The HubMagazine #34


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The HubMagazine #34

  1. 1.   E x c h a n g e o f I d e a s   |  January/February 2010  |  $10.95  HUB �e M A G A Z I N E A publication of and Cool News of the Day
  2. 2. WOULDA COULDA SHOULDA 3 words you won’t have to say next time. At Upshot, we not only help you develop innovative ideas, we help you get them to market first. So next time, it’s the other guy saying, “I wish I had done that.” Not you. For more information, visit © Upshot Inc. 2010
  3. 3. HUB �e P I VOT P OINT M A G A Z I N E Razor Sharp JANUARY/FEBRUARY 2010 A lmost 15 years ago, I started asking the best and brightest in marketing questions about the future of 22 this business, first on and now in the Hub. That probably translates into thousands of questions asked. But, in fact, I’ve really only posed variations of one, pivotal probe: Where’s it all headed? COVER STORY Some of the answers have been more memorable than others, obviously. If there’s one I recall best, it was Positively Safeway the response from Geoffrey Safeway chief marketing officer Diane Dietz gets Remembering  Frost, a former chief marketing inspiration from innovation. An exclusive Q&A interview by Tim Manners. the late, great  officer of Motorola, during late Geoffrey Frost. summer, 2005. It’s memorable partly 8 because, tragically, Geoffrey passed away within weeks of our conversation. But it’s more because he was so damn clear about what he saw coming. He was remarkably prescient when he referred to ROUNDTABLE his product as “the device formerly known as the cell phone.” He also suggested we should think about our Better Things business as “the industry formerly known as advertising.” Innovation just isn’t what it used to be. A discussion But my favorite part of the interview was when featuring Claudia Poccia of Avon mark, Jevin Eagle of Staples, Randy Carlson of Diageo, and Geoffrey talked about the famous William Gibson Jim Porçarelli of Active International. quote: “The future has already arrived; it’s just not evenly distributed.” As Geoffrey explained, “What he’s saying is that 16 there are people of the future, already here, walking among us. If you can figure out who they are and co-create with them, you’re actually doing a rather amazing job of not only anticipating, but also shaping W H I T E   PA P E R where the world can go.” It’s a new year, and a new decade. What’s new, for Map the Gap you, in the industry formerly known as advertising? Winning at retail requires innovation across Where’s it all headed? bundles of brand benefits. By Vinit Doshi. Tim Manners
  4. 4. Editor-in-Chief Tim Manners Senior Editors Peter F. Eder Jane Harris ALSO Managing Publisher Joseph McMahon 5 Art Director COOL NEWS Julie Manners Consumer Intelligence, Twittovation, Keds Collective, Little Nike, Design Concept Here/Nau/NYC and Full Yield. Alexander Isley Inc. Illustrator John S. Dykes 12 R ESEARCH R EPORT The New Super | What makes a supermarket innovative? An executive summary of a survey. Circulation Director Bertha Rosenberg Brain Trust Active International Arc Worldwide 14 S U RV E Y A NA LY S I S Supermarket Savvy | Innovative supermarkets tap into emotional and functional desires. By Randi Moore. Catapult Marketing EURO RSCG Discovery 20 Henry Rak Consulting Partners E SSAY Hoyt & Company Insight Out of Chaos Popping for Shoppers | The “pop-up” trend is driving retail innovation. Landor Associates By Beth Ann Kaminkow. Marketing Drive Mars Advertising Triad Digital Media TracyLocke WomanWise 27 W H I T E PA P E R The Shopper Aperture | Let’s put a new lens on the future of shopper marketing. By Anne Howe. Hub Club PMA RPM Connect Upshot 30 W H I T E PA P E R The “We” Decade | Creating community and higher purpose will elevate our brands in the 2010s. By Dori Molitor. The Hub David X. Manners Co. 107 Post Road East Westport, CT 06880 34 W H I T E PA P E R Smooth Selling | Integrated Selling drives bottom-line sales and better brand performance. By Paul Kramer. 203-227-7060 ext. 227 n Brought to you by the editors of Reveries. com and Cool News of the Day, The Hub magazine is dedicated to exploring insights, 36 R ESEARCH R EPORT The Socialized Shopper | New research shows how social media is changing shopping behavior. By Mark Renshaw. ideas and innovation as the ultimate drivers of business success. n Published bi-monthly since July 2004, The Hub’s circulation is exclusive to Reveries’ proprietary database of 40 E SSAY Beauty in Virtue | Luxury brands can make us look (and feel) truly good. By Cable Daniel-Dreyfus. approximately 3,500 senior-level, client- side executives in Fortune 1000 marketing 42 departments and major ad agencies. COOL BOOKS n Advertising: For more information on The Hub’s collaborative sponsorship and Makers, Think Twice and Start-Up Nation. advertising opportunities, please contact Joseph McMahon (joseph@hubmagazine. com) or 845-238-3516.
