Customer Experience Leadership

Shopper Marketing: Change the Experience, Experience the Change

Walking through a Whole Foods grocery store a few weeks ago got me observing some interesting things.  Have you ever noticed that refrigerated vegetable shelving has mirrors behind it?  That the international aisle has a different “look and feel” compared to other aisles?  That Burt’s Bees products have their own customized display?  As a marketer, these things caught my attention as efforts to attract consumers through a relatively new concept called shopper marketing.  Deloitte’s publication “Shopper Marketing:  Capturing a Shopper’s Mind, Heart and Wallet” defines shopper marketing:

“…all marketing stimuli, developed based on a deep understanding of shopper behavior, designed to build brand equity, engage the shopper and lead him/her to make a purchase”

Companies have traditionally focused on using research methods to tap into consumers’ behaviors and attitudes solely toward products and services.  Industry standard led us to believe that focusing on products alone was sufficient.  We’ve been fooled!  Understanding the customers shopping experience is critical to developing an optimal environment to reach consumers, building brand equity and encouraging product purchases.  According to Vice President of Shopper Marketing at Coca-Cola North America Diane Wallace, “shopper marketing is the next big step in the evolution of strategic retail marketing”.  But the In-Store Marketing Institute recently found that only 55% of consumer packaged goods companies have done anything to develop expertise in shopper marketing.  So, why isn’t shopper marketing used more?  What’s the catch?

In fact, leading consumer packaged goods companies are focusing more attention on shopper marketing, explained by the 2004 to 2010E 21% and 26% CAGR of shopper marketing spending from manufacturers and retailers, respectively.  Yet many competitors still aren’t involved in shopper marketing because it requires complex transformational change that disrupts traditional marketing and sales status quos, budgets, funding structures, processes, metrics and incentives.  Most importantly, implementing shopper marketing requires scarce skill and experience, particularly for consistent in-store execution and understanding performance metrics.  While many ponder the risks, innovative competitors are using shopper marketing as a differentiator that is launching them ahead and leaving hesitators in the dust.

In the near future, shopper marketing is expected to spread throughout the consumer packaged goods industries, become a more prominent part of the marketing mix and implement better infrastructures in regards to retailer/manufacturer collaboration, insights, targeting, measurements and technologies.  With 42% of leaders understanding the importance of shopper marketing, organizations are finally giving it due attention.  Looking forward, in-depth shopper marketing insights and research should facilitate organizations’ implementation of shopper marketing and aid in the difficult transition they face now.  So, as you stroll down supermarket aisles in the near future, you might notice you’ve developed an unexplained brand loyalty to Unilever products, cutting edge Coca-Cola displays grab your attention for the first time, and dim lighting and music put you in a pleasant mood.  Accident?  Of course not.  It’s just you experiencing the change of a changed experience.

Contributed by Kelsey Valentine, Associate, Synovate Customer Experience

Causality: Scientific, but not rocket science

There has been an increasing trend over the last ten years for marketing research consultants to analyze customer experience survey data through causal modeling or Structural Equation Modeling.  Part of the reason for this trend is the availability of easier-to-use modeling languages.  Advances in languages have taken the industry from LISREL and LVPLS (two programs that are quite difficult to use) to AMOS, EQS, Mplus, PLSGraph, and SmartPLS, among others.  So, with all of this software at our disposal being used by an increasing number of marketing research agencies and consultants, are companies embracing causality?  Do managers accept causal modeling output as proof of finding causal relationships in customer experience survey data?

Judea Pearl wrote a book on causality that, although is a landmark, is something I don’t recommend to others.  It is “tough sledding” and requires a big investment of time to understand.  (Causality  Models, Reasoning, and Inference, 2000, Cambridge University Press)  He creates a calculus that, taken together, claims to be a formal theory to accurately describe cause and effect using the languages of mathematics and graphical representations.  It was written to advance the philosophy and science of causality for the social sciences, economics, business, etc.  But company managers don’t read these kinds of esoteric books. 

