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FEATURE - Store Shelves Beat TV in New Brand Intros - By George Anderson

If you're rolling out a new product and you want consumers exposed to it, television commercials are good but nothing beats getting it on store shelves.

According to research conducted in six countries by Nielsen Bases, stores outdid television commercials by 50 percent to 36 percent when it came to making consumers aware of new items. This margin is up from a 52 to 48 percent split just four years ago, according to AdAge.com. U.S. numbers for stores (53 percent) and television (39 percent) were higher than the overall averages.

Consumers identified as heavy buyers were even more likely to cite store shelves as their introduction to new items (55 percent). The findings of research support the overall increase that brand marketers have put into shopper marketing initiatives in recent years.

Mike Twitty, director-shopper insights at Unilever Americas, told Ad Age, "For the longest time, shopping has been pretty habitual. People buy the same 300 [items] over the course of the year, so there was a lot of repeat purchasing, and not a lot of engagement at the shelf. What we saw in the last year contradicted that."

Economic factors drove some of that change, according to Mr. Twitty. "One thing they did was check the prices of things they used to buy routinely without giving it a thought.. So in-store became even more important than it had been in the past for new products or all products."

Interestingly, just putting products on in-line shelves was the most important factor in driving awareness of new items, according to the research. Seventy-one percent said they noticed new products within the standard planogram while secondary displays, retailer circulars, demos and in-store media graded out no higher than 18 percent. In-store media and sampling only achieved scores in the low single-digits, according to the Ad Age report.

Mike Hess, Carat's exec VP-research, marketing science and consumer insights, said the Bases research misses some key points in new product marketing.

"My concern as a media person is that I'm not sure in-store awareness is the same as the awareness you get from TV in terms of strategic attributes and benefits," he told Ad Age. "A 30-second spot gives you that ... the unique selling proposition."



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Haggling Makes a Comeback - By Tom Ryan

With consumers gaining leverage in a ruthless economy, haggling is on the rise in the U.S. And at the risk of losing sales, some smaller stores are developing strategies to capitalize on the practice.

According to America's Research Group survey, 72.2 percent of consumers haggled for lower prices over the past holiday season, and of that group, 80 percent reported being successful. Two years ago, 61 percent tried to negotiate, and only 50 percent of them succeeded.

"People have had markdowns thrown in their face so often they expect them," Martin Lindstrom, author of Buyology - Truth and Lies About Why We Buy, told Crain's New York. "Consumers have just gone through a one-year training session. At the end of the day, it's not the price per se, it's the concept. It's an addiction."

Mr. Lindstrom said that if managed wisely, savvy haggling can save a sale from walking out the door. Also, since big-box retailers aren't set up for on-the-spot pricing, it can be a differentiator.

"It gives the little guy a leg up on the big boys," said Mr. Lindstrom. "It's absolutely a strength of the smaller, independent retailer."

The challenge is that unlike many other parts of the world, sales associates in the U.S. aren't used to haggling. According to the Crain's article, the goal for sales associates is to make shoppers feel like they received a bargain while the store still gains an adequate margin. Prices may need to be raised or markdowns reduced throughout the store to provide associates with the leeway to reduce prices.

The overall haggling strategy varies by customer, and stores should be prepared to let a haggler walk.

"You always have your rock-bottom price," Joe Sundlie, an owner of an upscale vintage clothing store in Manhattan's Flatiron District, told Crain's. "Price the tag so you can allow yourself to drop it twice. They wait for the trump card, and that's your second price."

Bob Grayson, former CEO of Limited Stores and now a retail consultant, believes all stores in all likelihood make less money by haggling versus set pricing.

"If you would normally have come back with a lower price and your profit allows it, go ahead," said Mr. Grayson. "But to make spot decisions is not a good idea."

Discussion Questions: Is haggling a good option for stores? In what situations do you think it's appropriate? Do you agree that haggling could be a differentiator for small stores against big box chains?

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Article - Honing the art of haggling




The Loyalty Card Conundrum - By Al McClain

So here's the thing about loyalty - it's whatever the individual shopper/consumer wants it to be, not a marketer's program. One person is loyal due to personalized service, another likes the one free after ten purchases deal, while someone else wants to accumulate points. The problem seems to be that at least some marketers are more in love with putting together programs and setting rules than they are in really connecting with their customers.

Citibank and American Airlines have a program, for example, where one can earn 20,000 AAdvantage miles for doing the following:

 - Open a checking account with at least $1,000 by 6-30-09;
- Make one direct deposit or pay two electronic bills or make five qualifying non PIN-based purchase transactions with their debit card per month for twelve consecutive months;
 - Remember to register for the program using a special code;
 - Wait up to 120 days from completing all the activity to receive the miles. 

Meanwhile, speaker after speaker at last week's Loyalty Expo advised marketers to "simplify," "connect with consumers" and "keep it real." With the above example, we can see why that advice is necessary.

BrandMIND noted that households have an average of 14 loyalty cards yet a Colloquy presenter said that only 6.2 of those 14 memberships are active.  In other words, consumers have a lot of loyalty cards and can't keep up with them all. Yet, here's the program that started it all in 1981 making consumers jump through nearly impossible hoops to claim their award.