  5. 5. COOL NE W S Consumer Intelligence Keds Collective The defense industry has a long history of feeding innovations to consumer markets — the Keds is engaged in a “wholesale internet, satellite navigation systems and the computer itself originated as military projects, business-model change” in which its for instance. consumers not only design footwear, but can also sell it. “Marketing has Now, the consumer-electronics industry is returning the favor. For example, the U.S. Air evolved into a conversation with Force just ordered some 2,200 Sony PlayStation 3 videogame consoles, which it will use as the consumers,” says Kristin Kohler “building-blocks of a supercomputer.” Burrows, president of Keds. Meanwhile, in Iraq and Afghanistan, soldiers “are using Apple iPods and iPhones to run To keep that conversation going, translation software and calculate bullet trajectories. Xbox videogame controllers have Keds has launched a site, called Keds been modified to control reconnaissance robots and drone aircraft.” Collective, where consumers can This is occurring because the military spends “only a small fraction” of its $1.5 trillion choose from a palette or upload their budget on electronics, leaving it outspent on R&D by the consumer-electronics industry. own design elements. Electronics firms are also able to “move much faster than the slow, If Keds likes a design, it makes a deal multi-year grind of military procurement programs ... And with the consumer, who receives the emergence of open-standards and open-source a 10 percent cut on any sales. The software make it easier to re-purpose off-the-shelf shoes can either be ordered online by technologies or combine them in novel ways.” consumers or stocked by retailers for Leaving such innovations to the private sector sale in stores. meanwhile enables the military to “focus their So far, this hasn’t exactly made spending on the development of new technologies, anyone rich, but that’s not the point. rather than reinventing the wheel.” “I’m totally thrilled,” says Jeriana [S o u r c e : The Economist, 12/12/09] San Juan, who has “sold six pairs of Keds with her designs.” For Keds, its all about turning Twittovation “custom sneakers into an advertising juggernaut when the designers ... proudly holler about them from the “Twitter’s smart enough, or lucky rooftops of the internet.” Jeriana, enough, to say, ‘Gee, let’s not try to for instance, “has posted her Keds compete with our users ... let’s outsource designs on Facebook and is adding a design to them,’” says Eric von Hippel, Keds link to her website.” author of Democratizing Innovation. Similarly, Nike not only publishes Twitter CEO Evan Williams agrees: a “gallery” of consumer designs “Most companies or services on the web on NikeiD, but also provides start with wrong assumptions about what they “convenient icons to click to ‘share’ are and what they’re for,” he says. “Twitter struck an interesting balance of flexibility them on Twitter, Facebook and and malleability that allowed users to invent uses for it that weren’t anticipated.” MySpace.” Among other things, Twitter users invented the idea of putting the @ symbol before their Champion, meanwhile, asked its user names (e.g., @cool_news). They also picked up the idea of using the # symbol to “consumers to design hoodies and categorize topics — another innovation Twitter initially resisted. submit them for votes.” Darren Paul The # idea came from open-source advocate, @chrismessina, who says Twitter thought of Night Agency, the social-media the # concept was too nerdy for mass appeal. Well, now Twitter “hyperlinks the hash consultancy that helped create the tags so readers can click and see all the other posts on a topic.” Keds Collective, comments: “People feel much more connected to the Evan Williams says Twitter’s plan is to keep following its followers. “You get a bunch brand because they’re part of the of users interacting and it’s hard to predict what they’re going to do,” he says. “We say, advertising, in reality.” ‘Why are people using this and how could we make that better?’” [S o u r c e : Christina Binkley, [Source: Claire Cain Miller, The New York Times, 10/26/09] The Wall Street Journal, 12/10/09] Cool News of the Day, a daily e-mail newsletter of marketing insights, ideas and inspiration, is edited by TIM MANNERS. For a free subscription, visit
  6. 6. COOL NE W S W S COOL NE Little Nike Mark Parker thinks acting smaller will help Nike grow bigger. It’s not as though Nike, now 37 years old, is having any problems growing; its “stock is up 50 percent over the past five years while the S&P 500 is down 7.7 percent.” According to Interbrand, Nike’s brand value “has jumped from 31st to 26th” in the four years since Mark assumed leadership at the company. Despite this, Mark sees the Nike brand as something of a liability, particularly among younger consumers in action-sports categories. Jeanne Jackson, president of Nike’s retail division agrees: “Kids think it’s cool not to have a big, hairy name over the store,” she says. And so Nike’s latest retail venture not only doesn’t carry the Nike name, it has no name at all. Instead, the action-sports store, dedicated to skateboarding and snowboarding, simply displays the logos of “its three key brands at the entrance: Hurley, Converse and 6.0 (an action sports line that does have a Swoosh on it).” “The hardest thing for a company to do is to change when it doesn’t seem like change is necessary,” says Mark. One thing that hasn’t changed is Nike’s connections with celebrity athletes. “We always want to be connected with the world’s top athletes,” says Mark, himself a distance runner. “Our relationships with athletes fuel the innovations,” he says. And, of course, there’s China, where Nike invested some $1.5 billion in 2009, and may invest even more in the year ahead. “No matter how much you’re investing there, it’s not enough,” says Mark. [S o u r c e : Bruce Horovitz, USA Today, 12/7/09] Here/Nau/NYC Full Yield Jean-Pierre Veillet is creating a pop-up boutique “using materials ... “We need to put food back in the heart of health care,” says Zoe almost entirely rooted in New York City’s waste stream.” Finch Totten, chief executive of Full Yield. “It’s the cheapest way to deal with health and the simplest, and definitely the most This includes “fallen tree limbs found on the street, timber and pleasurable,” she adds. metal pipes from derelict Brooklyn factories and piles of discarded cardboard boxes — so that when the store closes, at least the Zoe’s focus is on the way people eat in the workplace. Her solution garbage won’t be new.” is a branded “12-month nutritional program” that’s designed to “take the guesswork out of what constitutes a healthy diet” and The boutique is called Here/Nau/NYC and naturally “will carry help reduce health-care costs. products from several environmentally minded companies, including shoes from Timberland and Toms, organic dresses and The Full Yield menu features “fresh items made with natural, whole sweaters from Stewart + Brown, bags made of recycled truck tarps ingredients” and “will be sold in corporate cafeterias and in the from Freitag and the sleek, athletic designs of Nau.” prepared-foods section of local supermarkets” in the Boston area. John Hancock, the insurance company, is among Zoe’s first customers, And so Jean-Pierre is busy fashioning displays out of cardboard with some 300 of its employees adopting Full Yield next year. and trying to turn bubble-wrap into lampshades. He’s got clothes “hanging from a rolling rack made of old pipes, timber and Meals are priced at $6 to $7 a meal, and employees will receive mismatched wagon wheels.” His main worry, he says, “is that it “$100 worth of coupons that can be used in John Hancock’s could end up looking clunky and cheap.” cafeteria and at 18 local Roche Brothers grocery stores.” Gordon Seabury, who owns Nau, refers to Jean-Pierre’s approach as Full Yield plans to take various biometric measurements of “dumpster-diving” but is “confident that the resulting decor would Hancock participants throughout the year, and then “analyze the ultimately reflect the company’s approach to considered design.” data against insurance claims to gauge improvements in health.” [S o u r c e : Eric Wilson, The New York Times, 11/5/09] [S o u r c e : Melanie Warner, The New York Times, 11/29/09] Cool News of the Day, a daily e-mail newsletter of marketing insights, ideas and inspiration, is edited by TIM MANNERS. For a free subscription, visit
