YOU ARE HERE…Whether You Like It Or Not

August 25th, 2010

By Doug Stephens

A recent study by Forrester Research concluded that while location-based services (LBS) such as Foursquare, Gowalla and Loopt are intriguing, they are still too small for major marketers to spend much time on.  Location-based services allow users to not only share their physical location with others but also to gather and receive information relative to their location such as reviews, recommendations, other nearby venues and friends that may be in proximity.  Forester added that while current users of location-based services are very likely to be influencers within their social circles, they are also largely male and therefore better suited to marketers targeting men.  Their overall advice to marketers was a resounding “wait-and-see” on location-based services.

Then Why So Much Location-Based Marketing?

But it’s hard to reconcile the Forester report with a lot of what’s happening in the marketplace.  Large players like Starbucks have been experimenting with services like Foursquare since early 2010, giving in-store discounts and rewards to users for checking in to their stores.  The GAP recently launched a one-day 25% off promotion to Foursquare users checking-in at GAP locations.  Add to the list the Wynn Las Vegas Hotel, the City of Chicago and Tasti D-Lite and it would appear that location-based marketing is being taken very seriously by major marketers across categories.  And it all seams completely understandable.  After all, isn’t the goal of marketing to be timely and relevant?  It would seem that LBS is an ideal means of achieving both.

Recently released LB applications such as the Shopkick are making news by taking shopper rewards to entirely new and location-specific levels, literally allowing shoppers to earn rewards simply for moving through various areas of a participating store.  And with retail giants such as  Macy’s, Best Buy, Sports Authority and American Eagle Outfitters and Simon Property Group testing it, Shopkick is getting some serious attention.

And in what is perhaps the ultimate sign that LBS has arrived, Facebook recently launched its own home-grown location service, Facebook Places, allowing users to share not only what they’re doing but also where they’re doing it.

All this activity and interest around LBS begs the question, if in fact marketers follow Forester’s advice and wait on the sidelines, do they run the risk of missing the “LB boat” entirely?

Making Location Make Sense

What most agree on is that location-based marketing services are still relatively new to the mainstream and largely misunderstood by the public and marketers alike.  To that end, organizations are forming to foster discussion, education and understanding about LBS.  One such organization, the Location-Based Marketing Association of Canada hopes to not only better define LBS but also share with marketers the unique opportunities the technology represents.

In response to the Forester study, Association Founder and President Asif Khan said “What they failed to highlight was the explosive recent growth of such services. Foursquare alone has over 2.5 million users and has experienced 28% growth in just the last month, according to RJ Metrics. More and more people are beginning to utilize location-based services and as Smartphone adoption increases globally, the numbers will only continue to increase.”  Khan also points to the introduction of Facebook Places as having the potential to immediately introduce upwards of 500 million users to the concept of location based services.

As for marketers considering location-based marketing, Khan believes that those who “move to embrace LBS early-on will reap enormous rewards from proximity marketing, including attracting more first-time customers, encouraging more repeat business and increasing sales.  I also see huge opportunities for cross-brand promotion for companies that have multiple brands like Gap and Old Navy.”

Forget technology. It’s about “return on relationships”

Techno-Anthropologist Clay Shirky is quoted as saying that “Communications tools don’t get socially interesting until they get technologically boring.”   To that end, Khan sees the use of LB reaching critical mass in 18-24 months.  “I think Clay is right” said Khan. “I don’t think it’s about technology at all.  At least, I don’t think people care about which app they use.  They only care about the size and relevance of the deal.   For brands and retailers engaging with these tools, the real measurement of success will not only be ROI, but Return on Relationship (ROR).

As for the future and the continued evolution of location-based technologies, Khan suggests that the very context in which we consider the term location will also evolve.  “Today, we think of location as only the physical space.  But I see a time where we will be in virtual spaces and augmented reality where brands and content will live as well.”

Full disclosure:  Retail Prophet Consulting sits as a current member of the advisory board for the Location-Based Marketing Association of Canada.

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Posted in Marketing, Technology, The Future, Trends, social media | 1 Comment »

If You Knew What Tomorrow Looked Like

August 17th, 2010

By Doug Stephens

There are essentially three kinds of information a company can use in order to operate their business:

- Hindsight:  Usually analysis aimed at explaining or understanding  what just happened

- Insight:  Typically situation analysis accompanied by recommendations to improve what’s happening right now

- Foresight: Often research aimed at identifying future threats and opportunities resulting from significant trends set to impact the business, culminating in predictions about what’s going to happen

Most companies invest in the past

What I find curious is the degree to which companies spend a disproportionate amount of time, effort and operating budget developing hindsight – literally gazing into the rear-view mirror.  In fact, many have armies of analysts crunching away at data in an effort to provide leadership with an understanding of what happened last week, last month or last year, presumably so they can then report coherently to their boss, board or shareholders.