Managers should remember the old saying that the proof is in eating the pudding.  In other words they should test the causal relations found in their cusotmer experience models.  All it takes is a little controlled experiment.  Most customer experience models are rich in causal details.  Pearl says that a causal model should enable you to predict an outcome from doing something.  For managers, all that is required is for you to do something.  Improvements in CSR knowledge will cause an improvement in the call center experience, for example.  All it takes is a little focus.  With a little more focus, you can prove that improvements in the call center experience can improve overall attitudes about your brand.  These, in turn, can influence financial success of the company.  It is not rocket science; but, it can be scientific.

 

Contributed by Bruce Corner, Synovate Customer Experience

Competing When "Price Isn't Everything, It's the Only Thing"

“Customer service trumps price” is the title of Bruce Temkin’s recent post (http://experiencematters.wordpress.com) on his excellent Customer Experience Matters blog.  Indeed, Bruce’s research indicates that service is more important to consumers than price across 12 industries.  However, Bruce’s work is consumer oriented.  This brings a question to mind, “Would we find the same thing in business to business markets?”

We suspect we would find the opposite – that business people are placing price ahead of service considerations in the current economic environment.  Increasing pressures for buyers to reduce their expenses, continued strengthening of corporate procurement departments, and hyper competition amongst sellers for reduced work in many sectors all tend to force the conversation towards service being a table stake and cost being the differentiator which wins the bid.

 

We’ve heard several times from clients across industries that they are seeking “the low cost solution”.  And, that is for projects that survive the wide ranging and deep budget cuts which are regularly taking place fairly early in most companies’ fiscal years.  Make no mistake, service is still expected and value (versus price) is discussed.  But, bottom line price appears to be winning these days in business markets. 

 

Operationally efficient, cost leaders are well positioned for this market.  But what if your organization is product or service oriented?  How can you stay in the game without simply pricing to win and suffering severe losses?  There are a few tricks that are working for smart business to business players, namely:

 

- Extend current contracts even before they come to renewal.  Make a preemptive offer of beneficial terms including pricing to build a longer term stable base of revenue that does not require renewal management:

 

- Create stripped down versions of solutions which deliver the basics at low prices.  There is nothing simpler, yet many B2B companies lack a basic offer.

 

- Communicate pricing clearly by showing low entry solutions with options that create greater product and service benefit at increased prices.  Sometimes, it's as easy as starting the conversation with a very low number.

Whatever the case, be prepared to meet and beat your competitors at the pricing game.  While talk about service will continue, we suspect that even leading organizations won't be able to provide any service at all without starting with "a nice price!"

Submitted by John Carroll III, Senior Vice President, Synovate Customer Experience

Recession Psychology… How Has the Recession Changed You?

I recently read an article on recession psychology in the Harvard Business Review (April 2009, How to Market in a Downturn) that started me thinking about how I have changed my own spending habits since the recession hit. 

 

The article offered four spending profiles based on identified patterns of behavior evidenced during economic downturns since the 1970’s.   In a nutshell, the four profiles are described as follows:

1.       Slam on the Brakes:  Most vulnerable and hardest hit group, have responded by eliminating, postponing and decreasing all types of spending.  Some are lower-income, but anxious higher-income consumers fall in this category as well. 

2.       Pained but Patient: Consumers who tend to be resilient and optimistic about the long term picture, but less confident about recovery in the near term.  This group is also cutting spending in all areas but less aggressively.

3.       Comfortably Well Off: Consumers who feel secure about their ability to ride out the recession.  Their consumption is relatively unchanged but may tend to be more selective and less conspicuous. 

4.       Live for Today:  This segment remains relatively unconcerned about their finances, unless they become unemployed.  Typically urban, younger renters who spend on experiences rather than stuff.

 

As I look at these profiles, I can easily see myself fitting in with the “pained but patient” clique.   As I reflect more deeply on how my spending patterns have changed, I realize that I have switched brands on several products, I have started buying in bulk more frequently, and the car and furniture that I was planning to buy this year have been postponed until 2010.  All of this has changed, yet my household income has not changed at all.  At least in my case, there is definitely something to this psychology stuff!  

