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Posts Tagged ‘Retail’

Technology Trips Up Target Brand

In brand-building, retail, Target on January 16, 2014 at 9:07 am

There are the good guys. And the bad guys. Pick your Target

by Robert Liljenwall

Cash_Registers

Image from Wikipedia Commons

Well, the bad guys won this round.  110 million hacked Target accounts.  Are you kidding?  And the CEO just now comes out (1/13) and apologizes.  While Rome was burning, he sat there – obviously speechless. Although he made no comments, he did authorize a 10 percent discount for the inconvenience for those on the first wave (70 million) who had their accounts hacked, with PINs no less.  And then, when it was discovered another 40 million were hacked, he decided to descend from his throne and make a comment – on CNBC and the Today show nearly a month after the breach.

The Good Guys

The strength of Target’s brand (which “was” one of America’s strongest, most recognizable brands) could not counter the weakness of their technology.  When technology fails – as it did here, the brand suffers the most.  Sure, they were quick to announce a fix for the first wave, and then another admission of 40 million more breached accounts sorta put a dent in their already weakened brand.

Talk about a brand and technology “perfect storm.”  There is no end to this story of course, since there could be more bad news from Target.  Target reports that they did suffer loss of sales (2 percent to 6 percent) after the revelation of the first 70 million (duh!), but the CEO now says that there are getting back to more normal numbers.

This reminds us of how the CEO of Exxon sat in his office for a full week when the Exxon Valdez ran aground in Alaska in 1989 and had one of the largest oil spills in US history.  He shut down like a dry hole in West Texas.  Like the Target CEO, he was hopeful that nobody was watching … that they, too, would be swept away in the next tide.  It was … and Alaska’s shoreline has proof that it did.  They’re cleaning up that mess and it appears the oil damage in many areas will continue unto the future.

But it all goes back to the core of branding: Do you trust the brand?  I recall that I was tempted to visit the nearby Target store in Pasadena – but first, I would go by the ATM and get some cash.  Good decision at the time.  And then the news of the second wave hit – “my God, is this never going to end.”  While Target did admit that sales were down, they stated the fix is going to be costly and will affect earnings.

Question:  Are you willing to swipe your card at Target now?

But wait!  Now we learn that Neiman Marcus has been hacked – and more on the way.  Isn’t this just terrific?  The Neiman Marcus hack has not be divulged, but my friends with NM cards have already changed them.

Who are the bad guys?

Was this an inside job?  Was it the Russian mafia?  The latter suggestion has surfaced in more than one news report – “they are very talented in hacking into our systems.  I can see them penetrating other large retailers around the globe,” said one security expert.  Do you believe him?  We think more breaches like this lie ahead.

What is so scary is the apparent ease the hackers had in breaching more than 100 million accounts.  Who is next?  That’s the big question.

But make no mistake about it:  Technology failed.  Brand damage is severe for now – but BTN believes they will recover – especially if there are more hacked retailers.  Spreading the bad news actually helps Target.  Pity the thought. – RJL

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A Day in the Life of Canadian Retail

In brand-building, Canada, retail, Shopper Marketing on August 21, 2013 at 2:32 pm

Challenges and Champions in Canadian Retail

by Jeff Sandgren

Dawn breaks over the eastern Maritimes, and the great economic engine of Canadian consumers revs up for another day.  Breakfasts and school lunchboxes, clothes and cosmetics—millions of consumer goods will all be synthesized into the activities and lives of thirty-five million Canadians.  Virtually every one of these items passed at some point through the vast enterprise of Canadian retail.

Happy Canada Day

Happy Canada Day (Photo credit: Anirudh Koul)

As Canadians awaken and prepare for their workday, one out of every eight will be heading to a job in retail; in the US, the retail sector employs about twice that proportion.  Yet while retail’s activity accounts for approximately six percent of Canada’s economy, the ratio in the US is triple that.  This significantly lighter saturation of the Canadian retail market, relative to that of the US, is one of the notable disparities luring the attention of US-based retailers to growth opportunities north of their border.

Powered by the engine of Canadian consumers—and by their annual shopping infusion of over $12,600 per capita (totaling over $450 billion)—Canadian retail was up before the dawn.  In fact, it never sleeps. Complex global supply chain networks source goods around the clock and around the world, as Canadian retailers—both domestic and foreign-based—constantly seek to better serve the changing tastes and escalating demands of the shoppers of Canada. Sophisticated retail technology systems ceaselessly churn through mountains of data. Retail merchants strive for the perfect assortment of goods, offered at the optimal price and promotion; while retail operators execute the merchants’ plans to ensure that all the right items are in the right places, each at the right time, with just the right number of retail store associates to deliver the ideal shopping experience.

One hour later, in the Eastern Time zone that stretches from the mouth of the St. Lawrence to the western bank of Lake Superior, dawn wakens the heart of the French Canadian market. The urban centers of Ottawa and Toronto comprise over 60% of the population of Canada, a large majority of whom live within 90 miles of the US border.   Fashionistas make plans for shopping trips in the apparel stores of Quebec and Montreal, where the latest styles from France, Europe, and around the world adorn the storefront windows.  The apparel tastes of the world are brought to these markets by merchants like Larry Rosen, Chairman and CEO of the Harry Rosen chain, founded by his father in 1954. Although his chain already accounts for 40 percent of the Canadian market in high-end menswear, Larry personally visits fashion centers around the world every year, immersing himself in the customers’ shopping experience there at clothiers large and small.  These days, Larry make his visits with his new iPhone in hand, having replaced his business-worthy Blackberry with the device that he finds helps him better identify with his target consumer.  Customer-centricity is a mission that never ends.

