4 Pricing errors that will break your business

Retail pricing can make or break your business. Coming up with RRP is 50% science and 50% art. The following symptoms and common strategies is evidence of poor pricing practices:

Price-point proliferation

This happens usually in multi-category stores. Stand in front of any merchandise category, say the pen department in a newsagent, and observe how many price points there are. Often you find six to eight price points ranging from below $1 to $10.

Can a customer really tell the difference between a $2.95 pen and $3.95 pen? If not, why are you selling pens at $2.95?

Rationalising price points makes buying a pen a more pleasant experience, and if managed correctly, will improve your margins.

In most categories/sub-categories, three price points (value, mid, premium) will do and in larger categories with a wider range of prices no more than five price points.

Pricing to achieve a margin

Many retailers follow a standard approach to pricing to achieve a certain margin. A standard mark-up is applied to every item purchased. In time, as wholesale prices increase, it results in the proliferation mentioned above.

A further problem is that is that while costs may increase, the value of the item does not necessarily increase. Often costs go up because volume is declining and the worst thing you can do is to increase the price. Simply applying a standard mark-up is counter-productive and it is often better to either accept a reduced margin to maintain volume or to de-stock.

Your mark-up is irrelevant; the only thing that is relevant is what a customer is willing to pay.

Of course ultimately you must achieve a certain margin (your ‘maintained margin’ after markdowns, returns etc) but on a product by product basis, the price is determined by a range of qualitative factors (see below), and the financial outcome is considered afterwards.

If you under-achieve your margin, you can’t simply up the prices to do so without considering these other factors – you have to reconsider your range. Of course there is no such thing as over-achieving your margin.

Following Manufacturers advice

The laws that govern resale price maintenance allow a maximum RRP but no minimum. (For a quick rundown of what can and can’t be done, this page by the ACCC sums it up nicely.)

On the one hand larger manufacturers are likely to have arrived at their pricing recommendation based on some pricing analytics, but that still does not mean that it is right for your business. Make your decision on the range of qualitative (the art) and quantitative (the science) factors, where manufacturer’s recommendation is one consideration. (Of course if you are an agent for a manufacturer, it is different.)

Ignoring qualitative pricing factors

People use price as a heuristic. That is they use it as an indicator (mental shortcut) of something else, and our case usually it is used to indicate ‘value’. Generally one must be an expert to fairly judge value. Say you are buying a car, can you unequivocally tell the difference between a Mazda and a Lexus? Most people use the brand and the price associated with that brand as an indicator of what a good car and what they then expect from that car given the price. It is no different when thy buy shoes or anything else.

The following qualitative factors need to be considered:

  • Brand

As the retailer it is therefore your job to manage how your pricing strategies over time communicate an important aspect of your brand. By setting your price, you are creating (or breaking) your brand.

  • Consistency

You should apply your pricing consistently - if you are selling coffee for $5 and slice of cake for $10, you shouldn’t sell a Coke for $2.  And if you are selling $2 coffees, you shouldn’t sell $5 cokes.

  • Value

People don't buy stuff because it is cheap, but they never want to pay more than it is worth. (Price's Golden Rule of Pricing). This is possibly the most important consideration: what is a customer prepared to pay, given the economic-, social- and competitive context of your store and your product?

  • Strategy

What are you trying to achieve? Market share vs profitability? Growing a business or defending territory? USP or competitive advantage? What is happing online?

  • Timeframe

How important is the product in the long run?

  • Marketing & Operations

How does the product sit in your offer? Is it needed to stimulate sales for another category? Is it a loss-leader?

The key point I want to make, especially for smaller independents, is that the worst thing you can do is to have set and forget approach to pricing. I can’t tell you how often I come across a retailer who simply says they multiply by 2.2 (to achieve 100% mark-up plus GST) and that is how they price everything.

That may the easy approach, but it is also the easy way to go broke quickly.

How to negotiate price without mentioning price

Last week’s post highlighted a few common errors made when pricing for retail. This week the focus turns to how optimise profitability by negotiating smarter.

Many wholesalers/manufacturers will have different types of discounts – not all of which are widely communicated. Often it is a case of ‘don’t give if they don’t ask’. And why would a rep give away something if it is not important enough for you to ask for it?

Here are twenty things you can negotiate that will either improve gross- or net margins:

1. Trade discounts (% off list price)
2. Quantity discounts (based on volume bought)
3. Seasonal discounts (incentive to stock out-of-season merchandise)
4. Cash discounts (reduction based on when bill is paid based on dating of the invoice.)
5. Slotting allowances (paying for shelf-space)
6. Markdown guarantees
7. Promotional allowances
8. Rebates (refunds from vendor which does not impact markdowns)
9. Payment options
10. Payment periods
11. Credit terms
12. FOB Origin or FOB Shipping point (e.g. centralised warehouse)
13. FOB Destination (with or without charges reversed.)
14. Free/Additional POS material
15. Exclusivity (for an area or for a period of time)
16. Co-operative advertising
17. Pre-ticketing/ tagging/ labelling
18. Packaged for resale
19. Field Merchandising & stock rotation
20. Dating (when the discounts etc. come into effect.) For an example of how to calculate the benefits, check this out. This example shows how a seemingly insignificant 3% early settlement actually translates to >50% in actual fact.

You won’t get everything from everyone – but all the little bits help.

Comment
Ganador Blog is about #thinkdifferent. We cover topic of business- and personal development aimed at entrepreneurial marketers. (c)Applies. Posts authored by Dr Dennis Price.

About boxes, being inside or out

An elderly couple was asked what the secret to their long marriage was. The woman was quick to reply. It is all about who makes which decisions. I let my husband make all the big decisions like what should happen to the exchange rates and the how the Prime Minister should change our foreign policy, and which wars we should fight. I make all the little decisions like where we live, what school the kids go to and who our friends are.

We are often told to think outside the box. In fact, I pride myself on my abilities in this regard. But it is not all it is cracked up to be.

  • We live in boxes.
  • We drive in boxes.
  • We give gifts in boxes.
  • We work in boxes.
  • We retail in boxes.

One day we will be carried out of this world in a box.

Boxes are unavoidable. The box presents reality as much as it presents parameters and constraints and to deny them is to deny reality. We can’t perpetually want to live and work and ‘innovate’ our way outside the box. Boxes are there for a reason.

Does that mean we have to accept the constraints of the status quo? Does it mean we must be happy with our ‘lot’?

There are two strategic options: accepting the reality of being in a box or rejecting the constraints and living outside the box. Which is the right option?

The simple answer is that both are right.

When the edges of the box are defined by uncontrollable events and unchangeable circumstances, then living within the box, dealing with that reality and ‘making do’ is the smart approach. Becoming efficient within those constraints (despite those constraints) is the key.

When the edges of the boxes are arbitrary constraints; especially those that are deemed to have always been ‘like’ that’ then they should be challenged and pushed. Don’t let tradition or fear define the edges of your strategy, nor let that determine what you are capable of.

The place to live, work and find success is inside the box and outside the box. The real challenge is knowing when to focus on the inside and when to focus on the outside. In the context of running a retail business, there are certain times when working inside the box is required. The obvious ones are:

  • Minimum wage
  • GST on overseas purchases (lack of)
  • Interest rates
  • Competitor strategy (less obvious perhaps)

The areas where you can (and should) constantly innovate and push the boundaries are for instance:

  • Promotions
  • Displays
  • Channels
  • Customer service

The problem is not that people don’t know when to think inside or outside the box. The problem is that people believe ONE way is always the answer.

