By Glen Terbeek
Each week, we are offering both a Premise and a Challenge to MNB users. The Premise will seek to state either a fact of life for the food industry as it currently exists, or a trend that seems to be developing as retailers and manufacturers seek a better way of conducting business.
Your Challenge is to respond by identifying the best ideas and examples that typify where the industry ought to be heading.
Week Two:
Premise:
Thought-leaders in the food industry recognize that logistics should not be the driving force behind supermarket operations, and that consumer-focused marketing is the new differentiating competitive advantage. Often, these thought leaders come from the independent sector, where retailers are not encumbered by logistics-driven infrastructures.
Challenge:
What is the best example of a retailer that has used marketing to drive consumer-focused innovation at store level? Be specific about the company, the goal that was set out, and how it was achieved. Think in terms of organization and measurement issues that allow innovation to happen (and avoid the pitfalls that often prevent innovation).
Winning Responses:
Again this week, we had several great responses to the challenge above. They all had some interesting similarities and point to the realities of the future for the industry.
Jeannine D'Addario writes about Stew Leonard’s: “Relatively small chain (3-4 stores) that used ‘entertainment’ to improve the overall store experience…..Limited SKUs and select offerings in each category allows Stew's to focus on highlighting brands in a unique way and takes the cost equation out of it for the shopper. They do it differently than every other grocery retailer...featuring top of the line cuts of meat at special pricing to draw in the consumer, then as you walk in the door the party atmosphere takes over...fun seasonal things outside...walk into the bakery section first thing... fresh baking on the premises...animated figures singing out to you...kids enthralled...a very different picture than any other grocery store...and the average customer ring well exceeds other grocery stores...parking lot is jammed every day...weekends specially...they broke the grocery store mold and approached it from the perspective of what keeps the consumer in the store and shopping.”
What I like about Jeannie’s entry is the focus on the shopping experience and selling (not distributing) that Stew Leonard’s does so well. They actually create many logistics efficiencies by taking marketing “risks” merchandising and actively selling a limited selection that is right on for their targeted market in a great shopping experience. They can do this because they are so close to their shoppers. They also prove that shoppers don’t want (redundant) choice, they want answers. I bet that their return on space and loyalty is some of the highest in the industry, with no logistics of their own.
David Hanneman writes: “My best example of a consumer (rather than logistics) driven retailer is Amazon.com. Granted, their model is very different from your typical brix and logistix retailer. In fact, most of the moving parts of logistics are completely outsourced.
One of the things that makes them a winner for me is that they drive so much value out of their "Scanner Data", it's amazing! Each time I "visit" their store, they greet me at "the door" with recommendations. Many of those recommendations I have purchased and might not have purchased without the recommendation. So, they can pull dollars out of my wallet that I was not intending to spend, AND, I feel delighted with it! They fill a need I didn't even realize I had. Now, how smart is that?”
Amazon is interesting because it is a “locally” owned store (with a global reach) that is using data for the shopper’s advantage first and therefore their own. In many ways, Amazon is closer to their shoppers than most large chain management is through making data work for their shoppers. One thing that David didn’t mention is that Amazon encourages their shoppers to improve the service (take ownership) through reviews of books that they have read, as an example. They have a strong brand and loyalty as a result.
Andy Woodrick writes: “Branch Markets of California and Arizona is a great example of a company which is consumer driven. Branch Market has decided to become a premier Hispanic marketer. They have studied this cohort and built their business around their findings. From the locations of their stores, to the bilingual employees, and everything in between. Branch Markets has delivered what their target consumer has asked for and are being rewarded for their efforts.”
I don’t know Branch Markets or how many stores they have. But the reason I picked this entry is because it sounds like they have attempted to design a store and shopping experience focused on the Hispanic market place and then pick locations where those stores will work. This is an example of marketing productivity, leveraging a specially designed store concept by placing it where it will work. I bet the associates in the local store are part of the execution of the marketing productivity. Now contrast this with a large retail chain that operates in many different markets as defined by demographics and competitors and tries to operate them from a central headquarters. Centralization and globalization exasperate the problem, in my opinion.
Glenn Cantor writes: “Although this entry may be a bit outside the realm of who we think of as retailers, I propose that the US casinos, in the gaming industry, offer the strongest example of customized, consumer-focused innovation.