 

So what profile do you fall into?  How significantly do you think that the recession has affected you personally? 

 

Also, what profile do you think that your customers fall into?  In January 2009, the Consumer Confidence Index sank to the lowest level since 1967.  It seems clear that new consumer segments are emerging in this recession that marketers are going to need to address.  As stated in Harvard Business Review (April 2009), “Marketers typically segment according to demographics or lifestyle.  In a recession, such segmentation may be less relevant than a psychological segmentation that takes into consideration consumers’ emotional reactions to the economic environment.”  

  

As companies everywhere are busying themselves cutting costs, reducing prices and postponing new investments, I found this article to be a good reminder that even in a recession it is still important to connect emotionally with customers.  Consumers may be justifiably a bit cynical these days, but they are still looking for brands and companies that understand their changing expectations and are worthy of their trust.   

Submitted by Rita Kahn, Assistant Vice President, Synovate Customer Experience         

 

 

Here Today… Gone Tomorrow?

It’s depressing to see and hear about the businesses that are closing or downsizing in some way.  As a human being, I feel for all of the employees that are directly impacted.  As a consumer, the closures and downsizing make me even more cognizant of the old saying “consumer beware.” 

In choosing a company for a product or service, I want to feel confident that the company will be around as needed and not get swept away by economic forces.  If I purchase an item and I want to return or exchange it down the road, will I be able to do so?  If I purchase a gift card for someone, will the recipient be able to use it?  If I need service on a product, will the company be around to provide it? 

The bottom line is that there is a lot of uncertainty these days.  More than ever, businesses are faced with the burden of building consumer trust.  As a consumer, I want some peace of mind that the businesses I choose will be there for me.  I’m clearly not alone. 

The cover article of the current (1/30/09) issue of Marketing News (“Right the Ship”) talks about rebuilding trust in this period of low consumer confidence.  The Consumer Confidence Index hit a record low last October and is still far from reaching what would be considered a ‘good’ rating.  According to this article, “A crucial step in restoring consumer confidence is restoring consumers’ trust that individual brands will remain strong and will continue to deliver on their brand promises.”

I recently had a CD that matured at what is now Wells Fargo.  In deciding what to do with those funds, I researched my options.  Ultimately, I chose to ‘reinvest’ my money with Wells Fargo.  Not only was the rate competitive, but the Wells Fargo representative did an excellent job educating me about the recent merger and earning my trust in the stability and strength of Wells Fargo.  This is what sealed the deal.  Oh, and by the way, I also ended up referring my dad to them.

Contributed by Christine Parcenka, VP, Synovate

"What do I do with THIS?" The Expected Return on Easy Returns

The fun shopping days prior to Christmas and the joy of giving are inevitably followed by ‘how am I going to wear this bright red sweater…’ or ‘what on earth is this gadget for…’ as we  figure out where to store the gifts we received this Christmas.  With storage space at a premium, and cash flow tightening for most of us, the ability to return or exchange gifts for usable items has become increasingly important. So, this year, I decided to gift items easy to return or exchange. This path, of course, led to merchants with the best returns and refunds policies.

I found a wide range of policies even within a particular category and, to my surprise, some merchants had good deals as well as superior returns policies. I think I am not alone in the mistaken belief that only high end retailers like Nordstrom or LL Bean can offer a ‘100% satisfaction guaranteed or return anytime for a full refund/ no questions asked’. Take the leading discounter -- Costco, for example. Costco has until now allowed customers to return items at any time for a full refund, except for personal computers, where returns were limited to six months. Recently Costco slightly modified this very liberal policy to give customers 90 days to return televisions, computers, cameras, camcorders, portable music players and cell phones. Compare this to Apple’s 14-day return policy! You can be sure that all electronic items on my gift list were purchased from Costco.

