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The HubMagazine #33

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The HubMagazine #33

  1. 1.   E x c h a n g e o f I d e a s   |  November/December 2009  |  $10.95  HUB �e M A G A Z I N E A publication of Reveries.com and Cool News of the Day
  2. 2. HUB �e P I VOT P OINT M A G A Z I N E NOVEMBER/DECEMBER 2009 Truth, Lies & Loyalty L et’s just get this straight once and for all: There is no such thing as brand loyalty. Each of us likes certain brands and may even love 26 COVER STORY them. We may buy them most of the time, or perhaps even every time. But the idea that we have a true bond Happy @ Zappos with any brand, like the kind of commitment we have Tony Hsieh whips up a happy culture and enviable in real life with our friends and family, is a farce. loyalty for Zappos. An exclusive Q&A interview This doesn’t mean we shouldn’t by Tim Manners. Loyalty is  try to create that kind of loyalty; most what we  of us tell ourselves that’s the end game 8 make it. and it’s always important to aim high. What it does mean is that we should take a harder look at how we go about creating what we call loyalty. ROUNDTABLE We need to admit that coupons, discounts, points and prizes are just beanbags. We ought to spend more High Fidelity time thinking about the stuff that really matters to Creating loyalty is a multi-layered challenge. people, and serve that up each and every day. A discussion featuring Richard McDonald of That means products and services that really and Fender, Steve Rotterdam of DC Comics, Peter truly solve problems and help people live happier lives. O’Reilly of the NFL, Joe Dobrow of Sprouts Providing a helping hand when someone really needs Farmers Market and Spencer Hapoienu of it, and smiling because we truly mean it. Insight Out of Chaos. It’s not because the customer is always right (nobody’s perfect). It’s because it’s up to us to make it right. 16 We may not get the same kind of loyalty we enjoy with our family and friends, but we’ll have more fun, and so will everyone else. W h i T E   PA P E R Shopping for Value Let’s give shoppers more value than they pay for. Tim Manners By Al Wittemen. tim@hubmagazine.com
  3. 3. Editor-in-Chief Tim Manners Senior Editors ALSO Peter F. Eder Jane Harris Managing Publisher Joseph McMahon 4 COOL NEWS Amoeba Music, Glazier’s Marketplace, Ford Lately, Jeffrey’s Meat Market, Kroger Customers and Glass Asda. Art Director Julie Manners Design Concept Alexander Isley Inc. 6 R ESEARCH R EPORT Crock of Loyalty | Is there any such thing as brand loyalty at the supermarket? An executive summary of a Reveries.com survey. Illustrator John S. Dykes Circulation Director 13 Bertha Rosenberg W H I T E PA P E R Think Big! | Embrace strategic planning as the great opportunity to build Brain Trust loyalty that it is. By Jim Doucette. Active International Arc Worldwide Euro RSCG Discovery 20 R ESEARCH R EPORT Henry Rak Consulting Partners Hoyt & Company Precision, Prudence & Passion | A study of multichannel shoppers yields Insight Out of Chaos valuable insights. By Masha Sajdeh and Nick Jones. Landor Associates McGuinn.com Marketing Drive 31 CASE STUDY Real-Time Loyalty | Green Hills Market builds loyalty where the shopper, product and store converge. By Richard Guha. Mars Advertising Triad Digital Media TracyLocke WomanWise Hub Club 34 W H I T E PA P E R Six Appeal | Marketing can help build strong shopper-strategies six ways. By Chris Hoyt. Prophet RPM Connect Friends BVI Networks, Inc. 38 R ESEARCH R EPORT Stand by Me | A year ago we were angry. Now we’d like some tender, loving care. By Dori Molitor. The Hub David X. Manners Co. 107 Post Road East Westport, CT 06880 42 W H I T E PA P E R Citizenship Branding | Loyalty grows when brand values and strategy align. By Scott Osman. 203-227-7060 ext. 227 hub@hubmagazine.com n Brought to you by the editors of Reveries. com and Cool News of the Day, The Hub 46 magazine is dedicated to exploring insights, W H I T E PA P E R ideas and innovation as the ultimate drivers of business success. Leading with Loyalty | Brand rituals build loyalty and drive growth. By Zain Raj. n Published bi-monthly since July 2004, The Hub’s circulation is exclusive to Reveries’ proprietary database of 50 approximately 3,500 senior-level, client- COOL BOOKS side executives in Fortune 1000 marketing Freedom, Inc., Delete and Eating the Dinosaur. departments and major ad agencies. n Advertising: For more information on The Hub’s collaborative sponsorship and advertising opportunities, please contact Joseph McMahon (joseph@hubmagazine. com) or 845-238-3516.