For the 80 million 12-to-31 year olds classified as Millenials, programs like the above example make even less sense. Panelists at a session on "Building Engagement with Millenials" said that this group is very connected with friends and family, relying heavily on word-of-mouth for everything. Millennials want instant gratification - they prefer instant cash back (who doesn't) versus mileage rewards that take a long time to accumulate.

Many would argue that consumers, if left to their own devices, would really prefer to just have better prices than wade through piles of special offers and loyalty program rules. (Can anyone say Wal-Mart or Southwest Airlines?) But, since there can be only one low price leader for any given type of business, everybody else needs to think about what else will work best and perhaps try the following tips:

 - Keep loyalty programs and special offers simple enough that harried consumers can figure them out easily and quickly.
 - Don't try to trick consumers with onerous rules and regulations - you'll get trashed via social media.
 - Personalize offers enough so that shoppers will know you are on the same page with them, but not so much that they think you are snooping on them or trying to be their "friend".
 - Think about what you offer from the perspective of consumers who are going through tough times more often than not, and are continuously bombarded by "deals" from marketers of all sizes and stripes.




Houston, We Have a Problem (Wal-Mart) - By David Morse, President and CEO, New American Dimsneisons,LLC

"I'm looking for a...Caucasian Superstore to cater to whites."
 
"What a way to assimilate - isolate yourselves into ethnic enclaves, trade at Hispanic-only stores, continue to speak Spanish. Then blame racists when you can't get a good job or move up the ladder of success in America."
 
"Wake up and have kids America, or else this will be Latin America."

This is a sampling of some of the comments posted to the Houston Chronicle's website in response to an article by Jenalia Moreno about the opening of Houston's Supermercado de Walmart, a Hispanic themed superstore opened on Wednesday by the retailing giant.

According to the article, Wal-Mart Stores converted one of its 39,000 square-foot units and "ditched the ethnic aisle, shrank the frozen foods section and stocked few brands of peanut butter, a food not popular with Latino immigrants. At the same time, it enlarged the trés leches-stocked bakery, added a kitchen that serves tacos and put up signs in Spanish and English."

According to Jose Antonio Fernandez, Wal-Mart vice president of business development, the company has learned how to serve Latinos from its experience in Latin America, where the retailer runs 2,346 stores, half in Mexico. "I think this is a natural evolution of what we've been doing for years," he told the Chronicle. And let's not forget that Wal-Mart has learned a ton from serving Hispanics here in the United States.

In other words, Wal-Mart is following the lessons taught in any marketing school anywhere that is worth its salt. Listen to your consumers. Stock what they buy. Merchandise the way they shop. And speak the language they speak. And lesson number one: be in tune with their demographics.

There are currently about 49 million Hispanics in the United States with nearly a billion dollars in purchasing power. They make up 16 percent of the U.S. population. By 2050 they are projected to make up 30 percent, eight years after Whites are expected to fall below less than half the population. Our country is witnessing a demographic revolution that is largely driven by Hispanics.

Wal-Mart is in touch with where America is going. Or are they? By catering to a booming Hispanic population does Wal-Mart stand to alienate its core consumer? A consumer that is Middle American, more suburban than urban, English speaking, and well, white.

Clearly, the Houston Chronicle readers do not consider themselves racist. They would tell you that Hispanics should assimilate like other immigrants before them (our research says that they are). They would tell you that as Americans, Hispanics should speak English (our research says they do - at least those who have lived most of their lives in the United States).  They would probably say that no race should be extended special treatment (even though Hispanics do not comprise a race; they just happen to be our country's largest and most recent immigrant group).

Is Wal-Mart wrong to be building Hispanic format stores? They wouldn't be the first in Houston. Three years ago, H-E-B opened a 48,000 square-foot Mi Tienda store there; Kroger transformed a 59,000 square-foot store to a Hispanic format a few years before that.




The Downside of One Big Customer - By George Anderson

Going back to the early nineties, we remember numerous discussions with consumer packaged goods executives regarding the wisdom of sales strategies that concentrated on a handful of big accounts while essentially walking away from smaller merchants.

We were told over and over (we're a slow learner, you know) that it made perfect sense because costs were reduced by having to deliver to fewer points of distribution and sales increased because more product was sold in one (name a big chain) rather than in 30 independent outlets.

"But," we asked, "what happens when all those little guys go away and you only have (name a big chain) to sell your products? Won't they own you then?"

You'd be amazed at how many top folks told us back then that by the time that happened they'd be hitting tee shots somewhere near Hilton Head or off on some other retirement adventure. The problem would be someone else's.

The reason for bringing this up now is not because we're looking to make big chains out to be villains or to excoriate CPG executives for short-term thinking based solely on getting theirs. The spark was the news this week that Wal-Mart, the world's largest retailer, had ended its exclusive deal to have Cott Corp. supply its private label soft drinks.

Cott, which happens to be the largest supplier of store brand soft drinks on the planet, "is unclear at this time" how it will be affected when its deal with Wal-Mart ends in 2012. Revenues from the Wal-Mart account are in the "the high 30-percentage range," according to Cott CEO Dave Gibbons.

According to a statement from Cott, it and Wal-Mart "continue to discuss a redefinition of their ongoing business relationship."



