Today’s Carpentry Lesson: Building a Virtuous Spiral

Create the Vision - Hire the Right Architect

MAY 11 210
This week’s post speaks to Retailers. We know there’s a strong correlation between the work environment retail employees experience and key store metrics such as customer loyalty. An article in the May 2010 digital edition of Progressive Grocer succinctly updates this with a report based on SUPERVALU’s work with its Independent Retailers. Here’s a quick synopsis of the steps retailers can take to build a virtuous spiral, strengthening both the loyalty of their customer base and the depth (loyalty, quality) of their employee base.
• Hire a skilled architect Design a program of research and action that will work within the realistic constraints of your organization. The research investment has to be balanced with investment in resources to drive change.
• Choose your materials wisely: select the right metrics
Know what matters – before you measure customer or employee behaviors or attitudes, you want to know what the key drivers are – so you measure only what matters, and what you could possibly change.
Operationalize those key drivers – specific behaviors, conditions, experiences can be changed. These are the foundation of your virtuous spiral.

• “Measure three times, cut once” Measure what matters. Three measures to consider:
o Measure your employees’ behaviors, attitudes, satisfaction
o Measure the customers’ experiences, satisfaction, loyalty
o Measure your employees’ perceptions of customer satisfaction
Employees are often tougher on themselves than customers are, so it is encouraging for them to see how well customers rate the store on various dimensions. Demonstrating where gaps exist between employees’ perceptions and customers’ realities brings the employees into the process and makes them more likely to embrace necessary changes. This is especially true for today’s Gen Y employees.

• Provide the right tools. The results of any measurement will be productive IFF effective steps are taken to change what’s holding back performance. This means laser sharp approach to diagnosis, selecting targets for change, and implementing that change
o Communicate results and plans, get stakeholder alignment
o Train focused on specific action areas

• Build! What is measured is managed.
o Coordination is key. Integrate your customer satisfaction program throughout your organization, including functions such as Six Sigma, Training, Communications, HR, Ad Agency….the more pervasive, the more impact it will have.
o Stay on top of the schedule. Understand the lag time between reading customer satisfaction, taking corrective action, and time for those actions to be recognized by customers.

• Celebrate success, recalibrate, keep building. Communicate and reward progress effectively. As the motivational literature attests, there is a science to accomplishing these goals:
o Showcase employees who embrace the program and have grown as a result of it –
o Let your customers know how you respond to their feedback – we listen, we act!

Five Steps Local Retailers Can Take to Build a More Valuable Customer Base

Bricks and mortar Retailers benefit from customized marketing research to optimize the way their store serves their target market. Research enables the Retailer to invest efficiently and effectively in actions that will leverage strengths, speak to correctable weaknesses, and enhance performance in the market. These are some steps a local Retailer can take. Some of these are not cheap, and they aren’t all appropriate for every Retailer. A savvy, thoughtful investment in marketing research can pay off quickly. One of the ways we provide value to clients is in providing advice as to where a shrewd investment in marketing research is likely to have the biggest payback.

1. Know your reputation in the market. A survey of all potential customers in the trading area for your store can provide a rich understanding of not only your reputation, but your standing vis-à-vis alternatives in the area. This provides the raw data which results in a current, detailed SWOT analysis. The quality of the survey design, the questionnaire design, and the analytic tools applied will determine the usefulness of the data you get from the survey, so of course my recommendation is to work with a highly skilled marketing research professional with depth of experience in this field.
2. Know what your own current customers think and do. Survey enough of your current customers to be able to analyze different sectors, from Brand Advocate loyalists to the occasional shopper. With some simple modeling, this adds richness and depth to your understanding of what drives that loyalty to your store, and what the payoff is likely to be if you improve in certain areas. This knowledge enables you to invest your time and money where it will have the biggest payoff in terms of loyalty, sales, and profit. You often get enough of your own current customers in the Market-wide study, so it calls for either an augment or a separate study.
3. Check in with your employees. For most bricks and mortar retailers, the employees are the point of the spear, the ones who can make or break your success, based on their customer interactions. Trader Joe’s has an entire radio campaign airing now about the value their checkers bring to the transaction, with their human touch with customers, to combat the prevalence of the Self Check Out Systems in our local supermarkets. There are 2 surveys that can be of great use: survey employee satisfaction, and survey employees’ perceptions of customer satisfaction. Often there is a disconnect between what employees say customers think, and what customers really think, about the store. Showing employees both types of information helps employees see where their perceptions may be amiss, and adds credibility to Management’s efforts to bring the store more into line with what customers want.
4. Know what the competition is up to. Keep a broad definition of “competition”; for a supermarket, it isn’t just the other grocery providers, consider any channel for the products you sell. You can do this through your own investigation of competitors’ marketing actions. You can hire Mystery Shoppers to shop their stores and report back. You can even recruit regular consumers to shop your store and others and report back on the experience, to get a clearer, more detailed read on strengths and weaknesses.
5. Know what’s going on in the world, and how it may affect your market. That means keeping abreast of shifting demographics, economic realities, values and beliefs, and more in your market. Millenials shop a store differently from Boomers; they use Internet-based tools far differently (think online couponing, Facebook, Foursquare, Twitter…) How deeply do you know how different generations shop, or what your demos are? The recession continues to have a massive effect, and savvy Retailers have adapted to it. For example, many supermarkets have not only beefed up their private label lines, they have developed programs to pull in dollars that used to be spent eating out at nearby restaurants, as consumers cut back on spending, and timed promotions to synch up with pay cycles.

