Jill Lajdziak thinks this recession is her best-ever moment to innovate. Not coincidentally she also thinks retail is a critical point-of-difference for her born-again brand, Saturn (link).
For Saturn, retail is the outlandish idea that buying a car should actually be a pleasant experience — before, during and after the sale. Jill is not the only one who is thinking “different” about retail.
Microsoft is creating stores that may not sell anything, but will help customers experience its software. Shiseido is training 5,000 “beauty counselors” to pamper its customers with personal service, and sell more products as a result.
Nespresso is Nestlé’s fastest growing brand in part because it controls its own retail experience through 175 of its own boutique stores, including its flagship on the Champs Elysees in Paris.
P.C. Richard, an east coast electronics retailer, is setting up shop in a rundown neighborhood along the New Jersey turnpike as part of a strategic plan to improve customer service and drive its next round of growth.
GameStop, a purveyor of used videogames, is growing not only because it offers great value, but also because it employs enthusiasts who speak its customers’ language.
So, while most of the retail world responds to economic crisis by laying off workers and slashing prices, a few enterprising souls see something quite different indeed.
They see retail as the future of marketing itself, a future in which it’s the experience that matters most, and faith that the cash register rings when we treat our customers right.
Imagine if you opened a store where selling stuff wasn't the main idea. What would be the point of that?
That's the challenge -- and opportunity -- facing David Porter, the former Wal-Mart executive just hired by Microsoft to figure out what a Microsoft "store" should be.
In fact, David told the Wall Street Journal that he already has a pretty clear idea: "The purpose of these stores is to create deeper engagement with consumers and learn firsthand about what they want and how they buy," he said.
According to the Journal, "the stores could feature a range of personal products from personal computers running its Windows operating system to cellphones running the company's Windows Mobile operating system to its Xbox videogame console."
But since Microsoft, unlike Apple, is mostly in the software business, David will have to "figure out whether to actually sell computers rather than merely show off their features."
Predictably, some are saying that opening stores risks alienating retailers like Best Buy that sell Microsoft software. Presumably, these are the same people who said Apple would alienate retailers by opening its own stores. Obviously, things turned out okay for Apple.
Things probably will turn out okay for Microsoft, too, because David Porter seems to understand that stores aren't just for selling stuff. They are also for building stronger relationships with your customers and creating better, more relevant, products for them as a result.
On November 26th, at approximately 10:45 a.m., Starbucks store No. 7449 in Nyack, New York, lost its greatest asset.
No, it didn't run out of its Pike Place Blend, oatmeal, or the sausage, cheese and egg sandwiches. It lost a regular customer -- a homeless man known to locals as Fleming Taylor, 62, who turned up dead in a nearby stairwell, where apparently he spent his nights and succumbed to a cerebral hemorrhage.
Fleming's fellow Starbucks regulars were grief-stricken, making a shrine of the plush, purple chair in which he had held forth each day for the previous year or so, chatting and philosophizing with his fellow customers. Most everyone assumed Fleming was homeless, but didn't know for sure because he never talked about himself.
"He was a proud man -- always cheerful, always smiling," Jen Weddle, the store's manager, told the New York Times. "I guess we were kind of his other family and I think that meant a lot to him, and it meant a lot to us."
This sad story, ironically, doubles as good news for Starbucks. It suggests that, despite the many mistakes that have led to its current troubles, Starbucks still has the capacity to create a sense of community and a purpose larger than just selling coffee.
About three years ago, I interviewed Anne Saunders, who was senior vice-president of marketing at Starbucks at the time (she's now with Bank of America). The first question I asked Anne was, "What business is Starbucks really in?"
She said: "A favorite saying we have around here is, 'we're not in the coffee business, serving people; we're in the people business, serving coffee.'" She also said, "We really think of ourselves as a coffee house."
Three years later, it's fair to say that while Starbucks may still think of itself as a coffee house, not enough of its customers do. Shortly after Starbucks announced it would close some 600 locations, I took a survey of readers of my daily e-mail newsletter, "Cool News of the Day."
The encouraging news for Starbucks was that roughly the same percentage of respondents said that they "liked" Starbucks about as much as they did five years ago. However, the percentage saying they "loved" Starbucks dropped precipitously, from 33 percent who said they loved it five years ago to just 10 percent now.
In addition, the percentage saying they are "neutral" about Starbucks has increased to 39 percent, up from 23 percent who said they were "neutral" toward Starbucks five years ago.