Whilst our focus (at Ganador) is the provision of solutions for creating teams/companies that are totally focussed on customer service, and everyone knows how important that is, we are the first to admit that great customer experiences are not the only thing that matters.

Sometimes you must think inside the box and sometimes outside. It is NEVER only one right way, sometimes it is both and sometimes it is neither.

Ganador Blog is about #thinkdifferent. We cover topic of business- and personal development aimed at entrepreneurial marketers. (c)Applies. Posts authored by Dr Dennis Price.

WHY DO RETAILERS FAIL #3: TREND vs ACTION

Last week I wrote that instead of responding to trends as drivers of the business, we should rather see trends as market responses to friction points in our business.

It follows, therefore, that we should see the trend as a symptom of a problem and not the cause of a change.

There is wide spread consensus that the following trends are manifesting right now, and that survival requires retailers today to master these trends and either future proof the business against their effects or to capitalise on the trends.

Typically, pundits will list a bunch of ‘things’ and label them trends:

  • Mobile
  • iBeacons/NFC
  • Gamification
  • Community engagement
  • QR codes
  • Multi-channel
  • Social Media
  • Internet of things
  • 3D printing
  • Fusion retail

The challenge with these lists is that the trends belong to different categories. Gamification is a strategy and QR codes are technology.

At the other end of town, Companies like PricewaterhouseCoopers will create conceptual frameworks, which are probably perfectly valid.


http://www.pwc.com.au/industry/retail-consumer/assets/Digital-Media-Paper-Jul12.pdf (Source)

In both cases it is hard to go from the diagram or the list to doing different things in your shop today and be confident that it is relevant to your business and that you are not simply addressing a fad. In accordance with my hypothesis, the trend is an indicator of an underlying issue.

What is the solution?

I suggest a simple process that can be used by large and small organisations alike:

  1. List each touch point of your customer journey (form initial web search to post transactional interaction)
  2. Identify potential areas of friction (e.g. website slow to load, long queue at the till) at each individual touch point.
  3. Fix each point of friction by asking the following three questions:

* How can I use current technology to reduce the friction?

* How can I systematise my operation to change it and to prevent it recurring?

* How can I use this change competitively?

  1. Ensure the changes are documented and communicated and trained into the business as required.
  2. Rinse and repeat as part of your annual business model review
Ganador Blog is about #thinkdifferent. We cover topic of business- and personal development aimed at entrepreneurial marketers. (c)Applies. Posts authored by Dr Dennis Price.

WHY DO RETAILERS FAIL? #2: FAILURE BY FRICTION.

 

To make sense of a great many of the trends in retail is not easy. Experts abound and a simple google search will give you some comprehensive, free slide decks. But how do you make sense of these trends in practice? How do you take it from words on a page to specific actions?

 Understanding the notion of friction allows you to do just that, because one can use that framework to evaluate your retail business quite effectively.

In The Necessity of Friction (1993) Keith Griffin, writes about the traditional view of Economics and it can be summarised as follows:

The core of late twentieth century economics consists of a set of assumptions which, taken together and seen as a whole, constitutes an image or vision of a self-regulating system in which friction and inertia are largely absent. Friction in both senses of the word is generally ignored: there is neither dissention and conflict nor is there resistance to relative motion. The economic system adjusts smoothly to disturbances; markets clear instantaneously; competition ensures that resources are used efficiently.

But, as any practitioner would know, and Griffins acknowledges, friction is real and it is every consumer’s bugbear.

What causes friction in the retail interaction?

The answer to this simple question will make sense of all the retail trends coherently.

Customers want zero friction. Remove friction, and customers are happy.

Price/cost is a friction point, and customers always want the best price (i.e. least friction). That is an easy one. Identifying a comprehensive list of friction points, specifically to your business, and developing specific strategies for them is harder.

Some examples are captured in the image below. The way to use it practically is to evaluate every customer touch point and assess the level of friction at that touch point.

·         Duration

·         Availability/timing

·         Effort/Physical

·         Choice/Competition

·         Epistemic Friction (e.g. product knowledge)

·         Psychological

·         Fit for Purpose/Quality

 

See figure 1 for a simplified, partially completed example.

 

Like any relationship, it is better when the friction is removed.


Retailers fail when they don’t recognise the friction.

How does this relate to evaluating trends?

The growth in ecommerce and social marketing is directly proportionate to online sales as it effective removes the friction of poor face-to-face serves, removes the friction of sales staff that lack product knowledge. And it is also directly proportionate to the friction caused by over-priced offers.

The growth in mobile phone usage (to shop or supplement shopping activities) directly reduces the friction related to the effort/ duration of shopping activities. And so too is the trend of customers who increasingly argue about RRP.

My hypothesis is this: It is not the trend that drives/impact our business so much as that it is our inefficiencies (friction) that cause the trends to emerge in response to that friction.

Consequently, if we become proficient at identifying friction, we will be better able to (a) anticipate the trends and (b) proactively respond to trends in good time. In fact, if we reduce friction efficiently, we will be less impacted by the trends, whatever they may be.

Dennis Price

LESS failure, MORE success - GANADOR

 

Ganador Blog is about #thinkdifferent. We cover topic of business- and personal development aimed at entrepreneurial marketers. (c)Applies. Posts authored by Dr Dennis Price.

WHY DO RETAILERS FAIL #1: THE BIG SQUEEZE

In our first post on the topic of failure, I gave an overview of what failure is, how we respond to it and how we should respond to it. 

There are many ways to describe what happening in the retail sector is. Disruption is too generic, and not helpful to understand what is happening. I prefer to identify specific patterns and one such pattern is ‘convergence’ or what is referred to as the dumbbell effect.  

A good example would be shopping centres, where the big centres with a great offer  just gets bigger and the small, convenient ones do well too; but the middle is being squeezed because the convenience is compromised, yet the range isn’t quite there; so the middle gets squeezed at both ends. 

A similar pattern can be identifies as boundaries between retail formats are being ‘squeezed’. See Image 1 below. Traditionally, you get Fast Food at one end and Restaurant quality food at the other. The price, the quality, the wait – everything was different resulting in very different experiences and expectations. 

Then disruptors come along and squeeze  the formats by creating a niche where none existed before - often in between two niches. When three niches go into two, there is usually some pain for someone. 

The most interesting thing about the big squeeze is that it is allowed to happen. Or is it that simple? 

One can argue that the incumbents of the pre-existing format, simply failed to cover their territory and an upstart came in to eat their lunch. The Quality Steakhouse should have offered $10 steaks. 

Or one can argue that the incumbents could not cover those territories because if they tried, they would have diluted their own proposition. Would you really have gone to Hungry Jacks for a $12 Steak Burger? 

As usual, the answer is probably not either/or, but rather a little bit of both. So the important thing is figure out what the important lesson are: 

1.     Whatever positional advantage you currently enjoy, WILL be eroded in time by an opportunist - it is only a matter of time. 

2.     Differentiation is critical in responding to consumer preferences. (Corollary: there is always a different way to slice the pie.) 

