it does not mean it IS smart!



AND PS:
Check out my photo gallery on the menu bar in the RESOUCES section (on the left of the screen) for some NY pics. Just some fun stuff.

Posted in Marketing, Research, Selling & Persuasion, Shopper Marketing

Neuromarketing for Retailers – Part 4

Pradeep’s book (The Buying Brain, 2010) is a must read. This post is the final extract on some of his findings – and it focuses on the applications of neuroscience in the retail aisle.

 

  • The median supermarket (US) is 46,755 feet.
  • The average number of items in a supermarket is 46,852.

Think about that – and what it means
I will limit commentary, and just repeat some observations. (A typical male brain approach 😉 )

  • Avoid sharp corners on gondola ends (end caps) as there is a danger signal that the brain recognises sub-consciously. (Who thought OH&S could actually increase sales?)
  • Evaluate EVERY touch point in your store for: findability, ease, simplicity, discovery, pleasure
  • Your retail environment should closely resemble the environment in which the product will be consumed. (Remember the Hi Fi lounge?)
  • Consumers that experience entertainment get emotional relief and minimises the pain of purchase. (Shoppertainment whatever happened to you?)
  • Make things as simple as possible; and colour is key element in achieving this. (Ever got lost in a car park that only had letters?)
  • Avoid information overload; the mind shuts down. We are neurologically primed to seek out differences and too much repetition of closely related/ similar merchandise sends the brain on a holiday.
  • Focus on faces. (Can you change your shelf-talkers to include someone’s friendly mug?)

 

As you read through this, you will likely think that you have seen examples of all of these somewhere. Some retailers have lucked into those solutions and others arrived by experimentation.

Others will have to ask someone who knows.


Posted in Marketing, Research, Selling & Persuasion, Shopper Marketing

Neuromarketing for Retailers – Part 3

Last week we had a short overview of the Boomer and Neuromarketing. This week we look at female brain and what it means to marketers.

We mentioned earlier that the human brain has not changed much in the last 100, 000 years. Coupled to the fact that the worst outcome for the ancient human female was ostracism from the group (it jeopardises survival) – and this still applies today; the context is just different.

 

  • Men tend to use either the rational or the emotional filter – whereas women tend to use both. (Women truly can multi-taks better than men.)
  • Although women have slightly smaller brains, it contains the same amount of matter – and it contains 11% more neurons in the language centres of the brain.
  • Women also remember stressful and negative experiences more than men (no jokes in the comments section 😉  – and this holds grave danger for their propensity to generate negative word-of-mouth.
  • In short, women are more verbal, empathetic, nuanced and loyal. What does this mean for your brand.

 

Here is a small case study presented by Pradeep in his book (The Buying Brain, 2010) for the re-design of a website that sold baby care products and other applications.

–    Position visuals on the left and semantics on the right
–    Feature moms using the product
–    Create forum where they can gather and share tips
–    Show mom-and-baby interactions

Next week – the final installment.