Consumers are accustomed to retail advertising consisting of heavy doses of newspaper inserts, mail circulars, and other mass delivered one-way messages. The traditional model will soon be a distant memory if predictions arising from a recent study come to pass. A survey of grocery marketers conducted by Valassis found that the traditional reliance on print media as an advertising channel will be declining dramatically in the next five years. Today, three-fourths of grocery executives use print media for marketing purposes. In five years, the number dwindles to 17 percent. In contrast, the proportion of grocery marketers saying that they will use social media as a marketing channel will rise from 12 percent to 65 percent during the same period.
Skeptics might interpret these findings as grocery marketers perhaps being too euphoric about social media. However, it seems that bullishness on social media marketing may be based on impact rather than hype. A new study by Ryan Partnership on retailers’ social media activity found that connecting with shoppers via social media is not just cool, it has observable payoffs. Among the study’s findings on how social media impacts shopper behavior were:
- 44% of shoppers surveyed indicated that a retailer’s social media update influenced a purchase
- 36% said following a retailer on social media led to trying a product
- 18% said they tried a brand because their friends like or follow the brand
Social media alone is not changing advertising; how we consume information has created a need for new communication approaches to reach and engage audiences. It would be understandable if some advertisers resisted a shift away from traditional media to rely more on social channels. After all, “traditional” means that it is customary practice, it is the way it has been done in the past. But, consumers are not hanging on to the past – they are using the tools of the day to acquire and share information. So, marketers may long for the good ol’ days, but we must align our practices with consumer behavior.
Creating mobile apps for your business today bears some similarity to developing a website circa 2000. It is still novel, all of the “cool” brands are doing it, and there are potential business benefits… you just may not be sure what they are. Perhaps you have come to the conclusion that the amount of revenue that a mobile app would generate does not justify the time and expense of going mobile. However, findings from a recent study by Deloitte Consulting on mobile shopping may change your thinking.
According to the study’s results, mobile marketing influences 5.1% of all retail sales in the U.S. That means 95% of sales are coming through other channels, so if mobile is not pursued right now that’s OK, right? Nope. You must look beyond direct sales to find the influence of mobile apps. Some of the most interesting findings included:
- 50% of consumers surveyed owned a smartphone (and penetration will continue to increase over time)
- Conversion of shoppers using a retailer’s mobile app is 21% higher than those not using the app
- The influence rate is expected to reach 17-21% by 2016, translating to more than $600 billion in retail sales
These figures are impressive, but long-term forecasts of emerging technology adoption often are overstated. So, let’s take a look at the influence mobile apps have on shopping behavior as evidence of their value:
- 25% of shoppers use a retailer’s mobile app the day before a planned visit to the store
- 52% use a retailer’s app on their way to the store (let’s hope they are not driving!)
- 61% use a retailer’s app while in store
These statistics reveal the true influence of mobile apps today – they are a valuable information source before and during a shopping trip. Tech-savvy shoppers that know what they are looking for or prefer not to seek out help from a salesperson are using mobile apps as a resource to assist in making buying decisions. Mobile apps represent an opportunity to persuade buyers at a very critical place – in front of merchandise. And, apps do not call in sick or expect raises like salespeople (coming from the former retail manager in me).
Consider what a mobile app could do for your business. Informing customers, engaging them with your brand, and of course, facilitating transactions are appealing incentives for going mobile.
MediaPost Research Brief – “Mobile Shopping Growing Exponentially”
The retailing industry is going through a period of significant change in terms of how customers interact with retailers. The days of the in-store experience being the dominant customer touchpoint are over. The advent of the World Wide Web gave shoppers a virtual shopping option. Despite predictions to the contrary, brick-and-mortar stores have not disappeared due to the emergence of e-commerce. Now, the evolution of mobile communication leads many retailers to again predict a revolution in shopper behavior.