  7. 7.   95  |  $10. 20 09  M ay /June  de a s   |  of I ange Exch HUB �e HUB �e Excha nge o f Ide as   |  Se pt em ber/ Oc tobe r 2009  |  $10 N E A Z I M A G M A G A Z I N E HUB Exchange o   �e f I d e a s   |  July /Aug ust 2009  |  $10.95  M A G A Z I N E THE HUB 12 TOP Shoppeng r Marketi ce Excellen  D ay  the s of  New Cool and s .com ev erie of R ion bl icat A pu A pub li catio n of R ever ies.c om an d Coo l  News  of th e Da y A publicati on of Reve a nd Cool Ne ws  of the Day Get the Hub! Keep up with marketing’s boldest and brightest. Subscribe today. It’s easy. Just visit:
  8. 8. ROUNDTABL E Innovation just isn’t what it used to be. Better Things What are you trying  up. Every single Staples store in always been that it’s not innovative the United States has easy-tech if it’s a solution in search of a to accomplish with  technicians who can provide a free problem. The goal of innovation is innovation? tune-up of your PC. really to ferret out a keen insight, to deliver something that is Claudia Poccia: With new products, A product innovation is our Mailmate needed, wanted or lacking. we constantly challenge ourselves Shredder. Our customers were to look outside of the cosmetic opening their mail in their kitchens The word “innovation” clearly is industry into the broader landscape but their shredders were in their overused. So many people use it of change. We try to leverage offices. So, we made a shredder as “give me something different inspiration across the convergence that’s just perfect for the kitchen. to save me for six months” or of media, technology and other There are many more examples of “something different for the sake of A product forms. solving problems for customers being different,” so that I can say R oundtAble We also engage with our customer embedded in our culture. that I have fostered innovation. F eAtuRing or representative because, for the Claudia Poccia most part, she is one and the same. We try to leverage inspiration across That’s why bringing our product Avon mark to her, where she lives, and where the convergence of media, technology Jevin Eagle she’s most receptive to receiving and other product forms. Staples our message, is so important. C L Au DI A P o C C I A Randy Carlson We bring direct selling into the Diageo digital age through social media and other nascent technologies. We’re Randy Carlson: The goal of But innovation really is about Jim Porçarelli going to her in a place where she’s innovation should be to bring new paying attention and looking for Active International open to receiving our message and ways to delight consumers that are sometimes the simplest things that engaging with our brand. relevant for them. For Diageo, and solve the issue in a way that no one a lot of mature businesses, maybe else has done before. Jevin Eagle: At Staples, the goal that’s more “renovation” than of innovation is to provide customers with value, product or an experience “innovation,” but it’s really about How do you create a  breathing new life into our brands. that solves a problem or helps make culture of innovation? their lives easier. That’s the link Some people look at innovation between the customer, the innova- as inventing the un-invented. But Poccia: Talent is the key ingredient tion, Staples and its shareholders. our obligation, as companies, is to to creating a culture of innovation. deliver business results. Inventing If you have a team of forward- For example, we offer free delivery the un-invented is a nice, long- thinking individuals who can that, in almost all cases, arrives term aspiration, but innovation had look at things with a fresh, new the next day. That would be an better create revenues and profits. lens, it creates an environment experience innovation. A service that fosters innovation throughout innovation is our free PC tune- Jim Porçarelli: My mantra has 8 THE HUB  JANUARY/FEBRUARY 2010
  9. 9. the company. High emotional Proven results are what get the organization intelligence is also paramount. gelled around innovation. You need people with great, cutting-edge ideas, but equally R A N Dy C A R L S oN important is a team that has the ability to initiate and execute You also need an element of In fact, she demands it. She inspires those ideas in a strategic manner. pragmatism. Rather than just us. She co-creates with us because It’s important to build a team of thinking about an idea, you need we’re both a brand and a channel. creative thinkers who reach for to go and do it and focus on results. So, whenever we ideate a product, the stars, but also keep one foot Otherwise, your innovation is not our favorite expression here is, firmly planted on the ground so going to have a long life. Proven “let’s take it to the Girl Lab.” That that everything aligns with the results are what get the organization means going to our consumer and business objective. gelled around innovation. our representative and engaging Eagle: We not only have a market her in the ideation and decision- Porçarelli: You have to give people research department at Staples, but making process up front. honest-to-goodness permission also groups of people who are not to fail. If people aren’t afraid of This co-creation partnership exactly in “market research,” but making mistakes, they are going enables us to bring forth products are constantly doing, testing and to come up with more and more that allow for our consumers’ and trying new things. For example, we creative and interesting ideas. representatives’ self-expression. So, have what we call our “usability she’s got a more immersive brand group.” Their job is to observe how You need people who say things that experience at a higher level of customers use things, either online you hadn’t thought of yourself. If emotional engagement with us. or in person. people are just repeating everything I already know, they are not right Eagle: I have a strong point-of-view At any given time, we have for my team. Leaders need to allow on this. We used to run a contest dozens of tests going on of either themselves to be challenged by at Staples called Invention Quest, new products, new ways to display their teams. where we asked customers and products or to develop offers. The employees to create new product culture when we go out into the Managers have a responsibility ideas. I’m so glad we did this — I field is the culture of listening, whenever someone comes to them