3.     The best, strongest and most compelling proposition will beat weak a weak proposition every day of the week. 

4.     In the new age of marketing, the value of brand can grow more rapidly than ever and decline more rapidly than ever. (You need it more and it is worth less.) 

5.     Niches are getting smaller, so you have to go deeper. (In practical terms, expanding your geographic reach via the internet allows you go deeper after a smaller niche.) 

What are you doing successfully to navigate the squeeze? Has it happened in your sector?

Dennis Price

LESS failure, MORE success - GANADOR


Ganador Blog is about #thinkdifferent. We cover topic of business- and personal development aimed at entrepreneurial marketers. (c)Applies. Posts authored by Dr Dennis Price.

Anatomy of Failure

THE FAILURE BOGEYMAN IS COMING

As soon as we hear the word ‘failure’ we run for the hills for fear of catching the disease. Some high achievers (Branson, Gates, Jobs and the like for example) tell us to embrace failure, but we all secretly think that is easy for them to talk, because they are already successful.

If I was that successful, I’d also be happy to admit my historical failures.

But what if the failure is recent? What if your failures outnumber your successes? Most importantly, what if you believe that you are currently not ‘successful’? Would you be prepared to admit failure?

Most people don’t and won’t. The average entrepreneur succeeds less than 30% of the time. On the other hand, Bill Gates has a 100% success rate with company start-ups. He tried once, and succeeded. Who do you think knows most about what works and what doesn't; the average entrepreneur or Bill Gates?

I tallied up all my business ventures and my pass rate is 2 from 7. That is less than 30%. (In the spirit of honesty, I wasn’t referring to the average entrepreneur; I was referring to my own track record.) I reckon I know more about failure than Bill.

There are MANY more failures than successes in the world. The real stats are:

  • According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months - that is approximately 20%.
  • According to an IBM study, only 40% of projects meet schedule, budget and quality goals.
  • For every seven new product ideas, about four enter development, one and a half are launched, and only one succeeds - that is less than 15%.

I can’t find a statistic to prove it, but I don’t believe this state of affairs has improved - ever. So that leads us to the conclusion that we are not dealing with failure like we are with other challenges.

What is failure and why are we so afraid of it?

WHAT IS FAILURE?

Success/failure is and can be more than material things like possessions and money. Success is defined as a state of affairs that are as desired, so failure is therefore non-existence of the success state.

For example: If you define success as a million bucks in the bank, then failure is not having a million bucks in the bank. If you define success as happy kids and time for your art; then failure is unhappy kids and no time for your art.

There is one important assumption in all of this and that this ‘state’ is able to be influenced. If you are physically unable to have kids, then you obviously won’t have ‘happy kids’ either. One can hardly classify that as a failure, even though it is not the desired state.

HOW DO WE RESPOND TO FAILURE?

1. We respond irrationally

The reason why we don’t want to admit failure is that we can’t separate the ‘FAILURE’ from the ‘ME’. We can say ‘it’ was a failure, but we really feel “I” am a failure. When we succeed, we are quick to explain how and why “WE” did it. When we fail, we are quick to find something or someone else to blame, because we take failure is personally.

We all know that synchronicity/luck plays a role, sometimes the dominant role in an outcome. When we succeed, we don’t acknowledge it, and when we fail, we feel like losers for blaming bad luck.

Psychologists will talk about our ‘locus of control’. We tend to internalise events, which is great when things go well, but not if they don’t. People can be trained to shift their locus of control.

2. We make failure relative

Because we want to disassociate ourselves from failure, we define it out of existence.

It is possible to define success anyway we like so that we can describe our current situation as ‘successful’, so that is what we do.

Ganador is a 2.5 person business. That is our business model and that is how we designed it and planned it. However, if I DID win a million dollar contract over several years requiring me to employ more people full-time, would I have done it? Of course I would have, right?

Since that makes the business less successful than it could have been; does it make it a failure? If we were honest, it probably does. I simply settled for less and moved the goal posts to make me feel successful (enough).

If you have a $5m a year retail chain that could be doing $8m, does that mean you are successful or that you are failing?

So, success (and failure) can be defined to suit, and that is a benefit and it is a trap. We end up believing we are as successful as we can be, even when we are actually failing.

Ganador has/does a lot of work with ‘critical retailers’. After eight years, I can say with some confidence that we are intimately familiar with failure. If one can be an expert about failure, then we are. And in eight years of dealing with under-performing retailers, not once did anyone ever take any personal responsibility for the state of affairs. Not once. (On the other hand, I can tell you that John Howard, Kevin Rudd, Julia Gillard and Tony Abbott have a lot to answer for…because they pretty much caused all the problems.)

3. We ignore failure

Our irrational fear of failure pervades our organisations, to the extent that it perpetuates failure. We don’t deal with it. Because dealing with it means we have to admit it, and we can’t do that at all. The consequence of this is that we actually don’t learn about failure, why it happened and how to avoid it in the future.

The people involved in a failed business or project will disband as soon as possible, avoid reference to that ‘black mark’ on their resume and move on.

HOW SHOULD WE RESPOND TO FAILURE?

Instead of a prescriptive list, maybe a few questions to suggest some possibilities will do:

  • How many organisations plan for failure?
  • How many organisations celebrate failure?
  • How many organisations extract maximum value from a failure by constructively engaging with failed teams and failed projects?
  • How many organisations document failure?
  • How many organisations invest in failure training?

HOW we may do these things would not be immediately obvious to some readers, and that is more or less the point. We don’t know what failure training looks like or should look like, because we have never done a course in ‘capitalising on failure’.

Over the course of the next few weeks, I will explore why retailers fail – and then conclude with how we may be able capitalise on it. It is time for FAILURE to come out of the closet. Hiding has zero benefits, and sharing the light of critical analysis on it helps equip us for the present and the future.

Let’s face it, if we work on our failures we have more raw material than if we simply try to replicate our successes.

Dennis Price

Helping to develop businesses less likely to fail at GANADOR

Ganador Blog is about #thinkdifferent. We cover topic of business- and personal development aimed at entrepreneurial marketers. (c)Applies. Posts authored by Dr Dennis Price.

A litany of retail failures, and how to benefit

AKA: RIP Retail Australia (or not)

It is easier to be pessimistic than optimistic, and one can find stats to support either view.

But here is my take on the retail landscape:

Average of 44 small businesses closing their doors each day, according to Australian Bureau of Statistics data

Small business failures up 48 per cent

Sales have been flat, like forever: The latest ABS Retail Trade figures show that Australian retail turnover rose 0.1 per cent in November, seasonally adjusted, following a rise of 0.4 per cent in October 2014.

Online eating our lunch. Total online retail trade, in original terms, rose 5.2 percent in November following a rise of 9.8 per cent in October 2014 and a rise of 8.7 per cent in September 201

The consumer is not coming to the rescue: Total household debt stood at $1.84 trillion at the end of 2013, equivalent to $79,000 for every person living in Australia at that time. This was higher than it had been at any time in the previous 25 years, even after making adjustments to remove the effect of general price inflation

And this won’t change soon: In 2012, Australia's household debt level was equivalent to 1.73 times Australia's 2012 gross disposable household income, whereas household debt in both Italy and Germany was less than a year's worth of gross disposable household income (at 82% and 93% respectively).

Sales growth is declining. Like forever - see graph.

