Wednesday, August 20, 2014

Are Bedtime Shoppers A Bad Bet for Target Brand?



There’s a saying that goes, “old poker players never die, they just shuffle away.” Today the same might be said for some retailers too.

Why? Well, in recent years many retailers have eschewed a differentiating brand strategy for gambling. OK, not gambling in the very strictest sense of the word, but certainly the part of, say, a poker game where players keep raising the stakes hoping their competitors will back down. If competitors don’t, of course, players have to raise the stakes again. For some retailers, again and again and again.

The best example was the bet retailers made on Thanksgiving. You have to go back a few years to see when those kinds of bets started being made, but if you want to understand today, you have to search yesterday even in marketing, and these days, especially in retail marketing. For the purposes of this example, we’re defining “yesterday” as approximately seven years ago, not so long a stretch in modern marketing time.

Back then most stores weren’t open on Thanksgiving. It was, after all, a holiday. A national holiday, in fact, and the signal that Black Friday – the kickoff of the holiday shopping season – was just a day away. It started with some marketer thinking, “Hey, how about we advertise some really great things at really great prices and open a little earlier the day after Thanksgiving, get a jump on Black Friday and, you know, get shoppers into our stores earlier – before they go and buy the same stuff at one our competitors.” And they did just that. They advertised they’d be open at 6AM (three hours earlier than they had in the past) and a gabillion people showed up for the $99 37-inch plasma TV, and thus the “Door-Buster” marketing concept was born.

But, retailers reasoned, if you could get people to stand in a freezing cold parking lot at 6AM, why not ‘raise the stakes,’ as it were, and open at 4AM? Well, the competition saw right through that bluff and said, “I’ll see your 4AM and raise you to 2AM.” Then bam! A raise to a 12:01 AM opening. After all, it was still technically Friday! Eventually it got to the point where some retailers were willing to raise the stakes enough to ignore the fact the it was Thanksgiving, and open on Thanksgiving Day. That too became a retailing-raise-the-ante game. First one opened at 11PM, then one opened at 10PM, then 9PM, then 6PM. Kmart finally won that pot last year by opening at 6AM – turkey dinner, stuffing, mashed potatoes and football games be damned! – and didn’t close for another 41 hours.

So did retailers win by raising the opening hour stakes? Not really. It was pretty much a bust. Last year sales were down 11% or 15% or 17% depending upon who was counting the chips, but what is clear is that sales weren’t up. Yes, yes, the Internet has a lot more to answer for than 24/7, readily available pornography and online poker. But in the absence of a real retail brand strategy where the brand acts as a surrogate for added value, tactics like early openings and low-lower-lowest pricing have become just, well, table-stakes.

Why the history lesson? It was announced that Target, who reported a drop in same-store sales and, via John Mulligan, their CFO, indicated it would be "very difficult" to increase store traffic in 2014, even if same-store sales rose by 1%, are – wait for it – going to be keeping their doors open later than the competition, because early openings worked so well for them! Oh, and we can only suppose, just to make sure that consumers who haven’t yet discovered the Internet, or insomniacs, or folks who aren’t daywalkers, can shop really late at night.

Typically Target stores are open 8AM till 10PM (9PM on Sundays), but the new hours will keep the stores open until 11PM or midnight (11PM on Sundays). The extended hours will vary by store, will start this month, and will be in effect through the holidays. Or, if retail marketing history repeats itself, until another retailer changes their hours to 7AM till 1 the next morning, and midnight on Sundays.

Is this an insane gamble? It’s been said that the definition of “insanity” is doing the same thing over and over, expecting a different result. They also say that most of the money you’ll win at poker comes not from the brilliance of your own play, but the ineptitude of your competitor’s off target strategy.

Anyone care to make a bet on the outcome of this particular game? 


Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: brandkeys.com. Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Monday, August 11, 2014

An Educated Consumer May Have Been Sy Syms' Best Customer, But Today They’re More Difficult To Engage!