Respondents cited a variety of reasons for their dimming view of the Starbucks brand, from the price/value relationship of its offerings, to a sense that the service isn't what it used to be, the stores aren't as clean and comfortable, and attempts at innovation have missed the mark. As one respondent put it: "Stop trying to sell me music and all that other crap!"
However, underlying such sentiments was an overarching sense that Starbucks simply had lost its way by opening too many stores, too quickly. "It was cool when it was rare. Now it's a 7-Eleven of caffeine," said one respondent. "It's spread too thin to really create community anymore," commented another. "At the end of the day, it's a chain," said a third."
Customers at Starbucks Store No. 7449 in Nyack, New York, clearly didn't get the memo that their favorite coffee house wasn't cool anymore. Unfortunately, the powers-that-be at Starbucks haven't gotten that memo either, and seem to believe that they can simply cost-cut and discount their way back to growth.
With its promise to trim some $400 million of cost out of its system, Starbucks is once again catering to its clients on Wall Street instead of its customers on Main Street. Nothing against cutting out waste and inefficiency, but Starbucks' more urgent priority should be to restore the warmth and community that used to make it a special place for so many people.
Instead of teaming up with Subway in yet another misguided attempt to make its product even more ubiquitous than it already is, Starbucks ought to think about linking up with local libraries and newspapers to help create conversations like the kind Fleming Taylor used to start.
Instead of offering up a loyalty-card program in yet another boneheaded move to confect the artificial allegiance of its customers, Starbucks should consider collaborating with local radio stations and bring live music into their mix, the way authentic coffee houses do.
Instead of serving cheaper drinks, Starbucks should invest in better service, cleaner stores and more plush, purple chairs like the kind Fleming Taylor turned into a bully pulpit of friendship, conversation and community.
If Starbucks does these things, the price/value ratio will work itself out, because even in today's economy people will pay more if it they are getting more of what they really want. It isn't all that complicated and it won't take much. All Starbucks has to do is remind us why we loved Starbucks in the first place. The rest will take care of itself.
The news on this morning's doorstep is that, all of a sudden, Saturn is the poster child for just about everything that's gone wrong with General Motors.
Reason is, Saturn apparently was the one thing General Motors got right in the last 20 years ... and somehow managed to get it wrong anyway.
Way back in 1990, Saturn created such excitement, and the truth is it didn't take much. The cars were affordable and reasonably well-built. Some liked the designs, although others felt the cars were unexciting.
What made the difference was the shopping experience, and the radical idea that you shouldn't have to dicker for a decent set of wheels. The price was the price.
So radical was this very simple and obvious idea that it was a key reason Saturn earned real-deal cult status among its customers. There was a time when Saturn drivers would honk and wave at each other (oh, we happy few) and drive all the way to Tennessee for so-called annual "Homecoming" parties.
In 1994, some 44,000 Saturn owners showed up at one of these parties! It was all downhill from there, though, and Saturn stopped hosting the events in 2004. And now General Motors intends to either kill Saturn or sell it, perhaps to China.
I have a better idea: Re-badge Saturn as "Uranus," with the slogan, "You Bet Uranus." The marketing possibilities are as endless as GM's stupidity.
Not since Richard Nixon imposed wage-price controls in 1971 have brand marketers faced a point as pivotal as the one they face today.
It was Nixon’s failed attempt to control inflation by freezing wages and prices that led to the trade promotions that forever altered the relationship between retailers and brand marketers.
As soon as the controls were lifted, marketers wanted to make sure they would never be hogtied like that again. So, they artificially inflated their prices and started dealing back the difference as discounts to retailers.
Thus began the power shift from brands to retailers, a shift that could now assume a whole new dimension in light of what could be the most severe economic crisis in our lifetimes.
It’s no secret that the substandard “private labels” of yesterday are today often just as good or better than the national brands they copy. The recession is a killer incentive program for shoppers to give these store brands a try. Once they do, will they ever return to the national brands?
One can’t help but wonder whether we might someday look back on the economic meltdown of 2008 as the moment when retailers finally sealed the deal with shoppers for their brand loyalties.
So far, some brand marketers are responding with downsized packages, cheaper ingredients and deeper discounts. However, as Nestlé and others have shown, even economically-stretched shoppers will pay a premium for brand experiences that meet their needs in fresh, innovative, and yes, relevant ways.
Friday's Wall Street Journal included a remarkable story about Nestle. In part it was remarkable because Nestle isn't necessarily a company that gets a lot of press, much less the kind of press that could fairly be classified as of the "man bites dog" variety.