was one of the judges — but I don’t whereas in traditional retail it’s with an idea — no matter how big think it was the most effective way a culture of telling. We have or how small — to sit with them to get insights because customers tremendous respect and awe for and help tweak the idea until it are not product developers. our store managers, and when works. It’s imperative to continue they give us ideas we take the conversation because it can A better way to get customers voracious notes. foster other ideas in other arenas engaged is for us to listen to them. that will solve bigger problems. How do you live your life? How do Carlson: Innovation really starts you work? How do you play? How at the top. There may be a heretic who’s trying to push innovations How should consumers  do you use products today? That’s where the much bigger ideas come uphill, but heretics have a very be involved in the  from. We listen, observe, and take low probability of getting anything innovation process? it from there. done without leadership support. Poccia: Bonding over beauty and Carlson: For us, the involvement Second, you need people who fashion fosters community and is three-tier, including consumers, believe in possibilities and are brings young women together. customers and distributors. If you willing to beat their heads against Because direct selling is inherently have a brokered sales organization, the wall. With innovation, you are participatory, it’s really natural for you should include them, as well. going to hear “no” a lot. You have us to engage with our customers It’s critical. to have people who are willing to work in that kind of environment and representatives to create a co- I personally find that the trade — and aren’t brought down by it. branding experience. including distributors and sales JANUARY/FEBRUARY 2010  THE HUB 9
  10. 10. organizations — has a kind of What is the most  taking any money you make and “fingertip feel” for what’s right or applying it to lower prices, and wrong with your product offerings. innovative idea   then focusing everything in your It’s a great thing to get that kind of you’ve seen? culture on leveraging scale to get feedback sooner than later. lower prices. I think Starbucks was Poccia: True innovators create the first to not require a signature On the other hand, your customers, products or services that customers at the register when you use your your consumers or the trade are not can personalize to meet their credit card. That was brilliant. going to come to you with the next, needs. I find TiVo fascinating. For big breakthrough idea. That’s just decades, all of us were happy to I do think that Staples’ ink not going to happen. So, hopefully view pre-determined and recycling program is breathtaking. that’s where the innovator’s thinking scheduled programming and then We give three dollars back for comes in. It’s really up to the out of the blue comes TiVo. every cartridge you bring back to innovator to identify the problem recycle. This meets the customer’s being solved, and how to solve it. Now we have the power to need for doing something good for decide when we want to watch the environment, while also giving Porçarelli: First of all, their this programming. This TV-by- them money for it. We’re going to involvement is about the due appointment culture has created a recycle more than 50 million ink diligence of the marketer. seismic shift in consumers. jet cartridges this year. There’s so much information and data available to us today, Something that we’ve done at mark Carlson: My favorite innovator but you need to understand the is a franchise called Hook Ups. Hook right now is Tesla Motors. attitudes, concerns and buying Ups are dual ended, customizable What Tesla has done is make a behaviors that are intrinsic to your makeup products for eyes, lips completely electric car using cell- consumers. So, don’t be afraid to and cheeks. We provide a wide phone battery technology. It’s the preview ideas with your audience. assortment of textures, tones and same kind of battery you have in product forms. The consumer can your Blackberry, just stacked up. Procter & Gamble had a wonderful put together over 2,000 combinations formula where every single brand and make it their own. That has They make a sports car that’s super light, looks a lot like the Lotus, and can go from zero to 60 mph in 3.9 seconds, with a 250- The culture when we go out into the field is mile range. It costs $100,000, but the culture of listening, whereas in traditional it is twice as efficient as a Prius. They are also making a 4-door retail it’s a culture of telling. sedan for 2011 delivery. J E v I N E AgL E What Tesla has done is turn the efficiency issue on its ear. They’re taking this notion of a car you had to set aside a little bit of its really gotten the industry’s attention want to be in and the right thing budget every year for testing — even because it puts creativity in the to be doing for the world, and though they knew that 80 percent of hands of the consumer. put them together. And they’ve the results may not give them an actually executed it. It’s brilliant! Eagle: With Amazon, one innovation insight worth acting on. But the was giving away shipping and Porçarelli: There’s a product other 20 percent was invaluable. As tying that to extremely low prices. called New Energy Solutions — it’s a result, they had the greatest insight Most business people would have this pad that you can put on your into the package-goods consumer. said “no” to that. Another innovation dresser, and it charges all of your While consumers generally don’t was buying back used books and electronic devices without having really know what they do want, then reselling them, which to plug them in. That really adds they pretty much know what they GameStop does with games. to your quality-of-life because don’t want. By knowing what to they’ve solved an everyday At Walmart, the innovation eliminate, it’s often a lot easier to problem. was Sam Walton’s concept of figure out what to offer. 10 THE HUB  JANUARY/FEBRUARY 2010
  11. 11. T HOUGHT L E ADER S In a very different realm, there’s for us — if not at the moment, a technology in radiology called then over the life of customer. micro-bubbles that are injected There are plenty of things we do into the bloodstream to take better where we’re not maximizing profits “pictures” of a specific organ. - on a transaction basis, but we are The idea is that if you inject the on a customer basis. That’s the key. CLAUDIA POCCIA is global bubbles with chemotherapy, you president of mark, Avon’s trend might be able to treat cancer more For example, during back-to- beauty and fashion boutique brand, effectively. It’s still being tested, school season, we offered free where she is reinventing the direct but could have a huge impact. backpacks — 100 percent back in selling business model for the Staples rewards on any backpack. next generation by tapping into How do you   Why did we do that? Not because the world of social media. measure the return   we thought we were going to JEVIN EAGLE is executive vice make money that day. The on innovation? president of merchandising and innovation is in how we create marketing for Staples. Jevin was Poccia: R.O.I., at mark, means value for customers. It all comes a principal architect in developing “Return On Innovation.” It’s a back to our customer economics. the Staples brand promise to make buying office products