Our retail landscape is littered with failures – from outright bankruptcy to strategic retreats. And failure defies any classification, as you can see from the range:

Small (Treehouse Children’s Decor) and large (Crazy Clark's and Sam's Warehouse). Food (Pie Face) and Fashion (Ksubi, Man 2 Man) and Homewares (Clive Peeters, Kleenmaid). Luxury (Perfume Empire) or Basics (Payless Shoes). Local (Darrell Lea) or International (Starbucks, Krispy Kreme) or franchised (Video Ezy).

But the purpose of this post is not to lament the state of the industry, but rather to make the point that failure is a fact of life. None of those organisations or the people involved with them need to be ashamed of the end result.

The problem with failure is that we run away from it and don’t confront it well enough to actually learn from it.

Melbourne angel investor Frank Cooper believes there is still some resistance to supporting an entrepreneur with an uneven track record. “Attitudes are changing, but there’s still a long way to go before we get to the American acceptance of failure,” Cooper says. (Follow the link to read the story of Franz Madlener and Villa & Hut and what he took from it.)

Over the coming weeks I hope to go some way towards bringing failure out of the closet.

Have fun

Dennis

Ganador: Solutions for Success

 

Why people hate, and what marketers can do about it

I originally wrote this post the weekend before the Martin Place siege in December 2014. Then I decided not to post it because it may appear to be smar-ar$ed or insensitive. But then we had Paris 2015 with the Charlie Hebdo massacre and it seems it is a topic that must be addressed.

The original title was: An Application of Rigidly Defined Uncertainty 

I published a draft framework recently that is designed to help organisations think about the future. In brief, I postulate that society of the future will function very much like a Caveman Society. The technology will be different and it will eradicate the disadvantages of actually being part of a small tribe (E.g. geographic limitations, physical limitations, health risks etc.) and enhance the advantages (intimacy, safety) etc.  I argue that this is the naturally preferred state of mankind. I then proceed to explain how and why these patterns all point to that future. 

I encourage readers to go and create their own predictive frameworks for the domain of interest. To bring this home with an example I thought I might take what is currently happening on an international level regarding the economic distribution of wealth. How would this Caveman Society play out on an international level? 

I believe it will manifest as follows: 

In the past tribes increasingly grew in size until they reached adulthood of nations. What we call a ‘country’ today is the outer limit of what a tribe can be. The world can be seen as a series of silos all side by side. France is its silo, America is its own silo and so forth. The borders are (were) the walls that kept each silo separate.   

In each vertical silo, you had different layers of course. You could view the layers of society in a few different ways, but since we are talking about economics, we can highlight the different economic classes. At the top is the so-called 1% and then all the layers to the bottom where you find the destitute and homeless. 

In essence, tribes were vertically segregated, even as they had different horizontal layers of economic status within each tribe: Inter-tribal geographic separation and Intra-tribal economic separation. 

Migration on a grand scale has caused a high degree of homogenisation in all countries. There are few countries in the world where you won’t find a Mosque, an Indian restaurant or a McDonalds. This is disrupting the fabric of the traditional tribe as the culture (language, practices, ethnicity etc) are being rendered apart. 

Naturally some members of the tribe are feeling threatened and the lines of tribal boundaries are being re-drawn. The question is HOW? 

Some commentators think (and agitate for) traditional geographical borders to be made less permeable. I argue that it is too late for most countries. An exception may be made for a few countries. For example North Korea is not attractive to migrants and China is not available to most migrants. 

I argue (in Rigidly Defined Uncertainty) that formation of the Tribe is the natural state for mankind and consequently a ‘borderless world’ is not an option.  

Unless there are widespread civil wars in a great number of countries, migration won’t be stopped. If one country stops the inflow, it will simply raise the pressure somewhere else to the point of breaking, resulting in a domino effect.  

If we can’t resurrect the old physical tribal boundaries, how will we re-draw the new borders to help us revert to the Caveman State of belonging to a tribe? 

In theory, tribes can be formed by say all red-haired people or by thin people or whatever is perceived to be a common interest. But in my view there are only two candidates for providing the basis for cohesive tribes that have strong, behaviour-influencing common bonds. That is religion or economics. 

Many people think (and fear) that religious extremism is being used to define tribes, but the most viable option I see is economic tribes forming across the world at the expense of geography, language and any other commonality. It won’t matter if you are French or American, it won’t matter if you are red-haired or blond, it won’t matter if you are Christian or Catholic – what matters is your economic class.  

·  The one-percenters will stick together to defend what they have got.  

·  The destitute will wallow together, irrespective of race or creed, in the rot. 

The million dollar question is how the ‘middle’ will break up? That is, how big and how cohesive will those groups will be? 

In theory, those with the most to lose will fight the hardest; but the paradox of economic wealth is that also makes you soft; so ‘theory’ may be obliterated by a relative minority of people who have less to lose but are street smart and not bound by the conventions of civility. 

The point is that tribes are re-formed around economic interests. In effect, I am talking about the lateralisation of tribal boundaries. The new dispensation will have Inter-tribal economic separation and Intra-tribal geographic separation. Instead of vertical silos in a single geographic area, we will have lateral (horizontal) silos (along economic lines) across geographies. 

To illustrate, one could like at the link between religious extremism and economics (of the American Fundamentalist Christian Right and Muslims for instance) but that would be too contentious for this forum. Instead, consider what is happening with something called #gamergate. It started out as a debate about sexism (female discrimination) amongst the small community of (nerdy) gamers. It has exploded into something entirely different. 

On the one hand you have the so-called SJWs (Social Justice Warriors) – get used to that term and if you want to waste some time online, check out the #SJW hashtag. When I wrote the little treatise, I labelled it as vigilantism. But I bet if you dig deeper you will find the SJWs are at the Yuppie end of the economic scale and the hard-core gamers are the archetypal lonely, nerdy males who are most likely not particularly economically advantaged. 

This post is not about gamers, but it is meant to illustrate the practical application of the framework provided by Rigidly Defined Uncertainty. Gamergate transcends national boundaries and a new set of boundaries are drawn. New tribes are being created around new ideas – and this is important to understand.

We all belong to a tribe and we need to belong to a tribe. As one set of tribal allegiance are being demolished we will create others to replace those. The ongoing challenge will be define what those new boundaries will be drawn ‘with’ – and I think it is a safe bet to consider economic class first.

Another example is religious extremism. This is as much evident in the American Right as it is in the Middle East, even though the means employed to achieve their goals are different. In the American Right you have a fundamentalist Christian faith that is employed to mask a keen desire to protect the tribal interests. The Right in the USA is conservative, capitalist and non-interventionist in their approach. For instance they are opposing Obama’s attempts at introducing healthcare by labelling it socialist. The real fear is that it is going to cost them money.

It would be interesting to explore how much of the extremism we witness in the Middle East, is religious and how much of it has underlying economic causes. (Discrimination, exclusion, racism etc directed at minorities.)

That is all Social Theory. What are the implications for your business? 

In the first instance it is worth thinking about the over-arching impact that this new tribalism will have on politics of Australia and what that may look like in the near future, for as we know political decisions have a material impact on your business. Every economic class will practice their own form of vigilantism to secure the safety of their tribe. Which tribes will win? We might not have the skinheads of Europe, but that does not mean the sentiments don’t exist here. 