  4. 4. COOL NE W S Amoeba Music “Big chains went under because they lost track of core customers,” says Marc Weinstein of Amoeba Music. Virgin Megastores, says Marc, “were almost like banks or something . They didn’t showcase the product. It was always just so sterile.” Amoeba, which Marc co-founded in 1990, bills itself as the world’s largest independent record store, with its flagship located “in the heart of Hollywood on Sunset Boulevard.” It is anything but sterile. Offering “a massive collection of diverse new and used vinyl LPs, CDs and DVDs,” Amoeba “also doubles as a popular live performance venue, hosting the likes of Paul McCartney and Elvis Costello.” Marc says the real difference is that Amoeba has “so many people who love music on both sides of the counter. We don’t have a real corporate hierarchy. People really get the passion when they come in the store. It’s an infectious feeling.” He also attributes the store’s success to its multilayered connection to the local culture. “A lot of collectors come in and buy hundreds of records off the wall, and lower-income families come in and buy VHS tapes. All kinds of culture is being recycled,” he says. Meanwhile, Marc is planning to launch a digital store early next year. His idea is to “create the ultimate indie version of a digital store with a lot of data and ways to look things up.” [S o u r c e : Amy Kaufman, The Wrap, 8/20/09] Ford Lately Ford Motor’s marketing chief, Jim Farley, thinks people are no longer brand-loyal to cars because quality has become a commodity. Glazier’s Marketplace “Brand loyalty has shrunk because of widespread improvements in the products,” says Jim. “The ‘trust factor’ is more or less the same for most cars.” A single-store supermarket in Las Vegas is betting that a distinct personality will win shopper loyalty. But Jim also thinks winning us back is more about the future than the past. “I can’t tell you how many car clubs I have been to where Perhaps most notably, Glazier’s Food Marketplace “will try to they own old Mustangs and vintage T-Birds, but they drive Camrys,” lure shoppers partly by moving front and center some of the he says. fresh food preparation normally done behind the scenes.” At least for now: “So far this year, only about 20 percent of car shoppers The store will also stock “a broader-than-average assortment stayed with the same brand when they purchased a new vehicle,” of items, such as mustards and seafood, a salad bar and a sit- according to CNW Marketing Research. That’s quite different from the down dining section with a player grand piano.” 1980s, when “nearly four in five Americans were repeat buyers.” Glazier’s will also have classical music in the store, hoping Some suggest that automakers invested too heavily in advertising that it will “calm shoppers into taking their time and perhaps promoted corporate brands rather than individual models (e.g., “Have picking up a few more items.” You Driven a Ford Lately?”). But Toyota found, for example, “that The retailer has no plans “to join the pile of fliers stuffed into the rock-solid quality that made its Camry sedan the top-selling car in mailboxes,” but does intend to “try some community-relations America did not lure many buyers to its full-size Tundra pickup.” tactics, such as making a meeting room available to local groups.” Jeremy Anwyl of Edmunds.com says the focus these days is on “What we have attempted to do is take into account all “value,” and cites Hyundai as having done a particularly good the things we found that we did or didn’t like about the job with that message. Hyundai and Kia, not coincidentally, have supermarket,” says William Glazier, the store’s founder, who replaced Chrysler and Pontiac in the top ten of the best-selling cars had previously built and sold four stores near Philadelphia. in America. [S o u r c e : Tim O’Reiley, Las Vegas Business Press, 9/28/09] [S o u r c e : Bill Vlasic, The New York Times, 10/21/09]
  5. 5. Jeffrey’s Meat Market Kroger Customers “I’m a piece of antiquity, kept alive,” says Jeffrey “We don’t need to draw in others So, Kroger pays attention to small Ruhalter of Jeffrey’s Meat Market. Jeffrey was who don’t shop with us because details, “such as sending a Jif peanut born into the butchering business, 54 years ago. the biggest opportunity is with our butter coupon to a mom who buys His early memories include being wheeled on a loyal customers,” says Kroger chief only Jif,” for example. handcart “through hook-hung sides of beef.” He executive officer, David Dillon. Kroger has also grown loyalty by has very definite ideas about what it really means building “larger stores with more David says Kroger realized this to be a butcher, too. products at cheaper prices ... cleaner almost ten years ago, and has been “A butcher is a member of your family,” says on a path ever since “to put the aisles and short lines ... $4 generic Jeffrey, “who makes sure that what goes into customer first, and permanently.” prescriptions, organic food selections your children’s stomachs is fresh, healthy and Most famously, Kroger engaged with ... and a 3-cent reward for using a precisely what they need to survive.” London-based dunnhumby to build a reusable shopping bag.” database of 45 million shoppers. He also thinks being a butcher means being part It has further tightened bonds by of the community. And so he lectures, offers food Kroger’s loyalty program has avoided “launching breast cancer awareness tours, writes recipe books, teaches classes and turning its “customer into someone campaigns using local women, and hosts art shows. He once fed steaks to 100 people always looking for the next deal” by giving away its Deluxe ice cream to at local hotel, for free. He’s also now starring “in creating “anticipation and excitement loyal Twitter followers.” his own pending reality show on TV.” over savings, letting its customers Ultimately, David says creating experience great value,” says Chris The show will chronicle Jeffrey’s days behind the loyalty is all about “the importance Allen of the University of Cincinnati. counter and also follow him as he ventures out of honesty and accepting feedback,” into the neighborhood. “There’s no such thing The database has also taught saying, “You can’t grow if you don’t as ‘just being a butcher’ anymore,” says Jeffrey. David Dillon “that even Kroger’s recognize the need for that ... We were “Community. That’s what I mean.” best customers are still buying not as good as we thought we were.” many items that the retailer sells [Source: Alan Feuer, The New York Times, 8/20/09] [S o u r c e : Laura Baverman, Cincinnati somewhere else.” Enquirer, 10/8/09] Glass Asda The U.K.’s second-largest food retailer plans to open its first “transparent” supermarket in South West Wales. The store will have glass walls instead of the usual brick, “to expose areas of the supermarket normally kept out of view.” It’s part of a larger effort by Asda Group Ltd. to build shopper loyalty. Andy Bond, Asda’s president and chief executive, also plans to “try to gain customers’ loyalty by giving them more say in how the stores are run.” Beginning in January, 18,000 regular Asda shoppers will be given access to products before they are launched in its stores.” Andy says he wants to “lift the lid on how we do things, and enable our customers to help make decisions that have an impact on what we sell and how we sell it.” Asda plans to “reward customers who come up with the ‘brightest idea’ that saves the business money. If a suggestion is implemented ... a customer could be in line to receive a check for ... five percent of the first year’s savings.” As Andy explains: “It’s about entering a new partnership, working with customers rather than simply working on behalf of them.” [S o u r c e : Lilly Vitorovich, The Wall Street Journal, 10/2/09] 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 www.reveries.com