NRF: The Sky Has Fallen - By Tom Ryan


In a session entitled "The Sky Has Fallen: Now What?" held Tuesday at the NRF convention, J.C. Penney CEO Myron "Mike" Ullman III, along with two financial experts, offered a dismal assessment of the current environment. The primary advice: hoard cash.

"I wouldn't worry about anything else for the next year," said Peter Solomon, founder and chairman of Peter J. Solomon Co. "You are selling on a survival basis and you have to survive... Don't worry about investing and if you survive, you'll somehow figure it out a year from now."

Mark Zandi, chief economist at Moody's Economy.com, said that while the last recession was an income-statement recession, this one is both an income-statement and balance-sheet recession. The difference is that the steep losses in housing and stockholding values have created a double-whammy, according to Mr. Zandi, and it is expected to play a permanent "psychological" role in the way people decide what to buy. He also noted a new trend toward conservative buying among younger people that may persist even after the recession is over.

"This is an end of a long run," added Mr. Solomon, who noted that for years easy credit allowed stores to keep expanding as consumers kept spending. Now, he said, consumer demand and retail have "caught up with each other."

At the conclusion of the presentation, each panelist was asked when he thought the economy might turn and what retailers should do to ride out the period.

Mr. Ullman said he expected 2009 to be "a tough year all year" with growth likely to resume again in 2010. Echoing other panelists, Mr. Ullman stressed the importance of preserving cash by reducing capital expenditures and better utilization of inventories. Said Mr. Ullman, "The extent that you can order correctly in advance, or move your inventory through the system more expeditiously with shorter lead times..those are things that are going to help you."

Mr. Solomon said it's difficult to predict a turn, noting that 2009 "is going to be a nightmare." While leadership overall will be critical, he underscored the importance of surviving the shakeout.

"The retailers that go bankrupt today are going to be liquidated," said Mr. Solomon. "And while they're going to be liquidated for the technical reason that there's no financing, they're going to be eliminated because the demand isn't there for retail space in America and it's not going to be. So if you're still in business, you're already in better shape."

Said Mr. Zandi, "The next six months are going to be very painful. The next six months after that are just going to be painful, and 2010 is going to be uncomfortable. So in the end, 2009 will be a matter of survival, and I would use 2010 to prepare for opportunities in 2011."

Walmart is Right On with RFID - By George Anderson

An article on the RFID Journal website, written by Kevin Ashton, co-founder and executive director of the Auto-ID Center, claims Walmart has it right when it comes to its radio frequency identification technology program and all those who have questioned its implementation are working under three flawed assumptions including:

- Tag cost kills the business case for RFID with suppliers;
- There's not enough time for vendors to prepare;
- The technology is not ready for the real world.

On the first point, Mr. Ashton said that it was vendors including CHEP, Gillette, International Paper, Philip Morris and Procter & Gamble that adopted RFID first and not Walmart. The retailer started to see the promise of the technology after observing its use by suppliers. A key point was that the technology was able to help vendors lower costs, which could be passed on to the retailer. It would make no sense for Walmart to push a technology that increased costs for suppliers since it would eventually have to pick up the tab.

Companies have had since 2000, when Walmart first began to explore RFID, to get ready for its conversion. Even those who only got started when Walmart unveiled its mandate last year have had plenty of time, according to Mr. Ashton. "With few exceptions, companies that aren't ready for RFID have only themselves to blame," he wrote.

On the final point of whether or not RFID works, the author claims that numerous studies from "around the world have shown RFID is good enough now." The technology may not be perfect but the best way to improve on it is to create a mass market for it. Walmart is in the process of helping to create that market and, Mr. Ashton posits, so should its vendors.

Retailers Launch Careers - By Tom Ryan

Target ranked 14th out of 119 companies on BusinessWeek's Best Places to Launch a Career survey. Other retailers making the list included Amazon (33), Macy's (56), Walgreen's (79), Kohl's (94), Abercrombie & Fitch (98) and Sears (110). This was the first time Target participated in this survey, which recognized the company for providing jobs for recent college graduates.

According to BusinessWeek, Target recruited on 404 campuses in 2007-08, and made job offers on 355 of those. Target also had 1,773 internships in 2007. Of those, 63 percent of eligible 2007 interns received full-time job offers and 74 percent of interns with offers accepted. Overall, 19 percent of Target's entry-level hires last year were interns.

"We continuously strive to attract, retain and develop the best talent for our stores, distribution centers and headquarters locations," said Tim Curoe, vice president, talent acquisition at Target in a statement. "In today's challenging economic environment, graduates want to work for a strong company with a great passion for ongoing development and training - both of which they will find at Target. In addition, our strongly held commitment to community giving and sustainability further solidifies why many potential team members view Target as an employer of choice."

The Best Places to Launch a Career ranking is based on three separate surveys: a BusinessWeek survey of career-services directors at U.S. colleges; a survey of 40,000 U.S. college students conducted by Universum USA, a Philadelphia research company; and a BusinessWeek poll of the employers themselves.

Consumer goods vendors making the list included Anheuser Busch (19), General Mills (24), Nestle USA (45), Whirlpool (46), Kraft Foods (49) and Loreal USA (65). The top ten: Ernst & Young, Deloitte, PricewaterhouseCoopers, Goldman Sachs, KPMG, Marriot International, Google, Lockhead Martin, IBM, and J.P. Morgan.