Some companies manage to balance their outlook with a degree of insight. Beyond basic scorekeeping, senior functional heads take what the analysts produce and use it to course-correct for the coming weeks or months or if they’re really aggressive…for the coming fiscal year.

However, it’s been my experience that only a small percentage of companies invest adequately in foresight.  And to be clear, I’m not simply referring to typical, periodic market research.  And this is not about the CEO simply coming back from a spiritual retreat and sharing his or her vision.  I’m talking about research that aims to build a complete organizational understanding of what the world and their business will look like in 25, 50 or 100 years.  I’m talking about sound and validated futures research.   Think of your own company.  How much of your time and your colleagues’ time is spent reporting on what’s happened versus trying to understand what’s going to happen?  How much more competitive could you be if that distribution of effort was reversed?

So why is that?  Why do most companies come up short in their investment in understanding the future?

It’s difficult to know for certain but here’s what I think.

Confronting the future takes courage

I believe that the willingness to develop foresight requires enormous organizational courage.  Garnering foresight or a view of what will be, may take you into unfamiliar territory and may mean facing uncertainty.   In some cases, foresight may reveal the inevitable obsolescence of your product, company or industry.   Understanding the future  may require that that you take unprecedented action today.  It may cause revolution in your business.  And it definitely requires strong leadership. Frankly, the future can be a scary place.

But the fact is that foresight also often reveals opportunities to create new markets, serve new needs and build new products.  Foresight promotes proactive change and evolution.  Foresight gives direction and meaning to what the company does.  And ultimately foresight is an essential component of survival.

It comes down to one simple question.  If you knew what tomorrow looked like, how would it change what you do today?

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What if it all STARTS with the purchase?

August 11th, 2010

By Joel Rubinson

Traditional marketing theory tells us that the purchase is the successful outcome of consumer-directed messages that create awareness which begets interest, desire, and action.

What happens when that is wrong?  What does marketing do when it STARTS with the purchase?

This is an extreme version of what Procter calls “store back”.  However, based on shopper insights research I have conducted, I believe that, for grocery products, over half of first-time purchases are unplanned; in fact, the shopper might not even have been aware of the product before buying it.  In those cases, it all STARTS with the purchase and ENDS with awareness.  The purchase funnel is totally flipped.

When it all starts with the purchase, the role of marketing communications changes.  Now marketing must get the product noticed at shelf and impart meaning to it instantaneously for the shopper.  Packaging, shelf placement, thematic displays, signage, mobile messages that are location-aware, shopper offers based on that shopper’s history, and master brand familiarity become the main vectors for creating meaning.  In this communications model, when someone encounters a product they were unfamiliar with they should be able make sense of it instantly; to tell YOU (the marketer) what the product is about, rather than you having to tell them in a concept statement.  After the product is bought and being used, there is more sense-making that occurs.  If the consumer is really into the product as they are using it, now you have an opportunity to build engagement:  they might join a community, become a fan in Facebook, share comments, start seeking out advertising and recalling it, seek out the brand’s “creation story”, etc.  In this scenario, the impact of brand narrative, brand values, social media engagement, etc. come AFTER the purchase, so they solidify rather than precondition the brand-customer relationship.

Could it really be that it all starts with the purchase?  Well, for certain types of products and retailing situations, I believe it does.  Consider this:

  • - Conduct a study to measure the percent of products bought for the first time that are discovered in-store (I got 50%+)
  • – Do you think the products bought for the first time on impulse in a Kroger’s, Trader Joes, Costco, Target, etc. are all the same and were previously known? If not, then you believe that brand adoption can START via the shopping experience.
  • - Consider shopping styles that people have, reflecting their relationship with a product category.  Can you imagine categories (e.g. artisan cheeses) where shoppers like to explore and find new interesting products to buy?

This last point is perhaps the most important.  People have different shopping styles for different product categories which means that the heuristics they use to make decisions are systematic.  You might not ever buy carbonated soft drinks the way you buy interesting dips that you just tried at a tasting station.  This is where behavioral economics intersects marketing; the study of how people decide is often more interesting than theoretical purchase intentions.  Hence, some products will predominantly be bought via a process that starts in-store.  Others will be bought based more on the traditional marketing model requiring awareness built via mass media. You need to study HOW people decide in order to understand when to start from the traditional end of the funnel and when you start from the other end of the funnel.

When it all STARTS with the purchase, everything that you thought was upstream becomes downstream and the thing that was the most downstream of all, the purchase, becomes the most upstream event.