According to a recent study by Motorola Solutions, 74% of retailers surveyed believe creating a more engaging in-store experience will be critical to business success over the next five years. Technology-assisted interactions are expected to play a significant role in shoppers’ behavior. Among key findings pointing to a more significant role for technology in retailing:
- 56% of all transactions will occur via mobile point of sale, self-service checkout, or a shopper’s mobile device
- 42% of sales will come from online, mobile, and social commerce sites
Exciting news – shoppers are embracing technology to make purchases… or is it exciting news? These trends should serve as a wake-up call for retailers that have resisted enhancing their interactive experiences for shoppers. It is understandable why retailers might be reluctant to quickly react to the forecasts – we have heard similar proclamations before. The Web did not make traditional stores obsolete, and while smartphone capabilities have definitely changed how we shop, brick-and-mortar stores are not going away anytime soon.
Regardless of whether the forecast for mobile commerce over the next five years comes to fruition, the survey’s findings should serve as a call for retailers to step up their m-commerce game. It is evident that retailers know the stakes are higher to meet shoppers where they are and deliver value by providing information, coupon offers, and transaction convenience. The key for retailers will be make understanding the customer shopping experience a priority – not what they think shoppers will want but committing resources to learn and understand what customers expect from retailers.
Marketing Charts – “3 in 4 Retailers See Improved In-Store Experience as Critical”
Some people say that customer service is not what it used to be. That point registered with me recently through an observation made by my 12-year-old son. We were shopping at a local department store, taking advantage of great deals on men’s clothing. As we checked out, the sales associate was very pleasant and talkative. She told us about other sale items and even about purse snatchings that had taken place at area stores.
We walked away and my son remarked “she sure was full of herself, wasn’t she!” When I asked what he meant, he said that she talked a lot. I paused momentarily and it hit me why he made that observation: That level of personal touch has become the exception rather than the rule in customer service. “That is how it is supposed to be” was my response. Traditionally, department stores have been known for delivering a personal touch. Sadly, that experience is delivered less frequently today. My professional career in marketing began in retail management for a department store. Our associates were required to write 10 thank-you notes to customers weekly. Timely approach of customers was expected. Sales associates were to be more than cashiers and serve as a resource to customers.
My son’s perceptions of what customer service is (and is not) have been shaped by mostly unremarkable interactions with service providers. Not necessarily bad service, but not the kind of experiences that you walk away from and go “wow – that was great.” A generation is being acclimated to “service” being driven by technologies such as self-checkout and online ordering. Measures of service quality are based more on the reliability of the technology than the personal attention given.
It almost sounds funny to say that conversation can be a brand differentiator. But, my son’s take on what is extraordinary customer service suggests that a personal touch has the ability to stand out in an environment that is often more concerned with transaction efficiency. Embrace the art of conversation – show customers that you value their business and more importantly that you value them.
Much is being made of a trend in retailing known as “showrooming.” Department stores and big box specialty stores have become product galleries. Shoppers come into the showroom, browse available options, gather information from salespeople (if they can), and often begin their online research on the spot. Smartphones with Internet access and apps that deliver instant price comparisons by scanning a product’s bar code have taken “just looking” to another level.
This trend does not bode well for brick and mortar retailers. Even historically strong retailers like Best Buy cite showrooming as a factor in their struggling performance. E-commerce giants Amazon and Walmart have the ability to beat most retailers (online and offline) on price. And, online specialty retailers can beat brick and mortar stores on assortments because they do not have to carry inventory for store locations. Given all of these reasons, it appears that showrooming is a threat to the viability of traditional retailers… or is it?
Is opportunity available in the trend toward showrooming? If you subscribe to the belief that when you are given lemons you make lemonade, the answer is “yes.” Granted, a segment of shoppers are influenced heavily by price in their buying decisions. For other shoppers, serving them can be accomplished by transforming the product showroom to a brand showcase. For example, when you walk through the doors at an Apple store, it is a playground for hands-on experimentation with Apple products. And, knowledgeable employees are available to answer questions and provide assistance. The atmosphere is electric; you want to go into an Apple store even if you are not in the market to buy a product. Apple stores provide an outlet for us to be immersed in the Apple brand.
Unfortunately, most brands do not stir passion like Apple. The challenge is how to take advantage of the trend of showrooming instead of falling victim to it. Yes, certain defensive responses can be taken like downsizing square footage and increasing product assortments online. But, play offense, too. Three areas of focus for retailers should be:
1. Define your brand – Understand why people would want to do business with you, and it does not have to be about price! What are the values that guide your business?