CPG Brands and Retailers Focus on Shopper Marketing - By George Anderson

A new study conducted by Deloitte for the Grocery Manufacturers Association finds that consumer packaged goods companies and retailers are rapidly ramping up shopper marketing efforts even as many acknowledge they are in the early learning stages around such initiatives.

The report, Delivering the Promise of Shopper Marketing: Mastering Execution for Competitive, found that 60 percent of brands and retailers say they have significant shopper marketing organizations compared to only six percent who gave a similar answer in 2007.

The report defines shopper marketing as, "...the employment of any marketing stimuli, developed based on a deep understanding of shopper behavior, designed to build brand equity, engage the shopper (i.e., an individual in 'shopping mode'), and lead him/her to make a purchase."

"Nearly every major manufacturer and retailer in the industry is dedicating resources to shopper marketing," said Brian Lynch, GMA director of sales and sales promotion, in a press release. "This report outlines lessons learned to date and puts forth a game plan to help companies become more sophisticated in their operations and thus more fully realize the enormous potential of shopper marketing."

According to GMA and Deloitte, companies typically go through three stages as they develop shopper marketing organizations and programs:

Incubating - Beginning stage where some fall by the wayside by failing to develop the means to ramp up.
Scaling - Ramping up to carry programs off on a larger scale.
Embedding - Developing a culture of thinking and working around in-store marketing.
Only about 10 percent of companies involved in shopper marketing saw themselves as advanced in its practice.

Those who excel at shopper marketing have a clear competitive advantage, said Rob Holston, Deloitte's shopper marketing practice leader. "Retailers and manufacturers who are embracing shopper marketing and executing against a core set of principles are growing 50 percent faster than the categories in which they participate."

Retailers saw greater opportunities to drive return on investment (ROI) using shopper marketing. Nearly half of all retailers saw it as the most effective means for generating ROI while 19 percent of CPG companies agreed.
 



Transforming Retail with Portable Shopping Devices - By George Anderson

Research from Frost & Sullivan concludes that portable shopping devices, including those mounted on carts, may be on the verge of transforming retailing on a global scale.

According to the report, World Customer Shopping Device Markets, the portable shopping device market reached $59.2 million worldwide in 2007 and the technology is being adopted on a widespread basis in Europe and North America. The Pacific Asia and Latin American markets are also seeing the pace of adoption picking up.

"The primary driver behind the implementation of portable shopping devices or mobile self-scanners is the significant improvement in the customer's shopping efficiency and labor productivity," said Prasanna Prakash, a research analyst with Frost & Sullivan Research, in a press release. "Using these systems, customers can eliminate waiting time in queues, leading to faster checkouts while retailers can streamline operations and redeploy staff to other functions within the retail environment."

The use of portable shopping devices enables stores to move workers from the checkout to other areas of the store to "augment customer relationship management activities," according to the report.

Frost & Sullivan suggests that digital signage solutions can be incorporated into store environments to help improve interaction with consumers using portable shopping devices at the point of purchase.




Why Publix is So Darn Good - By Wareen Thayer, Editorial Director

Is there anything that Publix doesn't do extraordinarily well? Shoppers and vendors love it, it wins lots of awards and makes lots of money.

"There's nothing particularly over the top about the way they do things; they just do what they do very well," said Ken Harris, managing director, Cannondale Associates.

Mr. Harris, who authors Cannondale's annual Power Ranking Survey, noted that the stores have wide, clean aisles, brightly lit stores and friendly service. And while anybody can have wide aisles and good lighting, it's a real trick to have consistently clean stores and friendly associates.

"Being able to run stores that are pleasant to shop isn't easy," he said. "These are fundamental things they've been able to master. They do so many little things incredibly well that it builds into a store experience, and that makes people enamored of Publix."

The Lakeland, Fla.-based chain is the best supermarket in the country when it comes to satisfying its customers, according to the American Customer Satisfaction Index. It's been at the very top of the list since the National Quality Research Center, Ann Arbor, Mich., began the annual rankings back in 1994. This past year, it scored an 83 out of a possible 100, well ahead of Kroger (75), Supervalu (74) and Whole Foods Market (73), the next three on the list.

"Being associate owned and operated allows our associates to take a personal interest in our business and our customers' shopping experiences," said Maria Brous, director of media and community relations for Publix. "Our mission is to be the premier food retailer in the world. To that end, we will provide our customers with stellar customer service and quality products at competitive prices."

Kevin Janiga, president of Winsights Marketing, said Publix provides "a very pleasant shopping experience. Customer service is very good and the employees truly act like they enjoy working there. The stores are uncluttered, in-stock and clean." Said another observer, "Publix has used customer service as a major differentiator versus its competition. This includes being in stock at rates better than the competition as well as having more and better-trained employees. They are in stock, both case and features, and they have well-trained and committed employees.

"I think they have more full timers than the industry average, which means better commitment and knowledge. This is important when you are selling and merchandising more volatile sections like frozen and refrigerated foods. In a soft economy, I don't see them moving away from this (a strong service model) because, like Wegmans, it is part of the culture. They may have to focus a little more on price, but they have good perimeters and will find a way to maintain margins."