The 2014 Brand Keys Back-to-School report card is in: households with school-aged children (pre-school through 12th grade) plan on spending more – an increase of 9%, and an average spend of $655.00. That’s according to 8,300 families with interviews collected by telephone and central location intercept, to account for the surging number of cell-phone only households.

Preferred retail categories indicates an increase in anticipated use of all retail platforms this year except catalogs, although, to be fair, some of those consumer purchases have shifted from hardcopy to digital. Online has, of course, been growing and increased use of mobile outreach is responsible for this year’s significant growth for that specific platform. Consumers have come to expect discounts for, well, everything, so virtually everyone mentions “Discount Stores,” although that was up a bit too.

Discount Stores                  99% (+2%)
Online                                 93% (+30%)
Department Stores             35% (+25%)
Office Supply                      30% (+20%)
Specialty Retailers              34% (+13%)
Catalogs                              30% (-5%)

This year, the top-10 list most popular retail and e-tail brands consumers mentioned as places they intended to shop included:

Retail                                     E-tail

1.         Wal-Mart                                Amazon.com
2.         Target                                     Walmart.com
3.         Macy’s                                    eBay.com
4.         CVS                                        Kohls.com
5.         Best Buy                                 Macys.com
6.         TJ Maxx                                  Zappos.com
7.         Staples                                   Overstock.com
8.         Footlocker                              Gap.com
9.         Payless                                   Nike.com
10.      Apple stores                            Target.com

Some of this reflects the consumers’ perceptions of a slightly improved economy, but it also reflects a definite need to re-stock. For clothing and shoes there’s no way to get around children’s growth spurts. But the figures also represent a shift in consumer buying habits.

Retailers started running official Back-to-School ads in June but they’ve been discounting and couponing continuously for the since the beginning of the year for, well, everything. “Back to School” is yet another way to position promotions in the low-lower-lowest pricing retail marketplace.

Nearly 35% of these marketing-educated consumers indicated they’ve already bought and stockpiled supplies getting ready for the first day of school. Another 25% indicated they would wait for the ‘Summer Sales.’ The remaining 40% are waiting till the last minute. Retailers have spent more than a decade teaching consumers they can get something cheaper or of better value if they just wait longer or look a little harder, and consumers have graduated with honors. And a mobile device in their hands!

Speaking of mobile devices, it’s also worth remembering that bigger ticket items like tablets and smartphones and computers, which in years past had been traditionally been purchased at the start of the school year, are now purchased throughout the year, so parents don’t feel the need to upgrade just because classes are starting.

It was Sy Syms, the off-price clothing entrepreneur, who observed, "an educated consumer is our best customer." But as most consumers now have their Doctorates in Marketing, compliments of the sustained efforts of retailers, they expect a lot more. Particularly when it comes to value. More particularly when it comes to value that will engage them and get them to behave more positively toward one retailer or e-tailer than others. Value, of course, isn’t just pricing, it’s brand, brand differentiation, shopping experience, customer service, brand engagement and a raft of other things consumer have come to expect as a rite of retail passage. Retailers that can engage consumers and are seen as surrogates for added-value will always benefit. Consumers not only believe that, they act that way in the marketplace.

And that’s a fundamental lesson all retailers need to learn.


Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: brandkeys.com. Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Wednesday, August 06, 2014

Want To Be A P&G Brand? (Placeholders Need Not Apply!)


Procter & Gamble announced it’s cleaning house. It plans to dump, er, divest 70 to 80 brands so, according CEO A.G. Lafley, P&G can “create a faster growing, more profitable company that is simpler to operate.” Well, fewer brands should certainly help make it simpler. As to more profitable, Mr. Lafley said P&G will focus on core business and popular consumer brands like Tide, Charmin, Pampers, Gillette, Crest, and Bounty. We don’t think you’d be surprised to learn that it’s those brands that account for the lion’s share of P&G’s sales and profits.