The news is that, smack dab in the middle of economic calamity, Nestle is not only raising its prices but also increasing its sales and profits. According to the Journal, Nestle has increased “the average price of its food and drinks 5.9 percent this year,” while increasing its sales 3.4 percent. Nestle also “expects organic growth — which includes increases in volume and prices — to stand around 8 percent, improving a previous guidance for around 7.4 percent.”
Now, Nestle isn’t raising prices just for the heck of it — the hikes are thanks to “jumps in commodity prices, including for oil, sugar and cocoa. But now that the commodity costs are starting to fall, Nestle said it doesn’t plan big price reductions, a move that analysts say should lead to higher profit margins.”
Emboldened by its success, Nestle “plans to launch a new line of expensive chocolates in France and Switzerland,” next month.
What does Nestle know that apparent few other companies understand? Here's what Nestle CEO Paul Bulcke said: “People go for value ... It is not always a question of price.” For Nestle, that means its NaturNes brand of baby food “boasts that it cooks the ingredients separately, an appeal to parents worried about sterilization,” for example.
It's a simple concept, actually. It's called putting your customers first by serving their needs. Strange as that may sound amid the current climate of corporate greed and corruption, it is still the most basic rule of business success because when you make products that actually perform better, people are happy to pay a premium for them in good times or bad.
This certainly is serving Nestle well at a time when so many other brands are scrambling to stay afloat by offering various and sundry discounts, promotions and quick-fix sales incentives.
It would be heartening if more companies realized that their first responsibility is to their customers, to help them solve problems and live happier lives. It's not about some feel-good marketing overlay; it's about making sure your brand has a meaningful place in the real lives of real people. And that's really what relevance is all about.
Last week, we saw a glimmer of hope that the promise of "retail strategy" may at long last rising above the level of a cruel contradiction in terms. I'm talking about the new strategic alliance between Procter & Gamble and Ann Taylor.
If you haven't heard about it, Procter & Gamble is collaborating with Ann Taylor to launch new versions of its Tide and Downy brands. What's striking about this is that P&G is choosing to launch a new brand through collaboration with a retail channel that does not sell its product. Rather, it is collaborating with a retailer that helps reinforce its message and build its image.
As reported in the New York Times, Ann Taylor chief marketing officer Robert Luzzi acknowledges that the alliance between a detergent and a fashion brand is "not typical" but uses the "R" word to explain the thinking, saying, " ... We decided that the partnership at this time was incredibly relevant for our clients in this pretty tough economy ... we want to deliver value for our clients."
P&G's Kash Shaikh agrees, noting, "Women spend $1,500 a year on dry cleaning and 65 percent of those clothes are actually machine washable." The P&G promise is that its new Tide Total Care and Downy Total Care products will "cut down on dry cleaning bills by helping clothes look new for a longer time."
Specifically, the P&G claim is that the new products "keep clothes looking new for up to 30 washes." The company reportedly spent "years of research into "preserving the shape and color of clothes after repeated washes."
Ann Taylor Loft will offer "free samples and coupons to customers who buy machine washable clothes." Stores will also have posters and "an eight-page magazine" offering "tips on how to keep clothes looking fresh (hint: they require Tide or Downy Total Care."
This is a promising development indeed. For almost 20 years now, we've chattered about the potential for retailers and brands to work together on a strategic basis as marketers. We've called the idea co-marketing, collaborative marketing and most recently shopper marketing.
Usually the talk quickly devolves into some tactical shadow of the original idea. We play checkers when the marketplace is crying out for chess.
This may not be "checkmate" for Procter & Gamble, but it certainly is a smart move.
Paul Newman will be remembered for many things -- acting, philanthropy, race-car driving. I will always think of him as an incredibly astute marketing guy.
About ten years ago, I was lucky enough to visit the Newman's Own offices in Westport, Conn., and interview its president, Tom Indoe (interview here). After the interview, Tom gave me a tour of the place, including Paul's office. He wasn't there at the time, so my fondest memory is simply a small sign tacked to the wall that read:
“You can get straight A’s in marketing and still flunk ordinary life.” ~ Paul Newman to Lee Iacocca after his Ford Pinto caught fire.
As far as I'm concerned, that says it all, and with the great sense of humor that is the signature of the Newman's Own brand.
This was, after all, only salad dressing. But Paul understood that people might buy his brand once because it had his name on it and might buy it twice because all profits went to charity. But they would only become loyal, long-term customers if it were a really good product. And it is.
Just as important, Newman's Own never deviated from the core idea that every one of its products was either created or inspired by the man himself. Paul Newman made certain of that by personally approving every single one of the brand's new products, of which there are now more than 150.