Target Needs to Put 'Pay Less' Before 'Expect More' - By George Anderson

The current state of the economy has consumers looking to save money. They know they can save at Walmart and the retailer has seen its same-store sales climb even as the economy has headed in the other direction. At rival Target stores, however, sales have been decidedly less than Target-like. Shoppers, a Reuters report suggests, have identified with the "Expect More" portion of the chain's tagline. What they have not bought into is the second half of that message that promises they will "Pay Less."

Recently, Target has begun to emphasize its discounter heritage more in its marketing with television ads, online and direct mail efforts promising consumers savings. Industry analysts say that price checks show that Target is competitive with Walmart on similar product pricing but that consumers have attached themselves more to the chic than cheap portion of the chain's value proposition.

"When economic times get hard and the business model is under strain, you need to find a way to refine your advertising to actually make it work harder, and I don't think they have yet," Zain Raj, chief executive of loyalty marketing firm Euro RSCG Discovery, told Reuters. Target's core middle-income consumer is looking for deals as disposable dollars get eaten up by higher fuel and food prices. The same shoppers, experts suggest, are less interested in getting a good deal on a new clothing item and prefer to save on the laundry detergent they use to clean the garments they already own.

Jeannine Befidi, a spokesperson for Target, said the company is emphasizing categories such as food and pharmacy over apparel to increase shopping frequency. That doesn't mean, she said, that the company plans "to change what we consider to be a proven, successful long-term strategy."

Ms. Befidi said Target is looking to strike the "appropriate balance" between "Expect More" and "Pay Less."

Joseph Feldman, a retail analyst at Telsey Advisory Group, told Reuters that Target needed to "change with the times" and do more "creative marketing and merchandising to convince the customers that prices are the same [as] Walmart."

Shelli Baltman, head of customer experience innovation at consulting firm What If, told the news service, "Walmart's done a really good job of letting customers know that they understand what it's like to tighten their belt."

Target, she added, needs to let its "customers know that we understand your suffering, and we are going to help you."

Walmart to Debut In-Store Network 2.0 - By George Anderson

Walmart is getting ready to roll out its second-generation in-store digital signage and television network.

While details are understandably scarce, the new Walmart Smart Network is expected to make use of moving digital signage, positioned closer to eye-level and incorporated into product displays, according to a report on AdAge.com. Walmart is expected to make use of "virtual assistants" that will give consumers access to product information or narrow down product choices based on a criteria set.

Walmart appears to be looking to increase the interactivity of its digital signage at a time when there is increased emphasis on measuring the effectiveness of in-store media. Nielsen is in the process of rolling out its Prism in-store media measurement system. Walmart, Procter & Gamble and Starcom MediaVest Group are among the supporters of the Prism system.
The retailer has sought to push the store as media concept, comparing the increasing foot traffic in its locations to smaller numbers of consumers watching network television. Advertising revenues for Walmart's in-store television network are estimated between $100 million to $150 million.

PRN, a Thomson company that operates Wal-Mart TV, is estimated to take roughly eight percent of the retailer's ad revenues, leaving the company with an added source of income and, as AdAge.com points out, "a corporate video network fully financed by suppliers."




Same-Site Sales Head North as Same-Store Numbers Go South - By George Anderson

Consumers were already turning in increasing numbers to shop online before gas prices went wild. Now that consumers across the country are looking at paying $4+ a gallon at the pump, even more are choosing to get on the computer rather than in their car to go shopping.

Major chains including J.C. Penney, Gap and Victoria's Secret have experienced healthy increases in their e-tail sales while store revenues have taken big hits. Penney, for example, saw same-store sales decrease 7.4 percent during the first quarter. At the same time, the company's internet sales were up 8.7 percent. Mike Boylson, chief marketing officer for J. C. Penney, said the company has found that mall-based sales are down more than off-mall locations and online outperforms both.

"We see more people turning to online because it's much more efficient in terms of time and money," Mr. Boylson told The New York Times. There's little doubt that online has moved from a tiny sales niche in retail to the firmly plant itself in the "worth counting" category. Online's coming-of-age was heralded recently when Moody's, the credit rating agency, began factoring retailers' online sales into its analyses.

"Online is starting to matter, and it is performing well," said Maggie Taylor, vice president, senior credit officer at Moody's Investors Service. "Now that it is big enough to matter, companies want to call it out."

A number of retailers, including Penney and Target, have started factoring online into company same-store numbers. Consumers, for their part, are looking for ways to cut gas consumption. Offers of free shipping are particularly attractive when consumers factor in how much it will cost them in gas to go shopping. Some merchants including Ebags.com have started using the high price of gas as marketing tool. In an email campaign to millions of members last month, the company sent the following message: "Paying too much to get from here to there? Skip the mall. We'll ship it to you for free."

Some consumers, the Times article points out, don't even mind paying freight charges. Jessica Delmar, a manager for a technology company in San Francisco, told the paper, "A lot of shipping costs are $3 and $5. That's even less than a gallon of gas now."




Off-Shoring/Outsourcing Customer Services Gets Dismal Grades - By Tom Ryan

A new survey finds that outsourcing customer service - whether to offshore providers or domestically - typically causes a "significantly negative" impact on customer satisfaction. But the study's authors still contend that despite widespread bad press, off-shoring customer service can work if done right.