Local markets across the culturally diverse greater Toronto area serve up the particular tastes of their local enclaves.  The strategy that ethnic eateries, handbag boutiques and neighborhood booksellers have always known—that of being obsessively tuned to the tastes and experiences of their local clientele—now drives all of retail. Some have had to adapt, like Eleanor LeFave, whose bookstore, Mabel’s Fables, has recently countered the pressures of online and big box booksellers by finding new sales opportunities in wholesaling to school book fairs.  In the ceaselessly competitive world of retail, the courageous merchants who innovate and adapt to changing customers and competitors survive and thrive. Those that have failed to steer by the customers’ compass lose their way, and ultimately fall behind.

Sunrise in the eastern prairies shines each morning on one of the most notable sites of changing retail formats.  Portage Avenue in Winnipeg was once the home of “The Big Store”, Winnipeggers name for the then-giant Eaton’s, where in the 1960s they spent 50 cents of every shopping dollar (excluding groceries).  The store, however, was only a small part of the giant catalogue fulfillment centre which covered 21 acres and employed 8,000 workers.

As times changed and Canada’s population became increasingly urban, more and more consumers had local access to stores; by the mid-1970s over 60% of Canada’s suburban population lived within a thirty-minute drive of an Eaton’s store.  In January of 1976, Eaton’s announced their last catalogue, and a massive layoff.  A string of missteps over the next two decades culminated in filing for bankruptcy in 1997, acquisition of assets by Sears a few years later, and the eventual retirement in 2002 of one of the most iconic Canadian retail brands.  Today Portage and Main in Winnipeg features shopping malls connected by an underground concourse and the Winnipeg Skywalk—both measures taken against the location’s legendary (if unproven) status as the coldest and windiest intersection in Canada.

As morning reaches the western prairies in Alberta, another day’s preparations begin for the 23,000 employees who work at the West Edmonton Mall—with over 350,000 m² of leasable area, the largest mall in North America (the world’s largest until 2004).  In the mid 1990s this mall included two full Bay department stores, the second having been added when the chain took advantage of space vacated by the bankruptcy of Woodward’s.  Other retailers leaving at that time included Canadian Tire and IKEA, part of a trend towards ‘big box’ standalone properties; but the space was subsequently filled by T & T Supermarket.  Since then, new additions have included the first Victoria’s Secret in Canada (2010), and La Maison Simons’ first outlet outside of Quebec (2012).  Today there are over 800 stores and services offering world-class retail experiences to over 28 million visitors per year.

Finally, dawn lights up the Rockies and the westernmost Canadian urban center of Vancouver.   Here, as in many urban areas, fewer young people are getting driver’s licenses—healthier lifestyles, digital socializing, and online shopping are making personal automobiles less relevant as the Millennials move into the mainstream. Smart retailers are reading these winds of change, and finding opportunity there.

Mountain Equipment Co-Op, a pioneer in healthy lifestyle merchandising since its founding in Vancouver in 1971, was also an early innovator in multi-channel retailing.  In 2013 it won the Canada Post E-commerce award for Best Multi-Channel Retailer of the Year.  Lululemon began here in 1998, also with a focus on healthy living.  Its 4,500 “educators” (a.k.a. store associates) mentor customers—traditionally females, but now including male yoga enthusiasts—towards the benefits of healthy lifestyle (with, of course, the proper apparel) in over 200 stores.  In a model to which many retailers aspire, the focus of retailers like these on quality goods and a well-educated customer base are overcoming the traditional “race to the bottom” on price discounting, which has dragged down other low-cost-focused retailers.  It’s working: Lululemon is now expanding into the US, UK, and across the Pacific to Hong Kong, Australia and New Zealand. MEC has over 3 million members in Canada and internationally.

Meanwhile, in the global time zone of cyberspace, where the sun neither rises nor sets, retail is always open.  Retailers with strong e-commerce programs are continuously retuning or reinventing themselves.  Staples, voted the most trusted brand in Canada in 2008, and a top 10 most trusted brand ever since, just re-launched its already successful loyalty program, and plans to add another 200,000 items to its e-commerce site by the end of 2013.  In the world of consumer-driven retail, continuous improvement is now de rigueur.

The machines and merchandise of Canadian retail, with their planning and problem-solving, never sleep – because they dare not.  Because the retail and consumer goods sectors are as challenging as they are rewarding, and as brutally competitive as any industry.  Because shoppers today have more choices and knowledge of alternative sources, more access to product and price information, and more connection with the influence of their peers than was dreamed of even a decade ago.  The dynamics of Canadian retail are accelerating at an unprecedented pace – and retailers that are slow to keep up are thrown out of orbit. – JTS

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Into the Wonderland of Neurodesign

In neuromarketing, Shopper Marketing on May 20, 2011 at 3:37 pm

by Jeff Sandgren

Upon learning that NeuroFocus, a curious company that is busy gleaning insights from deep inside our skulls, had recently published findings from a study of the male brain, I thought it prudent to benchmark my male psyche.

It turned out to be a choice like that of Alice, curious to see where the rabbit was going, and stumbling inadvertently into Wonderland.  My simple initial curiosity was, am I a ‘normal’ guy?

“It all depends on what your spouse thinks of you,” cautioned the instantly disarming Dr. Pradeep, CEO and neuro marketing White Rabbit, “your estimate of your own normality can be overly exaggerated.”

Dr. Pradeep is a genial, energetic fellow, whose frequent humor provides comic relief from topics as heavy as brain-wave analysis.  Nevertheless, I decided to proceed with caution, since there were clues here that my wife might already have this guy on her payroll.  Better to leave the personal introspection aside, I thought, and focus on the more general applications, starting with: what, among all their neuro-discoveries, has been the most surprising so far?