This is “store back” on steroids.

Now, the researcher in me has to ask the rhetorical question, “Does the marketing community have the research tools to act on this new way of thinking?”  Rhetorical because, I don’t think we do.

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Joel Rubinson is a distinguished expert in consumer and market research and the President of Rubinson Consulting. He can be reached at joelrubinson@gmail.com

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Posted in Behavioral Marketing, Branding, Marketing, Store Experience, Trends | 1 Comment »

The Problem With What You Do Best

August 2nd, 2010

By Doug Stephens

One of the first lessons I was taught in marketing was that when times were tough and sales were hard to come by, smart companies focussed on their core business.  They didn’t chase unproven concepts and ideas or explore unfamiliar ground.  Rather, they drilled even further into their primary occupation.  They “stuck to what they did best”.

I know now that nothing could be more untrue and that this pseudo-strategy has probably killed more companies than it’s salvaged.  And yet, we regularly hear CEO’s declare that they’re re-trenching around their core business in an effort to succeed.

When your core business IS the problem

The problem with simply focusing on your core product in tough times is that your core product might actually be what is making times tough in the first place. Focusing more intently on it  may only speed your demise!  Any creative or innovative thinking that could actually save the company is often stifled once the stick to what you do best mentality becomes pervasive.  Revolutionary ideas rarely see the light of day.

For the Apple’s and Google’s of the world, radical innovation is a daily breakfast item but the companies I truly admire are the ones for whom innovation is a painful leap of faith.  One can’t help but respect companies who have the courage to look outside their comfort zone for answers to seemingly insurmountable problems.

Below are what I consider to be three great examples of companies that chose NOT to stick to what they already know when times got tough but instead stretched to find new points of connection with their customers and in doing so, charted new territory for their brands.

Core Business WAS: Manufacturing a brand of automobile with little relevance, equity or appeal with young consumers.

What they DID: Instead of focussing on the automobile itself, Ford invested in Sync, a Microsoft designed system that seamlessly integrates phone, text messaging, web browsing and music through the car’s voice activated communication system.  Since its introduction in 2007, Ford has sold more than 2 million Sync enabled vehicles and claims that Sync-enabled models outsell non-Synch models twofold.

But the point here is really less about the technology and more about the message that Ford was sending to younger consumers.  In this decisive departure from its core product, Ford clearly told younger consumers that it “got them”.  The brand understood their need to integrate their personal technology into their driving experience and built a system that allowed them to do just that.

Core Business WAS: Manufacturing a low tech, old-fashioned toy in a market being increasingly dominated by video games.

What they DID:  Rather than waste effort trying to convince kids that plastic building blocks were cooler than video games, Lego reached beyond the safety of its core product, embracing the very technology that threatened its existence and making it part of the Lego experience.

The website offers video and online games, allowing kids to discover various Lego product sets in a fun and interactive way.Themed Lego kits correspond to popular movies, bridging the gap between passive entertainment and creative play.  They’ve also done a brilliant job of incorporating in-store technologies such as augmented reality to make the Lego buying experience truly exciting.

Core Business WAS: Making a brand of clothing that was being commoditized in the market and increasingly overlooked by younger consumers in favor of more fashion oriented, up-market brands.

What they DID:  Instead of focussing consumers on stitch-counts and pant styles,

Levis turned their attention to something well outside their core strength… music.  In 2010 they launched the Levis Pioneer recording sessions, a collection of 12 recordings by contemporary artists re-working classic songs that they’ve been inspired by.  The tracks and subsequent videos served as an allegorical bridge between the old and the new, a marrying of the classic and the contemporary.

Furthermore, it broke through the din of unremarkable messaging in the apparel market, sending a clear message to younger audiences that classic can indeed be cool.

Sticking to what you do best isn’t a strategy

These are only a few examples of brands that’ve had the courage to explore beyond their core.  There are others.  And in fairness, there are also a few notable examples of companies who did intensify their focus on their core offering to better serve their consumers – Starbucks being one of them.

But don’t let anyone convince you that simply sticking to what you do best constitutes a long-term strategy.  It’s more often the battle-plan of frightened business leaders who’ve simply run out of ideas.  They fail to realize that the core business of all great brands – regardless of what they sell – is innovation.

Innovation is what great businesses do best.

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The Post-Crisis Gen Y Consumer

July 27th, 2010

By Doug Stephens

Most marketers are all too familiar with what has become an overly simplistic consumer segment profile of Generation Y.  They are often broadly described as a large segment of 9-29 year old, tech savvy, voracious spenders with high ideals and expectations of the retail brands they shop.