  6. 6. RE SE ARCH REP ORT is there any such thing as brand loyalty  at the supermarket? Earlier this year, the CMO Council and the Pointer Media Network came out with a study reporting alarming erosion of consumer loyalty to brands bought at the supermarket. Crock of How many brands have your loyalty “For the average brand, 52 percent of highly at the supermarket today? loyal consumers in 2007 either reduced loyalty or completely defected from the brand in 2008,” the study said. More than 25 13.9% Wow — and this was before the recession kicked in. So, we thought it would be interesting Ten or more 41.1% to ask our readers — predominantly senior-level marketers — if they thought brand loyalty was BS Five or more 27.7% where supermarket brands were concerned. The survey seemed to generate more than its One or more 15.3% share of comments and controversy. Some of the controversy surrounded the questions themselves, None 2.0% particularly one where we were trying to get at degrees of loyalty in various product categories. The critics had a good point. We simply How many brands had your loyalty listed 20 popular categories and asked respondents at the supermarket a year ago? to select those in which they usually purchased more than one brand. Some respondents noted that an unchecked box might mean they didn’t More than 25 19.3% shop the category, not that they were loyal to a particular brand in it. Ten or more 42.1% That said, out of the 20 categories, only nine — ketchup, colas, deodorant, toothpaste, Five or more 25.7% frozen dinners, laundry detergent, toilet paper, canned vegetables, and yogurt — registered as One or more 11.9% die-hard, single brand, “loyalty” categories by more than 50 percent of respondents. None 1.0% Based on respondent comments, it’s possible that ketchup and colas made the cut because Heinz and Coca-Cola dominate their respective categories. It is also possible that frozen dinners, canned How has your loyalty to private-label brands vegetables and yogurt scored well because these changed over the past year, if at all? categories might be less popular than some others. Other respondents also took issue with our Increased 24.9% definition of loyalty as “a brand that you buy at the supermarket every time, without fail, and to which Stayed the same 59.2% you have an emotional or rational attachment.” Some said they didn’t buy the same brand Decreased 15.9% every time because favored brands weren’t always available. Others said they were on a loyalty hiatus from some brands because of the recession. Still others said they were loyal to more than one brand in a category and liked some variety. 6 THE HUB  NOVEMBER/DECEMBER 2009 THE HUB  NOVEMBER/DECEMBER 2009
  7. 7. Loyalty In which of the following categories do you usually An open-ended question, in which we asked respondents to name the brands to which they were most loyal, was notable for intense “loyalty” across a large number of brands. As one respondent put it, “Loyalty, not monogamy.” So, perhaps the prevailing definition of “loyalty” is different in marketing than it is in ordinary life, where loyalty usually means purchase more than one brand? Pick as many as apply. long-term emotional devotion beyond reason, sometimes at odds with one’s own best interests. Bread 68.3% Maybe marketers (and shoppers) have their own definition of loyalty that’s a step or two Breakfast Cereal 68.3% removed from its traditional meaning. Could be that’s a result of so many years of marketers Ice Cream 67.8% defining “loyalty” as discount programs whose real objectives, ironically, can be to promote disloyalty. Potato Chips 62.4% In fact, although a solid majority (67 percent) of respondents said they use a loyalty or retailer Beer 61.9% charge card at their favorite supermarket, a nearly equal number (64 percent) said that their Pasta 61.9% supermarket’s loyalty or charge-card program did not make them more loyal. Cookies 60.9% Meanwhile, our survey also found remarkable stability in levels of loyalty with 41 percent saying Bottled Water 59.4% they were loyal to “ten or more brands” today, versus 42 percent a year ago. Chicken 58.4% And despite conventional wisdom that private- label brands have enjoyed a sales bonanza during Paper Towel 53.5% the recession, 59 percent of our respondents said their loyalty to private-label brands had “stayed Fruit Juice 52.5% the same” over the past year. Respondents also said they were more loyal to brands (54 percent) Yogurt 47.0% than to the supermarkets where they buy them (46 percent). Toilet Paper 45.0% Finally, to the bottom-line question of whether brand-loyalty is BS, a whopping 86 percent said, Canned Vegetables 44.6% “no.” But don’t get the idea that just because we’re “loyal” to your brand means we’re going to buy it. Laundry 44.1% Respondent pRofile A total of 203 survey respondents included Frozen Dinners 42.6% brand marketers (24%), consulting firms (19%), and agencies (16%). Twenty percent worked Toothpaste 33.2% in packaged goods firms, 13% in media/ entertainment and seven percent in retail. A Deodorant 31.7% majority were senior-level executives with 72% reporting more than ten years of experience in Colas 29.7% marketing. Ketchup 26.7% Survey Results: http://hubmagazine.com/survey/loyalty_bs NOVEMBER/DECEMBER 2009  THE HUB 7 NOVEMBER/DECEMBER 2009  THE HUB
  8. 8. ROUNDTABL E Creating loyalty is a multi-layered challenge. High Fidelity how do you build  selling and the care and feeding of advertising or customer service the customer along the way. to build something that’s bigger loyalty in the store? than your four walls. I think loyalty Peter O’Reilly: We’ve tried to programs help, and I’m a strong Richard McDonald: We look take advantage of our retail believer in them. They keep some at retailers more as business opportunities by giving our customers shopping because they’ve partners than just outlets for our fans the type of selection and built up some points, but that’s more products. It’s really about long-term personalization opportunities at affinity than true loyalty. relationship building and it can’t retail that allows them to customize be a one-size-fits-all approach. their apparel and products and then I try to use words and language to A We equip the salesperson to connect that with the game. generate a deeper connection. If R oundtAble communicate our message, or else F eAtuRing they won’t talk about us. Richard McDonald This includes product descriptions, Customer service needs to rock as Fender Musical Instruments photography, packaging, web tools, videos, staff training, cool and hard as our guitars and amps. innovative promotion ideas — and R IC H A R D MC D oNA L D Steve Rotterdam the more turnkey it is, the better. DC Comics Brands need to take responsibility to empower retailers with the tools We’ve also expanded our product you can create a certain tone with Peter O’Reilly National Football they need. line to hit our female, youth and the language that you use, you’ll League Steve Rotterdam: Retail is where urban fan base with product get customers who recognize it our brand comes alive. This is lines that are fresh and unique. because it resonates with them. Joe Dobrow It’s about making sure that the They will perceive that there are where the over-the-counter debates Sprouts Farmers intensity and meaningfulness of some real people behind that store happen over what’s exciting and Market the NFL and individual teams and they are their kind of people. what’s really rocking people’s connect with fans at retail. And then you’re in business. Spencer Hapoienu interests. It is a place where you Insight Out of Chaos can have conversations amongst There is such a social dynamic Spencer Hapoienu: Retailers have peers who have similar interests. around our game, around bringing a big advantage over every other With very, very rare exception, our people together both at home and industry because they have the retailers are also fans themselves. at the stadium, that we need to opportunity to talk to the customer When a comic or graphic novel sells make sure that our retail and our on a regular basis, one-to-one. They well it’s because the retailers have licensing portfolio taps into those can build a behavioral transaction expressed their confidence in what elements of our brand essence. database that can tell them what we are doing to support the books. their customers respond to, what Joe Dobrow: The question is It’s really a business built on hand their customers like and don’t like. whether you can use programs, 8 THE HUB  NOVEMBER/DECEMBER 2009