According to the good doctor, they run into interesting insights all the time, nearly every day.  But there have been a few fundamental surprises.

Big Aha’s

“One big ‘aha’ concerns the over-sixty segment, and how we talk to them,” explained Dr. Pradeep.  “Their brains seem to almost always discard negative messaging.  There’s a difference between suggesting to an over-sixty person that
they should put their money where it’s safe (negative spin) versus suggesting that they put it where one day their grandchildren can have access to it (positive spin).”  The latter approach, according to this analysis, will likely be more effective.

Another ‘aha’ concerns the teen brain.  Since the different parts of their brain develop at different rates (the reasoning part of the brain develops more slowly than the emotional part of the brain), talking to teenagers should use the language of emotion, rather than the language of reason.

“I’m not just talking about marketing,” Dr. Pradeep added, “but about teaching and even parenting.  We might want to tell them they shouldn’t drink before they’re ready, that they should drive more carefully – what a frustrating exercise that is when we approach it based on rational arguments!”  He didn’t offer a positive alternative here (sorry, parents), but we assume it should be along the lines of “You know, getting a DUI or wrecking your car is SO awesomely uncool.”

So what about the male brain?  What’s the best way to talk to me?

Doctor Pradeep suggests that “… the cliché is to characterize the male brain has having a natural propensity to focus on scantily clad images; but that is an overly simplistic way of characterizing what is actually a more complex underlying emotional phenomenon.  We don’t tend to think of guys as emotional, so we talk to them in the language that grabs their attention.”

The doctor conjectured further.  “What if you understood the emotional territory that men’s brains occupy?  Then you could talk to them in the language that their brains are actually focused on, but do so with a certain emotional high ground.”

At this point in the interview, I abandoned the notion of selling this story to Cosmopolitan instead of using it in BrandTech News.  The notion that men’s brains have such a thing as “emotional high ground” might be too tough a sell.

So what about the female mind?  According to Dr. Pradeep, “It is only a crude and senseless man who would simplify the female mind.  The female mind is mysterious.”  And again, the contagious chuckle.

Seriously, there are insights being gained, and he promised that NeuroFocus will be revealing some big aha’s in the near future.  Dr. Pradeep did note that, while we (the royal Marketing We) seem to agree that there is a Trillion-Dollar Woman out there shopping, much of the marketing and message crafting still isn’t directed towards her, because it is still being created “… by guys, for guys.  We all give each other high fives about how wonderful we are, but too many times we aren’t targeting the decision maker in the language that is natural to their brains.”

Enabling Neuroscience

So how does all this mapping of our brain territory come about?  The enabling technology that NeuroFocus uses for their psycho-cartography is the well-established Electroencephalography (EEG); but not the gooey experience that most of us
envision, with greasy sensors stuck in your hair and a plethora of wires tethering you to the monitors.  Instead, NeuroFocus has developed Mynd™, the first ‘dry’[1] full-brain, wireless EEG apparatus.

The Mynd maps in great detail the parts of your brain that are active when you are sensing and considering various stimuli – without overlaying the subconscious stimuli of being tethered  by a mass of wires, or worrying about messy cleanup afterward.  Mynd effectively untethers the wearer, and the brainwaves it is capturing can be transmitted wirelessly to any Bluetooth-enabled device.

The real magic comes when this is coupled with pixel-level eye tracking, at a rate of two thousand times a second.  Test subjects can then be exposed to various packages, ads, images, messages, etc. while adorned with the NeuroFocus headgear.
A neuro-physiologist can observe in real time, and the ensuing data-stream can be analyzed and interpreted after the session.   The focus of NeuroFocus is on what they deem to be the three key parameters: attention, emotional engagement, and memory retention—because neuroscientists know what physical parts of the human brain correlate to those mental activities, and the EEG can reveal their activation.

But what about this Big Lurking Question:  was this neuroscience a creepy Orwellian invasion, or a way for Marketing to better understand and tailor the big wide world to little old you and me?

“Neuromarketing is just using science to understand what motivates us … and what makes us behave in certain ways,” the doctor assured me.

Focus on Retail

There are many applications for the findings of this research, so it’s not surprising that NeuroFocus has offices in such insight-hungry locations as New York, Hollywood, Cincinnati, Tokyo, London, and more.    The company is a world leader in the fast-growing neuromarketing research field, with numerous patents for its advanced technologies and a blue-chip client list representing the top companies in many Fortune 100 categories.

One solution area that is especially relevant to many of our readers is marketing to shoppers, online and in-store.  In fact, Dr. Pradeep is one of the Keynote Speakers at this year’s upcoming “Shopper Insights In  Action” ( www.iirusa.com/insights/homepage.xml ), along with such big names as A.G. Lafley, former CEO of Procter & Gamble, and Shopper Insights VP’s and Directors from Best Buy, Campbell Soup, Macy’s, Family Dollar, and GameStop.

Asking Dr. Pradeep about marketing at retail revs him up even more, like bumping an electron in the great atomic structure of neuroscience up to an even higher level.  But he isn’t just enthusiastic about it – he’s clearly vexed.

“There is your consumer, just a few feet away from your product.  There is your consumer, in your store, with money, ready to buy,” I could smell the ozone coming through the phone line, over a crackling high-pitched whirring sound that had nothing to do with bad reception. “What is the impact of marketing in that scenario, to a willing person with money in their pocket?  Hundreds of millions of dollars are spent sending messaging to the consumer on the couch, far, far away; yet brand marketers have difficulty justifying a few dollars more at retail.”

Doctor Pradeep suggests a new term, Storefront Marketing, to synthesize both the physical retail in-store environment and the online web storefronts (as distinct from webpages where goods are not being offered for sale), a very consumer-centric definition that defines a moment in time and space (or cyberspace) where a consumer is potentially on the verge of a purchase.