Those brands also tend to be engagement leaders in the categories we measure in our annual Customer Loyalty Engagement Index, meaning that they do a better job meeting customers’ category expectations than competitors. So good for Mr. Lafley, although this really was a long time coming. It turns out that many P&G products in many of the categories they’re looking to dump, er, divest, have remained not so much brands, as much as having turned into category “placeholders.”

“Placeholders” is the nomenclature we came up for categories that have more products in them than consumers really care about, and describes something people have heard of, provides perfectly acceptable degrees of primacy of product, usually have ubiquitous distribution, similar pricing models, and are, well, to be candid, exactly the same as one another. Yes, yes, different names and packaging, but in no other meaningfully way different. Most importantly, including the degree to which one product is seen to meet customer expectations they hold for the Ideal in the category, versus another similar product. So basically commodities with names attached. But not quite a “brand.” A “placeholder.”

Every January we measure between 65 and 90 categories and 500 to 1,000 brands in the Customer Loyalty Engagement Index we referred to above. Every year (and more-and-more often) we find we have to dump certain categories too. Oh, our metrics, which fuse emotional and rational consumer decision-making and engagement values, are as sensitive as ever. And for real brands, à la independent validations of the resultant brand rankings and loyalty measures, they continue to correlate very highly with positive consumer behavior toward a brand which, axiomatically (gross mismarketing notwithstanding), usually results in higher sales and profits. Sometimes categories just go away. Like “Movie Rentals,” “Answering Machines,” and “35mm Film.” But for placeholders, we just don’t see any significant differences in the assessments for one offering versus another, and, apparently, neither do the consumers. They are seen to be interchangeable.

So just to be clear placeholders are the same. Undifferentiated equivalents, mutual, and/or fungible. To paraphrase one of the funniest Monty Python bits ever, Dead Parrot, the brand has ceased to be. It’s expired and gone to that great supermarket in the sky. It’s bereft of meaning and differentiation, has kicked the category bucket, shuffled off this mortal coil. Which is pretty funny as a TV sketch but calamitous for something that used to be a brand. The placeholder is, indeed there, but “there” is pretty much just occupying place on the shelf, usually selling on some low-lower-lowest price strategy, neither of which helps a company’s bottom line. Which is why P&G is dumping all those products.

It was reported that for the full fiscal year, P&G’s income rose 3% to $11.6 billion. Mr. Lafley said although P&G delivered on its financial commitments, it "should have and could have done better.”

When you’ve got a real brand to work with, you usually do.


Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: brandkeys.com. Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Wednesday, July 30, 2014

2014's Most Innovative Tech Brands


A long time ago in a galaxy far, far away. . . OK, 35 years ago, which in tech-time is a long time ago, Sony introduced the Walkman.

If you weren’t around then or aren't a student of portable, private music devices, it was a 14-ounce, brick shaped portable cassette player with big square buttons, and biggish headphones, that came wrapped in a leather case. It ran on two AA batteries, had no external speakers and was the height of technological sophistication when it came to on-the-go music. It fundamentally changed the paradigm of how consumers experienced music and, thus, sold a cumulative 200 million units. By 1986 the word “Walkman” was included in the Oxford English Dictionary and became part of the lexicon.

Sony kept at it, innovating formats to accommodate CDs, but corporate hubris being what it is, when it came to MP3s, Sony insisted on sticking to a proprietary digital music format (the music version of their Betamax video players), which left the brand way, way behind Apple and its iPod. It also left Sony way, way behind other brands when it came to consumer perceptions regarding brand innovation.