  9. 9. It’s an enormous advantage that When our consumers most retailers don’t tap into. But I think that’s starting to change are having a conversation, because those companies are we’ve done 80 percent of our job. having so much success in a very difficult marketplace. S T E v E Ro T T E R DA M More and more companies are taking advantage of retailers that O’Reilly: Across the history of information or offers to people, so have data on what their customers the NFL, great technology has that they will have an affinity for do, and are using that to be much made the fan experience better or our stores. more relevant. more convenient. This September Now, Sprouts is a little bit we launched our new Red Zone unusual because we have an over- how can technology  Channel, which allows fans to representation of senior citizens watch every touchdown of every promote loyalty? among our shopper base. So, we’ve game on Sunday afternoons. got a lot of customers who don’t McDonald: Fender is unique in Our NFL Mobile Live product with want an in-store kiosk or a mobile the sense that we’re creating tools Sprint enables streaming of NFL app. For them, ironically, what’s for musicians to make music. Network games and provides every generating some loyalty is that my We’re known for our vintage tube stat and every play of every game. store is not techno-heavy. amplifier technology that’s still the We also continue to look at in- Hapoienu: As the ability to store, choice of most professionals. It’s stadium enhancements — whether analyze and interpret large volumes a lot of the same technology that that’s ordering food or seeing replays of data has accelerated, it has become we developed in the ’50s and ’60s, —we make sure that our most loyal easier to use technology to talk to but at the same time the needs of fans that go to our games have an customers on a one-to-one basis. the contemporary artist may be incredible experience. completely different. You can produce printed materials We also have a very sizeable that talk to customers one-to-one, As a result, we’ve had to evolve database, compiled across all of and you can reach the customer technologically within the company our different touch points. We use in the store with vehicles on a from a product development that to connect to fans on a one- targeted basis. You can use the standpoint and offer digital products to-one basis and customize our internet, email and Twitter. to meet the needs of new players. communication by favorite team. So, sustaining loyalty is about We’ve got so many fans whose There’s another opportunity to evolving with technology to fill a favorite team is not their local build loyalty by putting new latent need that musicians have to team. So, our database and other technology into products. For create something new. forms of online communication example, Nike put a chip in its help keep them connected. sneakers and then attached that to Rotterdam: Technology has an iPod. That’s a huge advantage changed the dynamic. It is no Dobrow: I’m a lifelong believer in when you integrate technology into longer a situation where you can database marketing. In the past, the product and then tie that back expect your consumer to find you. you had a lot of little mom-and-pop to everything else you’re doing. Consumers expect you to meet stores and they knew who their them where they are. customers were. And that was Those brands and channels that really the relationship on which how can social media  ignore the tools miss out on commerce was built. influence loyalty? opportunities for growth and to Today, we use technology to McDonald: Fender is all over social build loyalty. They are losing that identify and get to know our media. We are directly linked to core customer who will continually customers. The trick, of course, is Facebook, Twitter, MySpace and come back to your brand even when that you don’t want to cross the YouTube. We also have a very it’s not convenient or financially line of privacy. But we do want active community section on conducive for them to do so. to be able to serve up relevant Fender.com. We’ll post a question NOVEMBER/DECEMBER 2009  THE HUB 9
  10. 10. If we go deep into areas that are Once you know who your customers are and how they divide themselves authentic to our brand, we’ll have the up in various segments, you can most success with building fan loyalty. create affinity groups through social media that really provide PE T E R o ’ R E I L Ly that segment with interesting information or opportunities. Then it becomes a platform to build on our social media networks as The other thing — and this is not retention and sell more product, if we were sitting with each other, something you traditionally see but in an indirect way. and I might ask you: What’s your from a sport league — is that we’re favorite guitar? really digging into the youth space how about loyalty  and focusing on our next generation We’ll get thousands of people, of fans. For example, we’ve created among employees?  literally, in hours — and that creates a virtual world, NFL Rush Zone, McDonald: Everything that we loyalty. If you measure loyalty which is a great home for NFL kids do as employees at Fender is for through engagement and retention to connect, to chat with their the customer because that’s the of our customers — which is a great friends across the country. only thing that matters. It’s not way to grow your business — social media is a great way to do that. Dobrow: With social media, you for your boss or the CEO; it’s for can’t look like you’re marketing — the customer. That is emphasized Rotterdam: We include Comic-Con and you can’t look like you’re trying from the top to the bottom every and other fan conventions in our to look like you’re not marketing. day here; it is a mantra of the definition of social media. Such What you have to do is consider company. When you do that, then events are not just opportunities to what this technology has done: It’s your mission is pure and people bring our talent and fans together, brought us back to an old way of appreciate it. but also serve as forums in which to doing business where humanity The other thing that works for break news that radiates out to fan and transparency, sincerity and me is that I hire my customers. I press and mainstream media. honesty actually matter. hire people who dig this brand, Our daily blogs are also key But when you think about the understand it, love it and know elements of our communications language used in social media: you what the experience is like for strategy. They, in turn, feed follow somebody on Twitter, you the dealer, distributor or the information into our Facebook and link with someone on LinkedIn, or consumer. We bring those people Twitter efforts. you friend someone on Facebook in and it gets into our tribal gene This ensures that our message — that’s not deeply felt stuff. pool. Customer service needs to gets out to those who might not rock as hard as our guitars and True followers of the Grateful Dead partake of blogs or conventions, amps. That’s our culture. followed them around from venue but are still plugged into their to venue. That was loyalty! That’s Rotterdam: One of the first own social network communities. not what we’re talking about here. questions I was asked when I met When our consumers are having a The challenge is to figure out how our sales team here had nothing conversation, we’ve done 80 percent to bring substance to it to get that to do with where I’d been or what of our job. longer-term affinity, or loyalty. my plans were. The question was: O’Reilly: Delivering information in So, what are you reading? I rattled Hapoienu: Twitter is going to real time, whether that’s through off titles of comics I read regularly be a huge opportunity for a lot Twitter feeds to communicate the and I distinctly remember one of businesses to drive people to “inside” information our fans want guy saying to me, “Okay, that’s their products based on a sense on what’s happening at the league acceptable. Pedestrian, but of urgency. If you can create an and with our clubs, is critical. acceptable.” affinity with a group of customers We’re really staying on top of how because you know what they buy, Turns out I wasn’t reading enough our fans want to connect with the you can create an environment independent stuff. But I am now. game and the league. that people are drawn to. With comic-based literature, you 10 THE HUB  NOVEMBER/DECEMBER 2009