“You’ve done all your broadcast and print advertising, all your brand building, and now the consumer is right there at the point of purchase, eyeballing your merchandise.  How are you connecting with them?  What conversations are you replaying? Are you trying to start a brand new conversation?  Or do you think your previous marketing was so profound that you don’t need to converse with them again?

“Marketers aren’t connecting the dots at retail.  It’s about selective replaying, and that thinking hasn’t happened yet.  The brain of your consumer at retail, it’s the same brain you’ve been talking to.  What would happen now if you could selectively replay the key parts at that moment?  Neuroscience facilitates this by isolating these particularly evocative and memorable snippets.  These are what you need to give to your creative folks, so they can reactivate those snippets in the consumer’s mind and trigger a replay of thewhole story.”

We observed a common maxim of Storefront Marketing (by whatever other name you reference it): that you only have a few seconds of a consumer’s attention in which to engage them and draw them to your product or offer.

“That is precisely the point,” Dr. Pradeep replied.  “If only you could know at the point of purchase what was important to your consumer, and you could tastefully reactivate it, then the whole experience could be recreated in their mind, and you could have them engaged.”

Predictive Analytics

In addition to guiding the design of your Storefront Marketing, Dr. Pradeep believes that the combination of neuromarketing and predictive analytics can be especially effective.  And he had empirical evidence to back it up as his verbal tempo and tone hit the accelerator again.  “We did an experiment with a major client, in which we went back and looked at marketing with over two years of data, and applied to that history the predictions that our neuromarketing research would have made.  We wanted to see how our predictions correlated with real in-market performance.  In some scenarios, you might be very happy to find a 20 – 25% correlation of prediction with in-market results.  In our case, we found a correlation in excess of 80%.

“Imagine if you could know in advance how to make 80% of your ad budget effective.  What would you do?  How much better would your performance be?  What costs of wasted advertising could you save?  The predictive capabilities of these solutions are going to be phenomenal.”

Tapping the brakes just a bit, Dr. Pradeep noted, “Look, the whole truth of the human brain will remain forever unknown … but we can get closer and closer.  Purchase decisions are made at the brain, so the closer we are, the better our opportunities.”

Neurodesign

Finally, we asked Dr. Pradeep for his view of the future of neuromarketing.   There was a rare pause.

“When someone markets to me, I want them to talk to me like I actually have thinking and feeling brain – like I am someone who is not fooled easily.  People want to be talked to in a way that shows respect, that evokes thoughtfulness and passion.

“When we look back from the future, I think the very term ‘neuromarketing’ will become an anachronism,” foretold Dr. Pradeep.  “I think the future is about neuro-design.  By better understanding the human brain, we can move up the chain beyond marketing, to truly designing for the consumer products and offers that will genuinely be of greater service and relevance.

“Look at all the dials and knobs and instructions we have to deal with today.  Who thought I’d want to have to learn all this stuff?  Think of neurodesign as if everything was designed by Apple.  Brand Apple takes the time to make sure their products are fit for human consumption.   We have agencies to decide if food is fit for human consumption, but not product interfaces.

“Marketing informed by neuroscience can do better.  It can improve how we speak to and engage consumers.  It can direct products and features that appeal to the human brain, pricing that is not confusing, promotions that actually make sense.”

In summary, Dr. Pradeep believes we need to “demolish the glibness of marketing, put science in its place, and migrate marketing to the loftier world of design.”

After the interview, I reflected that my initial impression of Dr. Pradeep was all wrong.  He wasn’t the White Rabbit.  Clearly, he was The Caterpillar.  My mind was full of smoky, intoxicating images of a future where the inner mysteries of my brain directed the world of product design and marketing with magical efficiency.  I half-stumbled outside for a breath of fresh air, but still felt a bit dizzy, so I sat for a moment at the base of our maple tree.

An unknown time later, my wife woke me with a gentle shake.

“What are you doing sleeping out here?” she asked, “and what were you dreaming about?  You kept saying ‘curiouser and curiouser’.”

Okay, so my estimate of my own normality may, in fact, be just slightly exaggerated.    JTS

Editors’ Note: for those who would like to go further on this topic, Dr. Pradeep has authored a book titled “The Buying Brain”(2010), a business book bestseller.


[1]
The Mynd headset does require a very tiny amount of hair conditioner to make contact with the scalp

National Retail Federation celebrates 100th anniversary … optimally

In Shopper Marketing on March 16, 2011 at 5:13 pm

by Jeff Sandgren

Some of the words we use, we hate ourselves for in the morning.  ‘Optimization’ is one of them.  ‘Optimization’ is to business-speak as ‘cute’ is to babies.  It almost always fits in the conversation somewhere, but often doesn’t really tell you anything.  It does serve to identify the skulking presence of Brand Marketers who expect you to believe that their solution is not only good for you, great for you, and better than any competitive offering for you – it’s optimized, and therefore the best for you that anything in its class could ever possibly be.  At least until the next release.

But let’s not throw out that Cute baby with the Optimal bathwater.  Optimization isn’t just marketing hype.  It is a solid science whose time has come, as was evident at this year’s National Retail Federation (NRF) BIG Show where the perfect storm of empowered, value-conscious consumers and ravenous, stock-conscious investors narrowed the tightrope of retail performance to a razor’s edge.  If academia’s motto is “publish or perish”, the New Retail’s motto may be “optimize or perish”.

“National” Retail Federation is arguably a misnomer anyway, as attested each year by the growing international presence.  As long as we’re celebrating the 100th anniversary of this illustrious association, perhaps we should change the name to (dare I say it?) the Optimized Retail Federation.  The NRF is dead; long live the ORF!