“If you think about it, casinos are far above-and-beyond any other segment in how they attract and maintain their best, most-profitable customers. They are willing to fly these best customers from their homes to their location, give them their best accommodations, and do everything necessary to keep them there as long as possible. The result is that these top customers spent huge amounts of disposable income because they are made to feel special. Morality aside, even people who are not economically affluent spend large parts of their disposable income with the hopes of attaining this kind of service, and the benefits that go with it.
“How much cost and time would it actually involve for local, independent food stores to identify their best, most-profitable customers, and then GO PICK THEM UP AND BRING THEM TO THEIR STORES? Once there, these customers could be given special treatment- free lunch, samples, personalized checkout, an occasional gift, etc. Think about the mutual loyalty this would engender from both the retailer and the customers. And then, think about the example this would set for those customers who desire this kind of treatment, but have quite given the absolute loyalty required. And finally, think about how impossible it would be for Wal-Mart to replicate this kind of service.”
I thought about this entry and thought it had a lot of merit. So often we measure performance in terms of “logistical tasks” such as check out speed, stocking rates and other non customer productivity or marketing productivity measures. This is also true with most of the loyalty programs in the industry; true loyal shoppers get the same level of service as the occasional shopper does. The industry spends a lot of money winning the shopper over and over again, rather than reinvesting some of that expense on shoppers that are really true to the stores and really profitable as well. Not only do the casinos identify the loyal gamblers, they also make sure they have a great experience so they want to come back to their casino. They understand the lifetime value of a loyal gambler and what they can spend profitably over that time to maintain that loyalty. If they were a supermarket operator, they would stand in the same check in and check out lines as everyone else because they treat a customer as a $25 transaction, not a lifetime shopper who spends at least $100,000.
Summary:
All of the entries to this challenge had one thing in common; they were companies that were locally “shopper” focused. This was done in several ways. What is more important in analyzing the responses is there wasn’t one entry about a large supermarket chain.
What does this imply?
I argue that this is just more input that the current organizations, measurements and business practices of the industry are out of sync with today’s marketplace…which will be the subject of next weeks challenge.
Each week, we are offering both a Premise and a Challenge to MNB users. The Premise will seek to state either a fact of life for the food industry as it currently exists, or a trend that seems to be developing as retailers and manufacturers seek a better way of conducting business.
Your Challenge is to respond by identifying the best ideas and examples that typify where the industry ought to be heading.
Week Two:
Premise:
Thought-leaders in the food industry recognize that logistics should not be the driving force behind supermarket operations, and that consumer-focused marketing is the new differentiating competitive advantage. Often, these thought leaders come from the independent sector, where retailers are not encumbered by logistics-driven infrastructures.
Challenge:
What is the best example of a retailer that has used marketing to drive consumer-focused innovation at store level? Be specific about the company, the goal that was set out, and how it was achieved. Think in terms of organization and measurement issues that allow innovation to happen (and avoid the pitfalls that often prevent innovation).
Winning Responses:
Again this week, we had several great responses to the challenge above. They all had some interesting similarities and point to the realities of the future for the industry.
Jeannine D'Addario writes about Stew Leonard’s: “Relatively small chain (3-4 stores) that used ‘entertainment’ to improve the overall store experience…..Limited SKUs and select offerings in each category allows Stew's to focus on highlighting brands in a unique way and takes the cost equation out of it for the shopper. They do it differently than every other grocery retailer...featuring top of the line cuts of meat at special pricing to draw in the consumer, then as you walk in the door the party atmosphere takes over...fun seasonal things outside...walk into the bakery section first thing... fresh baking on the premises...animated figures singing out to you...kids enthralled...a very different picture than any other grocery store...and the average customer ring well exceeds other grocery stores...parking lot is jammed every day...weekends specially...they broke the grocery store mold and approached it from the perspective of what keeps the consumer in the store and shopping.”
What I like about Jeannie’s entry is the focus on the shopping experience and selling (not distributing) that Stew Leonard’s does so well. They actually create many logistics efficiencies by taking marketing “risks” merchandising and actively selling a limited selection that is right on for their targeted market in a great shopping experience. They can do this because they are so close to their shoppers. They also prove that shoppers don’t want (redundant) choice, they want answers. I bet that their return on space and loyalty is some of the highest in the industry, with no logistics of their own.
David Hanneman writes: “My best example of a consumer (rather than logistics) driven retailer is Amazon.com. Granted, their model is very different from your typical brix and logistix retailer. In fact, most of the moving parts of logistics are completely outsourced.