The research, according to The Wall Street Journal, came from analyzing the off-shoring and outsourcing activities of 150 North American companies and business units from 1998 to 2006. The study's authors were Jonathon Whitaker, assistant professor of management at the University of Richmond's Robins School of Business; MS Krishnan, professor of business information technology at the University of Michigan's Ross School of Business; and Claes Fornell, a professor of marketing at the University of Michigan's Ross School of Business.

Writing in the Journal, the scholars offered a few steps companies can take to improve the quality of outsourced customer service yet still reap the savings from moving offshore:

- Make sure the provider has enough information and full authority to help customers. To protect customers, the customer-service provider often isn't given complete customer histories and profiles. The provider also may not be permitted to grant credits to customers to resolve complaints. The authors wrote, "Companies need to weigh their concerns about information security and financial control against the damage that such arrangements can do to customer satisfaction."

- Companies can take advantage of the technological innovations available to some foreign firms. According to the authors, "Some foreign outsourcing providers have offerings their domestic counterparts can't match in terms of technologies that help guide customer service by recognizing patterns in consumer behavior."

- Invest the money saved by outsourcing to improve the quality of the company's products or services, or to cut prices. The authors found that most companies are only pocketing the savings. "Among the companies we studied that had outsourced customer service, there was no increase in the perceived-value component of their overall customer-satisfaction score: Their customers didn't feel that they were getting any more for their money than they did before the company started outsourcing," the authors wrote.



The Store is the Medium - By Tom Ryan

Archive Article - At a session at last week's Advertising Research Foundations's (ARF) Re:think Conference and Expo in New York City, industry executives discussed the many promising developments of the P.R.I.S.M. in-store marketing project as well as the challenges in its successful implementation.
P.R.I.S.M. (Pioneering Research for In-Store Metric) is the retail industry's most significant initiative to establish a global metric for evaluating the in-store environment as a marketing medium along the lines of Nielsen's TV, Internet, Box Office and other audience metrics. The Nielsen Company is now spearheading the research. The project, a computer-linked system of cameras tied to infrared sensors and human counters at retail, is designed to let retailers know how many people are in a store, what time consumers shop most, and how effective advertising in stores is. P.R.I.S.M. will be launched nationwide in July in several stores.

Speakers at the session, entitled The Store is the Medium, were Joel Rubinson, chief research officer, The ARF; Ramon Portilla, senior director, communication insights, Wal-Mart; Peter Hoyt, president & founder, Hoyt Publishing Co.; George Wishart, global managing director, Nielsen In-Store; and Kelly Downey, shopper marketing director, Unilever. Panelists stressed the value of being able to measure in-store marketing efforts, especially since the media industry has become much more fragmented and consumers exert much greater control over the messages they take in. Better metrics around in-store marketing promises not only to improve the marketing messages aimed at consumers at retail but also help optimize store layouts. "You can't set objectives if you do not have a way to measure success," said Wal-Mart's Mr. Portilla.

Nielsen's Mr. Wishart noted that the key is gaining "closure rates" as shoppers walk the aisles in understanding "not only when they but also why they didn't buy." He said CPG companies can learn the value of their investments on in-store marketing programs, retailers can learn how their shoppers shop, and it enables advertising agencies to become a much bigger part of in-store media for the first time.

"The nice thing is that everybody wins," said Mr. Wishart. Unilever's Ms. Downey noted that with P.R.I.S.M., vendors will be able to look at week-by-week data to measure how closure rates vary among different marketing vehicles for different categories and different retailers. It can particularly help in launches to make sure the product is reaching the target customer. Improved score carding also help vendors measure in-store against other advertising media. "We can actually begin to see what we planned to occur in the store and then what actually happens," said Ms. Downey. "We can look across retailers and see how a specific merchandising program was actually executed."

For proper execution, according to Ms. Downey, the project will need a strong commitment from the senior management level since extensive dialog will be required among manufacturers, retailer and agencies. Marketers may have to develop distinct in-store consumer profiles, noting that consumers respond to messages differently inside the store than outside the store with other media. Finally, partners should be wary of "analysis paralysis" because the extensive data becoming available can become unmanageable. Many should even consider third party support to move faster. "This is going to come at us like a freight train," said Ms. Downey. ARF's Mr. Rubinson said part of the driver behind the PRISM project is that stores have become much more engaging experiences for shoppers.

"It's no longer just a place to buy things," said Mr. Rubinson. "It's a place where you derive satisfaction, where you're having fun, and where you're absorbing new information and absorbing messages." As such, the overall shopping experience has to reach shoppers at an emotional level. "The bottom line is shopping is therapeutic," said Mr. Rubinson. "Shopping is fun. It's an important part of people's lives. So let's not forget that the act of shopping often has as much emotional content for people as the thing they are buying and using."   



Letting Pricing Help Guide Assortments - By Tom Ryan

Tapping into the analytics and advancement capabilities of Cannondale Associate's RichMix assortment planning solution, DemandTec (a RetailWire sponsor) has come up with an assortment optimization solution providing enhanced functionality for retailers to understand shopper behavior. Specifically, DemandTec Assortment Optimization, used in conjunction with DemandTec's Everyday Price Optimization product, promises to enable pricing analysis to play a much larger role in driving assortment decisions. Marc Dietz, vice president of marketing at DemandTec, says price and assortment decisions are highly interrelated. For example, a retailer may be pushing a "good, better, best" strategy in assortment allocation, but analytic analysis shows the prices aren't sending that "good, better, best" message to consumers at the shelf level.