Semantics aside, pity the poor Retailer of today.  How to satisfy C-level expectations for volume and margin gains over last year’s campaign when consumers have so much more knowledge at their fingertips?  The arbitrage of shopper price ignorance is as much a thing of the past as the luxury of widespread shopper price insensitivity.  To be clear, there still are, and apparently always will be, that segment of shoppers who don’t pay attention to prices, and just want what they want when they want it.  But for them, the Merchant’s need to know is no less: now it is assortment, size, and inventory optimization that must be dealt with.  No matter which segment you target with any strategy, that consumer has choices and knowledge like never before, and if you can’t optimize the driving characteristic that delivers the retail experience they crave and shape their shopping behavior, your competitor will be happy to do it for you.

Leveraging shopper insights has always been one of the core competencies of the most successful merchants and marketers; but in the past this was often more about art than science.   At the NRF conference, DemandTec shared results of recent research fielded by RetailWire that polled nearly 600 industry respondents.    Nearly 80 percent said shopper loyalty program data is the ‘most actionable’, and more than 90 percent consider the application of shopper insights in most business processes as a shared responsibility between trading partners – hence the current focus on collaborative solutions.

We set forth to review a solid sampling of optimization applications this year, and found plenty.  Even more significantly, we found that these solutions are reaching a maturity and sophistication on par with their newly-heightened relevance.  What follows is a list of highlights from conversations with some of the leaders in the field.  Bottom line: if you’re a retailer, and you’re not utilizing these solutions yet, baby, your bathwater may be about to run out.

Applied Predictive Technologies (APT)

At the heart of any optimization approach is the key question: how do you determine the Best Solution to a given problem.  Applied Predictive Technologies positions itself as a world leader in helping organizations harness the potential of “Test & Learn”, a powerful fact-based approach for choosing, targeting, and tailoring strategic and tactical actions.

The central premise is that modeling has to be done in the real world in small scale to validate. The key is a methodical creation of the control group, which should behave like the test group “when nothing is going on”, hence a “simulation versus null” test.

Generally, they evaluate multiple design approaches using simulations of each approach versus null test sets to determine each approach’s average error, and select the design with the lowest average error.  If a design approach = a “well-accepted “established” hypothesis” then it’s assumed to be correct.  For each test, multiple control ‘matches’ are determined, based on financial patterns and store attributes such as age, proximity, size, etc.  If that sounds confusing, think of it simply as using past behavioral correlations to construct future test designs.

According to Scott Setrakian, Managing Director, 28 of the top 100 U.S. retailers, 10 of the top 25 U.S. restaurant chains, and 5 of the top 15 North American banks use their solutions.   And the trend is upward, according to Scott, who told us “leading retailers increased their use of scientific testing by more than 21% in 2010 compared to 2009.”  U.S. Retailer customers include Big Lots, Food Lion, Office Depot, Publix, and Staples.   http://www.predictivetechnologies.com

DemandTec

DemandTec is a proven player in this space with implementations that connect more than 340 retail and manufacturer customers on the DemandTec network.  This reflects their architecture and approach, with collaborative solutions built to enable shopper-centric merchandising and marketing solutions. DemandTec customers include Ahold USA, Best Buy, ConAgra Foods, Delhaize America, General Mills, H-E-B Grocery Co., The Home Depot, Hormel Foods, Monoprix, PETCO, Safeway, Sara Lee, Target, Walmart, and WH Smith.

Last year they launched DemandTec Shopper Insights™ solution, part of their overall ‘nextGEN’ platform.  With these tools, merchants and marketers get even better information on sales trends by penetration, buy-rate, shopping trip statistics, and more, enabling them to target specific shopper segments with more tailored assortments, promotions and pricing.  Within a month of the launch announcement, Target Corporation adopted it as an extension of their nextGEN implementation, and others are quickly following.

Complementing DemandTec’s analytics-based software services, the company recently announced DemandTec Connect™, which introduces powerful social messaging and collaboration capabilities.  The company says these will “… make the DemandTec experience even richer and more collaborative for its community of customers and partners on the network.”

DemandTec is also one of the leaders who have expanded their solutions to serve the special needs of apparel and other short lifecycle products.  Recent additions to this solution set include ‘rebuy optimization’, size profiling and pack optimization, and store cluster analysis.

To add even more horsepower to their platform, DemandTec just completed acquisition of M-Factor, whose predictive analytics software for marketing mix and trade investment spending is now part of DemandTec Decisions™.  According to the company, their vision is “… to shift the industry toward a more dynamic, holistic, and collaborative planning model that drives better decisions, better results, and more value to retail trading partners and, ultimately, the consumer.” www.demandtec.com

JDA Software Group

We met at NRF with Heather Loisel, Senior VP Marketing.  Heather is a recent addition to the senior management team.  She recalled that, shortly after joining JDA, she attended their FOCUS Customer Conference, held each May, where she developed the strong  impression that “JDA is the best kept secret in SAP implementations.”

JDA are repositioning their solutions from a historically supply-side focus to the demand-side focus that was a common theme in countless presentations and booths at NRF this year.  They now speak a lot about the importance of “demand signals” and store-level assortment planning.  “We are one of the few to offer end-to-end planning solutions,” says Heather.  Their portfolio includes major acquisitions over the past several years of Arthur, Intactix, E3, Manugistics (the core competitive offering), and, last January, i2, strengthening their positioning as “The Supply Chain Company”.

Recent success stories include Ace Hardware, Hibbett Sports, Wilsons Leather, and Woolworths Holdings.  Heather also cited recent success with Lowe’s and Whirlpool, in which JDA’s Collaborative Planning, Forecasting  and Replenishment (CPFR) implementation “tied” Whirlpool supply to Lowe’s demand signal.

