Rather than trying to out-discount the discounters, or compete with the scale on which Amazon and other online retailers operate, I think retailers should be reevaluating their value propositions, both to their customers and to their consumer manufacturing partners. How do retailers in general, and your retail chain in particular, bring value to business partners and consumers?

I think the key to this is taking advantage of the two things retailers have in spades, and that all manner of disintermediation and price undercuts can’t take away: knowledge and space.

Focus less on selling, more on educating. Retailers looking for an edge over online and discount counterparts can find it in the on-demand knowledge of their employees. Online retailers like Amazon have some degree of product knowledge, but they don’t have the ability to tell whether individual consumers are actually looking for it – risking cognitive overload in the process.

On the other hand, retailers have extensive product knowledge, and sales reps to deliver it exactly when the customer wants it – and not a moment before. La-Z-Boy’s  simple in-store segmentation method, designed to figure out what kinds of sales expertise different customers are looking for, is an excellent example of how frontline staff can be trained to recognize the optimal way of delivering product knowledge.

Revive – or establish – emotional connections. It’s standard advice to companies and brands fighting commoditization and discounting: figure out the way your brand makes consumers feel, and pull on those heartstrings to shore up margins and marketshare. It’s a strategy used by businesses both tiny and gargantuan: for instance, Ukrops’, a family-owned grocery store in my hometown of Richmond, VA, dominated the grocery market in that city despite maintaining higher prices, refusing to sell alcohol, and being closed on Sundays. Why? The chain had a long association with the city of Richmond, such that shopping there was almost an exercise in civic pride.

We’re not all family-owned grocery stores, of course, and most of us can’t pull the heartstrings of civic pride convincingly. But we can figure out ways of plugging into our customers’ emotions: our study on Accelerating Loyalty can get you started.

Sell services, not products. Leveraging product knowledge by service selling is usually a B2B affair. But if your product is or has the potential to be confusing, service sales can be a great way to keep the customer happy, reinforce the brand promise, and fatten up margins a bit at the same time.

Best Buy’s Geek Squad, as well as similar services offered by other electronics big-box stores, is the quintessential example of this, and I think other retailers will get into the game as disintermediation begins to affect their core businesses.

Embed into routines. Retailers may be threatened by cheaper shipping and the ubiquity of computing platforms, but the one thing they have a ton of that online retailers can’t match is space. Physical space, that is – retailers occupy a dominant place in the built environment, and are fixtures in the midst of human routines. By piggybacking onto an unassailable part of people’s daily lives, retailers can give value to the customer in ways online stores can’t.

Redbox, for instance, has monetized the routine of stopping off at the grocery store to grab something for dinner on the way home from work: customers grab a bite to eat, pay for their purchases, and walk directly by a vending machine offering cheap movie rentals on the way out. 7-Eleven is trying to monetize the pre-work rush by offering gourmet, ready-to-eat snacks. And in a lot of places around the world, Starbucks has monetized the mid-morning work break.

MLC members – how are your companies shifting your value propositions to take advantage of the new normal? Let us know in comments.

Point of sale as decision venue. Given that 70% of consumers decide on what brand to buy when in the store (and this is true across categories and price points), marketers focus has to start with what happens at the moment of truth.  The best marcom means nothing if the messages delivered by the brand in the store are misaligned.  The most progressive marketing organizations are thinking about building strategies and campaigns from the store back rather than from the marcom forward.

Tighter retail control over the store environment. Retailers are tightening standards and requirements for what happens in store making it tougher for brands to create creative in-store solutions.  Brands that have succeeded are devoting more time and energy to getting it done and are following these simple “rules of engagement” with their trade partners:

• Take EVERY meeting offered by the retailer.  Too often the focus is on getting in with the buying group or the merchandising group.  Some of the best success stories came from brands that developed relationships with the loyalty card teams, the marketing group, and other oft-overlooked teams.
• Remember that not all retailers are created equal.  By “choiceful” when choosing partners for in-store efforts.
• “Do it like you want or don’t do it at all.”  In other words, compromising on your killer idea to appease the intricacies of the retailer is a lose-lose proposition.  You won’t achieve your goals and the retailer won’t be as inclined to work with the next time because you didn’t deliver on your promises to them either.
• Be sure your objectives are not brand-centric.  Retailers want actionable and measurable goals that are relevant to them.  In other words, a goal of selling one more six-pack of beer is more important to the retailer than selling more of your brand of beer.
• Have hypotheses for what will result from your efforts and take a “test and learn” approach to your experiments before launching them widely.