That legacy is now largely in the hands of Paul's daughter, Nell, who in 1993 convinced her dad to launch a line of organic food items. In a New York Times article, Nell confirmed that he didn't plan to help revolutionize the market for organic products: “He did know that it was a big thing, but I don’t know that he realized he changed snacking in America in terms of natural foods,” said Nell, adding, “He probably would have laughed at that."
According to the Times, Newman's Own "pioneered the use of sustainable, organic palm fruit oil. That led to the first trans-fat free microwave popcorn and to a filling for Newman-O's that was creamy without trans fat." His Fig Newmans actually built the market for organic fig paste.
As Nell pointed out: “Everything had to be something that my father, who was born in 1925, would look at, recognize and eat ... We wanted people of his generation to say, that really tastes good — and then say, oh, it’s organic.”
And, oh, it's also raised more than $250 million for various charities (must-see video here).
Wal-Mart is out with a fascinating presidential election poll of its female shoppers (a.k.a. Wal-Mart Moms) that reveals as much about Wal-Mart's fortunes as it does about Obama's and McCain's.
The poll of five battleground states finds Sen. Obama leading in three (Virginia, Nevada, Colorado) and Sen. McCain in the other two (Ohio and Florida), albeit by slim margins all around.
Obama's strength is surprising because Wal-Mart defines "Wal-Mart Moms" as "more socially conservative women who typically don't have a college degree, who are feeling the economic pinch and are shopping for its lower prices." Clearly, this sounds more like a description of a McCain supporter than an Obama backer.
So what's going on? Have these "socially-conservative women" gone liberal all of a sudden? Obviously not. What's happened is that as the economy has softened, the profile of the Wal-Mart shopper has changed. Apparently, more "college-educated, socially-liberal women" are now shopping at Wal-Mart because they are also "feeling the economic pinch and shopping for its lower prices."
This could be a momentary aberration that will correct the instant people are feeling better about the economy. Granted, that may not be anytime soon, but the point is that it also presents a huge opportunity for Wal-Mart to expand its base over the long-term.
Wal-Mart does appear to be attempting to capitalize on the situation by going "green" in a big way and offering $4 prescriptions, for example. This can't hurt, but Wal-Mart may be missing its greatest opportunity to win over women (and everybody else) for a long time to come.
What Wal-Mart needs to do, quite simply, is improve the shopping experience to a point where people don't shop there because they need to, but because they like to. Easier said than done, but Wal-Mart can look no further than to Best Buy, where a woman named Julie Gilbert is making Best Buy a great place for women to shop by becoming a great place for women to work. This is paying off for Best Buy big-time.
As Dori Molitor notes in the current issue of The Hub magazine: "The immediate impact on Best Buy's business is evident in its $2 billion of market-share growth from female shoppers between 2005 and 2007."
You can read all about Julie Gilbert and Best Buy here. It's a truly amazing story and a must-read for anyone who wants to understand how keen insights into women can drive phenomenal growth.
A tour of the FAO Schwarz flagship store in NYC should be mandatory for everyone who wants to understand the relevance of really good retail.
When last we left FAO, we left it for dead. Every single one of its stores was closed, and it was in Chapter 11 bankruptcy. Seems like yesterday but that was five years ago. FAO had made the fatal mistake of attempting to compete with Wal-Mart and Toys R US on price and, worse, its merchandise mix had turned pedestrian.
If you're lucky enough to visit FAO Schwartz today, you'll see retail as retail should be done. You're greeted by a singing doorman, who looks like he just stepped off the set of the Nutcracker. A few steps away, you've got the now-famous Myachi guys, doing amazing tricks with beanbags.
Step inside the Harry Potter boutique and it's like you've stepped into Hogwarts. The young wizard behind the counter takes one look at you and you're convinced that you actually have. Little kids are dancing with delight on the famous giant keyboard. And, yes, the fellow with the boomerang airplanes is still there, throwing his little toy plane at the crowd and watching us duck as it pulls a u-ey and returns to him.
The place is teeming with people but somehow it doesn't feel crowded. Staffers in blue shirts seem to be at every turn, ready to help and answer questions. You've really got to see it to believe it -- I've just barely scratched the surface here.
What matters is, FAO Schwarz has done what every great brand does when it loses its way. It has re-ignited what made FAO great to begin with. The coolest part of the story is that FAO is about to expand exponentially, but it's going to do it right. This time, it will open its stores as small boutiques, inside some 600-700 Macy's department stores nationwide.
FAO Schwartz is a profile in relevance if I ever did see one.