"The right assortment is right only if the prices are right," says Mr. Dietz in an interview with RetailWire. "And that's because if you start pulling items off the shelf or adding new ones, you change the relative price relationships or gaps between products left on the shelf. That could completely change how consumers make decisions around that category."

DemandTec's Assortment Optimization software service combines the demand intelligence and forecasting capabilities of DemandTec with the analytics and advanced capabilities of RichMix, the assortment planning product relied on by many CPG vendors. The goal, according to Mr. Dietz, is to measure the "incrementality" of adding or subtracting an item within a category mix. Typically, assortment allocation is guided by ranking best and worst sellers; and eliminating the worst. But eliminating one of the poorer sellers might not have the desired effect if it contributes to variety more so than other items.

"So if you have 100 items and you're delisting five items, the relative incrementality and importance of numbers 96 to 99 might change once you start removing items," says Mr. Dietz. "With the old way of using a ranking report approach, it's just static. Those bottom five just come off."

DemandTec's Assortment Optimization software enables retailers to explore these "What if" changes around the mix. The package also enables retailers to understand "transferable demand." Once an item is removed, for instance, a consumer may switch to a competing national brand, a private label product, or not buy any other brand in the category altogether. Overall, DemandTec sees a renewed interest in assortment optimization. On the one hand, retailers realize they have to understand whether mainstay brands are incremental versus duplicative parts of the mix. On the other hand, retailers are looking to add variety to the mix through new brands, brand extensions and private labels. Although this is helping the push toward more customization and merchandising assortments to local regions, retailers are looking for more sophisticated analytical tools to handle the significant increase in SKUs.

"You would never have a completely different assortment in every single store," notes Mr. Dietz. "But you might have an 80/20 rule, where 80 percent of all the merchandise in the store will be the same and 20 percent will vary based on local market demand. So how do you use that local 20 percent most effectively?"



Retailers Backing Out of Shopping Centers - By George Anderson

The combination of increased construction costs along with the prospect of slowing sales growth has led some retailers to pull out of planned shopping center projects. Others that continue to look for new locations are being more cautious before committing to undertake store construction, according to a report on The Dallas Morning News website. Two store sites approved for Home Depot stores have been canceled as the chain is going through what Hunter Stansbury, senior real estate manager for the chain, called a "cooling-down period."

John Weber Sr., president of Weber and Co., told an audience at an International Council of Shopping Centers event that commodity prices, not labor, have driven project costs up 20 to 25 percent so far this year. While others have backed off construction projects, crafts retailer Michaels Stores is planning to open 45 locations this year, roughly the same number it has opened each of the last 10 years. Even so, Karen Slayton, real estate manager for the chain, said the company is proceeding with caution in choosing new locations this year. "We're all expecting you to bring deals to us for 2010," she said.
J.C. Penney real estate negotiator Viral Patel said the company is looking to delay any projects "if the growth isn't going to be there." The department store chain scaled back its plans for 50 new stores in 2008 to 36.




Digital Signage Draws Attention - By Tom Ryan

According to a new study, digital signage catches the attention of more people than any other comparable advertising medium. It was also found digital signage to be more interesting than any other medium and more entertaining than every other one except TV. The survey of 900 adults in July 2007 conducted by OTX (Online Testing eXchange) found that digital signage - defined as videos of electronic images on LCD, plasma or normal TV outside of the home - "catches their attention" for 63 percent of respondents. That's higher than billboards (58 percent), magazines (57 percent), TV (56 percent), internet (47 percent), newspaper (40 percent), and radio (37 percent). SeeSaw Networks, a media company specializing in digital out-of-home media, commissioned the study.

Respondents said they noticed digital signage in an average of six locations over the past week. Among the places cited was airports, train stations, elevators, doctor's waiting rooms, casinos, health clubs, golf courses, restaurants, bars, gas stations, checkout lines and sports stadiums. Forty-four percent of respondents paid "some" or "a lot of" attention to digital signage. That rated below TV (52 percent) and close to magazines (45 percent). But it was higher than radio (40 percent), newspaper (40 percent), billboard (33 percent) and internet (32 percent). Asked which advertising medium they found to be "least annoying," only newspapers (23 percent) were less annoying than digital signage (26 percent). Billboards were also at 26 percent, followed by magazines (33 percent), TV (51 percent), radio (52 percent) and internet (67 percent).

The study also broke out digital signage awareness across 12 Life Patterns. Although all groups were highly aware of digital signage, young urban professionals, college students, mobile affluents, avid moviegoers, and Hispanic families skewed slightly higher.One clear difference was around text messaging. The survey found that 73 percent of college students and 68 percent of respondents between the ages of 18 and 34 used text messaging versus 50 percent to total adults. And of all respondents using text messaging, 53 percent said they are likely to "text a response" to an offer seen on digital signage.

Mobile Device Users Want More and More  - By Tom Ryan

While some consumers vex about all the complex gadgetry on their cell phones, an IBM survey found 80 percent of consumers are looking for more applications and services - not only for entertainment but also for basic transactional and utility purposes.