JDA differentiates itself especially on their ability and track record implementing solutions in the broad Enterprise Resource Planning space.  “The world’s largest retailers use JDA,” says Heather, “but you don’t have to be large to be a good fit for our solutions.”  www.jda.com

KSS Retail

Another very established player in price and promotion optimization is KSS Retail.  Their VP Marketing, Lyle Walker, tells us that “we started doing retail price optimization back in 1993, and there was already 15 years of prior science behind it then, so we’ve been perfecting this for over 30 years.   KSS has been doing it longer than anyone.”

A major development for them occurred in 2010, when UK consulting powerhouse dunnhumby acquired them.  Dunnhumby’s client relationships are exclusive within a given market space (geographic and class-of-trade), so it was necessary to make KSS an independent subsidiary to avoid conflicts.

They are “getting into” markdown pricing, but are not there yet.  They claim to be implementing a unique and superior approach to the science of markdown, with near real time transaction-level data.    Much focus now is on the Heartbeat® Shopper Insights Platform, a “very granular, intelligent sense-and-model solution” that determines when problems arise in store selling conditions.  The pitch here is that the retailer can effectively use shopper transaction data with KSS’ analytics as a shelf auditing mechanism.  Results are extracted into decision trees, which “take price model optimization to the next level”.   The other key element of Shopper Insights is, as the name suggests, analytics across customer segmentations.  Users can still see aggregated results across all segments, including cross-effects, but now they can drill down to specific targeted segments.

KSS website claims 32 major clients.  New customers include O’Reilly Auto Parts, 7-Eleven, Fred’s Inc., and Foodstuffs (a New Zealand retailer – the dunnhumby relationship is providing more international reach as well.)  www.kssretail.com

Revionics

When it comes to retail price optimization, the common approach is to emulate the three basic pricing strategies of retail merchants:  they begin with ‘everyday’ pricing, pique interest and demand at times with special ‘promotional’ pricing, and end the cycle (especially for apparel and electronics) with ‘markdown’ pricing.  Taken as a whole, this is commonly referred to as Lifecycle Pricing.

According to Susan Boyme, VP Marketing, Lifecycle Pricing is Revionics’ core solution.  They strongly position their integrated forecasting, an approach that “…uses a single forecast across all software modules to provide a more accurate, consistent version of consumer demand.”   Historically, their solutions began with fast-moving consumer goods; but they have branched out, asserting that “our science adapts to other merchandise categories with different characteristics.”

Their approach is to take retailer (and syndicated) data, and make recommendations on pricing.  This is a key differentiator for them.  Their solutions are about finding and recommending what to do, and ranking the items and actions which will help meet the retailer’s objectives.

Revionics is one of the larger, more established players in price optimization, claiming over 60 leading retailers as customers, with over 20,000 locations.  Recent customer additions include Dick’s Sporting Goods, Roundy’s and the Tractor Supply Company.  www.revionics.com

SAS Institute

Diana McHenry, Director of Global Retail Product Marketing, shared with us SAS’ excitement over two ‘big news’ announcements.   The first is their positioning of their new offering as next-generation “high-performance predictive analytics”, with their “turbo-charged SAS® in-memory computing platform”.

First go-live customer is Macy’s, as announced by EVP Steve Nevill in a Big Ideas session, scheduled to happen later this year.  Another undisclosed client is positioned soon thereafter.  Larry Lewark, CIO Macy’s, says “we view this as a major breakthrough for quick analysis”.  They are already claiming results for improved performance, including “10 times reduction in demand modeling and forecast cycle time, a 3 times improvement in optimization time, and up to 70% reduction in hardware costs”.

The second big news is their Size Optimization for apparel.  The traditional model of supplier pre-pack assortments of so many items per size, color, and style, has historically resulted in the all too common double curse of shortage on some sizes (bad customer experience, lost sales) and too much of others (and therefore, margin reduction from excessive markdown).  New supplier and supply chain capabilities make it feasible to customize pre-pack to store level – but it doesn’t make any difference if you don’t know WHAT size assortment makes sense for each location.  Their analytics package purportedly solves this problem.  They cite great success with this already at Kohl’s, Charming Shoppes (especially Lane Bryant banner), Tilly’s, Aéropostale, and Wet Seal.  Kohl’s Kevin Mansell (Chairman, CEO) cited size optimization initiatives as a key driver in their recent 3% improvement in in-stock levels.  www.sas.com

Soft Solutions

Soft Solutions is a 20+ year old global provider of merchandising software for multi-format, multi-divisional and multi-national retailers.  Their current product, version 7, released last year boasts a new interface that leverages their “Web flow” approach to enhance navigation, improve speed and capacity, and employ self-learning functionality – another key approach to optimization solutions.  They play heavily in European markets, but also count large U.S. customers like CVS Caremark.

As with any merchandising technology, developing the right solution requirements up front is critical to success.   For Tier 1 customers, Soft Solutions uses a certified third party provider to document requirements and make sure they are solid.  The third party is paid by the retailer; but Soft Solutions offers a “cost offset”.

According to Dr. Fady Garabet, General Manager North American Operations, their forecasting includes halo, similarity and cannibalization analytics.  CVS, for example, forecasts a full 52 weeks ahead.  They believe their forecasting functionality is one of their great strengths.  www.softsolutions.fr/eng/

1010data

Formed in 2000, 1010data’s solutions were developed for large scale financial data systems, and their leadership is heavily financial in their pedigrees.  They strongly position their differentiation on merits and enablement of “database transparency”, contending that typical solutions, with the rules, filtering, and pre-processing of data for efficient access effectively lose some of what matters.  “The problem with optimization solutions,” says VP Jim Mattecheck, “is that they have to extract into separate systems, which bottlenecks processing –  they resolve this with averages, which obscures insights.”

