Bryan Pearson's Blog, page 15

Auctioning Experiences: How Marriott, Coachella Bid For Customer Engagement

(Photo by Kevin Winter/Getty Images for Coachella)

Some experiences money can’t buy. But if you’ve got 22,500 reward points, you can bid for them.

Consider the coveted experience of staying in a tricked-out safari tent at Coachella music festival. Marriott International is designing eight of these tony tents, each to duplicate a room in one of its eight boutique hotel brands, and putting them up for auction. Seven of the Coachella tents are open for auction through April 6. Bidding for three of the tents opens at 22,500 points for Marriott reward members, and bidding for the remaining four starts at 7,500 for Starwood members. One tent will be offered via sweepstakes to Marriott members through March 31.

But instead of paying cash for the opportunity, those who want to stay in one of the tents will have to pay with points in an auction. And that means that in order to bid or qualify, they’ll have to be members of the Marriott or Starwood hotel loyalty rewards programs.

It’s a trend that has been growing among retail reward programs for some time. Reward memberships come with a variety of benefits, from early access to sales events to free alterations. However, the number of accumulated points can be daunting to account for, so retailers seek new ways for their members to redeem them. The challenge is these options have to be exciting in order to generate interest and rare enough to hold member attention.

Auctions for exclusive experiences such as movie premieres, meet and greets with music legends or a night in a tent at Coachella are perfect examples. Furthermore, because many of the experiences involve partnerships with third parties, they do not add pressure on the merchant’s ability to meet demand.

Here’s how more retailers are partnering with or using points auctions to engage members.

Hilton HHonors

There are lots of one-night-only options on this auction site, from Broadway shows to concerts in London. Members can choose from four experience categories (music, sports, culture and food) and can further narrow their searches by dates, country and state. One can, for example, seek out all food events taking place in New York through the end of May. If HHonors cannot find a match, it suggests alternative events.

Sony Rewards

Among this card’s periodic auctions are ShowStoppers auctions for hard-to-find Sony-branded collectibles and experiences, such as private events and signed memorabilia. Members who are short on points can purchase the difference for 1 cent apiece. Sony also offers 10-hour reverse auctions on the third Wednesday of every month. In these auctions, the list prices of items drops by a predetermined amount.

The Delta SkyMiles Experience

Among the items on auction for these frequent flyer miles are tickets to the Academy of Country Music Awards, a visit to the TV set of Rachael Ray (and a meet and greet with the star) and a vacation to Telluride. Members are notified by email when they are no longer the highest bidder. Miles are automatically deducted from the winner’s account only after the auction is finished.

IHG Rewards Club Auction

Intercontinental Hotel Group strives for high-touch experiences for its bidding members. Among the events are tickets to the Austin Food and Wine Festival, tickets to the Masters or passes to the BMW Car Control School, where students can test their braking and handling skills on a track. In most cases, bids run into the hundreds of thousands of points.

Verizon Smart Rewards

Members of this program can vie to win electronics or gift cards to retailers and restaurants by entering their points in its live auctions. It offers both points-only and points-plus-dollars auctions, the latter of which involves bidding to win savings, such as 75% off a $100 item. Once a bid is placed on a desired item, the member is kept apprised of whether he or she is the leading bidder or has been outbid.

Marriott International

In addition to luxury tents at Coachella, the Marriott Experiences Marketplace includes a meet and greet with Tony Bennett, VIP access to the Belmont Stakes Racing Festival and tickets to the Rock & Roll Hall of Fame Induction Ceremony.

Exclusive perks like these enable merchants to distinguish themselves from the competition. Members, meanwhile, get to enjoy two levels of experience — the first being the rush of the auction. Money cannot buy that sense of exhilaration, but points will.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

How Retailers Can Maximize The Power of Coupons

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Here’s a lesson in consumer loyalty boiled down to three words: Seven in 10.

This is the number of brand-loyal shoppers (69%) who would switch labels while in the store based on discounts received on their mobile device, according to new survey results by shopper marketing firm Valassis. Roughly 80% of those surveyed said a coupon would influence them to purchase a brand they typically would not buy.

Despite the growth of low-priced retailers such as Aldi, Trader Joe’s and others, the research confirms that coupons still heavily influence consumer purchase decisions. And this raises questions regarding the psychology behind consumer price perceptions and what exactly flips the “buy” switch.

Does the thrill of saving money through a coupon outshine the act of paying a lower, everyday price for the same item somewhere else? Evidence suggests it might, which can have daily (and pricey) implications for traditional and everyday-low-price merchants (EDLP), as well as product manufacturers.

Put another way, experience may be a bigger factor in effective discounting than savings. Before exposing what merchants and manufacturers can learn from the research, let’s explore the psychology behind discounts.

Coupons On The Brain

The mental rush associated with saving money is well established. However, some studies indicate the excitement of redeeming a coupon is greater than simply paying less for a product that is not discounted. It comes down to power.

According to a study cited by Psychology Today, habitual coupon users prefer to buy products with a coupon even if it means spending more money. Specifically, shoppers preferred to spend $4.29 for a six-pack of yogurt, after applying a 50-cent coupon than paying $3.99 for the same yogurt at the same store during a different week.

By choosing a purchase that requires savings, the research explains, consumers feel they have control over the discount, which nurtures “smart shopper feelings.”

“The thrill of using a coupon and getting a better deal than other consumers takes precedence and shoppers lose sight of the actual cost,” Psychology Today explains. “The result: Regular coupon users often spend more for an item than those who don’t use coupons.”