For instance, 56 percent of the 700 consumers surveyed worldwide indicated they were "interested" - either somewhat or very - in banking via mobile devices. A whopping sixty eight percent indicated they were interested in using mobile devices for maps; 55 percent to get news; 52 percent for e-mail services; 56 percent for instant messaging; and 53 percent for browsing the internet. In more pure entertainment areas, 53 percent were interested in using their mobile devices to watch TV; 41 percent to play online games; 45 percent to buy music; 44 percent to buy videos; and 41 percent in buying games. In its survey, only 20 percent of customers indicated they were "very satisfied" with their current mobile internet services, while the remaining 80 percent were split among "somewhat satisfied (40 percent)," "somewhat dissatisfied" (12 percent), "not satisfied" (five percent) and non-users (23 percent).

Asked what's stopping them from using mobile internet more often, too expensive (50 percent) was the most cited reason. That was followed by connection too slow (40 percent); don't find it convenient (37 percent); tried but didn't find it useful (17 percent); never tried it, but never felt like using mobile internet (16 percent); don't know about it (eight percent); and don't know how to use it (six percent).

The study, titled Go mobile, grow from IBM's Institute for Business Value, estimates the market for mobile internet services will reach $80 billion by 2011, with increasing usage expected to fuel growth in both the provision of services and mobile internet advertising. At the same time, the number of mobile internet users worldwide is projected to approach 1 billion, a 191 percent increase from 2006 and a compound annual growth rate of 24 percent.

"Clearly the same market forces which empowered consumers to choose personal computers that were open and enabled them to customize their applications are at play in the mobile web marketplace," said Dr. Sungyoul Lee, global consulting leader, Electronics Industry, IBM, in a statement.

Where are the In-Store Implementation Best Practices - By James Tenser, Principal, VSN Strategies

The In-Store Implementation Sharegroup has just released its first work product, a working paper, titled In-Store Implementation: Current Status and Future Solutions. It is time for the retail consumer products industry to coalesce around a new set of best practices centered on merchandising. More than a year in the making, the 15,000-word document argues in favor of a collaborative, industry-wide initiative aimed at closing the implementation gap that today limits effectiveness of merchandising, promotion and category management in the retail consumer product industry.

The ISI Sharegroup was formed in 2007 by like-minded visionaries from consumer packaged goods, retail, merchandising services, technology and consulting firms. Member companies include Anheuser-Busch, Driveline, General Mills, Giant Eagle, Nestle-Purina, PepsiCo, Procter & Gamble, RetailTactics, Schnuck's, The Partnering Group, and VSN Strategies. [Editor's Note: James Tenser is the principal author of the ISI report.] In-store implementation, or ISI, refers to the collective physical and informational actions performed at retail to actualize merchandising, marketing and media plans in the store. ISI encompasses compliance, measurement and communications activities, and is defined by a Plan-Do-Measure process cycle that controls implementation plans and work and communicates implementation signals.

Sharegroup members estimate the available bottom line opportunities from improved implementation approach one percent of gross product sales, or $10 to $15 billion of the $1.5 trillion total U.S. annual volume across the food, drug, and mass channels. Contributing factors include an estimated $46 billion in excess shelf inventory in grocery, costing $3 billion in lost profits; the ever-persistent out-of-stock problem, reported at 8.3 percent of items overall, amounting to tens of billions of dollars in affected sales; and as much as $25 billion in ineffective promotional spending annually by CPG manufacturers.

"Excess inventory and out-of-stocks are results of inadequate shelf management and inability to manage and monitor shelf conditions," said Dr. Brian Harris, founder and co-chairman of The Partnering Group, who chairs the ISI Sharegroup. "No level of Category Management or supply chain process sophistication can fix these problems in the absence of an improved in-store implementation discipline." Sharegroup members are calling for an industry-wide culture of compliance to help resolve systemic merchandising challenges. The working paper proposes a path toward greater cooperation between retailers, manufacturers and third parties that would ultimately enhance the customer experience and industry profitability.

Friends and Family Seal the Deal - By George Anderson

If you want to influence a consumer's purchasing decisions, then it's almost always best to get to their family and friends first. If you can convince family and friends to recommend a product or service, then you're a long way down the road to making the sale. But how, just exactly, do you get friends and family to make a recommendation? That is the grail that most marketers seek and few find.

According to ZenithOptimedia, word-of-mouth (WOM), specifically those recommendations from family and friends, ranked highest in purchasing influences in the firm's Touchpoints ROI Tracker study. Scored on a grade of one to 100, recommendations graded out to an average of 84. The next closest influencers were TV ads (69) and internet searches (67). Magazine (60) and newspaper ads (55) were next followed by outdoor (45), radio ads (42) and banner ads online (41).

Bruce Goerlich, ZenithOptimedia's president of strategic resources, North America, told AdAge.com that marketers understand the importance of WOM but haven't figured out to make it scalable. "Word of mouth is incredibly powerful, but we as an industry are not doing as good a job as we could do in generating it," he said. Lawrence Feick, professor of business administration in the University of Pittsburgh's Katz Graduate School of Business, told BizReport, "The sea change is that for 40 years marketers knew that word of mouth was important, influential, pervasive. But they saw it as something to be described and hoped for."

"It is only in the last 10 or 15 [years] that they have thought about it as a communication tool that can (at least in part) be managed," he added.