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.

Two forces of nature influencing your decisions

Eventually orthodoxy gets criticised.

It is harder to play an unorthodox bowler. It is harder to argue with someone coming from an unorthodox position

Eventually orthodoxy is claimed to have fallen into disrepute, is accused of being stale or irrelevant.

And sometimes some of that is true.

But often it is simply the swing of the pendulum that is forcing you to think the other way is better. The grass is greener and all that.

People who fall victim to the swing of the pendulum are victims of a force of nature (momentum) just as much as people who hang on to orthodoxy are victim of a force of nature – inertia.

The lure of unorthodoxy is its shiny new-ness; because human beings are intrepid explorers and we all suffer to some extent from neophilia. And in the new-ness you will find innovation and improvement.

But in tradition and orthodoxy, you find stability and efficiency and comfort. It is also where you have proven results.

Consultants are by definition geared to suggest change and improvement because that is what feeds their families and without realising it, that perspective will always bias their thinking and their advice. How often does a consultant tell you to keep doing what you are doing?

This is an extract from our occasional/fortnightly newsletter... why don't you get your free copy from our website?

It didn't make the news, but this is the most important thing you will learn today

The best CEO in the World pinpoints their reason for Success - yet it doesn't make the news.

Jack Welch is arguably the all-time benchmark for high-achieving leadership of a mega-corporation - the poster child for effective CEOs of the world.

In his final letter to the shareholders of General Electric, Jack Welsh explained why they had been so successful.

Do you know what Jack Welch said was the most important reason for GE’s success?

  • Was it their scale?
  • Access to capital?
  • What about their progressive strategy?
  • Or the ability leverage their supply chains?
  • How many would vote for their innovation capability?

None of the above. It was that they never stopped learning. GE was the poster child for the ‘learning organisation’.

"The initiatives are playing a critical role in changing GE, but the most significant change in GE has been its transformation into a Learning Company. Our true "core competency" today is not manufacturing or services, but the global recruiting and nurturing of the world's best people and the cultivation in them of an insatiable desire to learn, to stretch and to do things better every day. By finding, challenging and rewarding these people, by freeing them from bureaucracy, by giving them all the resources they need—and by simply getting out of their way—we have seen them make us better and better every year."


It is a concept made famous by Peter Senge. If you haven’t read The Fifth Discipline, please do it.

But surprisingly there are remarkably few companies who strive to be learning organisations and consequently the case studies are far and few between. To be perfectly honest, I am quite saddened and despondent by the state of affairs.

When you think about it for even a moment, you realise how obvious the truth is. The greatest CEO of our generation declares it the critical ingredient to success. I write about those themes here every week – and live and work in this space for the last 8 years of my life. (I thought it was a no-brainer as far as consulting niches go: find the ONE thing that all organisations need, is obvious and logical and is endorsed by the most credible leaders of our time. I was wrong.)

But I will eat my proverbial hat if even ONE retailer (current or past clients excepted) reading this can come out to say that they have studied what it means to be a learning organisation and they are formally and purposefully striving to be one.

As much as growth, innovation, change, et al are part of the corporate-speak; is it really embedded in the DNA of the organisation?

How honestly you can answer that question will determine if you are around a decade from now.

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.

Am I just full of it, or is this important?

Maybe I am just full of it... but I wrote this in 2010 - and saw it again recently. I think it deserves another run... even if I say so myself:


The Pocket Principle

Some things just happen.

Pockets for instance. Let’s take the kind I am most familiar with: men’s pants pockets.

Are your pockets too short?

If you do stick your hand in your pocket, chances are that you will find that it is just right. Not too shallow, not too deep. Not too tight – just right.

Who decided what pockets should look like? Who dictated where they should go? Who decides the depth, the angle, the size?

A designer did of course, but what set if rules did they follow? Who dictated that they should be just so?

No one. Everyone.

Just the momentum really. A bit of logic, maybe – they should be where your hands can reasch them. But we don’t give it too much thought, and even designers probably don’t think too much about where the suit’s pockets go. They go where they always have. In the same size. The same depth.

The collective wisdom of the ages.

You don’t notice or think about your pockets.

Until they are wrong.

If you suddenly can’t reach the coins in the bottom, or they are too shallow and everything falls out, or too small. Then you notice.

And in a retail store there are many pockets.

Little pockets of customer interaction that you never notice. Like where your counter is located, forcing the queuing customers and the entering customers to cross over. Merchandise that is too high, or too heavy. Things that are not priced.

How did that happen? Is that just the way it always has been? Are you really aware of your pockets or, if you are honest, do you not really notice them?

When a customer has to ask you where something is in the store; that is a pocket of failure. You can call the customer stupid or lazy or blind, or you can put your hand in your pocket and figure out if the customer experience really can’t be better.

Great brand experiences don’t happen by accident, they happen by design. How much time did you spend designing the customer experience?

Unlike pockets, customer experiences can be ‘wrong’ and you may never notice. Unless you consciously go about designing the right customer experience.

Because, believe me, the customer notices.

On NOT understanding people

I have been blogging 8 years. You'd think I know what is popular and what will get people clicking and talking. And you'd be right in a small way, because I know a little, and this is what I know:

My most popular post of all time is THIS one. The amount of original writing is limited. The insights are arbitrary and, dare I say it, relatively shallow and somewhat cliched. But it has a killer headline that seduces people to click.