On a more direct, pragmatic level it has obvious implications for market segmentation. Every tribe is a potential market. That may appear cynical, but the golden rule of economic demand and supply will come into play. What is the make-up of your current users/patrons/customers?

It also has obvious practical implications about workplace health and safety and managing risk. 

It has implications for supply chain. Which countries are you sourcing product from? 

It has implications for branding and marketing communications. New taboos and new opportunities will emerge.

And finally, ideally and most importantly; what all businesses should be doing is creating tribes of their own. Seth Godin wrote about tribes a decade ago. I agree with him. The idea of ‘tribes’ are even more pervasive than Godin thinks it is, and explains more. It also has awesome predictive power.  But if you can do what Seth says and turn a target market into a tribe, you’ve got it made.

The violence we see in our society, whatever you believe the cause is, is a manifestation of the innate desire for humans to belong to tribes. One of the smartest things you can do as a retailer is to use this insight to protect and improve your business.

11 Scientific Findings on Retail Pricing

This article summarise most important FACTS that you need to know about pricing in retail

I don’t often do this, but this is the entire executive summary of a serious research paper on Pricing. The fact that I am doing this now, hopefully suggests that it is important. It is a little bit ‘dry’, so I have highlighted the ten most important findings in bold.

Executive Summary by Ametoglu et al, 2010) on a paper titled “Pricing Practices: Their Effects

On Consumer Behaviour and Welfare.”


The pricing practices discussed in this paper are highly prevalent in today’s society. While classical economic theory suggests that people will act rationally, using cost benefit analysis to make choices, scientific research shows that this is not the case. Humans do not have the capacity to recognise and evaluate all the available information in today’s complex environment, nor the time or motivation. Instead, people use mental short-cuts, or heuristics, to deal with this complexity.

Whilst heuristics can usefully guide our behaviour and allow humans to function in the world, they are not perfect calculations and are subject to occasional and sometimes costly mistakes. Importantly, heuristics leave people exposed to external influences, including pricing cues. The literature on pricing practices suggests that pricing cues provided by retailers can affect consumer behaviour and value perceptions.

Compared to presenting a total price partitioning prices into a base price and surcharge can significantly increase consumers’ positive evaluations and purchase intentions, and can lower search intentions. This is because consumers may fail to fully adjust from the initial (lower) price of the base good and therefore underestimate the total price of the product.

Evidence suggests that people tend to stick with the default option, even when this option has major, long-term consequences.

There is a large body of evidence to show that the presence of an advertised reference price increases consumers’ valuations of a deal and purchase intentions, and can lower their search intentions. Reference prices can have a significant impact even when these are disproportionally large and when consumers are sceptical of their truthfulness. The effects of reference prices are stronger when consumers are not readily able to compare them to an industry price, such as with unbranded, or retailers ‘own brand’ goods, and with less frequently purchased and more expensive items.

The available evidence on the effect of offering a “free” product in a bundle (e.g. 'buy one get one free') is mixed. While some studies show that this practice can increase consumer valuations and demand, others show that a freebie designation does not increase consumers’ perceptions or willingness to pay for the bundle.

One large scale study suggests that the bait-and-switch practice may have a substantial (negative) impact on consumers. Moreover, consumers are drawn in to promotions and where the item is out of stock, they predominantly switch to another item within the same store, due to lowered search intentions.

Compared to a single unit price promotion, a multiple unit price promotion (volume offer) increases the quantity consumers buy, even when the discount does not differ and consumers do not receive an incremental saving. This effect can be substantial. Importantly, a bundle discount can increase quantity decisions relative to per unit discounts even when consumers may not purchase enough of the products to qualify for the bundled discount.

The effects of bundles (pure or mixed) are partially explained by confusion in that consumers generally believe that bundles involve discounts (i.e. infer savings) even when they do not and no such information is presented. Bundling can also influence choices because it decreases cognitive effort.

Evidence specifically looking at the effect of time-limited advertising is inconclusive. However, it seems that under conditions in which time-limited offers do trigger feelings of scarcity, consumers are more likely to overestimate the product quality, or the value of the deal, lower their intentions to search, and have higher intentions to buy. Shorter time limits may augment this effect (though very short time limits may have an opposite effect).

Research suggests that pricing practices may be less effective in conditions where consumers are readily able to make memory based price comparisons, or have quick and easy access to price information, such as in online environments. On the other hand, pricing cues put forward by sellers both online and offline may still influence consumer behaviour, indicating that learning and/or easy access to information does not eliminate the impact of these practices.

The problem with good advice is...

I served my national service in South Africa. All up spent 4 years of my life in uniform. By and large those years were wasted (another story) but I have always tried to seek out those secondary benefits, and one of them has stood me in good stead.

When you train to go into battle and you are being ‘delivered’ to the site in the back of a troop carrier, you have to dismount while the vehicle is moving.

The vehicle drives in a large circle and every ten meters or so. A soldier has to dismount and take cover while the vehicle continues. The speed is probably about 20km per hour, and as you can imagine there is a lot of noise and dust and yelling of instructions. When it is your turn, you have leave your seat (really just a wooden bench) proceed down the bed of the truck and approach the tail gate at a fresh clip … and jump.

Sounds simple. And it is. If you follow one piece of advice.

The problem with a lot of good advice is that it is counter-intuitive. (Because if it was obvious, it wouldn't have been required.)

And almost without fail, on the first round, every one of us landed on our butts/backs. Your rifle gets dirty, you are not in a position to assume your position, so you can imagine that it made the sergeant very unhappy.

The advice was that when you jumped, you had to throw your weight forward. Specifically, since you were carrying a 40KG back pack, you had to use that weight to create as much momentum as possible, and fling your weight forward so that feels you are going to do a face plant. The speed of the vehicle and momentum/inertia and gravity would ensure you landed on your feet.

Despite being told what to expect and what to do, we all learned the hard way.

Two lessons I learned from that experience:

  1. If the momentum is going one way and you want to go the other way, AND you want to land on your feet, throw yourself into with all your might. Despite your fears and the apparent stupidity.
  2. If someone gives you advice based on deep experience, especially if it is counter-intuitive, it pays to listen.

(And I wonder if companies would fare better if they had a platoon sergeant to straighten out the smart-arses?)

Two of the most dangerous words in business

Complete the quiz below to test your familiarity with players in the retail market:

  • Sportsgirl is just like…
  • Bunnings is just like…
  • Zara is just like…

(Don’t skip this, because you will need your answer at the end of the post.)

The answers are… whatever you want, I won’t be able to convince you otherwise, and this post is about why I can’t.

Human being are innate pattern seekers. Our brains are wired to explain all the things we experience as quickly as possible because that best ensures our survival.

Is that brown shape in the grass a snake or stick?

The fastest way to do this is to map it to something we already know. Make one connection between the new experience and an existing, and your brain can file it away. As soon as you can say something is ‘just like’ that new thing is not new or dangerous anymore.

In the process we create stereotypes.

Some good: long, thin with uneven angles, not moving = stick.

Some bad: People who wear turbans/hijabs are evil.

Stereotypes save us a lot of time and mental energy and getting things wrong occasionally is a small price to pay for all the other times we got it right. Psychologists term this tendency to for people to favour information that confirms their preconceptions a  ‘confirmation bias’.

It works for us most of the time. Except when it doesn’t.