  11. 11. have to have that level of personal The question is whether you can engagement if you hope to have any credibility with your fans, build something that’s bigger creators and staff. than your four walls. O’Reilly: Commissioner Goodell is JoE D oBRoW building an innovation culture at the NFL, and giving everybody a voice. more relevant relationships with aligned with your business. For a customers, whether that’s in the company like Fender, that’s going to The whole organization is part store, on the web or on the phone. be music education, especially with of a team — from the folks on the the arts under siege in the schools. business side to those out on the If you’re a salesperson at retail field — the NFL is one unit with and your company has given you Little Kids Rock is one of our one mission. It’s an organization tools so that you know who your philanthropic programs. We have with incredible loyalty among its top customers are, to recognize the Fender Foundation that gives employees, and that culture of and acknowledge them, that’s a grants to everything you can innovation that the Commissioner great way to build loyalty.Anything imagine that results in people established is one of the core that makes the employee feel giving the gift of music. reasons that it remains so strong. more satisfied and gratified about How do I keep a 60-year-old brand their role makes them much more Dobrow: Shopper expectations about relevant to a group of young, interested in staying with that employees are now so low that even emerging guitarists who, in company. a little bit of a customer service spark defining themselves, are going to can make a huge difference. Of It also creates more energy for the dismantle everything their parents course, it cuts the other way, too; a store owners because they’ve got thought was cool? The only way I little bit of a customer service more control over the business, can do that is through loyalty. And problem can be devastating. and have more confidence to do the only way I can get loyalty is more merchandising, to expand, through honest, sincere, authentic I like to spend time training the and to remodel. It’s about giving engagement with my customers, cashiers before a store opens the employees tools to make them the people who use our products because that’s my marketing better at what they do as it relates and depend on them for a living. department! I want those cashiers to the customer. to know what kinds of questions Rotterdam: Our characters have a customers might ask about our long history of being utilized for marketing programs, and to interact how does social  good causes. Dating back to World with those customers so they can responsibility create  War II, Superman, Batman and give — and get — feedback. loyalty? Wonder Woman enlisted kids to get their parents to support various Employees are just a unique kind McDonald: When we talk about bond efforts. We’ve also put them of consumer who happen to see social responsibility, we’re talking and the rest of the Justice League the company from inside and out. about the responsibility of being to work on behalf of many social, They are blogging and Tweeting honest in our communications, civic, health and fitness related when they’re not at work so their the brand promise we make and organizations. perspective can be a source for building tremendous consumer how we keep the brand promise. As a company, we’re supportive loyalty. That kind of responsibility returns of an initiative called the Comic in loyalty. So, if you treat your Book Legal Defense Fund, which Hapoienu: Developing strong customers like you treat your addresses various issues related relationships with customers friends and you treat your family to censorship in our industry. energizes employees and makes (hopefully you do that well), And, where we can, we will also them more comfortable with you’re making it. support cause-related efforts of the products they are selling. Now, if you have a cause that’s local retailers, especially those It galvanizes them to be more pure, it should be something that’s concerning literacy. creative and find ways to create NOVEMBER/DECEMBER 2009  THE HUB 11
  12. 12. T HOUGHT L E ADER S At the end of the day, our costumed after selection and quality; value; heroes are champions of good. and the shopping experience. But These are characters whom parents a table can stand on three legs, and grandparents can feel good and while social responsibility - talking to their kids about, and provides stability, it’s not yet that builds loyalty as well. critical for building loyalty. RICHARD MCDONALD is For example, up until recently, svp of global marketing for O’Reilly: About two and a half 99% of the bags we gave out at Fender Musical Instruments years ago, we looked at everything Sprouts were plastic. Now we Corporation, responsible for that we’re doing in the corporate marketing, advertising, product offer paper bags that cost four social responsibility space. We development, artist relations, times as much, but it was the right were doing a lot of things well, product education, promotions thing to do. No one came up to us but that audit led us to going deep and events. afterward and said, “Thank God in areas where we knew we could you made the switch. Now I’m have the most impact, and that STEVE ROTTERDAM is svp of sales not going to shop anywhere else!” and marketing for DC Comics, were very authentic to who we are But over the long haul, it will help running both the direct and as a major sports brand. build loyalty. book trade sales departments, That has led us to a major supervising marketing and Hapoienu: Too often the ideas publicity while also overseeing commitment to youth-health and smack of transparent marketing advertising-sales and custom fitness under our NFL Play 60 publishing. PETER O’REILLY is vp, fan Developing strong relationships with strategy and marketing for the National Football League, and customers energizes employees. also leads the NFL’s corporate SPE NC E R H A P oI E N u social responsibility initiatives. He previously was a director of marketing for the National Basketball Association. campaign. The goal is to encourage on the coattails of a charity. kids to get at least 60 minutes of Developing ideas that are either JOE DOBROW is vp, chief marketer physical activity every day. borne from the DNA of the and “tofu” peddler at Sprouts Farmers Market, a 40-store, retail brand or the culture of the We’ve gotten tremendous traction Phoenix-based chain of natural customers are the most effective. — nationally, across 32 clubs and foods stores. He previously with employees, as well — because Saks is running a program to sell led marketing at Whole Foods, Balducci’s and Flexcar. it is so authentic to who we are as coats by providing 25 percent off a a brand. new coat if the customer brings in an old coat that Saks can donate to It is something that our athletes SPENCER HAPOIENU is president the appropriate local charity. live every day, and it has given us and co-founder of Insight Out a major impact with kids, families While that promotes coat sales of Chaos, a database and direct and schools. So, whenever we at Saks, it is possible that many marketing company. He can be reached at spencer@iooc.com or think about social responsibility, customers might not think of (212) 935-0044. it needs to be so core to our donating an old coat and now overall mission and part of our would. Or, they might not have business. If we go deep into areas thought about buying a new coat that are authentic to our brand, and now would. we’ll have the most success with Either way, charities will get the building fan loyalty. benefit of coat donations and Dobrow: Social responsibility is Saks and its customers have the fourth leg of a table on which done something for the local consumers make buying decisions, community. n 12 THE HUB  NOVEMBER/DECEMBER 2009