easy. metric for success that has never Carlson: At Diageo, we have been more critical to the bottom business performance metrics line. We measure it through our that are attributed to innovation. RANDY CARLSON is global most important asset, and that’s the In fact, in our annual report, innovation director for Diageo. mark representative. That’s because half of our growth last year Previously with Ralston Purina, not only is she our consumer, but came from innovation. It’s a real Tropicana and PepsiCo, Randy has she’s also our retailer. a diverse perspective on common number. There’s real bookkeeping success factors for innovations So, for us, the innovation imperative and accounting associated with across marketplaces. is to deliver an entrepreneurial innovation that’s done both in platform to this representative aggregate and individually. JIM PORÇARELLI is chief strategy officer at Active International, a global marketing and business If people aren’t afraid of making mistakes, solutions firm. He can be reached at they are going to come up with more and more creative and interesting ideas. J I M P oRç A R E L L I that reinvents direct selling for In a broader context, your return on innovation and reinventing them, and allows them to play on innovation requires short-term themselves. Is there a return on in a digital space through their metrics in addition to the long- innovation? You bet your life social networking platform. As term investments, and you have to there is, because innovation is the her engagement and connection roll them up together. If you start lifeblood of every business. through these platforms rises, so doing activity-based costing on each There’s a huge return because does her sales productivity. So, it individual innovation, there will innovation fosters innovation. generates organic growth. be more things you kill than you When someone comes up with an launch. When that happens, then Eagle: Innovation is all about the innovative idea it becomes almost somebody else invents the future. notion that if we do things for our addictive because as you begin to customers that meet their needs, Porçarelli: Without innovation, have success with innovation you they will reward us. Our underlying a company will begin to die. want to have more success, and more assumption is that doing good Great companies falter because innovations follow. Innovation is its things for customers is also good they didn’t put enough emphasis own impetus for greater innovation. n JANUARY/FEBRUARY 2010  THE HUB 11
  12. 12. RE SE ARCH REP ORT What makes a supermarket innovative?  Where would shoppers most like to see  innovation? Which supermarkets are  most innovative? The New How innovative is the supermarket you shop most often? Conventional wisdom has it that many — if not most — supermarkets haven’t changed much Somewhat 55.0% for about 50 years. True, there’s more in the way of prepared meals. And the number of products Very 21.7% offered has grown. Store brands may have improved in quality, too. Not at all 17.1% But has the basic construct of aisles of ingredients really budged all that much? We put Extremely 6.3% this question to readers and the answer came back somewhere down the middle: A majority of 55 percent said the supermarket In which ways is your supermarket innovative? they shop most frequently is only “somewhat” (pick as many as apply) innovative. As one respondent put it: “It seems grocery Product Selection 54.3% retailers perceive innovation as being creative with inventory and don’t give enough consideration to Prepared Foods 46.6% environment and space.” The only area a majority deemed innovative Private Labels 38.9% was “product selection” (54 percent), followed by “prepared foods” (47 percent) and “private Store Layout 31.7% labels” (39 percent). However, in nine out of ten areas, survey Checkout 31.7% more in the way of innovation: product selection; respondents suggested they would like to see Customer Service 29.8% format/store layout; checkout; customer service; promotions; new services; online tools; and Promotions 17.3% displays. The only area shoppers indicated they Displays 17.3% are satisfied is “private labels.” Online shopping tools appear to be especially Online Tools 13.5% ripe for innovation, as an overwhelming majority of respondents (74 percent) said they do not use New Services 12.0% retailer websites. An even larger majority of 80 percent said they do not use “any other online planning tools for grocery shopping.” Some remarked that they weren’t aware that How important is a supermarket’s prices versus its such tools exist, while others confirmed that this innovations to you? may well be the case: “I wish I could get ads via my phone and use mobile coupons. I would also Somewhat 39.6% love to be able to upload coupons to my loyalty Very 37.1% card and not have to deal with paper coupons.” Frustrations were many, with crowded Extremely 18.3% stores and slow checkouts being the most frequently cited complaints. Others aimed their Not at all 5.0% ire at stores that rearrange aisles for no apparent reason: “Shuffling where categories are found, 12 THE HUB  JANUARY/FEBRUARY 2010 THE HUB  JANUARY/FEBRUARY 2010
  13. 13. Super Where would you most like to see innovation at your supermarket? (pick as many as apply) sometimes just from the right to the left are annoyances, not innovations.” Self-checkouts also received mixed reviews. others said they only benefit retailers. One Some said they liked the convenience while respondent had a similar complaint about store formats: “I’m tired of grocery stores being laid out to help the grocer and the vendors.” Product Selection 51.5% Overall, there was no shortage of suggestions on where supermarkets could improve in ways Store Layout 50.6% both big and small: Checkout 41.6% “ Why can’t grocery bakeries make good, healthful, preservative-free breads?” Prepared Foods 35.5% “ This business of forcing me up and down aisles and across the store to find the things I need is Customer Service 33.3% tiresome and makes me tired and angry.” Promotions 31.6% “ I wish I didn’t have to go to three different stores in order to supply our home.” New Services 31.6% “ So many carts with wheels that don’t work right!” Online Tools 29.9% Despite such grievances, a perhaps surprisingly large majority of 70 percent said they generally Displays 25.5% enjoy grocery shopping, especially discovering new items. And even though most do not consider Private Labels 15.2% their supermarkets to be innovative, a plurality of 43 percent felt their grocers were up-to-date. But as one respondent observed, the In general, do you enjoy grocery shopping? innovations of the future may well be rooted in the past: “I shop at a small, family-owned Yes 70.3% supermarket that prides itself on personal service. Another hinted that maybe it isn’t up to Its innovation is old-fashioned customer service.” No 29.7% supermarkets to be innovative at all: “Since I purchase groceries from three stores and one farmer’s market each month, maybe I’m the innovator.” Overall, which era does the supermarket at which you And this comment may provide the greatest usually shop most resemble? insight of all: “Here’s the deal, when money is 2000s 42.7% in short supply and entertainment dollars are small or non-existent, grocery shopping becomes 1990s 21.4% entertainment … When money is flowing and we can eat out more often and I’m cooking less, then 1980s 11.5% grocery shopping goes back to being a chore.” The supermarket picked at the number-one 2010s & beyond 10.7% most innovative? Whole Foods, followed by Trader Joe’s and Wegmans. Curiously, nowhere near as the supermarkets they shop most frequently. n 1970s 7.7% many respondents selected these same stores as 1950s 3.8% Complete survey results can be found at: 1960s 2.1% JANUARY/FEBRUARY 2010  THE HUB 13 JANUARY/FEBRUARY 2010  THE HUB