If that long, thin brown shape turns out to be a snake, the price is death and it is irrelevant that the previous thousand times you walked on that pat it was only a stick.

The effect of confirmation bias is to erase the new experience and to assimilate it into what we know, which creates a virtuous loop of self-fulfilling confirmations.

Eventually we only perceive that which confirms our preconceptions.

This in turn keeps drawing us to people, things and ideas which are already familiar with: we read the newspapers which share our views, the watch the movies we like, we mingle with people who are like us.

And even when it doesn’t quite fit, we ignore the bits that don’t and simply complete the picture we want to see. In the figure below you will see a square that does not exist, because you fill in the blanks to see what you want to see.

We do the same with ideas, experiences and interpretations of other people.

I am sure you have been on a holiday somewhere (Bali, France) and thought hat landscape looked ‘just like’ – Adelaide or wherever. And soon after you are thinking the bread tastes just like that deli back home and the coffee reminds you of that time you visited Melbourne… and you start wondering why you paid all that money.

The objective truth is that no two things/ experiences can be alike. When we say something is just like – we diminish the new experience and destroy what is unique for the sake of remaining in a comfort zone.

This is especially sad when we diminish people who are not like us to something that they are not, but suits our prejudice.

In the business world, we are prone to make this mistake too. Even if confirmation bias is potentially ‘fatal’ we continue to do it because that is just how we are wired.

Is there is a way to minimise the effects of confirmation bias in the workplace?

It takes a bit of work and re-training the brain, but there is. Whilst I can’t (and no one can) you can change how you process things, so consider the logic below:

When we match patterns, we match to things we know.

The easiest match is with the things we know best.

What do we know best?

Ourselves. Our environment. The familiar. Otherwise known as our comfort zone.

So the solution is simply to start training yourself to:

  • Do things outside your comfort zone.
  • Be conscious about seeking out differences rather than similarities.
  • Consciously take a different route.
  • Make an effort to catch yourself saying it is ‘just like’ and correct yourself.

Can you remember which retailer you said is ‘just like Sportsgirl’?

Now make an effort to now consider how those two are different. And there has to be at least one major (point of) difference, otherwise one of them won’t survive.

Then make that kind of thinking a habit.

That is how you discover new things, that is how you innovate and that is how you see opportunities; by focussing on differences and gaps, not on similarities.

I can speak from experience because I am a contrarian and I am acutely aware of the need for likability which precedes any relationship because I don’t always succeed in getting people to see past the contrariness. But what I miss out in warn and fuzzy relationships, I make up in edgy new experiences; and most of the time I consider that to be a fair trade.

Dennis

Ganador: Solutions for Learning in the Retail Supply Chain

 

 

 

 

More discrimination please

One of the most important skills we can have – is the ability to ask questions. This ability underpins our ability to discriminate.

Discrimination has been given a bad rap: we are told not to discriminate based on age, sex, race, sexual orientation and so on. But in the process, all discrimination is tainted.

If you can’t discriminate between poisonous and non-poisonous plants, or dangerous or safe animals, you won’t survive long. If you can’t discriminate between good and bad, new and old, valuable and non-valuable you will miss all opportunities and fall victim to perfectly foreseeable disasters. (You get the idea of the picture above?)

The ability to discriminate is important – crucial even – and yet we are expected to acquire this skill by osmosis.

From a business perspective we commonly rely on questioning to discriminate. I wrote previously about the million dollar question, but this post is more about the nature of questioning and the purpose of questioning.

Steve Jobs is famous for saying (effectively) that Apple does not do research because customers don’t know what they want:

It's not about pop culture, and it's not about fooling people, and it's not about convincing people that they want something they don't. We figure out what we want. And I think we're pretty good at having the right discipline to think through whether a lot of other people are going to want it, too. That's what we get paid to do. So you can't go out and ask people, you know, what the next big [thing.] There's a great quote by Henry Ford, right? He said, 'If I'd have asked my customers what they wanted, they would have told me ‘A faster horse.’

Jobs knew that it is almost impossible to ask the customer the type of (right) question that will give you a valid answer when it comes to researching new products that don’t exist.

My doctoral thesis changed because a professor asked me a question I could not answer. I can’t remember what my first proposal was, but I can remember his response because I learned something powerful that day, when he asked me:

SO WHAT?

Dave Trott is a Creative Director of a London Agency. He writes an interesting blog – here is an example - and his book is titled Predatory Thinking. What predatory thinking boils down to in my mind is simply the ability to ask questions that other people don’t.

Some example of good and poor questions:

POOR: Is Facebook a good platform to advertise on?

GOOD: Why are people using Facebook?

POOR: Should I build a website or an app for that new service?

GOOD: How do customers want to engage with my business?

I won’t keep going, but you can see readily that poor questions are the ones that have binary/ closed answers. Good questions on the other hand reveal something essential about the topic.

These are legitimate answers:

·        Facebook is a good platform to advertise on.

·        We want faster horses.

·        We want faster modems.

The follow up question is: SO WHAT?

What are you going to do with that answer? How is it useful?

Simply knowing there is a lot of people on Facebook does not mean anything. Unless you can answer the question that follows: so what?

 

 

 

 

 

 

 

 

 

The first step in creating a customer service culture

We are currently building a Customer Service Training program for a client and the format and structure of it is the ABC of Customer Service. The ‘B’ is about behaviours. The ‘C’ is about Communications.

The ‘A’ is about that one thing that marks the difference between success and failure.

If it is not in place, then nothing else matters. Whatever you do in place of this, will never sustain the business.

Can you guess what that is?

It is about ‘ATTITUDE’ in customer service.

Many people say you can’t change attitudes, but you can. Have YOU ever changed your attitude towards something? Have you ever changed your mind? So can your staff – if they have a compelling reason and it is approached the right way.

There is quite a bit of psychology involved and I don’t want to give all the secret sauce, but suffice to say that the foundation for successful service culture is people with the right attitude.

It is true that it is easier to recruit for attitude and to train for skill. The problem is that even if people start with the right attitudes, they change over time and besides it is hard to fire everyone on something so subjective.

The start of the process drop the notion that the customer is always right. And to replace it with something that is actually true and that the teams can relate to.

 

The difference between success and failure as a retailer

As you may have realised, I like proposing a contrarian view on many sacred cows – not always because I firmly hold that opinion, but because I like to encourage people to question their own beliefs.

I sit here pondering what I can share with the audience that will be worthwhile, and I think about merchandising, margins, and multi-channel retailing and the like.  Or maybe I can debunk some social media myths. These are all worthy topics that should be thought about, and are easy to write about. (And fun to poke a stick at.)

But somehow I thought of the ONE thing we rarely discuss, but that I see all the time in retail. I am in the fortunate position to get a real helicopter perspective on the performance of many retailers in every category.

If you had to ask me to pick just one thing that I can have, or the one thing that makes tie difference between a successful and an unsuccessful retailer. Can you guess what that would be?

I can tell you that I don’t have it. At least not naturally. I can recognise it, and I value it, but I have to work at it consciously because it is not innate – yet it is the one thing that discriminates between the average and the excellent performer.

In retail specifically, I like to talk about this one ingredient as a ‘Merchant Mentality’.

I am involved with a couple who are buying a restaurant. They have the work ethic. They have the desire. They have the money. There is only one reason why they shouldn’t do it – and that is because they don’t have the ‘hospitality mentality’. I fear for their success.