84% Choose Stores By Discounts   

The Valassis study, “2K17 Valassis Coupon Intelligence Report,” backs up this theory.

According to the findings, more than two-thirds of shoppers will buy a product only if they have a coupon for it. This makes that product an added item. Almost nine in 10 (86%) make purchases based on in-store discounts, such as through circulars or mobile notifications.                                                                                                                                     

Other results of the study show:

86% of the shoppers surveyed said coupons have influenced them to try a new product.
84% shoppers say coupons influence their store choices.
77% decide which store
to shop based on where they can use paper coupons; 67% decide which store to shop based on where they can use paperless discounts, such as those downloaded to their loyalty cards.
75% of those surveyed print coupons from the internet.

But how do coupons stack up against everyday low pricing from the retailer’s perspective? In separate research, it’s been shown that planned discounts generate higher revenue for retailers than everyday low pricing. On the other hand, EDLP gives merchants better control of inventory management, forecasting and related expenses.

Clip n’ Save Tips

The takeaway is that when it comes to shopper preferences on price, people want the power. History indicates this as well as the research. Remember what happened when J.C. Penney opted to drop coupons in favor of  EDLP several years ago — sales dropped by 20% in the first quarter.

Keeping these points in mind, following are three takeaways for all retailers, as well as product makers, based on the research findings:

Put relevance before reductions: Regardless of the promotion, it will most likely resonate if it hits one of the rings that define the lifestyle of the target shopper. The more closely the offer hits, the better the customer experience and thus, customer engagement. Purchase data can enable retailers to tailor offers to individual shoppers. A supermarket can, for example, create and send customized coupon books based on a shopper’s previous purchases.

 

Use the technology: Investments in data collection and related analytics are increasingly no longer a “nice to have” in big retail. A unique customer identifier, such as through an opt-in mobile app, can help a retailer understand a particular shopper’s browsing patterns both online and in-store. It can, for example, anticipate that she will shop certain areas of the store and send coupons for products that complement other items she regularly buys.

 

Listen, literally: We shouldn’t ignore the potentiality of the consumer’s role in the promotion process. Retail marketers can be masters of engagement, metabolizing consumer purchase data into a variety of shopper segments to which they can tailor offers. However, merchants still risk misreading the signals. The sure-fire way to learn if a coupon hits its sweet spot is by asking the target shopper. A retailer can, for example, offer shoppers a range of coupons they can select from in return for conducting a survey. Those selections would confirm specific preferences.

What this all boils down to is the experience. When it comes to consumer loyalty and engagement, a promotion can be an effective attention getter. But it has to satisfy that thrill-of-the-hunt urge in order to leave an imprint. The goal of a coupon should not be to get the shopper to the store once but to get her to plan her return.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

Wal-Mart Convenience: What’s In Store

(AP Photo/Jae C. Hong)

What lasts about three minutes, wakes you up and gives you gas? Lately, it’s a visit to a convenience store. But if Wal-Mart’s recent forays into the format are any indication, this soon may change.

Wal-Mart is testing several convenience store–type concepts, the most recent stores opening in Texas and Arkansas. Other concepts include an online pickup store and a to-go format, launched a few years ago, that features prepared foods.

With each iteration, it appears Wal-Mart is repackaging just what a convenience store should be to modern consumers. That is to say, it is transitioning from a gas station shop packed with cold drinks, snack cakes and hot dogs to a destination for prepared meals, pre-ordered household items and, yes, gas.

Retail analysts might point out that Wal-Mart is simply following the lead of key emerging trends, particularly those supporting the public’s desire for more healthy foods. But the mere size and purchasing power of the chain among consumers and vendors dictates that what it chooses to do will in turn influence the entire convenience store industry.

Let’s look at where its path has led so far.

C-Stores Uncovered

Long the hub for fuel, fountain drinks and road food, convenience stores have proven adept at morphing to meet the rapidly moving lifestyles of consumers.

The first convenience store, an earlier iteration of what is now 7-Eleven, was founded in 1927. Convenience stores essentially replaced the general store, and are now increasingly serving the role of grocery chains. As described by the NACS (The Association for Convenience and Fuel Retailing) convenience stores evolved from “gas stations that happen to sell food to food retailers that happen to sell gas.”

Among key statistics:

U.S. convenience store foodservice represents a roughly $61 billion industry, according to the NACS. For context, Kroger Co., the nation’s largest traditional supermarket chain (and also a convenience store operator), generated total 2015 sales of nearly $110 billion.
The industry reached a record 154,535 stores in 2016, a 340 store increase (0.2%) over 2016.
Convenience stores account for 80% of all the fuel purchased in the United States — 124,374 convenience store locations include pumps.
The stores are getting bigger. The average urban convenience store is 4,594 square feet, while the average rural location covers 4,938 square feet.
Despite size, the average visit to a convenience store is three to four minutes.

Enter Walmart

Wal-Mart’s latest c-store concepts are described in the Dallas Morning News as “tweaks” more than reinventions, but taking into account the size of the industry and Wal-Mart, which posted a 2016 revenue of $486 billion, a tweak can ripple into considerable change. Consider that Wal-Mart’s roughly 11,700 global locations attract 260 million customers per week.

The two test stores it opened in January include a lot of the staples you’d expect in a convenience store, right down to the ICEE machine and roller grill. The stores also include a hot section of prepared foods, including pizza by the slice, a six-tap coffee bar and a selection of fruits, yogurts and Marketside-branded salads and wraps. Both the Texas and Arkansas stores operate in the parking lots of Walmart Supercenters.