 

Some merchants have product specific and even brand specific return policies. At Wal-Mart within the Electronics department, if you take the time to read the fine print, computer hardware must be returned within 15 days of receipt; computer components and computer accessories must be returned within 45 days of receipt; camcorders and digital cameras must be returned within 30 days of receipt; GPS units, digital music players and portable video players must be returned within 15 days of receipt. My guess is that many Wal-Mart customers find out the hard way since generally Wal-Mart accepts returns after 90 days.

This made me wonder about the impact of return policies on customer loyalty to a merchant. After all, most consumers buy things they would rather keep provided it satisfies their need and meets their expectations. Wide scale abuse of returning items for some obscure gain will likely never happen. I also wonder if during tough economic times consumers may be willing to pay a premium for attractive returns policies, especially for big ticket items, to make sure that their investment is really worth what they believed it to be in the showroom! And, yet, retailers like Costco, Nordstrom and LL Bean continue to be the exceptions, while most others tighten their return policies hoping that it will benefit their bottom line. While it is true that tougher return policies or processes can intimidate some of us into keeping items that we will never really use or enjoy, will we return to buy more from that merchant or recommend the merchant to others? Probably not. But then again, perhaps these merchants are thinking of their return policies as drivers of cost and not as an important part of the overall customer experience with impact on customer loyalty and more importantly, future sales. 

Contributed by Shubhra Ramchandani, VP, Synovate

Compelled to Act

An article in the Journal of Economic Psychology details a study of soccer goalkeepers and their behavior during penalty kicks (link to abstract).  After an expert review of 286 penalty kicks in professional soccer, judges deemed that the optimal strategy is for goalkeepers to stay put in the center of the goal and react to the kick.  Keepers almost always, however, jump to the right or left just before the kick.  Why do keepers earning millions ignore the optimal strategy, particularly when it is something as simple as "stand and react?"  A second study with 32 professional keepers revealed a compulsion to act because it feels worse when a goal is scored following inaction (staying in the center) than following action (jumping).

I draw comparisons to the companies I see in my consulting practice.  When faced with poor customer service, low satisfaction scores, and decreasing employee morale, companies feel compelled to act quickly and often believe delivering a superior customer experience as the solution.  They begin making investments to enhance the customer experience, which is good.  Similar to goalkeepers, today's business leaders would rather take swift action toward solving a problem than wait with what some might perceive as "analysis paralysis."

But many jump too quickly in the wrong direction.  For example, they may prematurely tie performance management and compensation to customer loyalty measures before employees fully understand how they can influence those measures.  This often leads to frustration, or to false positives as employees learn to "game the system."  Alternatively, companies may invest in areas of the customer experience that will not have as much impact as other areas that customers deem more important.  Today there are many cost effective ways to quickly assess both the customer experience and a company's competency in managing the customer experience.  Pausing to gather that valuable information will help business leaders target their investments appropriately and prevent them from leaping too quickly the wrong way.

What is the next deal going to be?

In these tough economic times, it has become apparent that many businesses are working harder than ever to maintain some share of the consumer’s wallet.  In many situations, businesses appear to be using lower prices or better deals as their strategy for getting loyal customers to continue spending.  Retailers seem to offer new (and better) deals each month.  If it’s not a ‘buy one, get another for 50% off,’ it’s ‘20% off all purchases’ or perhaps free shipping.  Some businesses that may not have traditionally competed on price are now choosing to do so by offering special deals and discounts.  I’ve noticed that some upscale restaurants are now offering ‘early diner’ pricing, special ‘bargain-priced’ multi-course meals, or free limo service.

While on the one hand, I appreciate the special deals that many businesses are offering, I question whether there are some downsides associated with shifting to this strategy, even if it’s temporary.  As a loyal customer of some of these businesses, I wonder “What’s the next deal going to be?”   I’ve found myself delaying a purchase because I questioned whether there would be a better deal next week.  In situations where I did buy, I’ve felt ripped off when the same business offered a better deal at a later date.  These special deals also make me realize more than ever the enormous profit margin that must exist on some products, which leads me to believe that the products are still overpriced, even with the discount or special deal.