One of the things that makes them a winner for me is that they drive so much value out of their "Scanner Data", it's amazing! Each time I "visit" their store, they greet me at "the door" with recommendations. Many of those recommendations I have purchased and might not have purchased without the recommendation. So, they can pull dollars out of my wallet that I was not intending to spend, AND, I feel delighted with it! They fill a need I didn't even realize I had. Now, how smart is that?”
Amazon is interesting because it is a “locally” owned store (with a global reach) that is using data for the shopper’s advantage first and therefore their own. In many ways, Amazon is closer to their shoppers than most large chain management is through making data work for their shoppers. One thing that David didn’t mention is that Amazon encourages their shoppers to improve the service (take ownership) through reviews of books that they have read, as an example. They have a strong brand and loyalty as a result.
Andy Woodrick writes: “Branch Markets of California and Arizona is a great example of a company which is consumer driven. Branch Market has decided to become a premier Hispanic marketer. They have studied this cohort and built their business around their findings. From the locations of their stores, to the bilingual employees, and everything in between. Branch Markets has delivered what their target consumer has asked for and are being rewarded for their efforts.”
I don’t know Branch Markets or how many stores they have. But the reason I picked this entry is because it sounds like they have attempted to design a store and shopping experience focused on the Hispanic market place and then pick locations where those stores will work. This is an example of marketing productivity, leveraging a specially designed store concept by placing it where it will work. I bet the associates in the local store are part of the execution of the marketing productivity. Now contrast this with a large retail chain that operates in many different markets as defined by demographics and competitors and tries to operate them from a central headquarters. Centralization and globalization exasperate the problem, in my opinion.
Glenn Cantor writes: “Although this entry may be a bit outside the realm of who we think of as retailers, I propose that the US casinos, in the gaming industry, offer the strongest example of customized, consumer-focused innovation.
“If you think about it, casinos are far above-and-beyond any other segment in how they attract and maintain their best, most-profitable customers. They are willing to fly these best customers from their homes to their location, give them their best accommodations, and do everything necessary to keep them there as long as possible. The result is that these top customers spent huge amounts of disposable income because they are made to feel special. Morality aside, even people who are not economically affluent spend large parts of their disposable income with the hopes of attaining this kind of service, and the benefits that go with it.
“How much cost and time would it actually involve for local, independent food stores to identify their best, most-profitable customers, and then GO PICK THEM UP AND BRING THEM TO THEIR STORES? Once there, these customers could be given special treatment- free lunch, samples, personalized checkout, an occasional gift, etc. Think about the mutual loyalty this would engender from both the retailer and the customers. And then, think about the example this would set for those customers who desire this kind of treatment, but have quite given the absolute loyalty required. And finally, think about how impossible it would be for Wal-Mart to replicate this kind of service.”
I thought about this entry and thought it had a lot of merit. So often we measure performance in terms of “logistical tasks” such as check out speed, stocking rates and other non customer productivity or marketing productivity measures. This is also true with most of the loyalty programs in the industry; true loyal shoppers get the same level of service as the occasional shopper does. The industry spends a lot of money winning the shopper over and over again, rather than reinvesting some of that expense on shoppers that are really true to the stores and really profitable as well. Not only do the casinos identify the loyal gamblers, they also make sure they have a great experience so they want to come back to their casino. They understand the lifetime value of a loyal gambler and what they can spend profitably over that time to maintain that loyalty. If they were a supermarket operator, they would stand in the same check in and check out lines as everyone else because they treat a customer as a $25 transaction, not a lifetime shopper who spends at least $100,000.
Summary:
All of the entries to this challenge had one thing in common; they were companies that were locally “shopper” focused. This was done in several ways. What is more important in analyzing the responses is there wasn’t one entry about a large supermarket chain.
What does this imply?
I argue that this is just more input that the current organizations, measurements and business practices of the industry are out of sync with today’s marketplace…which will be the subject of next weeks challenge.
- KC's View:
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Thanks from both Glen Terbeek and MNB for all the terrific responses we got to Week Two of our “BIG IDEA Beat” contest.
All four of this week’s winners will receive copies of Glen’s book, Agentry Agenda.
Look for next Monday’s “BIG IDEA Beat” contest challenge…exclusively here on MorningNewsBeat.com.