Additionally, Wal-Mart is testing convenience stores for online order pickups. Its most recent location, in Colorado, includes a fuel station and drive-through where customers can pick up those grocery orders, as well as the standard c-store fare. The 4,000-square-foot location opened in December, about a year after Wal-Mart opened a similar store in Alabama.

“We’re eager for feedback from customers. We want to know what’s working,” Wal-Mart spokeswoman Anne Hatfield told the Dallas Morning News.

A third concept—and Wal-Mart’s first run at the convenience store format—Walmart Grocery (formerly called Walmart To Go) opened in 2014. The store, in Arkansas, offers hot foods, including rotisserie chicken, as well as online order pickup. Wal-Mart has not announced plans to open additional locations.

Inconvenient Trends

What lies ahead for Wal-Mart’s convenience store exploration will be determined by the prevailing needs of today’s on-the-go consumer. This may range from pet-watering stations to prepared meal kits to tech counters for unexpected smartphone needs.

Whatever the outcome of Wal-Mart’s convenience endeavors, it is correct to pursue them. As pointed out in recent research by industry consultant WSL Strategic Retail, one of the key trends the retail industry is exploring to maintain consumer interest is new formats, including smaller, local stores. But to succeed, retailers ultimately have to deliver happiness.

These hard truths may be inconvenient to some retailers, but like the need for fuel, food and a morning cup of coffee, they are hard to ignore.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

5 Loyalty Secrets You Don’t Know About Retail Rewards In 2017

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If retailers really want to use their loyalty programs to drive up sales in 2017 and beyond, then they better give their customers the wheel.

Asking for directions and understanding how to use the data map were among five crucial requirements that retail and loyalty experts provided when asked to identify the least-known or -understood aspects of retail reward programs today. From early customer input to assortment optimization, these observations might sound head-scratchingly obvious.

However, resolving them could be a complex undertaking, which is why so many loyalty programs fail to retain member interest. Of the 29 loyalty programs in which the average U.S. household is enrolled, they tend to participate in just 12, according to the 2015 COLLOQUY Loyalty Census. That’s a 42% participation rate. Once that rewards app or card is relegated to the mental dustbin, it is likely to continue collecting dust, much like porcelain collectibles on the retail shelf.

Ready to dust off your loyalty playbook? Following are five expert secrets to loyalty success.

Sales don’t always indicate bestsellers

Advanced analytics and loyalty data can unearth hidden value in items that may be slow sellers, if retailers examine different sets of metrics, said Graeme McVie, vice president of business development at Precima, a retail analytics firm.

“Retailers often rank and yank when evaluating their assortment; that is to say they rank all items in their category by sales and de-list the bottom performers,” McVie said. He suggests retailers use the “true item value” and “customer item importance” metrics:

True item value: This is calculated by taking an item’s total sales (ABC laundry detergent), subtracting the sales that would transfer to a similar item if the original item were eliminated (XYZ laundry detergent), and then adding in the sales of complementary items that were purchased with the original item (ABC fabric softener).

Customer item importance: This gauges the value of an item, even a slow seller, to very loyal customers. If the item is removed and the retailer offers no alternative options, the customer is likely to take her entire basket to another retailer. Walmart learned this the hard way with its inventory optimization a few years ago.

There’s still a lot of bloom on the boom

Retailers are right to target millennials and other younger generations, particularly through mobile communications. However, if they fail to extend the same opportunities to baby boomers, they risk missing significant opportunities, said Phil Seward, regional director of the Americas at ICLP, a global loyalty marketing agency for retailers and part of the Collinson Group.

More than nine in 10 boomers (93%) feel overlooked and inadequately rewarded, according to ICLP research. Consequently, they are less loyal to their favorite brands, Seward said.

Losing this loyalty, to a retailer, means losing a healthy revenue stream. Data shows that 84% of boomers use smartphones throughout the shopping journey and 79% are willing to indulge in purchases for their families. “In order to build emotional connections with this highly influential and often more affluent generation, retailers should better tailor online and mobile marketing initiatives, leveraging data-driven insights to turn them into repeat, loyal customers.”

You should let customers drive

When it comes to developing or revamping a loyalty program, retailers might overlook their most valuable information resource — their customers.

We’re not talking about the insights gathered through loyalty program data, which would help a merchant determine ongoing assortment, promotions, communications and customer engagement. Rather, we’re talking about the elements that shape the loyalty program’s model. Retailers rarely ask their customers what motivates their loyalty because they assume they already know, said Chip Bell, author of the book “Kaleidoscope: Delivering Innovative Service That Sparkles,” and senior partner of the Chip Bell Group, a customer experience consultancy.

“Customers are constantly changing — today’s fad is tomorrow’s antique,” Bell said. “Start a loyalty program by asking customers. Look at the theme of frequent customer complaints as a path to the opposite end of the spectrum. It can reveal what matters most!”

But let the insights intelligently map the journey

Once the foundation of a good loyalty program is poured, it’s time to use the data. This leads us to the most vexing question in loyalty marketing: figuring out how to use the data.

There’s no shortage of it — retailers have a wealth of data on their shoppers. The issue is they often don’t know how to interpret it. This makes implementing a targeted rewards program difficult, said Debjyoti Paul, assistant vice president of digital business at Mindtree, an IT services consultancy based in India and New Jersey.

“The first step is to clean up the loyalty data to uniquely identify each shopper and form a basic profile that is trustworthy,” Paul said. Next, enrich those profiles through machine-learning techniques such as artificial neural networks and support vector machines, the former of which adapts through trial and error and the latter of which can be trained to solve optimization problems. “This will ensure [retailers] are able to frame enduring loyalty programs that effectively develop customer stickiness and reward loyalty over time,” Paul said.