In a recent Brand Keys survey of consumer perceptions of innovative tech brands, 4,500 consumers (500 men and women, 16-65, from each of the 9 U.S. Census Regions) were asked to rate companies and brands on a 1-to-10 scale when it came to innovation for on and off-line technological innovation leadership. The top-20 rankings ended up looking like this:
  1.  Apple (98%)
  2. Samsung (97%)
  3. Google (96%)
  4. Amazon (95%)
  5. Microsoft (91%)
  6. Netflix (89%)
  7. HP/Panasonic (87%)
  8. YouTube (85%)
  9. Facebook (82%)
  10. Twitter (80%)
  11. Hulu (79%)
  12. IBM (78%)
  13. LinkedIn (77%)
  14. Canon/Dell (75%)
  15. Uber (74%)
  16. Airbnb (71%)
  17. Roku (70%)
  18. Sony (68%)
  19. Intel (67%)
  20. Pinterest/Yahoo (65%)

While Sony ended up toward the bottom of our list, and, by the way, lost nearly $1.4 billion in their fiscal year that ended in March, they apparently don’t intend upon staying there – either perception or profit-wise.

The solution? They’re introducing a new, $700 Walkman aimed at upscale consumers looking to trade up in the audio-to-go category. The XZ1 is Sony’s 21st century version of the Walkman; hefty and heavy, hand-carved from a block of aluminum, housing 128 gigabytes for radically high-quality files that combines data storage, download speed, and sound quality.

Brand Keys tracks consumer expectations in nearly 100 B2C and B2B categories, and generally speaking, expectations have only increased – especially when it comes to personal technology. This new Sonly entry is an example of a product built to address some of those consumer expectations likely created from consumer exposure to high-quality HD-TV and newly-popular premium headphones. And whether the new Walkman will be a niche product or a consumer phenomenon remains to be seen.

As Apple (#1 on our list) discovered, truly great innovative products can change everything for consumers – from how they listen to music to what they expect about how they’ll listen to music. And when brands do that, they elevate themselves from well-known brands to innovation icons.


Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: brandkeys.com. Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Monday, July 28, 2014

More Hot Water For Red Lobster


It’s been no secret in the restaurant world that Darden Restaurants has been trying to 86 their Red Lobster restaurant chain for a while now. It hasn’t been a secret to us either.

According to the Brand Keys Customer Loyalty Engagement Index for Casual and Fast-Casual Restaurants, brand engagement for the chain – a leading-indicator of consumer behavior and, axiomatically, profitability – has been lukewarm. All the advertising and promotion in the world – including seafood fests, endless fried shrimp, and for two-for-one meal- deals – hasn’t been able to help the brand claw its way up the list. Or with tanking same-store sales, which were down nearly 6% for the quarter. Current brand rankings looking like this:
  1. Panera
  2. Chipolte
  3. Au Bon Pain
  4. Arby’s
  5. Cosi
  6. IHOP
  7. Texas Roadhouse/Olive Garden
  8. TGI Friday’s/Applebee’s
  9. Ruby Tuesday
  10. Chili’s
  11. Golden Corral/Outback
  12. Red Lobster 

The brand found itself in even more hot water recently when the hedge fund, Starboard Value LP, who own an 8% stake in Darden Restaurants, sued over a $2.1 billion agreement to sell Red Lobster to the buyout firm, Golden Gate, alleging it was “a fire-sale price.”

Olive Garden, also operated by Darden (along with more successful specialty brands like Bahama Breeze, Yard House, and Capital Grill, too small to make our lists yet), hasn’t done much better either, on our Customer Loyalty Engagement Index (down two spots to #7) or in same-store sales, also down. And if/when the Red Lobster sale is completed, Olive Garden is expected to account for as much as 60% of Darden’s revenues, which was recently reported to have plunged 35% compared to same time last year. So putting extra stress on a brand structure that wasn’t up to code in the first place.

Darden has indicated that they intend to highlight quality, freshness, and health, all of which are values more and more customers attribute more and more to fast-casual brands like Panera, Chipolte, and Au Bon Pain (#’s 1, 2, and 3 on the Customer Loyalty Engagement Index list), none of which have fried-anything on their menus.

Starboard Value LP filed with the SEC last week requesting the Darden books and records, complaining of “months of maneuvers” looking to silence shareholder opposition. They argued that Darden should have placed their real estate assets into a separately traded company and, by selling Red Lobster, the potential value of the transaction has been diminished.