But how much of what we think we know about Gen Y is born out of pre-recession realities that no longer exist?  In the cold light of a post-recession day, does the post-crisis Gen Y consumer bear any similarity to the one that’s become stereotyped in North American marketing circles?  Moreoever, what do retailers need to understand about this generation to successfully win their attention and loyalty as they move into their prime consumption years?

To help answer these questions, I spoke with Kit Yarrow PhD, professor of psychology and marketing at Golden Gate University and co-author of the acclaimed book, Gen BuY: How Tweens, Teens and Twenty-Somethings are Revolutionizing Retail. Kit is widely recognized as a leading authority on consumer psychology and Generation Y.

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Retail Prophet:  Throughout the the last decade we heard a lot about Gen Y’s spending patterns; specifically that they were spending at a rate up to 500 percent greater than their parents in adjusted dollars. What impact has the recession had on Gen Y spending patterns?

Kit Yarrow: They’ve cut back – but not as much as older generations.  It makes sense when you consider that Gen Y had less and so lost less during the recession. They’re also highly optimistic about their earning potential and consequently less cautious when it comes to spending. This generation was trained by their parents to have high expectations. Lastly, Gen Y “wants” feel a lot like “needs,” especially when it comes to technology. In contrast to older generations, they’re spending less because they have less to spend, not because they have a new attitude about spending.

However, although they haven’t adopted the frugal mindset of older generations, they have learned new ways of shopping. They’re definitely less impulsive and more interested in cheap thrills and sales promotions than they were pre-recession.

Retail Prophet:  The silent generation’s consumer behavior was to some extent a product of the Great Depression. Consequently they became known as a generation of savers. What long-term effects do you see this recession having on Gen Y’s consumer tendencies?

Kit Yarrow: Gen Y is more knowledgeable about personal finance issues and money management as a result of the recession.  I think parents are doing a better job of preparing their kids for financial independence.  Gen Y has not been psychologically damaged by the recession in the same way that Depression Babies were. Not even close. I’ve heard more Gen Y’s scoff at the futility of saving than I have those who have stopped spending (though neither extreme is the norm).

Retail Prophet:  From your research, what would you say are the most significant changes or adjustments retail businesses need to make in order to appeal to Generation Y customers and secure their loyalty in the decade ahead?

Kit Yarrow: It’s essential to get Gen Y involved. They’re willing to advise and champion retailers. Why not take them up on it? The key is to acknowledge and reward their involvement – a little courtship is required. Secondly, I think communication has to be more visual, symbolic and intuitive. Honestly, transparency, humor and humanness go a long way too. There also needs to be more activity, product turnover and sensory involvement than what satisfied previous generations. Lastly, it makes sense to rethink absolutely everything with a nod toward what’s technically possible today.

Retail Prophet:  Certain marketing messages resonate with specific generations. For time-compressed Baby Boomers for example, “convenience” became a key driver. Are there any particular messages you think resonate particularly well with the Gen Y consumer?

Kit Yarrow:  This is the generation that always gets their say, but isn’t always heard. There are multiple ways to get your point out there – and the result is lots of talking, not so much listening. What Gen Y craves is to be seen and heard. Status is no longer about money, it’s about influence. Therefore the messages that resonate with Gen Y are those that champion the customer. Listen, respond, notice and reward – that’s where it’s at.

Retail Prophet:  We’ve all heard the statistics about the disproportionate channel growth of e-commerce compared to bricks and mortar retail. Are there any indications from your research about Gen Y’s attitude towards shopping online versus visiting a physical store location? Will bricks and mortar retail suffer under a Gen Y consumer?

Kit Yarrow: There really has to be a complete integration now. Gen Y’s shop in stores with Internet information and apps that allow them to compare and share at their fingertips. Gen Y views online and physical location retail as equally valuable and somewhat seamless. After all, virtual is more tangible to Gen Y than to older generations.

They prize online capabilities like crowdsourcing, customization and most importantly their ability to learn and share with others. At the same time, according to my survey, Gen Y also enjoys shopping in stores more than any other generation. The smart retailers today are really looking for ways to enhance both experiences and their retail brand by bringing more online capabilities into the store and putting more of the store experience online.

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Kit Yarrow, Ph.D. is a professor of psychology and marketing at Golden Gate University and their 2009 Outstanding Scholar. Her book, Gen BuY: How Tweens, Teens and Twenty-Somethings are Revolutionizing Retail (Wiley, 2009), was described by Publisher’s Weekly as “a must-read for all who hope to keep their companies relevant and viable.”

Kit has given talks on Gen Y, the psychology of consumers and insight-driven marketing to organizations such as Stanford, The Commonwealth Club, Cisco and Vogue.  And she’s consulted to businesses including General Electric, Del Monte, AAA and Nokia.

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