Take a breath on breadth

Product assortment is often derived from loyalty insights, but striking that balance — too much? Too little? — is arduous. Total store optimization helps retailers assess the necessary breadth and depth of various categories, said McVie.

“Consider the yogurt category. How many flavors of yogurt are required versus how many sizes versus how many brands?” he said. “Now contrast this with the spices category, where breadth is required but not depth — lots of different spices but not many types of oregano.” This strategy enables retailers to align the depth and breadth of each category with the needs of shoppers to ensure the correct amount of shelf space is allocated to each category.

These five essentials may not be a total secret, but they do hold the keys to loyalty success. If a retailer wants its loyalty program to be among those 42% in which Americans maintain activity, it should consider acting on them now.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

Yes, Men Coupon — And 5 Other Things Retailers Should Know About Male Shoppers

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When it comes to important household spending decisions, the question of who buys the pants isn’t as simple as it first appears. Rather, the question should be who spends the most time and money selecting them.

Increasingly, it is men, and not just when seeking a pair of slacks. Men are outpacing women in several behavioral categories when it comes not only to apparel shopping, but also to the grocery aisle. And where they are not outpacing women, they are narrowing the gap.

From list preparation to bargain hunting, men are increasingly displaying the qualities many retailers may equate with the traditional female shopper, to the tune of hundreds of billions of dollars a year. The average male spends nearly $300 a month just on groceries, and $85 a month on apparel. Both figures exceed these metrics for women.

Yet it seems in many ways, the male consumer is still misunderstood. In truth, male and female consumers have one important factor in common when making purchase decisions: They are often based on habit. If retailers want to get a leg up on this valuable market, they have to learn the average man’s passage to purchase — regardless of whether he is buying pants or produce.

Following are six male shopping habits that men wish retailers would pick up on. (Hint: Real men use coupons and sales staff.)

They Outspend Women

When it comes to apparel, men outspend women by about $10 a month, or 13%, according to “The Boutique @Ogilvy 2016 Men’s Shopping Report.” Ogilvy predicts the menswear market will grow by 8.3% in 2017, to $110.3 billion, outpacing growth of the women’s wear market, which is projected to be 4.2%. Apparel retailers looking to improve sales could benefit not only from well-placed displays of men’s apparel (not always in the men’s clothing section), but also by targeting men more specifically. Lululemon, known first for its women’s yoga gear, began targeting men a couple years ago and now expects this segment to eventually generate 40% of it sales internationally.

They Bring A List

More than half of surveyed men (52%) said they write up a list before hitting the grocery store, according to research by the Food Marketing Institute (FMI). Yet just 42% of men actually take inventory of their needs before making that list. A similar discrepancy exists among women, who are more likely to do both. Retailers can assist male shoppers using loyalty purchase data and similar membership programs. The Kroger Co. offers its shoppers digital shopping lists that connect with digital shelf technology, enabling users to locate in the store the items on their lists (a leading request among male shoppers).

They Listen To Sales Staff

They may not like asking for directions, but more than a quarter of men younger than 35 (27%) are influenced by the sales staff when making clothing purchases, according to Ogilvy. That compares with just 18% of men older than 35. The explanation may be that the younger group wants to look neat and stylish — for professional and romantic conquests — but lacks the confidence to pull it off. The Toronto menswear shop Gotstyle addresses this perceived need with a makeover service called “It’s a Match.” The goal: help men look terrific on their dating profiles and in person.

They Bargain Hunt

When preparing for the grocery store, four in 10 men (41%) said they collect and bring coupons and 49% peruse circulars, according to the FMI research. Men also seek value in their clothing purchases. More than half of men surveyed (53%) said they are persuaded by value when it comes to in-person apparel decisions, and 26% said they shop for clothes due to promotions, according to the Ogilvy report. The lesson here is to make couponing easy and fun. Emailed coupons likely have a higher chance of redemption, since they can be stored on a smartphone.

They’re Clubby

Men are more likely than women to shop the club-store, convenience and online channels, according to research by the Hartman Group. You might think this is because these environments enable men to purchase what they want quickly and with little thought. But let’s consider the model at Costco, which many men love to shop. The club-store chain intentionally makes shopping its big stores an adventure by regularly moving its merchandise around and by limiting its aisle signs, so shoppers are required to explore. The more time consumers spend cruising through the store, the more likely they are to spend.

They’re Fast, But Not As Fast As You Think

Men who describe grocery shopping as a chore still spend, on average, 56 minutes in the supermarket. That compares with an hour for men and women who enjoy it, according to research by NPD Group. When it comes to apparel, men linger even longer. A 2015 survey by Budget Sense reports that men spend 30 minutes more time apparel shopping per week than women — three hours compared with 2.5 hours.

All of this is to say that there’s no point in skirting the question of which gender is of greater value, because the answer is both. Retail behaviors are predicated on broader influences, from profession to the region one lives in.

The key to making coupons, staff and store layouts work is personal relevance. And that is a human understanding retailers need to put on one leg at a time.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

The Simplicity Solution: 4 Ways Retailers Earn More By Keeping It Simple

(PATRIK STOLLARZ/AFP/Getty Images)

Simple-size me.

With apologies to a major fast food chain, this may well become the motto for 2017. As consumers wrestle the daily crush of choice and complexity, they want increasingly for the consuming process to be nothing more than simple. They want what no dollar can buy, which is time. So it should not be surprising that 64% of consumers will pay more for simpler experiences.