Now I wouldn’t go so far as to say these trends are leading us down a path where brand marketers will become subservient to shopper marketers, but the room was in agreement that collaboration has never been more critical.  And while the question was posed as to how best to organize to optimize the balance of shopper and brand, the consensus was that the crux of the question was less about boxes and lines on an org chart and more about getting teams to collaborate better.  If you’ve got a system that works well, we’d love to hear about it.

I will admit I am not the normal shopper in my family, but I thought I had a straight-forward process in mind:  buy the brand of fruit snacks we have at home.  According to MLC’s latest research, that would make me a “tunnel” consumer – I consider only one brand and buy only that brand.  That strategy worked until I showed up in the aisle. While there was a bit of rhyme and reason to which products were where on the shelf, there was little clarity as to why some fruit snacks were to my left while others were to my right while the fruit rolls were in the middle.  All of a sudden, I was thrust into the role of the dreaded spindler –rather than being a tunnel or even a classic funnel, I was now in a state of buying flux.  One minute there were three or four options, then two, but oh wait, check out this one – now I’m back to three.  Is it a snack or a roll?  All natural?  Real fruit juice?  8 servings or 10?

It was brutal.  And it left me with a question for all you CPGs and retailers – why do you make this so darn hard?  You’re smart, you’ve been at this for a while, and most of you have some pretty deep pockets to do some heavy-duty quantitative research.  My take on it is pretty simple.  Shopper marketing is hard.  Somehow what happens in store has to align with your other marketing efforts, but it also has to serve a higher standard – prevent competitors from prying me away at the last minute and/or creating intent in the moment I’m staring at the shelf.

While we don’t espouse to have all the answers, we have been talking to a lot of folks who own shopper marketing for their organization.  Are you curious to hear what we’ve been learning?  Do you have insights to share?  Consider joining us and our colleagues at Iconoculture for a day-long cohort session on Shopper Marketing hosted by our friends at Newell-Rubbermaid.  To register, or share an opinion about shopper marketing, feel free to reach out to Lisa Filler.  We’re always looking to hear and learn more. If you are your organization’s CMO and want to learn more about the perils of spindles and the benefits of tunnels and how to position your organization accordingly, consider joining us for our executive retreat on Compressing the Decision Journey.

And in case you’re wondering how my camping experience turned out, it was a blast.  Except of course for those darn fruit snacks.  I finally thought I’d found them.  Down there on the left by what appeared to be the healthier fruit snacks – all natural, real fruit juice (and not just apple and pear juice with some food coloring), 10 servings per box.  The only problem was they were the only fruit rolls on that part of the shelf!  Oh well – I’ve been learning to like them myself since the kids didn’t find the rolls very easy to rip and chew.

Not really, it turns out.  In MLC’s recent Consumer Purchase Behavior survey, we specifically tested for changes in buying behaviors to see if consumers are returning to pre-recession patterns.  Spring thaw isn’t quite right—a better metaphor would be something like “dead cat bounce”.

For our global readership not familiar with this grim idiom, the gist is that dead animals don’t bounce very high when dropped.  From pretty much any height.  I should state at this point that no animals, living or dead, were harmed in the production of this blog post.

Here’s the scoop.  We looked at a broad swath of consumers in the US and the UK, and focused specifically on the ones who said the recession caused them to meaningfully change their buying behavior in one of these ways:

• Look for and use coupons much more often
• Purchase private label or store brands to save money
• Shop at more real or online stores to find best price, even if that means more travel or search time
• Purchase smaller quantities of goods instead of stocking up
• Make use of sharing or renting schemes to save money on big ticket items I used to buy

We then asked these consumers if they are they doing more, the same, or less of that behavior than they were in the teeth of the recession one to two years ago.  The results?

• Only 3-5% of consumers were doing less of any of these behaviors
• About 35-50% of consumers said they were doing about the same amount of each behavior.
• The remaining 40-60% are actually engaging in these behaviors more than they were as recently as last year.

Ouch.  Dead cat, indeed.