2. Create the culture – Once the brand is defined it has to be spread through the organization. One knock on brick and mortar stores is that employees are indifferent and unknowledgeable. They must know their critical role in customer satisfaction and the store’s success.
3. Build an experience – Transform shopping from something one has to do to something one wants to do. Think about retailers you enjoy visiting – what is the attraction? It rarely has anything to do with price. It is the experience of being in that environment that draws you in and brings you back.
Do not write the obituary for brick and mortar retailers yet. Yes, the showrooming trend requires retailers to rethink the role of the physical store in their marketing strategy. But, opportunity exists for retailers that use their stores as the connector between their brand and customers.
WSJ.com – Can Retailers Halt ‘Showrooming’?
When attempting to navigate the rocky road that is department store retailing, maintaining status quo is not a viable strategy. The department store sector has been challenged for years by greater merchandise assortments of specialty stores and lower prices of mass merchandise discounters. One company caught in the fight for relevance has been JC Penney. Sales in 2010 were $17.8 billion, down from $19.9 billion in 2006. In addition to declining sales, the company faced a brand image problem as it was perceived as old and stale.
The response to the challenges faced by JC Penney was laid out this week by new CEO Ron Johnson, an Apple disciple. The boldest strategy change is a radical shift in pricing and promotion. The company is ditching the traditional high-low pricing model. Instead of frequent sales and discounts, a three-tier pricing strategy will be used. Products will be at an everyday low price, monthly values, and best price Fridays on first and third Fridays each month. Analysis of transactions revealed that only one in 500 items was sold at regular price, so the move to streamline the dizzying number of promotions (nearly 600 a year) to a more straightforward pricing approach is logical.
Let’s jump to the most important question: Will this strategy work for JC Penney? The key to its success will be convincing shoppers that the value-based pricing approach is better for them than sales featuring hot prices and coupon offers for additional discounts. A rational analysis of the pricing approaches would point to value pricing as a better deal for buyers. However, we do not always make rational buying decisions. The psychology of a sale suggests to shoppers that a bargain may be realized when a product’s price is temporarily reduced. Add an incentive like a coupon on top of the sale price, and buyers have been trained to expect value delivered in this way from retailers.
JC Penney desperately seeks to carve out a distinctive brand position. If it cannot position through products, service, or brand image, perhaps price is the final frontier. If this strategy succeeds, JC Penney can re-establish its relevance. JCP (as it is branded via its new logo) must deliver a great shopping experience to go along with its simplified pricing. If it succeeds, JCP shoppers may just be singing “It’s the end of the sale as we know it, and I feel fine.”
AdAge – “JC Penney Reinvents Department-Store Retailing”
Who does own your brand? A strange question, you may be thinking. Or, perhaps you suspect I am lobbing a trick question your way. My response on both counts is “no.” It is neither a strange question nor a trick question. I would say it is a question with a very straightforward answer. Who owns your brand? Not you!
Brands are perceptions, associations, and images held by customers and others. Thus, they are the true owners of a brand. As a marketer, you are merely a caretaker, a steward charged with protecting the value it holds with stakeholders.
Do you need proof? Take the story of Gap. The clothing retailer unveiled a new logo last week only to announce four days later that it would keep its iconic blue logo. The change of heart followed immense public backlash against the new logo.
I read with amusement different opinions from designers and other experts about why the Gap’s new logo was an epic fail. Some experts said the Helvetica font was horribly outdated and unworthy of a trendy apparel retailer. Others said the blue square that protruded above the “p” had no relevance or meaning.
These critiques of the Gap’s new logo miss the most obvious point: the Gap’s logo does not belong to Gap. OK, the tangible qualities of the logo belong to Gap. Ownership is protected by a trademark. But in reality, Gap’s customers own the logo and the brand. Those brand elements connect the company with persons who care about it. Making swift, drastic changes to this piece of the relationship with customers is a prime reason why the uproar was so ferocious.
Manage your brand; build your brand; do what you can to control your brand. In the end, it is not yours, so commit to engaging your stakeholders so that you are partners in its development. Don’t go it alone, or you may experience the same “gap” in stakeholder relationships as Gap is experiencing now.