This is among the findings of the latest Global Brand Simplicity Index by brand-strategy firm Siegel+Gale. Now in its seventh year, the index ranks brands on their perceived simplicity based on an online survey of more than 14,000 people in nine countries.

This year, low-priced German grocery chain Aldi topped the list as simplest brand, followed by U.S. newcomer and rival Lidl. Other high-rankers include Google, Netflix, Ikea, Amazon, KFC, YouTube, McDonald’s and Subway.

All that simplicity adds up to one particular positive for brands that can embody it, and that’s a premium, according to Siegel+Gale. Among the study findings:

61% of consumers are more likely to recommend a brand that is simple
62% of employees at simple companies are brand champions versus 20% of employees at complex companies
A stock portfolio of the simplest global brands outperforms the major indexes by 330%

 

Put simply, brands do not require Rubik’s Cube-like marketing strategies to excel. They may in fact need the opposite. The hook is that simplicity isn’t all that easy to achieve.

Simplicity Rules Of Thumb

That being said, simplicity — in terms of brand experience — is not hard to define. I think a simple brand experience follows three rules:

It gives consumers what they want.
It is available when and where they want it.
It can deliver in three actions or less.

 

Technology makes these rules fairly easy to achieve. The challenge for retailers is implementing the processes that streamline choice and eliminate purchase steps yet still cater to broad needs. Consumer data, such as from a loyalty program, will aid in this process.

Take, for example, coffee. You want a latte? Starbucks has lattes. You want it in 15 minutes? Starbucks has an app so you can order it in advance and have it waiting for you. You want it in two steps? The same app has a “pay” function that simply deducts the purchase from the bank of money you’ve preloaded to your account.

Notice I didn’t mention the broad menu of flavors or brewing options on offer at Starbucks. Choice certainly does muddy the notion of simplicity, particularly on the retail shelf (which is why consumers love Aldi). But if the consumer knows in advance what she wants, then the brand has already achieved simplicity in its marketing. It merely has to get that product to her, in as few steps as possible.

How Red Bull, Ikea And Costco Make it Simple

 Reducing steps actually does take complex thinking, however. It also requires a lot of high-level planning to ensure the experiential floorboards are secure. Following are four fairly straightforward steps to laying the groundwork to simplicity, by brands that do it with excellence:

Resist diversification: When Red Bull entered the U.S. in 1997, it created a new product category — energy drinks — that was easy to spot. Red Bull came in peculiarly small cans, just 8.4 ounces compared with 12 ounces for most soft drinks. It also offered only two options, regular and sugar free. When other companies rushed to compete, they did so with an array of flavors and options, while Red Bull adhered to its commitment not to diversify. Red Bull has since added new flavor varieties, but its familiar cans are still its core, contributing to a brand value of nearly $8 billion.

Be predictable: Sometimes, surprises add confusion. A simple brand makes it clear what consumers should expect. Ikea manages this in spades, or Allen wrenches: It is low cost because its customers have to put the Billy bookshelves, Micke desks and Pax wardrobes together themselves. Further, it carries pretty much the same assortment in every store, and every single product is Ikea branded. This enables the retailer to have complete control over the making and distribution of everything it sells.

But still delight: A predictable assortment can still have its share of surprises. Ikea introduces new designs and stylish accessories regularly, but maintains a core of staple furniture items. Costco, similarly, manages to carry a wide assortment of products, from kayaks to coffins, but its individual product choices are limited. The warehouse club reportedly only carries about 4,000 unique items at a time. This may means four dishwashing liquids, for example, or 30 cereals, rather than hundreds.

And be sure to deliver: Loyalty requires trust, and trust is built on giving what a brand promises. In pretty much every case, this entails quality. Lidl, the German supermarket chain that is just entering the U.S. market, is described in the Siegel+Gale Simplicity Index as offering a straightforward retail solution: inexpensive food that does not sacrifice quality or taste. Lidl feels confident enough in its offerings to serve them with garnish, according to the report: “The high-profile Swedish pop-up restaurant ‘Dill’ was revealed to be serving up a menu created entirely of Lidl products and produce.”

In doing this, Lidl delivers on the element of surprise by inventing new ways to present its existing product, rather than adding to the selection.

Such thinking is at the essence of “simple-sizing” an experience. A consumer does not have to be wowed with big gestures, just the right-sized ones.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

The 4 Roles Of The Retail Worker In An Artificially Intelligent Store

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This piece follows an earlier story about artificial intelligence in retail.

Meet Chad. Yesterday, he was your typical helpful retail employee. Tomorrow, he may be John Henry.

Henry is the American legend who, with his bare hands, outperformed a steam-powered railroad drill in a contest that pitted man against machine. Today that drill is artificial intelligence, and instead of digging, it’s selling.

Whether Chad and artificial intelligence (AI) have to compete, however, is a question for retail.

And the retail industry will have to address that question quickly. The artificial intelligence industry is expected to grow by more than 20-fold over the next seven years, to $3 trillion in 2024 from $126 billion in 2015. Much of that expansion is rolling out now in the physical and virtual aisles of retail, and with it comes questions about job security.

Workers have some reasons to be concerned. Artificial intelligence is capable of efficiently and inexpensively managing important tasks that require intense human commitment. The digital questionnaires that parlay consumer feedback into detailed product recommendations come first to mind.

Still, I believe the most relevant consumer experiences, the ones that leave an imprint, involve the human touch. A retailer’s AI software might advise an online shopper to buy what will be the very best coat for his needs, but can it tell him how it looks? Regardless of how the sale is made, the shopper is likely to prefer that a real person be on hand during the transaction.