  13. 13. WHI T E PAPER Embrace strategic planning as the great opportunity to build loyalty that it is. Think Big! By Jim Doucette they yield actionable plans, according to the McKinsey Quarterly. At the heart of this dissatisfaction: 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 B n The approach to investment prioritization is uilding strong consumer loyalty to not systematic. your brand represents the Holy Grail n Growth targets are not driven by consumer or for marketers. Strong consumer loyalty category realities. gives the marketer the ability to do n Growth strategies are overly reliant on white space, all sorts of things that we marketers — and our acquisition, etc., versus “controllables.” firm’s shareholders — love! Strong loyalty enables n Growth options are not systematically quantified, making comparisons across franchises and operating a brand to grow through line extensions and groups difficult, if not impossible, to make. new innovation, to price against weaker n The financial plan is often disconnected from the competitors, and employ other strategies that strategic plan, leaving the most carefully crafted deliver ever-higher levels of volume and profit. strategies starved for implementation resources. When should we start down the path to this land It is easy to see the path that leads to such of brand nirvana? Well, in a word … now! Now is dissatisfying strategic plans. A good strategic the time of year when many marketers are creating planning process should be a dynamic, creative their strategic business plans, which is the essential discussion about discovering the possibilities to grow starting point for creating a stronger consumer consumer loyalty and take your brand to new heights. proposition and, ultimately, more loyal consumers. However, when you are embroiled in a business, The bold executives among us will plot a course it is hard to get “out-of-the-business” and challenge for dramatically accelerated growth. That is certainly conventional thinking. Further, the breadth and the intent of the “strat plan.” Too often, however, depth of consumer insight needed to drive the strat strategic planning becomes a derivative exercise. The plan is often not present. How can you make sure last strategic plan is dusted off and developing the not to fall into this trap? There are two fundamental new plan essentially becomes a process of making steps for creating a successful strategic plan and, incremental changes to the prior one. consequently, strengthening consumer loyalty to your The results of strategic planning processes are brand: 1) Understand consumer behavior and the certainly not adequate. Fewer than 50 percent of senior drivers of behavior in a precise, detailed way and use executives are satisfied with their current strategic the behavioral foundation to organize everything else planning processes and fewer than 25 percent think you know about the consumer (i.e., needs, attitudes, NOVEMBER/DECEMBER 2009  THE HUB 13
  14. 14. etc.) and 2) Build a plan upon this behaviorally-based between the core business, new innovation and foundation. acquisitions/divestitures across the portfolio. A comprehensive understanding of consumer behavior starts with an in-depth analysis of A GRowth Action plAn consumer usage and purchase patterns. There are Before we get to balancing activities across the two very powerful analyses that allow marketers to portfolio, it’s time to create growth action-plans at the understand, validate, and leverage these behaviors brand level in six areas: empirically: A usage domain that analyzes the largest Marketing Strategy. Two critical questions need to viable set of competitive/substitutable products; and a be answered: What is the right strategic positioning purchase structure that defines the drivers of purchase for my brand and how should the positioning be behavior in close-in, specific, product categories. communicated to my brand’s target consumers? Each one provides distinct and vital insight into If the consumer behavior analysis determined how consumers behave. The combination of usage that your brand’s actual competitive frame is broader and purchase behavior gives you the foundation to than previously imagined, your new strategic brand develop much clearer strategic decisions to make your positioning should reflect this broader competitive brand the one that best meets consumers’ needs. set. The strategic brand positioning should be very When integrated with targeting, need state, specific with regard to competitive frame, target, product performance, brand benefit and brand-equity benefits, reasons-to-believe and brand personality. information, you have the insights to create a framework A well-defined positioning easily lends itself to for accelerating the growth of your business. The a copy strategy that is the linchpin to making sure framework should define a future in which your brand is your brand’s messaging is synchronized across all more differentiated versus your competitors and creates marketing, public relations and selling touchpoints. stronger loyalty with a wider consumer base. Even marketing and sales programs that sometimes Where should your brand compete to establish have more of a short-term, tactical objective (such as a competitive advantage? Your brand’s strategic many consumer promotions and in-store promotions) positioning should answer that key question. For should be linked to the strategic positioning to example, does the brand compete in soup or simple reinforce the brand’s new message. meals; OTC medicines or pain management; isotonics Getting the positioning right, and consistently or refreshment beverages? reinforcing the positioning through the entire brand’s Furthermore, do you have a strategic brand messaging, is a key to strengthening loyalty. And, positioning that is clearly articulated and precisely once you have the right positioning, stay with it! A good defined? Is it understood and embraced by the entire positioning should last for years: Tide’s In — Dirt’s business unit and your business partners? Does the Out; and It’s Not Delivery, It’s DiGiorno — are examples positioning enable your brand to stand apart from of positionings that grew those brands for many years. your competition in a highly relevant way? Spending Strategy. A precise positioning also Answering those critical questions with a yields efficient growth for established brands because consumer behavior-based approach is the key starting you can calculate the profit-maximizing point of point for strategic planning. In addition to providing marketing spending — across advertising, consumer clear direction for each brand, defining the strategic promotion and trade (or customer) promotion — brand positioning ultimately allows you to define the against your brand’s new competitive frame. roles for each brand in your portfolio. In cases where the competitive frame for your brand Against the newly defined competitive frame, is much larger than previously imagined, the brand you will be able to evaluate each brand’s ability to likely should be spending more on marketing to reach grow revenue and deliver on margin requirements by the broader audience with your new, more relevant assessing the brand’s competitive effectiveness and message and build consumer loyalty to your brand. the attractiveness of its core categories. The Goldfish brand has increased its marketing You are then able to calculate the expected future spending behind its tasty, fun and wholesome treat value of each brand. The results are role definitions for positioning, which allows the brand to source volume each brand in your portfolio in a way that is rigorous, far beyond the kids’ crackers category. With the ‘mom quantitative and rooted in consumer’s actual behavior. appeal’ of being a baked (not fried) snack and its fun- Once consumer behavior is well-understood, for-kids message of the “snack that smiles back,” the the second key is to balance strategies and activities brand has enjoyed rapid growth in recent years. 14 THE HUB  NOVEMBER/DECEMBER 2009