  14. 14. SURVE Y ANALY S I S Supermarket Savvy T he latest survey asked a I m pl I c at I o n s : Improve navigation — beginning savvy shopping crowd whether today’s in the parking lot and continuing through the store supermarkets are innovative. What we and checkout. Create a shopper-centric store layout heard back was how shoppers want us to with intuitive assortments and adjacencies in an innovate today’s shopping experience. uncluttered environment. What do they want? Well, as one respondent Fix the broken carts. Smooth the checkout succinctly said, “I want it all.” And today, to get it all, experience — if not with technology with good, old shoppers go everywhere. fashioned, helpful, happy, engaged employees. When asked, our shoppers reported that they Relevant Rewards. This means delivering more patronize an average of three different supermarkets, than price incentives in a format that is relevant to making one or two trips per week. But that’s not today’s shoppers. It is about innovating both in terms the whole story. When we dig into where they are of content and delivery. It is about informing and shopping, we unearth an eclectic, channel-blurring motivating shoppers along their paths-to-purchase. I m pl I c at I o n s : Provide relevant, convenient rewards and tools that are customized to shoppers’ Innovative supermarkets tap into needs and localized to their markets. It is about consistently reinforcing that membership in retail emotional and functional desires. reward programs has privileges. To do this, retailers need to build in additional value and convenience. To help communicate, augment list that includes traditional supermarkets, specialty outbound retail email campaigns with innovative stores, club, mass and drug. product information, planning tools, recipes and a link to What drives them? From a functional perspective, coupons. Consider extending to mobile applications. shoppers want: From an emotional perspective, shoppers connect Product selection. Provide affordable, one-stop with retailers and brands that: shopping without sacrifices. This starts with providing Understand them by having the right assortment, quality produce — including both local and organic right offers and then something extra. Strive to choices. It extends to value-added product options, understand the cooking-shopping-nurturing connection with shoppers looking for specialty, gourmet and that drives both the function and emotion around prepared-foods offerings. many shopping trips. Don’t underestimate shopper I m pl I c at I o n s : Provide an array of quality products commitment to more sustainable and green solutions, that meet their needs and their wants to build baskets. even in a down economy. Be consistent in your product offerings and eliminate I m pl I c at I o n s : Understand your shoppers and the critical out-of-stocks that drive shoppers out of their preferences. Become a resource for more than your store. merchandise, and become a partner that helps provide Convenience. It’s not all about location, location, innovative solutions that entertain and nurture their location. It is about time: Get shoppers in, get them families. out — fast, with everything on their list. Provide them Engage them personally with communications with helpful and happy personal service. that inform and educate — before and during the 14 THE HUB  JANUARY/FEBRUARY 2010
  15. 15. shopping trip. Shoppers are looking for information that provides ideas and inspiration. Ask them their opinions! Truly Super Markets I m pl I c at I o n s : Understand your shoppers’ paths- to-purchase and engage them along the way. Don’t In survey respondents’ own words, here’s what undervalue the role of personal service. Create simple, makes supermarkets super: relevant planning tools that integrate with how Whole Foods: Product Selection; Convenience they plan today. Engage them visually in-store with (Store Layout and Service); Engagement attractive displays and signage — remembering that (Communications and Causes). value is much more than price. Entertain them. Take the mundane out of the Trader Joes: Product Selection; Convenience shopping experience — make shopping an event. You (Checkout and Service); Entertainment have a live audience. Make it fun for them and for (Sampling and Surprises). family members in tow. Wegmans: Shopping Experience; Product I m pl I c at I o n s : Add music, demonstrations, Selection; Convenience (Layout and Signage); sampling, wine tastings, product specialists and good, Engagement (Communications, Causes, Recipes old-fashioned customer service to add a personal and Service); Entertainment (Sampling). element. Introduce them to new products and invite Tesco Fresh & Easy: Product Selection; them to explore. Convenience (Checkout Options and Layout); Success requires solutions that drive the mutual Engagement (Social Media). goals of both the retailer and the manufacturer. This means listening to the shopper and delivering against multiple shopper needs. Manufacturers need to find connecting points between their brands and the retailer. If your Build programs to deliver against shoppers’ product benefit is about convenience or speed, partner multiple needs. For example, when we create with retailers to deliver convenient solutions and programs that inform and educate (e.g., recipes, meal services. For example: This checkout or checker plans, activities, in home entertaining tips, healthy brought to you by Brand X. living guides, etc.) We show that we understand that If your product makes folks smile, sponsor an our shoppers are looking for ideas and solutions. employee recognition program that delivers improved When these ideas include complimentary (and customer service that engages shoppers and improves potentially private-label) products, we are building convenience. If your brand entertains, find a way to baskets in a way that leverages the retailer’s product bring that into store in a way that builds on both the selection. When we overlay incentives in a tips booklet, brand and retail platform. or through shopper targeting, we are providing relevant Listen to the voice of the shopper and understand rewards. the impact of changing shopper behavior. Irrespective By collaborating with retailers to develop in of any shortcomings, 70 percent of our survey store “solution centers” with attractive fixtures and respondents say they like shopping and discovering informative signage, we maximize convenience while new things. engaging shoppers. Add an educated, animated So, create events that encourage shoppers to go demonstrator, and we entertain the shopper, as well. on a “treasure hunt.” Purposefully drive consumers When we bring these elements together, we are on the throughout the store to fulfill their missions to discover road to true super marketing. n something new — it both engages and entertains. Shoppers are pre-planning as never before, but according to this survey 60 percent of them are RANDI MOORE is vice-president not using retail circulars and 74 percent are not and account director with leveraging retail websites. Marketing Drive. She leads the Engage consumers where they plan by integrating agency’s shopper-marketing into relevant online activities like popular cooking practice. Randi can be reached at (Epicurious, Food Network) and couponing sites to build on planning behavior. JANUARY/FEBRUARY 2010  THE HUB 15