Someone with a merchant mentality instinctively moves the merchandise in a way that will sell more. They naturally pick adjacencies that will sell better for both products. They seem to have a sixth sense for what will make the customer buy. And above all, they are obsessed with making the sale.

A true MERCHANT understands that sales cure all ills.

It really isn’t about stats. Nor displays. Nor location. Of course all these are important, but in many ways these are just proxies for having people with a merchant mentality.

If I was heading up a chain right now, I would make that my singular priority: get managers who are MERCHANTS in my stores.

Easier said than done and all that, but the critical performance factor nevertheless.

Are you ready for responsive retailing?

I borrow the term from (where else?) the internet. Responsive websites are sites that automatically adapt/ respond to the device upon which it is accessed. The same site on a mobile device will look and function differently to the same site being accessed on a desktop computer.

Image Kikitwou on Deviantart.

Image Kikitwou on Deviantart.

I think there will be major role to play for organisations in a retail supply chain. That role will be constantly evolving and it will require different skills. For example, great retailers must acquire curation skills and not (merely) merchandising skills. Retailers must learn the art of story telling in different mediums, not (merely) via a window display.

There are many more. In fact, I would say that most (99%) of job descriptions that exist in the retail environment today is largely outdated already, and if not will be in two years.

Not only must retailers acquire responsive retailing skills; the same requirement applies to responsive strategies, responsive systems and so forth.

To have a responsive retail business means you must design a responsive retail business. This means re-thinking everything you do.

There are three dimensions (like with any design) to Responsive Retail

First Dimension

Fundamentally retail is/was transactional. A customer exchanges money for goods or services. Success requires that you stock the right product at the right time and place and price. It is pretty simple. Your competition is clearly identified on this same dimension. As a retailer, all that is required is that you push your message out to market and convince them of the benefits.

I term all the elements of this first dimension the 'RETAIL PROPOSITION'. I have written two blog posts about it - start here. If you are seriously interested in this topic, I recommend that you get the Jump the Curve eBook.

Second Dimension

For a long time consultants and good operators have acknowledged that it is hard to sustain a competitive advantage at the transactional dimension. 'Customer Service' became the new battle ground.

With customer service I refer to things like all the add-ons (delivery, wrapping) through to pleasant human interactions (courtesy, responsiveness.)

Have you ever wondered if there was ONE SECRET to customer service? There is:Read this article on HBR.

Third Dimension

This is the new battle ground. Of course, both the first and second dimensions of retailing remain valid. It is just that a good offer and good service are now considered cost of doing business. Consumers demand/expect a great value offer accompanied by great customer service. These are givens.

But if you want to operate/compete in an environment where online is a serious option, then you have to build out the third dimension of retailing: THE EXPERIENCE.

This is more than customer service. It is a new way of shopping.

I wrote this document in Nov 1999, proposing an approach that shopping centre landlords should be approach eCommerce. The bulk of those arguments STILL hold true. I say this not to brag about how insightful I am, but to point out that many of these changes are obvious - and have been for some time.

Retail Experience is more than Retail Theatre

Jon Bird wrote up a piece on Urban Outfitters. It is what he terms retail theatre. And whilst I agree with what Jon writes about that particular retailer, I do think that it qualifies only partially as an 'experience'. This article, also by Jon Bird, describes something more akin to the notion of retail experience I want to explore.

In my mind there is a difference between 'theatre' and 'experience' - and whilst I am being arbitrary here, it is an important distinction. 'Theatre' is entertainment ('shoppertainment') - and I am after more than that. An experience INVOLVES the customer - it is interactive and engaging on an intimately personal level. Watching 'Getaway' on TV is entertaining, going on the holiday is the experience. Creating an experience is not about sexy visual merchandising.

A store that really delivers an experience is Jay Kos. Read this article and follow the link to their website. Two commentators have written interesting articles that explains how retail may play our in the future.

Doug Stephens used the phrase the 'store as media' (not sure if he coined it) but it is a phrase that resonates with what we have been saying for some time. This articleby Doug touches on many of the same points I make here.

Michael Fox runs an online business Shoes of Prey) and wrote this article in SMH depicting a future retail scenario.

Everyone has been to a family restaurant, so I thought that might be a good example.

The OLD way (two-dimensional)

You arrive a few minutes early, but they have the table ready anyway.

The waiter acknowledges you, greets you, introduces himself and takes you to your table where they hand you your menu.

The waiter comes around within a few minutes to take orders.

They even suggest a few specials and make a recommendation for the wine.

They place the order at the kitchen and return with water & crockery.

They bring the food out and serve it the proper way.

Everyone gets the meal they ordered, and it is presented well and it tastes exactly how you expected.

During the course of the meal there are a few 'table checks' and they top up the wine/ water.

They bring the desert menu, take the order and serve the desert in good time.

The waiter is alert and you catch their eye easily and you signal for the bill.

Your credit card is approved and you leave a healthy tip.

You are greeted when you depart.


The NEW way (three dimensional)

You arrive at the restaurant and you are greeted by name by the host.

He accompanies you to the foyer where other guests are mingling.

The host enquires about your last business trip and compliments your companion on her earrings.

As the host introduces you to a few other guests, the sommelier brings you a pre-dinner drink (based on knowledge of your preferences. But it is a new flavour, and they share a few titbits about the new process/grape/brand whilst serving you.

One of the hosts is telling a story to a few people gathered around her, and you join the half-circle to watch the 'performance'.

A few minutes later the door to kitchen opens and the host invites everyone in. There are long bench tables arranged around the kitchen island, which is manned by 8 chefs.

The lighting changes and the head chef introduces the crew. Each of the four long tables will be serving different range of dishes based on your recorded preference. You had indicated 'seafood' and your companion take your seat at that table.

Your seafood chef greets you by name (they had the seating plan indicated on their side of the table, and they have learned something about every customer.)

He then proceeds to run through the menu planned for the night.

As they start the preparations, they engage you in conversation, telling you what they are doing giving some tips as they go.

The courses are placed in front of you by your chef throughout the night.

When you are ready to leave, you simply get up and excuse yourself.

The chef comes around and gives you a hug and your companion a kiss on both cheeks.

They insist you take the half bottle of wine with you as you leave.

At the door, the doorman opens the door to the waiting taxi.

At the end of the month, your credit card is charged the usual monthly membership fee.

Whilst you may argue that you would not like the 'new' restaurant experience; that is not quite the point. This is just one example aimed at people who do this for the food experience. I am sure you can imagine a few other 'themes' or experiential outcomes that would suit your tastes better - and if there is a market for it, some restaurateur will cater for it.

The point of this exercise is to imagine how a 'traditional' concept might be transformed in an experience. You may think a restaurant is an easy option, but the same can be done for a travel agent, a hair dresser or a shoe shop - quite easily.

Dreaming up the experience is the easy part. Translating it into a physical experience (staff, systems, procedures etc.) is the hard part. And of course doing so at a profit is harder still.

Customer Experience is NOT what you think. There are three compelling reasons why (bricks & mortar) retailers should conquer the science and the art of delivering customer experiences. Delivering an experience is the single most important, sustainable differentiator.

Web-designers spend a lot of time on (UXD – user experience design) because they understand that if you lose the browser for a split-second it they are gone with a single click. Retailers have the opportunity and the ability to create an experience that counts (CXD) – but few do.