And there should be. Because when it’s time to troubleshoot, to answer an unscripted question or to simply advise whether the red dress fits better than the blue one, consumers typically want to call in the humans.

Maximum Mind-Meld: 4 Ways

This is why artificial intelligence and organic intelligence should mind-meld, not compete.

It’s a classic “The sum is greater than its parts” formula: Retail workers and AI could more effectively improve the customer experience collaboratively, by borrowing and maximizing on each other’s skills. Here are four ways to accomplish that.

To hire the best: More than half (52%) of job recruiters say the hardest part of their job is identifying the right candidates from a large applicant pool, according to Ideal, which makes talent acquisition software. This is largely due to the time-consuming task of culling through resumes and applications. An AI recruiting system could automate that review process while integrating it into the existing recruiting database to avoid workflow disruption. This would sharply reduce hiring time and give retailers a better chance of winning the best talent. Ongoing AI surveying can provide employees with instant feedback and progress reports.
To improve operations: Just as AI applications can help mobile-toting consumers locate specific brands on the shelf, the technology can provide employees with on-the-spot product availability. With voice-recognition software, for example, employees can determine swiftly if a particular item is in stock or, if not, when it will be. Such interactions are crucial for impulse purchases, and if the shopper’s whim is not immediately addressed, then we may miss that magic opportunity. The voice-controlled wearable technology called Theatro connects retail employees directly to point-of-sale software that provides not only availability, but also product information. It also enables employees to communicate more efficiently with each other.
To advocate for shoppers: The best data for a retailer is that which is released from its silos and set free — with discretion. AI consumes information and converts it into insights, and those insights, if shared, can empower employees to become customer advocates. Many AI apps serve as questionnaires, narrowing down consumer product preferences, for example. If in-store associates are briefed on the brands and items most popular through these AI interactions, they can apply that knowledge to in-store displays and recommendations. They can further use post-purchase feedback (again through AI survey applications) to share approval ratings with prospective shoppers in-store.
To say thank you: A digital concierge or bot might make a smashing recommendation to the hapless guy seeking a Valentine’s Day gift, but a digital thank-you just sounds canned. A follow-up call from a human is more likely to leave a lasting impression, particularly if that worker has the basic AI-gathered insights from the purchase. A special offer along with a personal thank-you will likely make that shopper feel especially privileged, and eager to shop that retailer again. The employee, meanwhile, could ask if it is OK to follow up in a month or so (either personally or by AI) to see how the product is working out.

 

Artificial intelligence is drilling deep into the retail industry, but its capabilities are far from the enduring nature and deftness of the human touch. The challenge for retailers is to ensure their human touch, or experience, is not outdone by machines.

Should Your Brand Take A Stand? 3 Ways Advocacy Can Boost Sales

When Starbucks recently announced it would hire 10,000 refugees worldwide, it did more than protest a presidential decision; it raised the stakes for all retailers.

Not for them to hire people fleeing war-ravaged territories, but to determine and recognize their responsibilities to all stakeholders. For some retailers that responsibility may still be limited to making a profit, but increasingly this bottom-line focus is no longer an option.

From gay marriage to immigration rights, some emerging social and political issues are just too culturally significant for retailers to ignore. Social media may have a large hand in the reasoning for it; it provides a powerful soapbox on which consumers can collectively push for change.

The risk is that once a merchant takes a stand on a high-profile issue, it sets a precedent that may cause consumers to expect a similar response to future events. On a practical level, a retailer has to address the ramifications of its decision to advocate.

(AP Photo/Richard Drew, File)

“If such a retailer was my client, my first question would be, ‘Do you know the political leaning of your customers, employees and vendors, and if any would be offended by your coming out with this position?’” said Jonathan Bernstein, president of Bernstein Crisis Management in Pasadena, California, and author of the book “Manager’s Guide to Crisis Management.”

Retailers Who Advocate

In many cases there’s no avoiding offending someone, so it’s a matter of choosing the greater good for the brand. Here’s a sampling of how some merchants handle advocacy.

Starbucks on Jan. 29 said it would hire 10,000 refugees worldwide after President Trump announced plans to prevent asylum seekers from seven largely Muslim countries from entering the United States. Trump supporters quickly called for a boycott, stating that Starbucks should focus on hiring Americans. In response, Starbucks stated, in part: “We make decisions based on our mission, values and heritage and we recognize that sometimes there are some who may disagree with us. We respect the diverse points of views held by our partners and customers and will continue to listen.”

Macy’s stopped carrying Donald Trump-brand clothing in 2015 after the then-presidential candidate called Mexican immigrants rapists and murderers. Macy’s held its ground after Trump was elected, but pinned its reasoning on politics. “We wouldn’t have a Hillary Clinton suit line either,” CEO Terry Lundgren said. Trump supporters boycotted and took credit when Macy’s recently announced it would close 68 stores, though the fact that several other retailers also are shuttering locations indicates broader economic issues are at play.

Target raised ire — and praise — when said it would allow transgender customers to use whichever bathrooms corresponded with their gender identity. The policy followed legislation in North Carolina that required transgender people to use the public bathrooms that matched their birth gender. When some of its customers protested, Target did not back down. Rather, it announced in August 2016 it would install private bathrooms in all of its stores.

Kellogg Co., though not a retailer, acts in many ways like one and has a similar brand identity. So when the maker of Froot Loops and Pop-Tarts said it would pull advertising from Breitbart News, it risked a customer blowback. Kellogg stated the right-wing website did not align with its values. Breitbart responded by calling for a boycott and also ran controversial stories about the brand. Consumers have rallied on both sides, but it’s too soon to tell if the move has caused sugary (or non-sugary) cereal consumers to convert.