  16. 16. WHI T E PAPER Map the Gap By Vinit DoShi h e n r y r a k c o n S u l t i n g Pa r t n e r S T he real story behind the growth of store brands is less often about price gaps  than the shrinking value gap between national and store brands. This narrowing  value gap is real, and marketers anticipating an economic recovery to lift their  sales in a “rising tide” effect are bound to be disappointed. Consumers are fundamentally changing their consumer behavior that holds as true today as ever: attitudes towards more conscientious consumption National brand manufacturers need to innovate across on matters of environment, health and value. The the entire value bundle that comprises the brand — heightened importance of value-for-money is leading positioning, product, packaging, pricing, etc. — in them to rethink their attitudes and behaviors order to deliver relevant benefits to the right targets in concerning the value of branded products and the a superior way and align with consumers’ needs and price premiums they are willing to pay for frequently desired benefits. consumed necessities. Mature markets demonstrate these principles of consumer preferences all the time. In the last five years, for example, marketers have successfully Winning at retail tapped into consumers’ health and wellness needs with a variety of innovatively-positioned and requires innovation precisely-targeted beverage products that promise to deliver specific functional benefits such as quick across bundles and lasting energy, meal replacement, or vegetable nutrition — often to selected targets during specific of brand benefits. parts of the day. These consumer preferences lead to consistent behaviors that collectively create markets organized The trend is further reinforced by better consumer around bundles of relevant benefits. This results in perception of store brands, backed by improvements product groupings that deliver primarily against one in the quality and range of these products (according of those benefit areas and compete closely with other to a recent study, 70 percent of millennial women products in the same group. perceive the quality of store brands to be “excellent”). Regardless of the market, price-value invariably This portends the potential continuation of store manifests itself somewhere in the structure, although brand sales and share growth, and a steep challenge the role of price-value relative to the role of brand to the growth of branded products. varies considerably across different markets. The To look for answers, we turn to a key principle of price-value dynamic depends on the importance and 16 THE HUB  JANUARY/FEBRUARY 2010
  17. 17. types of consumer needs, nature of product usage, A market map provides a precise understanding role of trust and imagery in the category, the presence of how consumers are behaving, for what reasons, and strength of dominant brands and levels of and with what trade-offs. It is a proven platform for marketing and innovation. evaluating and predicting the impact of different Ultimately, however, the price-value relationship marketing strategies. As such, it is an essential depends on how well marketers have managed to define foundation for managing a brand to a better outcome. and deliver relevant benefits. In some cases, marketers Unfortunately, many organizations do not fully have created benefit-structured markets based on years appreciate or understand the power of a correct, of advertising, innovation, and effective positioning precise, and behaviorally-based understanding of against relevant functional and emotional benefits. their market. Too often, a brand’s competitive frame is In these situations, brands or brand groups play a based on category definitions, consumers’ opinions, or significant higher-order role in which they effectively a less-than-rigorous evaluation of consumer behavior. stand for and own key benefits to the exclusion of As a result, the hierarchy of benefits may be other brands. Store brands may play a smaller role — out of order, or the spheres of influence through existing but interacting in an undifferentiated way — which consumers make choices and trade-offs may or in a limited way that does not preclude the growth of be misrepresented. Managing a brand with a flawed branded players. The example of soy milk demonstrates understanding of the market is bound to inhibit or how branded products used precise positioning, even derail growth. marketing, and innovation to establish and own a value- So, the first challenge is to understand how the added position as a tasty, healthy, nutritious, dairy- market is organized, what your brands really compete free alternative to conventional milk, leaving behind with, and on what basis. After developing a precise, the commodity dynamics of the dairy milk category. behavior-based understanding of the market, you At the other extreme, markets that lack meaningful are ready to understand how to guide your brands differentiation of relevant benefits to consumers, to more advantageous positions of sustainable and significant marketing, and effective innovation, profitable growth. You can also identify and prioritize predictably degrade into attribute-driven markets in the most viable innovation opportunities among many which form, flavor, price-tiers, or easily replicable seemingly reasonable options. factors become the primary organizing principle of the market (for example, conventional dairy milk). Finding growth opportunities In such cases, national brands often play a The logical first place to look for growth is among weakened role in the structure, and store brands do your established brands in their current, competitive well as consumers reward the brands that deliver the frames-of-reference. In some cases, a brand may have only differentiating benefit of relevance — price-value. significant upside potential in terms of consumer Most markets fall into a continuum between these behavior that can be accessed. Well-differentiated extremes in which many national brands are fighting a brands often find that their strong loyalty puts them losing battle, struggling to stem losses or eke out small in the enviable position of being able to bring in new gains. Some are dealing with the added burden of budget buyers or increase usage simply by increasing media cuts and cost reductions that affect product quality. spending. All the while, store brands are racking up growth. More often than not, however, brands have not Fortunately, the picture is not all gloom-and-doom fully optimized their potential from a positioning for marketers of national brands. If they are committed standpoint. Many brands may be competing in an to understanding and leveraging the principles of undifferentiated way with other brands, representing consumer preferences and benefit-structured markets, the same benefits to the same consumers in more or they have good reason for optimism. In a previous less similar ways. issue of The Hub, my colleague Eric Greifenberger Insights based on the market map can provide introduced the concept of a market map (see: Map the a breakthrough understanding of how to deliver the Market, July/August, 2009). functional and emotional benefits of a market in a JANUARY/FEBRUARY 2010  THE HUB 17