What is a ‘customer experience’? It is NOT customer service. A clean store, friendly and helpful staff and user-friendly return policies – for example - is customer service not customer experience.

The great unspoken assumption is that you have the base right: great products or services at the right price, presented well and great customer service that meets expectations. Customer service is not longer a differentiator, it is cost of entry.

It is NOT shoppertainment. It is not singing and dancing, it is not plasma screens and things that fall out of the roof – that is shoppertainment, not customer experience.

Customer experience comprises all of the above, but above all customer experience has an emotional dimension.

How do you create the emotional connections? This is of course quite complicated because human being are complicated – and their emotions especially so. My favourite new consumer is NewNowLo and she is not Chinese: She is the person that moved from wanting new à demanding new, now at low prices.

The world is changing and people are moving from:

Needing stuff >>> Demanding experiences

Conformity >>> Customisation

Plutocracy >>> Democracy

Self >>> Community (The Tribe)

Consider just two emotions and a few retailers that do a reasonably good job of delivering that emotional connection.

AROUSAL OF THE SENSES

  • Abercrombie & Fitch

  • Victoria’s Secret

  • Starbucks

EXCITEMENT/TENSION FROM NOVELTY

  • Zara

  • Daily Deals

  • Anthropologie

Delivering the customer experience is reliant on the H-Factor. That was the basis of the talk I delivered recently at the Melbourne Retail Expo and Conference.

I have previously published newsletter (ReadThinkLearnLaugh). SUBSCRIBE HERE and receive access to the latest issue which contains a series of screencasts exploring how you create and deliver a customer experience. (HINT: customer experience is NOT customer service.) I have based on the presentation mentioned above - and there is a special offer for readers ;-)

Someone who has managed to create that theatrical experience and a compelling retail story is the STORY concept in NY:

Founded by Rachel ShechtmanSTORY is a 2000 square foot (200m) store located in Manhattan’s burgeoning new retail corridor of 10th avenue. STORY is a retail space that has the point of view of a magazine, changes like a gallery and sells things like a store. Every four to eight weeks, STORY will change out all its merchandise, design, and fixtures and reinvent the store around a different story-based theme.

Watch this talk by Rachel telling the story of...STORY.

The truth is that designing and delivering a great customer experience (3D Retailing) is only part of the success. Because the reality is that you will have to keep changing the customer experience to adapt to changing consumer demands, changing technologies and changing competition.

The core skill is not designing the experience, but building the systemic ability to design and re-design the experience into your business. This is what I term Responsive Retailing.

We Are Not Yet Ready For Social Retail. You can’t have a real relationship if you view customers as traffic. Referring to people as ‘traffic’ shows a cultural ‘attitude’ that lacks (or will make it difficult to acquire) authenticity.

You can’t say you love women if you think of them as bitches – even as a ‘joke’. (And vice versa of course.)

As a centre manager I worked hard, but with limited success, to change the language in my centre. I wanted our tenants to be called retailers. I wanted ourcleaners to be called housekeeping.

I am pretty sure my team thought I was strange, but I know that if you change your language, you will change the culture. Take for instance what happened at Enron.

Amidst Enron's excesses were the unmistakable cultural cues that drove employee behaviour. "We're an aggressive culture", "Guys with Spikes", "Money is the only thing that motivates" and "Rank and Yank" are but a few of the statements heard. Is it any wonder traders thought they had the right to manipulate the market?

The CEO of one of the biggest culprits in the recent US mortgage meltdown had a vanity numberplate: FUNDEM (fund them) – with reference to their philosophy to give a loan to anyone that can, as his employees subsequently described, ‘fog a mirror’. Say no more.

I know old habits die hard. I know you think it is an ‘innocent mistake’. But it is not.

So here is evidence of the type of language that reveals an organisational culture that is not yet ready for the era of social retailing: Consumers. Target Market. Traffic. Segments. Hits. Yield.

Responsive Retailing is retailing that responds to ANY context and it is 'just right' no matter what device/platform the user has.

Are you ready for responsive retailing?

Recently I failed with a project. Want to know why?

Recently I failed with a project. Want to know why?

The strongest and most destructive force in business is resistance to change.

We know about it and we trot it out when things go against our plans, but we don’t usually recognise it when we are the resiting force. Then we think we are sensible.

It is hard to judge what change is necessary and what not. It is easy to judge what change is inevitable but it is hard respond to it.

The obvious an inevitable change become apparent because everybody is trying to deal with it and we talk about it which brings it to the surface.

The most dangerous types of change are the insidious ones. The sneak up on us and we only discover in hindsight that it has happened. Almost every man alive realises they are 20kg heavier when they are forty than when they were twenty. And the rare few succeed in turning back the clock.

The ones who avoid that inevitable, insidious change do so not because they are smarter, but usually for other reasons that had the unintended consequence of saving them from the fate of that insidious change. To continue the previous analogy, the man not overweight at 40 is either blessed with lucky genes, or for instance chose a job that required them to be vain enough to be obsess about their weight (for example) and thus avoid the curse.

We point the finger at others who are resistant, but a moment of honest reflection is all that is required to realise that ALL of us resist change when we perceive it to be dangerous or uncomfortable. And we all fail to spot creeping change that is the real killer.


Today is my birthday, so only appropriate that this is the topic of the day - even if I scheduled this post at the end of September. Happy Birthday Me. 

The promise of a pattern that lures us


People are innate pattern seekers. When we look for the secret of success we look for a path that someone else has followed. We hang on to the words of the gurus who promise a recipe.

People love to learn lesson by analogy. Lessons about leadership learned from sailing the ocean. Lessons in courage from climbing a mountain. Lessons in strategy from being a football coach. Lessons in innovation from how a squirrel or lessons in brand management from Lady Gaga.

Have you ever stopped to think: where did the pit bull or the coach or the mountaineer or Lady Gaga learn it? Who did they pattern their decisions and behaviours on?

The world IS full of patterns. Cycles everywhere. Pyramids abound. The best way to explain most things can be found in a matrix. Every mathematical formula is a pattern and even kindergarten kids have heard of algorithms.

But in a complex world filled with complex human beings operating in a dynamic, shifting landscape, we will only ever find partial patterns. It is a grave risk to extrapolate anything on a linear basis.

That Turkey being raised in the backyard will think it is living a great life for every day someone pops in and feeds it to its heart’s content. Daily, without fail, for weeks and months on end. Until, on Thanksgiving, their carer does not come with a bowl of food, but an axe. And it ALWAYS happens.

Patterns and secrets and recipes are only ever partial insights. No one know everything and nothing is ever known completely.

We don’t have to be paralysed into non-action, but instead we should always ensure we have a built in capacity to change and adapt. There is that one day a year where the Turkey would wish its wings are not merely ornamental and that they could fly. But then it is too late.


The idea of the ENSO circle or incomplete circle is that it is painted in one stroke. This icon is meant to resemble enlightenment, strength, elegance, the universe, and the void or the space that connects everything. The concept is very difficult to describe because it is not really meant to be explained, it is meant to be felt, the moment of creativity is shown by painting the circle with brush, you may only take one stroke to create the icon and cannot alter it after this one stroke. The single stroke emphasizes this creative moment of imperfect perfection.

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