  15. 15. innovation Strategy. In addition to growing the base Several years ago, the Tylenol brand was business, growth through innovation is part of the able to grow profits while maintaining volume by lifeblood of any successful brand. The key question to understanding the brand’s true competitive frame and answer is: How and why will the new product replace pricing within that competitive context. consumers’ existing behavior with a new behavior? Selling Strategy. Even well executed, great While creativity is important in any innovation marketing strategies cannot be fully realized unless process, it should be directed after a thorough the consumer concept is taken all the way to the understanding of the existing consumer behavior point-of-sale. that must be changed, the benefits consumers seek At this point, you need to translate the brand’s through this behavior, the attributes that support consumer strategies to category leadership platforms the behavior, and the parts of their current behavior with shelving, assortment and promotion strategies consumers are willing to change and not change. All that reflect consumer behavior and are tightly linked of these facets should be understood by the consumer to marketing strategies. behavior foundation you built at the beginning of the For example, by bundling the right items together, strategic planning process. a promotion can address a larger set of consumer Once the V8 brand clearly understood its unique needs, different users or different usage occasion, vegetable nutrition benefit within the world of juice, so it will tend to be more incremental. For example, it allowed the brand to expand into vegetable/fruit a pain relief promotion might include headache, blends, such as V8 V-Fusion, as well as soup, with V8 body pain and muscle pain remedies, or powdered Soup. Each new product contributed to the overall V8 soft drinks could be packaged in stick or multi-serve trademark’s position of “another delicious way to get canister forms. your vegetables.” In an era where many consumer purchase Comparing the innovation opportunities you have decisions are made at the shelf, getting selling defined with your company’s in-house development strategies right is often the critical link in driving capabilities also can form the basis of an acquisition loyalty to your brand. strategy. On the other hand, if segments of the business Portfolio Strategy. After brand-level strategic no longer fit well with the brand’s competitive frame, plans are developed, it is time to integrate the brand you may want to consider divesting those segments. plans into a portfolio plan. This is where the brand Each strategy — smart innovation rooted in actual roles, which you determined earlier in the strategic consumer behavior, strategic acquisitions, divestiture planning process, come into play. of non-strategic assets — sharpens your brand’s Meshing brand roles with the brand-level core relevance to the consumer and strengthens loyalty. business (marketing/selling/financial), innovation Financial Strategy. The essential questions to and acquisition/divestiture plans should lead to the answer at this stage are: What activities truly drive right blend of activities that are sequenced to deliver profitable volume growth and what is the optimal accelerated top-line growth while delivering bottom- pricing for my brand? line commitments. A thorough brand “due-to” analysis will Strategic planning season is the time to step identify the activities that truly drive growth for the back from the day-to-day activities of managing the brand. This is an especially important step. In our business and assess your business in a holistic, yet in- experience, activities that are within your control depth manner. This is the time to be bold and create a often play a large role in determining the success of plan that strengthens consumer loyalty to your brand your brand. and puts your business on a new, higher-growth A clear and precise understanding of your brand’s trajectory. n competitive frame identifies the competitors consumers are likely to switch to and forms the basis for a brand pricing strategy. For a more accurate measure of price elasticity, consider brand (not item) elasticity within JIM DOUCETTE is a managing director the context identified by the competitive frame. with Henry Rak Consulting Partners, a growth strategy consulting firm. Once the pricing architecture has been determined, Jim can be reached at jdoucette@ the final step is to identify the “right” spend back that hrcpinsights.com or (203) 698-7712. maximizes revenue and earnings while protecting volume and equity, which in turn drives loyalty. NOVEMBER/DECEMBER 2009  THE HUB 15
  16. 16. WHI T E PAPER Shopping for Value By al Wittemen tr a c y l o c k e W hen i think of loyalty, i don’t think of brands. i think of people. i think     bout what it is that a person does that makes him or her so special that it   a  makes me loyal. it’s the intellectual, spiritual and emotional connections  that make the difference. For me, loyalty is having lunch with my friend Tim  at the Little Kitchen in the Compo Shopping Center on Route 1 in Westport, Connecticut.  Mitch Albom had his So, we’re having lunch, lunch with Morrie, which had an impact on his life, Let’s give shoppers more and as usual, I always get around to asking Tim about and my lunches with Tim do the same for me. Our value than they pay for. the next issue of the Hub. It’s not like I shouldn’t lunches are always about remember. But this time making people think, smile, and realize that sometimes the issue is going to be about brand loyalty. And my there’s a different way of thinking that can lead to a first thought was, “Hey, piece of cake.” Hell, that’s These lunches are always about the truth. They more creative solution. who I am and what I’ve done my entire life. In fact, my career was built on making people retailers and their collaborative relationship. In always begin with what’s new with shoppers and loyal to brands. So, whether it’s Heinz ketchup, Finlandia cheese or Swift beef, it’s all about creating years past, when we talked about brand loyalty, our brand loyalty, and I know how to do that. assumption was that whatever you wanted to do at But the truth is that there really is no such thing retail could be done. as true brand loyalty anymore. Almost nobody buys That’s not true today. We now also have to the same brand all the time. Even fewer people will consider what can be done with the retailer, and that bother to find a different store if their favorite brand affects what we can do to build brand loyalty. isn’t available. That’s the real acid test of brand loyalty The second issue concerns the difference between and it’s a test few brands, if any, can pass every time. what retailers and brands say, and what they do. Loyalty is bull when you apply it versus those This dichotomy intrigues me. The reality is that some definitions, especially in consumer packaged-goods, marketers develop plans based on who they are, how ever since the Great Recession. Never before have they live and what they do, versus whom they are we seen life in general — not to mention ingrained marketing to and what they can do for them. purchase behaviors — so disrupted. Last but not least, when Tim and I have lunch, we’re And yet, everyone has an answer to the question, always looking for who’s doing it best and the results “Which brand are you most loyal to?” Often, it’s a food achieved, because it’s always about keeping it real. item. Some people are addicted to the taste of Tabasco 16 THE HUB  NOVEMBER/DECEMBER 2009