Jim admits they “don’t have a formal optimization solution, per se, today”, but contends that retailers can benefit from the ability to do quicker analysis on questions that arise during their daily decisions, rather than waiting for long overnight processing.  www.1010data.com

BrandTech News’ view

The exhibitors’ directory for the NRF show listed almost 40 companies with solutions in price and promotion optimization, so the above are but a few.  This leaves potential new users (or disgruntled current users) with a quandary: how to pick the Optimal Optimizing solution.

Focusing as we do on the intersection of branding and technology, we suggest starting with the brand point of view.  How you price your merchandise is a big part of your brand image, and a critical aspect of how consumers experience your brand.  Some optimizers refer to the ‘price image’ as a way of characterizing this.  Retailers need to begin with three questions on this.  What do you think your price image is?  What do your shopper segments think it is?  What do you want them to think?

There are lots of technology issues to be considered, starting with a fundamental platform questions.  Do you want Software as a Service (SaaS), premise-based software (installed on your servers), or cloud-based?   What optimization modules and features will be most important to supporting your business objectives?  Even more than the technology, understand the science behind it.  Yes, there is real science at the heart of this, and a solid choice in solid science will help ensure solid results.

Most importantly, focus on value.  The whole point of optimizing is a balancing act, pleasing consumers who will reward you with sales (and, if you’re good at it, margin), and pleasing shareholders who will reward you with market capitalization (and, if you’re good at it, performance bonuses).       JTS

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Shopper Marketing Conference targets “In-Store Experience”

In Shopper Marketing on March 16, 2011 at 4:55 pm

by Robert Liljenwall

Every seasoned retailer and brand marketer knows that if you can improve the in-store experience, shoppers will stay longer and spend more.  Disney found that out a half century ago.  Apple epitomizes the in-store experience.  Costco keeps you there by giving you free treats from their famous Demo Queens.  But the target keeps moving, too.  What worked five years ago, may not work today, and we know, strategic marketing teams are huddled everywhere trying to ‘unlock’ the secret to getting customers to spend more.

Under the leadership of Dr. Dan Flint, Director of the Shopper Marketing Forum (SMF) at the University of Tennessee, leading retail and brand marketers are gathering for the inaugural Shopper Marketing Managers Conference, March 29-31 in Knoxville.  (BrandTech will have a complete update on this important conference in our next issue.)Dan Flint

The theme of the conference is: “Improving the In-Store Experience.” The two-day intensive seminar includes an impressive group of speakers from companies who lead the way in shopper marketing, including: Frito-Lay, Crossmark, Mars, and In-Store Insights, with UT Faculty presenting on Research Insights. Dr. Brian Harris, chairman and founder, The Partnering Group, will be giving the opening keynote. The Hot Topic Shopper Marketing Breakouts, facilitated by UT Doctoral Students, provides time to focus on key areas of interest and allows colleagues to interact, share, learn and provide professional insights.

According to Dr. Flint, the driver for the course is a sense that many more managers and new hires are moving into something related to “shopper marketing” in their organizations without a solid foundation of what that means.  They may know what it means to their firm, he states, but not what the leading firms in the industry are thinking of.  The inspiration came from some of our sponsor organizations stating that something was needed to orient their managers and get them to a baseline level of knowledge that they could build on.

“We think that this is needed because more and more focus will be placed on shopper marketing. If too many managers think this is tactical merchandising as it has always been, they will be shocked when competitors regularly take market share away from them, or grow the entire pie in ways they did not foresee,” Flint said.

One of the major factors is the rapid expansion of shopper marketing conferences and discussions in industry that have prompted this initiative.  Research has been going on focused on shopping behavior, consumer behavior, retailing and branding for years. Now much of the attention is being placed on pulling this all together through the entire path to purchase.  So now brand management discussions are involving what has to happen at the store and collaboration discussions are cropping up everywhere between brand marketers, retailers and agencies like never before.

Brands are working with retailers to help retailers differentiate themselves in unique ways.  It has changed the skill set required by brand managers and account managers.  They all need to know business analytics, shopper insights, strategy, brand management, account management, merchandising, finance and supply chain management to make this work.  These skills are currently spread across three to seven people in most firms today.  The course is designed to help managers understand how all of these things are interconnected.

“Essentially,” Flint said, “we need general management skills that span research, strategy, marketing, sales, finance and supply chain management.”

The unique expertise that has been fostered at the University of Tennessee is many years of research in all of these areas and significant work experience with companies.  From consumer psychology, to shopping behavior, to technology in stores, service quality, business analytics, retailing layout and operations, brand management, buyer-seller relationships, strategy and so forth the University has at least one if not more faculty who have spent their careers conducting research in each area.

“We have pulled faculty from retailing, statistics, operations, logistics and marketing to put this course together and to conduct our managers conferences.  We build in hands-on exercises to bring points home and provide nearly two dozen practical worksheets that go along with a formalized shopper marketing management process.  We also have a secret weapon so to speak in significant input from Chris Hoyt of Hoyt & Company; an extremely well-respected expert in-shopper marketing, and Ken Barnett; the CEO of Mars Advertising, regularly cited as one of the top shopper marketing agencies in the country,” stated Flint.

“In fact, Mars Advertising has won the Hub Top 12 award several years in a row. Both Hoyt & Company and Mars know what works and what doesn’t,” Flint stated.  “They have helped us combine their practical experience with our own research and practical experiences with manufacturers and retailers to put together a solid 4.5 day exposure to the concepts, processes, and tools of shopper marketing; from insights and opportunity identification; to strategic planning, execution and measurement.”