 When to Make a Stand

These cases reflect situations when brands either proactively chose to make a strong value statement or were forced into doing so. In either case, retailers need to consider several factors, such as how their vendors, not to mention their various other shareholders, will react. Following are three key considerations:

Can you take a snub? On highly debated issues, remember that boycotts can last longer than support rallies. Case in point: Chick-fil-A’s stance against gay marriage, as detailed in an article published by the Stanford Graduate School of Business. Those who aligned with Chick-fil-A sponsored a day of support, but those who opposed it boycotted the chain for days, weeks and possibly for good. As the Stanford story, by Ian Chipman, put it: “If you’re inclined to have a queasy feeling about the brand, it’s permanently etched in your mind, whereas the positive vibes just don’t stick around as much.”

How do your employees feel about it? It’s natural for a retailer to worry how its customers might react to a social or political stand. However, it should consider its front-line employees first, because they will be the face on the decision. Any advocacy should serve to reinforce the staff’s faith in the brand, not undermine it. This means choosing a cause that is in sync with the company culture and clearly communicating the reasoning behind it. As Bernstein explained: “One of the higher risks is employees publicly speaking out against their employer if they disagree with them, either for the record or anonymously.”

Small gestures can backfire: True, social justice-minded consumers likely prefer brands that share their values, even in a pinch. However, using this as an opportunity to jockey for market share can be hazardous, said Ronn Torossian, CEO of 5W Public Relations in New York. He referred to Uber’s effort to pick up travelers at John F. Kennedy International Airport when taxi drivers protested President Trump’s immigration ban. Uber’s message might have been “Don’t worry, we’ll get you home,” Torossian said, but it backfired. “Its core customers, most of whom weren’t even at the airport, sympathized more with the protest than Uber’s gesture. It’s OK to piss off a whole bunch of people; just don’t piss off your core customer.”

In short, weigh the circumstances and know your audience. Do they identify with the personality of your brand, for example, or the functionality of your product? People are at the center of all these decisions — that is a fact that cannot be ignored.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

Tiffany Ads Make Us Gaga For Valentine’s Day

Nothing says robin’s egg blue like a Lady in black.

Such was the latest ad for Tiffany & Co., which featured

(TIMOTHY A. CLARY/AFP/Getty Images)

 

Lady Gaga and aired at the Super Bowl, making for one more first at the historic game. First overtime, first 25-point comeback, first game-day Tiffany ad. But will the advertisement do for Tiffany what Tom Brady did for the Patriots? The bellwether may exist in the fast-approaching Valentine’s holiday.

 

Some may think Tiffany chose an unlikely person and venue for its advertisement, but did it? The ad’s story (not a couple in love, but one brand in love with another), the event and Lady Gaga just might appeal to a market, and sensibility, that Tiffany has trouble attracting — a young one.

Financial results indicate that Tiffany needs to find a buying market, young or otherwise. Sales in the first three quarters of 2016 declined to $2.77 billion from $2.89 billion in the same period in 2015. Profits slipped to $288 million from $300 million. The U.S. market in particular underperformed; sales from stores open at least a year declined 6% due to weaker traffic in all regional markets except Japan.

On Feb. 5, hours before the Super Bowl, Tiffany replaced CEO Frederic Cumenal, who had been heading the company since April 2015. The jeweler’s top designer had left three weeks earlier. It appointed chairman and former CEO Michael Kowalski to succeed Cumenal on an interim basis.

Broken Hearts

It may be a coincidence that the Tiffany-CEO breakup occurred just more than a week before Valentine’s Day. The timing of the ad likely was not.

Some retail analysts have suggested that Tiffany’s struggle with lagging sales may be due to a lack of love among younger shoppers, many of whom view it as an “old world luxury.” In any event, the withering sales can certainly be tracked to Tiffany’s home turf.

The gilded chain attributed a 2% third-quarter sales decrease in the Americas largely to U.S. consumers. Likewise, a lag in U.S. spending contributed significantly to its overall year-to-date sales decline of 7%. The drop affected most product categories, particularly silver jewelry, which represents the blue-box entry price for many.

To rekindle interest, Tiffany has introduced edgier collections and more acceptable price points. It’s a good step. But Tiffany can’t get younger shoppers in the door until it changes perceptions. Enter Lady Gaga.

Going Gaga

This may be why Tiffany chose the Super Bowl as the event for the Lady Gaga spot. She’d already generated hype as its half-time performer. And it’s worth noting that while Tiffany had not previously advertised during the Super Bowl, it has produced the Vince Lombardi Trophy since the first big game in 1967. So Tiffany probably knows a few things about the audience.

It may also know this: Almost half of Valentine’s Day gift buyers — 46% — do not start shopping for gifts until early February, according to a survey by Bing. Another 28% rush out in the week before. Those between the ages of 25 and 34 spend the most, $234, while those age 18 to 24 spend an average of $148 — not shabby.

A separate survey by Discover shows much the same — that adults younger than 35 plan to spend an average of $185, or about $40 more than survey respondents overall.

And what are they buying? Tiffany did not rank among the top-10 online search terms in Bing’s survey (interestingly, Olive Garden ranked third). However, jewelry did top its list of most-searched items via mobile devices.

And people are buying it. Overall, Americans spent $4.5 billion on jewelry in 2016, according to research by Fundivo.com, a small-business lender. That shakes out to $166 per purchase.