  18. 18. Concentric spheres of competitive interaction illustrate the range of competition from close-in to furthest-out Fruit-flavor All flavors of Desserts/ Desserts in other Ice Cream Ice Cream Sweet treats situations S o u r c e : Henry Rak Consulting Partners more compelling, effective or different way. Or, it differentiated itself as a high-quality, more effective can show how to expand the benefit appeal to more laundry care product. Chanel owns a certain mystique consumers, or across more occasions. in perfumes and luxury accessories. Victoria’s Secret In recent years, some brands have leveraged and Starbucks have come to stand for distinct benefits consumer trends by emphasizing the simplicity and to selected consumers that allow each to transcend the freshness of their ingredients to consumers who are products themselves to own an experience. most motivated by health and wellness. One particular An integrated view of the market with consumer brand of lunch and dinner products has done well by needs and usage behaviors can also help identify elevating its appeal from basic product attributes to a emerging opportunities to meet unaddressed or sharper connection with old-world Italian sentiments. unknown needs. The bigger and further out the idea, In other cases, positioning a brand to bridge multiple the more likely it is to require significant product benefits has proven effective in improving relative innovation. The process begins by examining the value perceptions versus store brands. different needs that people experience across occasions A market map represents “concentric spheres and their satisfaction with the current solutions, all of of consumer interaction,” in which each sphere which helps identify problem areas and gaps. represents gradually broader sets of needs being met For example, the basic “hydration” benefit of by a wider array of competitors (see chart). In this beverages has been redefined and segmented to meet sense, a brand can look for growth by extending its different nuances of the basic need, including portable positioning to stand for something bigger and broader. hydration for everyone/everywhere/anytime (bottled Taken to its logical conclusion, such brands can water), hydration with replenishment (isotonics), begin to own a “benefit platform” to a sufficiently hydration with nutritional benefits (vitamin and distinct degree that they command greater loyalty and enhanced waters), and so forth. source volume from brands in other segments of a Exploiting the sufficiently large and viable white- market. This is known as “partitioning the market.” spaces can sometimes provide more significant and A brand that has partitioned the market is sustainable growth opportunities than battling for characterized not only by strong market-share, but share within crowded areas of the market. Effective also by strong loyalty and a price premium. Tide has innovation requires brands to extend their positioning 18 THE HUB  JANUARY/FEBRUARY 2010
  19. 19. platforms and equities to reach further out (or develop competitive frame includes Subway and Quiznos, new brands), secure larger marketing budgets, and then product testing on that brand should include manage to a longer-term investment horizon. the sandwich chains’ products. Following that, An effective portfolio plan that balances risks simulating the trade-offs between different levels of and rewards by optimizing the shorter-term and product positioning, quality, pricing, and margins can longer-term opportunities of established brands and provide management a quantitative range of options to innovation simultaneously, can enjoy significant factually determine what size business is most viable competitive advantages and drive sustainable growth. from a total perspective of volume, revenue and margin. Drive ROI at the Expense of Growth. Optimizing Av o i d Q u i c k F i x e s the marketing mix is a powerful way to understand the Having examined some examples of how to drivers of the business, to quantify what works and use the market map to one’s advantage, it is equally what doesn’t, and to evaluate the mix of tactics and important to note some principles of what not to do, campaigns. However, when used in an isolated fashion or what to avoid as singular quick-fixes. to reduce costs or improve ROI without effective growth Fight Fire with Fire. The temptation to fight strategies to guide the decisions, such “optimization” store brand growth by “right-pricing” the brand, or does nothing more than facilitate a more efficient increasing price promotion, may yield short-term deterioration of the brand (using proven tactics to do it!). relief. However, unless the brand aspires to become Of course, continuous improvement in execution just like a store brand, this is unlikely to drive is important, but effective marketers seldom use the profitable, long-term growth. It may even focus the efficiencies only to cut costs, reduce risk, or make brand on fighting an unwinnable battle in the wrong minor corrections to the mix. Effective marketers part of the competitive frame. use it primarily to fund their most promising top-line That said, pricing and promotion clearly play growth strategies — and to do it smarter along the way. critical roles in the overall marketing mix. Our ••• recommendation is to simulate and test pricing and promotion strategies. This should be done as part of a Marketers need a precise, fact-based understanding comprehensive growth strategy in which these levers of the market to determine the linkage between consumer play a precise supporting role to the main storyline of needs, benefits and behaviors. Knowing the basis of a consumer benefit-centered strategy. competition is critical, not only against store brands, Undermine Product Effectiveness. Every but against the entire relevant frame of reference. promising strategy is ultimately predicated on the A market map is a dynamic reflection of the ever- assumption that the product must deliver on consumer changing ways that consumers prioritize needs and expectations. Reducing costs to improve margin can organize behavior. With this knowledge, the marketer be risky. For some brands, years of small, seemingly will understand the benefits a brand should reasonably innocuous cost reductions affecting ingredients, strive to own through positioning and innovation. packaging, amount, and quality have compounded Markets can be changed by the actions or inactions themselves into noticeable changes in overall product of marketers — to the benefit of some brands and the appeal. It is clear that the growth of store brands detriment of others. Only the fittest will survive. n in several categories is due to years of gradual cost reductions by the branded products. Without meaningful product differentiation VINIT DOSHI is a principal with Henry versus store brands, justifying a price advantage Rak Consulting Partners, a growth- becomes difficult for a branded product. For this strategy consulting firm. Vinit can be reason, we recommend testing for relative product reached at preference in the context of a brand’s full competitive or (203) 540-5524. To learn more about HRCP, visit frame-of-reference. For example, if a frozen sandwich brand’s true JANUARY/FEBRUARY 2010  THE HUB 19