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: 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                      
2.         Target                           
3.         Macy’s                          
4.         CVS                              
5.         Best Buy                       
6.         TJ Maxx                        
7.         Staples                         
8.         Footlocker                    
9.         Payless                         
10.      Apple stores                  

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: 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: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.