That’s a lot of rings. It’s also more than what Tiffany is tracking to ring up in terms of fiscal 2016 sales. To win a fraction of that $4.5 billion, Tiffany needs to turn the heads of younger star-crossed consumers. These are the shoppers it should commit to long-term, while also keeping its older, more reliable market in good hands.

Lady Gaga, thanks to her recent duo with Tony Bennett, may just be the perfect match for both.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

Using Artificial Intelligence Both In Apps And In The Aisles

Photographer: Patrick T. Fallon/Bloomberg

If the basics of retail are elementary, then it should be no surprise that a technology named Watson is leading what may be one of the biggest trends in 2017.

Watson is the name of an artificial intelligence technology (AI) by IBM; many may remember Watson for its $1 million winning streak on “Jeopardy.” Today, several major retailers — from Macy’s to 1-800-Flowers.Com — are using or testing the supercomputer’s cognitive computing capabilities to more acutely predict (and serve) customer wishes.

Most recently, Staples announced plans to implement Watson technology to bring to life its Easy Button. Infused with the technology, the button can now take Staples orders by voice, text, email, messaging app or mobile app.

The marvels of AI capabilities are wide-reaching, as is evidenced by the Amazon Echo and Google Home smart speakers. It’s no wonder retail is a great fit. The technology can understand and interpret customer preferences to make more accurate product suggestions, manage inventory based on predictive modeling and even identify ideal store locations. The industry, valued at $126 billion in 2015, is expected to reach $3 trillion by 2024.

Well-Timed Intelligence

Many merchants have adopted some form of AI in the past year. But are they in jeopardy of being too late?

I suspect online merchants are better equipped to get up to speed; they cut their teeth on clickstreams and piles of customer interaction data. But what about brick-and-mortar players?

They do collect data, often via loyalty programs, but putting those insights to action can be a complex endeavor with so many store-related distractions at hand. And in many cases, their data hierarchy and retention capabilities need significant work.

Enter a host of new AI applications, which are now more targeted to suit specific retail needs and therefore more approachable. In this context, perhaps late is better than never.

The key to faster adoption is the ability to see tangible results, said Emily Bezzant, head analyst at Edited, a retail analytics company with offices in New York, London and Melbourne. Brands are expanding the amount of data they have outside their core businesses, she said.

“All retailers have data within their business; the question is how can they best get actionable insights from it,” said Bezzant, who predicts AI will be a major retail trend in 2017. “AI and machine learning aren’t a fad; they’re a new technological innovation that means huge sets of data can be leveraged into decisions that could formerly only be made by people.”

Many of those decisions are now being made by a technology with a human name: Watson.

Watson’s Many Partners

I singled out Watson because so many merchants are testing and using it, and not all are online-exclusive. In addition to Staples, the following merchants have partnered with IBM:

Macy’s: Though it’s a traditional brick-and-mortar retailer, Macy’s has invested heavily in online and omni-channel merchandising. This includes the Macy’s On Call app, which combines Watson’s cognitive computing with location-based software to answer shoppers’ in-store questions, such as where a specific clothing brand is located. The program was tested in 10 stores through fall 2016.


Under Armour: The maker of high-tech activity apparel recently partnered with Watson to create an app that helps customers track their health and fitness activities, including sleep and nutrition. It in turn provides the users with coaching based on their data, as well as the results of other people who have similar health/fitness profiles. It also pulls from nutritional databases, physiological and behavioral data.
1-800-Flowers.Com: The digital florist and gift company tapped into Watson to create GWYN, a virtual gift concierge. GWYN “intuitively guides customers through their shopping experience to help them select the perfect gift,” according to a company press release. GWYN can interpret questions such as “I am looking for a gift for my wife” and then ask related questions about the occasion and sentiment to make reliable suggestions.


The North Face: The outdoor-gear chain launched a Watson-powered digital shopping tool that presents online coat-shoppers with a series of questions, such as “Where and when will you be using this jacket?” The answers are used to generate relevant coat suggestions. Shoppers who use the tool are more likely to buy than those who do not, The North Face told Adweek. The retailer is exploring different ways to use the technology.


Sears: The 124-year-old department store chain is using Watson to boost one of its tried-and-true categories — tires. The AI-enabled app, called Digital Tire Journey, prompts the shopper with questions and matches the most appropriate tires with driver preferences. The app identifies the shopper as a Comfort Warrior, Value Seeker, Off-Roader, High Performer, Safety Seeker or Winter Warrior and presents several purchase options (buy online, schedule an appointment or reach a call-center employee).

Embrace the Algorithms 

Based on these examples, it’s evident that brick-and-mortar merchants certainly have the ability to adopt AI technology. The trick is having the required data and the ability to blend it with the in-store experience.

They certainly can take a lead from online merchants. Bezzant points out that many retailers are already using big data analytics to track the competition and hone their retail strategies.

“However, it’s the savviest and most forward-thinking brands that are looking more deeply at machine learning, analytics and AI across all aspects of their businesses,” she said. “Embracing self-learning algorithms gives retailers the ability to sell more products with less discounting, understand competitors’ pricing, have correct product assortments and minimize gaps, spot key trends early and capitalize on them with maximum efficiency.”

Indeed, retail’s AI adoption is not all happening online. Nor is it all relying on the power of IBM’s Watson. The robots being tested at Lowe’s, called LowBots, come to mind. They can process natural language to respond to customer questions, and can even tell the difference between people and objects.

That may seem elementary to you and me, but in retail it represents a graduation of sorts. Where do the humans fit in? That’s a topic for another article.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.