Creativity – “What the Gap Did Wrong”
Wal-Mart has developed a reputation for threatening several American treasures: mom and pop retail stores, independent pharmacies, and small town grocery stores. Now, some people believe it is targeting another All-American icon: the Girl Scouts. Wal-Mart has introduced cookie items in its Great Value line with amazing similarity to Girl Scout mainstays Thin Mint and Tagalongs. According to a post on the blog Authentic Organizations , Wal-Mart is hurting the Girl Scouts by selling “fake” Girl Scout cookies. The taste and texture are similar, too similar, to Thin Mint and Tagalongs, says blogger CV Harquail.
Before labeling Wal-Mart as evil (again), consider the situation more closely. Girl Scout cookies are sold for 1-2 months out of the year, leaving a void of 11-12 months. If Wal-Mart’s products are intended to be like Girl Scout cookies, is Wal-Mart perhaps filling an unmet need? Quality is also an issue. If the knock-off versions of the cookies do not pass the taste test with consumers, the products will not be successful. Most importantly, a stark contrast exists between the mission of Wal-Mart and the Girl Scouts. People will continue to buy cookies to support the Girl Scout cause. Cookie sales are a Girl Scout tradition, and no imitation product can match the Girl Scout marketing combination of great taste, worthy cause, and massive sales network.
One could even argue that competition is a good thing; it should keep the minds behind Girl Scout cookies thinking about how to be innovative and make a long running tradition even better!
Ad Age – “Mom Accuses Walmart of Going After Girl Scouts”
A key measuring stick for retailers and the economy as a whole is approaching with the back-to-school selling season (which is difficult to consider as it seems school just ended!). Will consumers who have been holding on to their money in recent months open their wallets to buy clothing, computers, and other items needed to get ready for the new school year? If yes, is it a signal that the economy may be in the early stages of a thaw that could ultimately lead to happier times? If no, does it mean that the recession will continue to inflict misery on consumers and businesses alike?
The answers to the above questions: stay tuned and we will find out. However, if retailers enjoy a spike in sales in the coming weeks they will have to do so with less product assortments for their customers. Unlike last year when most retailers had merchandise in stores when the recession’s effects were felt and were forced to deeply discount to move their inventories, this year’s store stocks reflect a softer economy. Many stores’ shelves are noticeably leaner. It is possible that consumers conditioned to have ample assortments from which to choose may be less satisfied with retailers’ offerings this year. If that happens, the much needed boost to the economy from back to school sales may not materialize.
Retailers appear to be in a no-win situation. Too much inventory is expensive to carry and can further hurt profit margins if extensive markdowns have to be taken. Too little inventory may turn off customers who feel they do not have ample choice and opt to go elsewhere, or worse, not spend at all. Here’s hoping that retailers meet these challenges and a successful back-to-school selling season is enjoyed by all!
The Wall Street Journal – “Stores Anxiously Watch Back-to-School Sales”
I recall a conversation more than 20 years ago I had with a men’s clothing buyer for the department store where I began my marketing career. We were discussing different approaches for promoting sales on men’s suits. What was more effective: 50% off or advertising the specific price point that reflected a 50% savings? If I recall correctly, the buyer opted to use the percentage discount as the method for framing the promotional price.
Fast forward to today, and the same questions are being asked. In this tight economy, what are the magic words that will prompt consumers to loosen their purse strings and buy? A recently released report by Information Resources Inc. suggests consumers are motivated to scour retailers’ sales offerings in the quest for deep discounts. Furthermore, frequent discounting by retailers has left consumers longing for more, more in terms of deeper discounts. Retailers are responding by stretching the upper limits of their price discounts. Claims of “save 50%” are increasingly being replaced with claims of discounts of 70-80%. In other words, the wow factor of a 50% off sale has been diminished by overuse; deeper discounts are needed to create the desired impact.
Going back to the original question: what’s the best way to frame a discount? It appears the answer is promote the percentage savings, but unless it is an eye-popping figure, consumers may sit on the sidelines and wait for a better deal to come along.
Link: The New York Times – “Never Mind What it Costs. Can I Get 70% Off?”