 

Does this mean that these businesses shouldn’t compete on price by leveraging special discounts or deals?  Not necessarily, particularly given the state of our economy.  However, it does mean that businesses should keep in mind the potential risk associated with such tactics.  It also means that businesses shouldn’t lose sight of the importance of appealing to both the heart and mind of the consumer.  It’s relatively easy for a competitor to replicate a special deal, however it’s not so easy to replicate a relationship based on emotional ties.  In a global survey recently conducted by Synovate, consumers were asked about their attitudes toward the economy and prices. Despite concerns about the economy, a majority of Americans (59%) said they will always find a way to afford some items that make them feel good.   So perhaps offering the special deals and discounts isn’t the only way to survive during an economic crisis.

 

Contributed by Christine Parcenka, VP, Synovate

Staying Relevant in Tough Times

If you’re not familiar with Whole Foods, you might not see anything unusual about the promotion of great values and great deals at a grocery market.  For those of us who are, trust us…this new messaging is quite an oddity for this high end, natural foods and gourmet grocer who is more often thought of as the ‘whole paycheck’ food market.  For us, seeing this signage causes pause and forces us to ask:  Have they changed their strategy?  Have they lost their way?  Have they sold out?  Have they gone mad?  The answer, of course, is no, not at all.  They are simply finding a way to stay relevant in what is a very challenging economic period for all.

 

Faced with a significant downturn in earnings and the reality of a slowing economy, Whole Foods has launched a new value strategy aimed at helping more cost-conscious customers trim their grocery bills without sacrificing their desire for healthy, high quality foods.  In the process, they are hoping to squelch their image as an overpriced destination store.  To achieve this goal, the company has turned to some traditional solutions including the use of discounts and coupons, and an expanded offering of value alternatives including its own store-branded (Whole Foods’ 365 Everyday Value Brand) items.  The retailer has also, however, found some clever ways of helping customers while driving home its value proposition. For example, they are now publishing money saving tips, meal plans, and recipes for customers in their Whole Deal Value Guide (available online and in-stores) and offering ‘value guides’ and ‘value tours’ to help guide shoppers to good deals and tips for shopping smartly.   The company is also actively supporting an online community forum where ‘frugal foodies’ can share buying tips and low cost recipes with one another.  One has to appreciate these initiatives as they deliver a direct benefit to consumers while reinforcing the uniqueness of the Whole Foods experience and creating a sense of community around the Whole Foods brand. 

           

When times get tough, we all know that companies face the temptation to cut costs in areas that inevitably remove value from customers and degrade the overall customer experience.  It takes strong leadership and commitment to one’s mission to find other ways to survive the tide and so I think it’s helpful for us to feature companies who resist the easy and worn path in an effort to steel our collective will and inspire us to do the same at our companies. 

Do you have examples of how companies are staying relevant in these economically challenged times?  Perhaps creative things you’re doing at your company?  If so, please do share.  I think we can all use some inspiration in these trying times.

 

Contributed by Michelle Yakovac, VP, Synovate

What about the rest of us stuck here in coach?

AirTran Airways is allowing coach travelers to impulse purchase a business class upgrade while they are on the plane.  While a writer at The Economist focuses on the value to the purchaser of the upgrade (see article) we would turn attention to the impact on the rest of the coach passengers that remain at the back of the (air)bus.

 

Putting a clear price on a better seat may indeed help coach travelers value their own decision to fly in the economy section.  This may reset expectations even lower (can they get lower?) for air travel in economy, thereby potentially improving the perceived experience should AirTran deliver the basics right.  Alternatively, we could see all out chaos as coach travelers fight to pay to get themselves into the "big seats".  Whatever the case, it seems that AirTran is following a pattern by most airlines to bring the air travel experience to all-time lows.

 

Contributed by John Carroll III, SVP, Synovate Customer Experience