Darden is introducing lighter dishes to boost lunch business, and Eugene Lee, Darden’s president, has been quoted as saying they’re “in the early stage of exposing guests to what we call a brand renaissance plan,” but all that is pretty hard to swallow. And based on current brand rankings and customer engagement levels, we’d say near impossible.

But to paraphrase Lewis Carroll’s Red Queen about Darden’s chances, “Why, sometimes I've believed as many as six impossible things before lunch,” so we’ll have to see what they finally serve up.


Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: brandkeys.com. Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Tuesday, July 22, 2014

Luxury Brands Are Different



French luxury-brand Hermés posted second-quarter sales last week. They were reminiscent of the Orson Wells line, “Living in the lap of luxury isn’t bad except that you never know when luxury is going to stand up.” Sales were up, but only a little – 5.8%, a real softening of the growth the brand has seen in recent quarters. Down from the first-quarter’s 10.1% growth, and +12% achieved a year earlier.

And yes, these days there are regular retail brands out there that would be thrilled to see that kind of growth, but luxury brands are different. Luxury brands are the only ones where it is possible to make luxury margins. And they have come to expect consistent, strong growth. There was a time when it was said that luxury brands were recession-proof. You could safely say that because luxury brands possess something regular brands don’t – an increased emotional engagement quotient that provides consumers with products that possess an added-value well beyond primacy of product. A bag is a bag, right? Wrong! As every fashionista knows, a Hermés Kelly bag is not just a “bag.” Neither is their Birkin just a bag. Nor is Chloe’s Paddington, Fendi’s Baguette, Dior’s Saddle or Louis Vuitton’s Murakami just something to hold personal items. It’s the brand that’s different.

The bad news for Hermés is that some of their sales problems were related to a virtual cessation of sales in Japan, traditionally an enormous market for luxury goods, reporting sales growth of only 1.5%. The good news (or at least the better news) is that the slowdown had nothing to do with the brand and mostly the fact that sales were up nearly 22% the previous quarter boosted by price increases and heightened consumer purchases made in advance of an April 1st VAT hike. Growth in the United States was softer too: 7.9% down from 18% in the first-quarter.

Over the years Brand Keys has observed that luxury goods have precisely the same engagement drivers as regular goods competing in the same category. The difference is that consumers hold higher expectations for those engagement drivers when it comes to luxury goods. Held to a higher standard, if you will. And while expectations generally have increased faster than brands can keep up, lower-priced brands like Coach, Kate Spade, Michael Kors, Marc Jacobs, and Ralph Lauren have managed to edge their brands up the luxury-expectation incline, with new brands, like Detroit-based Shinola, entering the marketplace too.

Sales are always contingent upon the vagaries of marketplace and the competitive set, but ultimately luxury brands endure. It was Coco Chanel who wisely professed, “In order to be irreplaceable one must always be different.”

And, it turns out, luxury brands are.


Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: brandkeys.com. Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Wednesday, July 09, 2014



Reading GE CMO Beth Comstock’s HBR blog, Innovation Is Marketing’s Job, Too, some of Dr. Seuss’ advice that ran through my mind. Paraphrased, the good Doctor said, “Look at me! Look at me! Look at me NOW! It is fun to innovate, but you have to know how.” Ms. Comstock’s mandate was to make GE marketing a vital operating function, including innovation, something that would drive organic growth – beyond just helping to craft advertising and external marketing. Her shared her 4-part formula about how to innovate. She suggested:
  1. Go to new places
  2. Shape the market early
  3. Incubate new business and models
  4. Invite others in
We are big fans of innovation. Going into the black hole of (YOUR CATEGORY GOES HERE) can be an exciting and rewarding exercise. But you really do have to know how. To be perfectly transparent, our own philosophy and practice centers around Ms. Comstock’s #2, “Shape the market early,” which is a lot easier said than done for many brands. The best way to shape the market, of course, is to have a deep understanding of what the consumer wants and what they expect before even they know what they want or expect.