The results held in both the US and the United Kingdom, and we’d expect to see the same in most all developed markets.  That helps explain the recent earnings announcements from the likes of Colgate, P&G, Kimberly-Clark and Clorox—all of these companies are suffering from tepid demand in some of their core categories.  In Q4 2010, sales of private label goods grew at 1% year-over-year, whereas branded goods sales declined 0.8%, according to a recent Sanford C. Bernstein & Co’s analysis of Nielsen data.  Our research findings offer little prospect of a bounceback.

So, what are marketers to do?  It seems there are two levels of responses to think about: structural demand-supply changes and tactical marketing shifts.  In the structural category, marketers ought to be thinking about shifting energy to emerging markets, taking capacity off line (e.g., shutting less productive plants), and investing in innovation to develop new product that will serve new consumer needs at lower prices.  MLC members, see our latest work on radical innovation to advance your thinking here.

As to tactical marketing plays, in the coming months the MLC research team will scour the globe for best practices that don’t fall back on discounting, coupons and promotions.  If you’re proud of what your brand has done on this front, do give us a shout, please – pspenner@executiveboard.com.

I loved the simplicity of the statement and the depth of the insight. Given the increasing prevalence of mobile/social/location technologies like Foursquare, it can be awfully tough for retailers to differentiate, so the customer experience has never been more important.  Do you know the difference between your brand standards and your brand standouts?  If you are like most businesses, the truthful answer is “no”.

When we looked at the importance of corporate brands two years ago, more than one-third of businesses cited “customer-focused” as a brand attribute.  Almost the same percentage said they were “trustworthy or ethical”.   To the customer, this results in limited differentiation among brands.  In fact, only 7% of individuals felt a company’s uniqueness was “different” or “very different”.  Clearly, we’re very good at confusing a brand standard with a brand standout (see image below; click to enlarge).

What’s more, if we look at the lessons from our B2B research last year on Delivering a Preferred Customer Experience, the big lesson is nearly identical.  Companies that are able to articulate – and deliver – a unique benefit to their customers are far more likely to win the customer loyalty battle than peers who are fighting to own a more common benefit, e.g. the brand standards for their industry.

So why is it so tough for marketers to practice what we preach?  For one, we fall victim to proximity bias, our inability to see the forest for the trees.  Because we’re working at it every day, at some point we begin to believe that our “customer-focused-ness” is different from what our competitors can do.  And perhaps it is different.  But is it so different that your customers will pay you for it, or Tweet about it, or rush to be mayor of one of your locations?

A second reason we often see retailers (and others) competing on brand standards rather than brand standouts is the reluctance to rule out some segments of customers to the benefit of other segments.   Day one of Marketing 101 always begins with the same lesson – you can’t be all things to all people.  While we internalize the all things part, we often forget the all people part.  The idea of intentionally excluding some potential customers is tough to consider when every customer seems so precious.  Yet that’s precisely where the answer rests – better segmentation and better segment understanding.

Do you have clever ways to prevent proximity bias in your organization?

MLC members, check out the Segment Learning Protocol from Dow.  Or, for a classic example of aligning brand standouts to customer experience and product investments, check out the Investment Screening Protocols from Victoria’s Secret.

That’s the conclusion of a new report from Iconoculture, which tells us that a number of factors, including crunched schedules and more precise shopping habits as a result of the recession, have led to an opportunity for brands who design their products for easier identification. They’ve noted a few tactics brands are embracing to allow their products to stand out:

• Be contrarian. Designs that stand out (or go for the understated look while others are loud) get noticed more often. Go black like Kimberly-Clark’s U by Kotex box amid the pasty pastels in the feminine care aisle. Or up when others are down, like Rain-X. With competitors literally lying down on the shelf in the typical horizontal flowpack, Rain-X stood up in a Doyen-style pouch to get their Glass Treatment and Glass Cleaner wipes noticed.
• Have a block party. Brand blocking — when multiples of the same product work together side-by-side for overall impact — is not only easy for consumers to see, but is often hard for them to ignore. Coca-Cola’s redesign of their Minute Maid orange juice packaging, for example, repeated an image of oranges on the primary display panel of cartons and bottles to suggest the abundance and freshness of a local fruit stand.
• Use your brand as a beacon. For years, stores have reaped the benefits of shelf-ready/retail-ready displays: faster restocking, reduced labor costs and, in some cases, automatic dispensing/resetting. Now, shelf, end-cap and point-of-purchase displays are getting more graphic, making it easier for shoppers to spot brands, and from farther away. These also give food, beverage and CPG brands the latitude to push harder on special promotions, such as the “safari jeep” display that Nestlé designed for their Choco Crossies brand in support of this summer’s World Cup.