  17. 17. sauce, Heinz ketchup clutching their coupons, or Diet Pepsi. Others and checking their are hooked on personal circulars. Nobody looked items, like Dove soap particularly happy. or Head and Shoulders It’s not just at the shampoo. supermarket. You could So, this isn’t just pick almost any brand another Hub issue about in America and it is at loyalty, or another time risk. General Motors used in space where we’re to be a brand everyone going to talk about brand aspired to. The Gap used loyalty. This is really a to sell what everyone watershed moment where was wearing. We all never has the concept of remember the Marlboro brand loyalty been so important to achieve, and yet so Man. And who didn’t want an account at Merrill Lynch? difficult to accomplish. Most people don’t even mention these brands in There is no “normal” where loyalty is concerned polite company today, much less trust them enough to dramatically changed shopping behavior. today. There’s only a new book, yet to be written, on be loyal to them. This collapse in consumer trust has I decided that the only way to attack brand brand loyalty. Whom do we trust anymore? We used to loyalty in a fresh way, is to go back to the three things implicitly trust brands, but now it’s almost as though Tim and I talked about at lunch: The truth about brands are guilty until proven innocent. A few have shoppers and retailers; the reality that brands have held onto their equities — Walmart, McDonald’s, Nike more price pain; and the fact that, despite all of this, and Apple, come to mind. But most others are slipping. people still believe they are loyal to certain brands To restore trust, marketers have to think about the cost-to-benefit ratio. The challenge is that it used even though those loyalties may have shifted. re-framing value differently. They have to think about A MAtteR of tRus t to be easy to identify the number-one attribute of The truth about consumers and customers can be a brand, develop a positioning based on that, and summed up by this quote from Kelton research: “This communicate it. recession has accomplished what markets spend But today, it’s harder than just identifying lifetimes trying to do: disrupt ingrained purchase an attribute; we have to create value and do so behaviors and encourage change.” on a consumer’s and shopper’s terms. That’s not We marketers used to make a living on creating necessarily what we think the attribute is, but it’s not demand through increasing impulse purchases, for that complicated, either: It all comes down to value. example. That’s not as easy anymore. One recent Shoppers will shop less unless we’re providing them survey found that 74 percent of shoppers have with value. However, often that’s a category decision, changed their shopping behavior and are making not a brand decision. fewer impulse purchases, using more coupons and buying more private label. RetAileRs ARe RespondinG I saw this with my own eyes while doing in- The truth is that retailers, more than brands, are store intercepts last Saturday. Most shoppers had responding to these shopper changes. Just look at their heads down, reading their shopping lists, their ads. My most favorite thing on Sunday morning, NOVEMBER/DECEMBER 2009  THE HUB 17
  18. 18. after going to church, is this classically, based on pulling out the newspaper insights and research. It all ads and analyzing what The Book of Loyalty looks perfect, except for one retailers are doing. There’s thing. You don’t make your Let’s write a new book on brand loyalty, a difference today. based on three things: numbers. Traditionally, retailers What to do? Try this: lowered prices to clear 1. Prove our value every single day. If we want Go shopping for a week’s inventory. You could almost brand loyalty, we need to give loyalty, and groceries for a family of four, we need to give loyalty in terms of what predict the ad, year after on a budget of $100. Dinner the shopper wants in terms of value. year. Today, they’re cutting for seven nights. This is no prices because consumers 2. Meet the basic needs of your shopper. In joke: Most of America makes are demanding it. They’re the past, we tried to create wants through just $45,000 a year. When just not buying unless they impulse purchasing and demand creation. you look at what they’re Today, people want what they need, see the value and many spending on other things, a week’s worth of groceries. nothing more and nothing less. retailers are providing it. that’s what they have left for You know, I always 3. Communicate how our solutions solve thought Kroger had too their problems within budget with better By Tuesday, you’re going I think Kroger doesn’t have much private label, but now packaging, displays and most of all, a to have a headache and better, higher-value product. you’re going to need pain enough, even though they’ve relief, so that has to come increased their private-label out of the $100. Would you line by 15 percent. Kroger’s buy your own brand? Not private label is selling and why wouldn’t it? A “Big K” a chance. You’re going to buy the value brand, the Kroger-brand soda sells for about half the price of a private label. name brand. The conventional way of building brand loyalty There’s a big difference between 10 percent and isn’t working. If we want to get real about building 50 percent when it comes to prices. It is the difference our brands, we’ve got to get real about what shoppers between thinking you have brand loyalty and living think not only about our brands, but the brands in the real world. Some marketers, such as Procter & they’re buying. That private-label brand, to them, is Gamble understand this. more important than ours; they’re more loyal to it P&G had forever dismissed the idea of cutting because they see the value in it. prices for its brands, whether it’s Tide or anything else. But in September they announced price cuts cleARinG puRchAse huRdles across 10 percent of their global line. They’re going I did a few store checks to help me think through to increase promotions and emphasize value benefits, how loyalty has changed, and saw several purchase and are introducing a value offering through a new barriers. The first one is quality and performance. line called Tide Basics. Shoppers think the private-label brand is just as good Unless your brand is making a difference in terms as ours. That’s what they think. When it comes to of how that shopper and retailer defines value, it won’t cost, they cannot afford a branded product even if it be around very long. It probably doesn’t even deserve did have a slight advantage. They have $100 to buy to be on the shelf. seven meals for the week. To bring this reality to life, suppose your brand is From a sentiment standpoint, they are seeing two in the pain relief category. How can you build loyalty products on the shelf that, based on the appearance of in a category where the fastest growing brand is the product and package, seem similar. But one brand retailer’s private label? The retailer’s own pharmacist is charging $4-$5 more than the next. From a business recommends the store brand as just as good and standpoint, shoppers do not like a brand that charges lower priced. Whom do you trust more than your so much more for no apparent reason. pharmacist? From an ethics standpoint, this kind of price gap So, you come up with a new positioning, complete makes them angry. They see it as borderline illegal or with advertising and digital campaigns. You go about immoral for a brand to charge a higher price with no 18 THE HUB  NOVEMBER/DECEMBER 2009

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