Want to know what consumers want and expect? The easy-answer is “everything.” In virtually every category you can imagine expectations have risen, 20-25% (more if you’re talking ‘tech’), while brands have only managed to keep up by 5-6%. That gap is called, the “expectation gap.” It’s the space between what people really want and what brand actually delivers, and is a fertile place to dig if you’re looking for areas where your brand can innovate. That corresponds with Ms. Comstock’s point #1, and while her “new places” were of the more tangible kind, and ours more notional, it’s a  “new place” for a brand to study nonetheless.

The thing is, from a marketing and/or research perspective, you can’t just ask consumers what they want. Consumer decision-making is more emotional than ever before, and often those emotional values turn out to be things consumers don’t articulate. Or don’t want to articulate to an interviewer. Or just can’t articulate. So you can ask, but if a brand doesn’t know how to accurately capture those emotional expectations, they usually end up talking about or thinking about rational aspects of the category. And these days, rational doesn't usually translate to something innovative and differentiating. By the time the rational bits of the category are articulated by consumers as something they expect, they’re more likely “table stakes,” basic things you need to have in order to play in the brand’s market arena, but something everyone has, and definitely not something innovative.

Brand Keys fuses emotional and rational aspects of the category to identify how consumers really view a category and what they really expect from their Ideal. We capture predictive lead-time insights of 12-18 months as regards expectations. How well your brand matches up to the Ideal identifies expectation gaps, valuable areas (or a new place to go) worth a drill-down exercise or, at the very least, a once-over, and typically results in innovation.

Do that, and your brand – to borrow Ms. Comstock’s phrase – gets “to shape the market early,” with the added benefit of getting a jump on the competition. In the last century, and depending upon the category, that “jump” à la traditional marketing and research might have been worth a 2 or 3 year lead. Today if you get 6 months, it’s a gift. You need something that will give you a real head start on meaningful and competitive innovation. Here’s a real-life example in the Automotive category from the Customer Loyalty Engagement Index.

Over the past two years, values related to personal connectivity and entertainment has grown at nearly double anything else as regards a positive contribution to auto brand engagement and customer loyalty and, therefore, profitability. (FYI, “fuel efficiency” grew too, just not as fast). But the gap between what consumers really want, and what the best of 22 automotive brands we track delivers, leaves an emotional engagement expectation gap of 23%, a gap large enough to drive a truck through. So if innovation is marketing’s job too, the opportunity these engagement metrics identified was a perfect place to drill down and uncover something your brand could have innovated, owned, and used to shape the rest of the market.

Sure, consumers are tech-conscious, and connectivity and technology have been slowly driving their way into the automotive category. Various brands have been using ”technology” as a differentiator to one degree or another, but the fact is that consumers have wanted this increased level of car-connectivity for what’s going on 4 years, and had some bright brand been able to identify it, they could have taken ownership of it, vrooming ahead of the competition instead of having to tailgate rivals.

Last week, a 2-page ad ran in the Wall Street Journal, with the headline on page 1, reading “The Connected Car Is Here,” and on page 2 the announcement “Chevrolet Is The First And Only Car Company to Bring Built-in 4G LTE Wi-Fi to Cars, Trucks and Crossovers,” which seems pretty innovative. Right now. But we’ll have to see how long that particular innovation window remains open, and how long it is before all cars have to offer it just to keep up. What was “innovation” will turn into “table-stakes.” What once delighted consumers, now has become obligatory.

It was Steve Jobs who famously pointed out that “innovation is the difference between a leader and a follower.” We would add to Ms. Comstock’s praise of innovation that innovation is the best way to ensure consumer engagement, brand growth, and corporate profitability, and it can fall easily within the purview of the Marketing and Research Departments, if you know how.

Harvard Business Review has pointed out that it’s tough when markets change and your people within the company don’t. But these days it’s even tougher when consumer category values change, and companies don’t change the research tools or marketing metrics they use to measure them.

Sticking with our automotive theme, it’s worth remembering that when it comes to innovation there are no old roads to new directions.


Connect with Robert on LinkedIn.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: brandkeys.com. Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.