Nufer Marketing Research consults with Retailers to understand their unique shopper-related challenges, and provides custom research solutions that result in targeted, actionable business recommendations.

Manufacturers’ Actions Fight the Tide of Private Label Share Gains

Over the course of this deep recession, private label sales have grown substantially over 2008 (+2%) and 2009 (+1.1%), but may be stabilizing in 2010 as reported in today’s Ad Age article, at about 13.8% in household/psl goods.  Jack Neff, the author, makes the point that Brands will have difficulty recovering share lost to private label for many CPG categories, as the private label products are delivering well enough on consumers’ needs.  Here are some of the actions Manufacturers are taking to win back some of that lost share. 

Manufacturers are focusing on package design to differentiate and communicate at shelf:

• Just today, Ad Age reports P&G’s focus on packaging to differentiate itself at shelf and the challenges the retail environment poses.
• Campbell’s focus on packaging  resulted in a revamp of its soup packaging, to stimulate an emotional response as well as make it easier to find the “right” product faster.

They are augmenting this with ad spending to drive share growth:

• Although magazine ads sales in Q1 were lackluster, (# pages down 9.4%), there are signs of renewed vigor in that sector.  Toiletries and cosmetics ad $ and pages actually grew substantially in Q1, and CPG giants like Heinz, Clorox, and notably P&G have  increased their ad spending, reflecting the theory that increasing share of voice beyond market share will lift market share.

Driving sales growth will depend on the Brand’s ability to sell both the consumer and the Retailer:

1. Differentiate the Branded products from private label based on tangible and emotional benefits, to get the consumer off the price focus.
2. Make it worthwhile for the Retailer to stock this Brand – by providing products (and supporting them) that not only meet sales targets but can demonstrably increase category sales, increase basket size or trips, or increase commitment to this Retailer’s site. Retail Leverage has some insightful thinking on this. 

Marketing research often plays key role in assessing a product’s potential to not only entice shoppers, but to help build the Retailer’s business. We work with both Manufacturers and Retailers illuminate consumer response to products both in isolation, and in context at shelf.

New Product Development – 3 Critical Variables

In today’s WSJ, there is an article about new product development, written by a team of McKinsey and MIT professionals. The authors analyzed new product development activity in 28 companies in North America and Europe, and report these 3 things that those with the best product development records do differently than less successful companies.

Tellingly, out of the myriad of variables that might drive successful new product development, marketing research was one of the 3 they cited:

1. Keep the project requirements focused, consistent, and well-communicated.

2. Nurture a product development culture: have the right team, focused on the project, with responsibility and autonomy to get products developed.

3. Talk to the Customer! The top performers periodically tested and validated customer preferences during the process –including early phase research to determine customer needs.

This article cites the bottom line impact of following these reasonable practices. Particularly in such a dynamic, difficult economic environment, the temptation can be strong to take shortcuts in that “talk to the customer” aspect of product development. This article supports the value of customer input throughout the product development process, and demonstrates the downside of failure to do so effectively. It is crucial to have the right research done. Our clients benefit from our expertise throughout the new product development continuum. We work closely with our clients to understand the critical business issues around a particular new product development project, and because our work is custom designed, we leverage that research investment productively. The key is to determine at which phases of your process consumer input is most impactful, and how to get the knowledge as efficiently as possible.

Here are some of the phases where we work with clients – consider them as you look at your new product development process.

• Need gap identification – where is there “white space” in this category, needs that are important and not being met by current offerings? How extensive is this problem, how big is the market for this?

• Insight development and evaluation – what is the underlying problem or conflict that consumers experience, and that your product solves?

• Develop the product conceptually – use consumer input to design viable alternatives (product features, branding, pricing, etc.) prior to significant product development costs.

• Test prototypes and alternatives – we do this at many stages of development – testing names, packaging, pricing, formulations – all aspects of the product.

• Positioning – what are the most relevant benefits or RTB’s to communicate, and to whom?

• Putting it all together – testing product prototypes prior to introduction, advertising development and communication, in-market reads, in-store evaluation, and more.