Dr. Flint’s personal background and research has focused on bringing social psychology into understanding what consumers and business customers value from products, services and organizations.

“I specifically look at patterns of change that suggest what shoppers, consumers and business customers will value in the future, and work on processes to help organizations create a proactive customer orientation – to look ahead and anticipate.  One view we bring into our discussions has to do with how to leverage a powerful trend toward co-creation of value and experiences that consumers now expect into the shopping experience,” he said.

To register, please go to the Shopper Marketing Forum homepage: http://shoppermarketing.utk.edu/ .  Simply click on the registration link to gain immediate access to the Registration Page. Under Registration Category, register as: Conference Attendee.  The fee is $149.  For questions or to pay your registration fee, please contact Jennifer Johnson, Forum Registrar.               RJL

Daniel J. Flint is The Proffitt’s Inc. Professor, in Marketing, associate professor of marketing in the Department of Marketing and Logistics, and director of the marketing Ph.D. concentration at the University of Tennessee, Knoxville. He has a Ph.D. from the University of Tennessee, an MSA from Central Michigan University, and a BS in Engineering from Annapolis.

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Steve Jobs dips into Apple’s brand equity to answer critics….

In Apple, brand-building on July 30, 2010 at 6:40 pm
Image representing Steve Jobs as depicted in C...
Image via CrunchBase

by Robert Liljenwall

How strong is Apple‘s brand?  Count the numbers – more than 3.3 million iPads sold in the past two months….Apple is selling the new iPhone4 at the rate of 4 million per month….Apple becomes the nation’s second largest corporation (the largest tech company ahead of Microsoft) in terms of valuation, second only to EXXON Mobile.  Overall, between the iPhone, iPad, and iPodTouch, Apple is selling 6.85 million IOS devices a month or 42 percent more than Android.  This is a battle of classic proportions between Apple and Google, and it ain’t over yet.

But let’s talk about brand equity=.  How does any company deal with adversity and controversy about its behavior or product failure?  We can all take lessons from British Petroleum on how NOT to conduct crisis management.  Also, we have learned from Johnson & Johnson’s masterful handling of the Tylenol scare in February 1986 when a woman was reported dead from cyanide poisoning in Tylenol capsules.  Johnson & Johnson immediately pulled the product from all shelves.  It was, indeed, a brilliant and gutsy move to take their most popular brand off the shelf.  It preserved their brand leadership for the past 25 years.

What did Steve Jobs do when their antennae wasn’t working the way they said it would work on the new iPhone4?  He held a much-anticipated, well-attended news conference.  No recall.  No apologies.  He explained this was a very common problem with all cell phones and his expertly designed Keynote slides demonstrated that the actual failure was so minor that it was within so-called industry standards.  Steve did offer a free phone guard to keep your sticky, electric-generating fingers and hands off of his iPhone so the antennae would work.  Besides, he said, all cellphones have the same problem. There, take that!  And what did his competitors say:  “Hogwash!”.

This is what we call in the brand business – a brand equity withdrawal.  If your company has a strong brand – you can get away with this once in awhile – not all the time, of course.  But Apple has been performing so spectacularly these past few years, it is hard to argue with Steve Jobs or Apple’s overall financial (re: brand) performance. The numbers don’t lie:  These are consumer votes, and they not only vote with their feet, but with their wallets.  Apple stores are grossing over $4,000 a square foot around the world (average) and it’s the highest of any retailer in the world.

When you go into an Apple store, as I did yesterday to finally pick up my iPhone4, I was amazed that in the middle of a workday, the place looked like the character shop on Main Street at Disneyland.  (I can’t recall someone asking Steve Jobs after his news conference….”where you going?”  “To an Apple Store!”).  Every spare experiential station was full with people standing in line to try out the new iMac (just came out) or the iPad or the iPhone.  Gold cards were flying out of wallets.

Let me tell you a cute story….After getting my new iPhone4 activated (“do you need a bag?” the kid in the blue shirt asked me?  “No.”  I wanted to show off the new iPhone4 box it came in).  I’m walking out the store – hated to leave, but just before I reach the doors, this young gentleman is walking next to me.  I look at him, and whispered…”Did you buy anything?”  “No, I didn’t.”  “Well,” I said, “you know, don’t you, that the alarm goes off if you didn’t buy anything.”  He stopped and looked at me, surprised at what he had heard.  I stopped, too, cracked a faint smile, and we walked and laughed our way out of the Apple store in Pasadena.  Me?  I had my new iPhone4 and damn happy about it.  The kid?  He’ll be back.  He told me Mom had to approve it first.

Apple’s brand equity?  There is probably no company on the Planet right now who has more equity in their brand than Apple.  And in Steve Jobs.  If you want a good, ol’fashion cry about the success of free enterprise, read Fast Company’s current article on Apple.  You’ll find out why Apple epitomizes the best of American ingenuity, creativity, business success, and why the Apple culture is to be emulated.

OK, so you think I’m biased.  I am.  I admit it.  But what was amazing to learn that my perception of the Apple brand is that its customers are similarly attracted to other classy, sophisticated brands.  I teach Brand Management at UCLA Extension and we talked about the Apple customer – what are their values?  What other brands would they be attracted to?  We came to the conclusion that an Apple iPhone user is the same type of person who would want to own a Porsche.  Fast Company came to the same conclusion.  I used to own a Porsche….but my needs have changed.  I own a Toyota Tundra (small ouch) to pull my Airstream (another fabulous brand)….but I damn sure am going to own Apple’s latest iPhone.  Can’t do without it.  And neither can the other millions who couldn’t wait to get their hands on the new iPhone.  If anyone knows that, it is Steve Jobs.  He knows his customers.  He has turned a “want” into a “need”.

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