MLC members can find more on shoppability at our newly-launched Iconoculture microsite. If you’re interested in learning more about what Iconoculture can do for your organization, please contact your account manager.

But frankly, this too often turns retailers into myopic, proximity-biased incrementalists in their customer strategy (too harsh again?). Imagine my encouragement when I see retail CMOs begin to tout the very elements of customer-focused strategy their CPG peers have long known.

This new focus on the customer take two forms: organizational structure and marketing communications execution. Take Express, for instance. Organizationally, Express CMO Lisa Gavales (follow her on Twitter here) now owns all e-commerce activity. From a communications perspective, every touchpoint – be it on the store floor or the web homepage – displays the same visual branding. Express is Express, no matter where the customer encounters it. While a recent development at Express, MLC research would clearly indicate that customer-focused, channel-agnostic marketing communications will yield far higher returns to the whole portfolio than category- or channel-specific campaigns.

At Macy’s, you practically have CMO Peter Sachse committing marketing treason, saying, “What we don’t need to do is get new customers.” Yet he’s right, because he too has placed the customer at the forefront of marketing’s strategy, rather than a distant second to classic merchandising techniques. And what better way to do this than. . .wait for it. . .asking the customer! Sifting through NPD Group data, interviewing shoppers as they left the store, all in an effort to generate customer centricity. Much like Express, the end result is an inevitable broadening of Marketing’s scope of control (which of course we as marketers enjoy). Sachse states specifically that the web should be the brand’s hub, which can lead to innovative uses of the web as a marketing communications vehicle, as in this recent Macy’s campaign.

Yet for many retailers, the transition to a customer-driven marketing organization may not be as simple as having charismatic leaders like Gavales and Sachse. That’s where MLC research can help build the business case for customer focus:

• See how Tesco created an annual customer plan to implement improvements to the shopping experience grounded in customer insight.
• Read how Food Lion co-opted cross-functional partners by pre-committing them to next steps on customer-focused projects.
• See how Victoria’s Secret filters all customer-focused investments to ensure alignment with the brand and target customer.

The trend toward customer focus in retail is more urgent and necessary than ever before, as the sector seeks to reinvent its offering coming out of the recession. Those that fall behind in satisfying customers’ needs will likely get trampled in the next Black Friday rush.

By Tasneen Padiath

I’m no wine connoisseur, so the marketer in me kicked in on a recent trip to my local liquor store.  I considered the attributes I wanted – under $15, preferably red, not too sweet or fruity, a familiar brand name and something that connotes a fun experience. Faced with an array of wines from California to Chile, from Merlot to Bordeaux, I was struck by the enormous difficulty marketers face in differentiating their brands and creating a connection with consumers in the moment.

Granted, I was probably a little outside of the target segment for most wine makers, but what would have altered my decision? A catchy label or even a suggestion from one of the sales people could have nudged me in a different direction. The lesson for me here: while there is immense opportunity to influence a brand decision before a consumer goes shopping, the importance of the in-store experience—whether through product placement, point of purchase signage or a well trained store employee—cannot be minimized.

According to a recent study from the Grocery Manufacturers Association, Booz & Company, and SheSpeaks, shoppers choose 59% of the brands they buy in the store. Of those items, 85% of shoppers perceive in-store factors as more influential than out-of-store marketing. After price, communicating benefits on packaging is most influential, whether to reinforce existing brand preferences, drive competitive switching, capture purchase when there is no strong brand preference, or create impulse sales. In fact 77% of shoppers do not take detailed shopping lists into the store. Instead, they use “mental lists” that include “brand consideration sets,” but evolve as they are exposed to more marketing at home, in transit and in the store.

This probably explains the surge in interest from MLC’s membership on Shopper Marketing. We recently hosted a round robin discussion with a few of our CPG members to discuss the future of the function.  We discussed questions such as:

• Where should Shopper Marketing sit within the organization? (Centralized Under Sales / a Center of Excellence / Centralized Under Marketing)
• What skill sets should we look to hire and develop?
• What are the right metrics to measure our performance?

MLC Members, We’re also seeing increased interest from retailers to partner with manufacturers on Shopper Marketing. Look out for more discussion groups from us in early 2010.