My next best post (on LinkedIn) is THIS one. It has a quarter of the views, but 10 X the number of thumbs up! It is certainly a much better post than the previous one, but it is not particularly deep - and if you read it you will immediately grasp the obvious lesson/message it contains.

THIS post is much better than any of the above. It is actually useful and contains a powerful, 
foundational insight that can be translated (and used) into any business challenge. It has below average views, and 2 likes.

Watch and observe the follow of 'updates' on social media platforms. Whether it is Twitter or LinkedIn or whatever, the most popular posts are:

  • An image - with a (unoriginal) quote
  • A recipe that promises a quick solution in X number of steps
  • A wild promise to make someone better at (leadership, personal branding, productivity - fill in the blank)
  • A shortcut to achieving some type of superficial success (be more popular, get more followers, etc)

From what I have learned about people's online behaviours, I can say this quite unequivocally:

  • People don't really want to learn, they want a shortcut.
  • People don't want to think, they want to be reminded of what they know.
  • People don't' want to work at figuring something out, wrestle with an application - but want it given to them.
  • People don't actually grow their own purpose through self-reflection, they want to follow the crowd.
  • People invariably mistake the obvious for the truth.
  • Almost everybody reading this will think the above don't apply to them.

OUR GRAND ERROR OF JUDGMENT:
Words of Wisdom are seen as wise if everyone else previously agreed that those words are wise. Business advice is taken from people who are perceived to have been successful.

The TRUTH is that words of advice may be true or untrue irrespective of the past record of the person speaking them. The truth is the truth, no matter where it comes from. Someone who has spoken a past truth does not necessarily have a monopoly on the truth; it can come from anywhere - even from a child.

Taking advice from someone who has succeeded in business (or anything) is actually rationally not the smartest thing that you can do. They may have tried once or twice and succeeded wildly and admirably. Good for them. But that means they have not gone to school on that particular challenge.

Here is the thing though:

  • Because they have succeeded at one thing does not mean they will succeed again.
  • Because they have succeeded in their way, does not mean it is relevant to your situation.
  • Because they have succeed, does not mean they understand why they succeeded because they may actually not have the self-awareness or the understanding of the true factors of success.
  • Because they succeeded, they don't know what causes failures.
If ANYONE had the real secret or recipe, we would have no more failures. Polio may have been eradicated, but failure hasn't; because there is no antidote to failure.

If you want to take advice from someone, don't take it from someone who ONCE hit a hole-in-one; take it from a PRO who may have NEVER hit a hole-in-one, but can land the ball within a few feet from the hole every time.

This extract from our (approximately) fortnightly newsletter. Do you get it?


Brand (Non)Sense - Read the signs

Have you read the signs?

An acquaintance is considering abandoning the franchise agreement for their coffee shop. There are pros and cons both ways, but the biggest risk they face what will happen when they take the sign down.

I have suggested this risk to them as nicely as I can. But I am not sure they are listening. They currently benefit from a brand. They argue they are being harmed by it. Either way, the BRAND is exerting an influence on the business.

What they don’t seem to grasp is that simply replacing one bulkhead sign for another does not create a new brand. There is a long list of things that ‘signify’ the brand – things they (as long-term franchisees) are taking for granted.

They may be justified in wanting to ditch their franchisor, but I am not sure they understand the consequences (and the requirements) of creating a new brand fully.

Retailers sometimes think branding is what marketers do. Small business thinks branding is what big business does. Big business thinks ‘branding’ is what advertising agencies do for them. None of the above are true.

I blame marketing practitioners for the fact that most business people don’t appreciate the importance of brands. Proctor and Gamble were/are lauded for being the pre-eminent exponents of brand management, but making ‘brand’ the responsibility of one person did branding a great disservice.

The definition of ‘branding’ doesn’t really illuminate the subject:

Old English brand, brond "fire, flame; firebrand, piece of burning wood, torch," and (poetic) "sword," from Proto-Germanic *brandaz (cognates: Old Norse brandr, Old High German brant, Old Frisian brond "firebrand, blade of a sword," German brand "fire"), from root *bran-/*bren- (see burn (v.)). Meaning "identifying mark made by a hot iron" (1550s) broadened by 1827 to "a particular make of goods." Brand name is from 1922.

Whilst the origin of the word ‘branding’ may have much in common with the practice of farmers slapping a hot iron on the arse of a cow, and it was used to signify ownership; the modern practice of ‘branding’ as a dark art of marketing is quite different. The brand symbol (a logo) is but one element in the arsenal of the professional brand manager.

Branding is actually semiotic craft.

Semiotics is commonly defined as the study of signs, symbols, and signification. Signifiers are any material things that signify, e.g., words on a page, facial expressions or images.

Despite the fact that I say you can’t outsource the responsibility for branding to an ad agency, you can’t really build a brand effectively with the assistance of your second cousin twice removed and an aunt who dabbles in drawing. You may be able to buy a logo for $99 online, but you can’t build a brand that way. There is a time and place for professionals to be involved.

CASE STUDY #1

The following two advertisements were analysed by Emma Henderson (researcher), whom I will rely on to make the case.

Both of the following advertisements are for Ralph Lauren Romance.  Figure 1 is for the women's fragrance and Figure 2 is for the men’s fragrance. 

The ads signify DIFFERENT things to their male and female audiences.




BUT – and this is the power of advertising that is done ‘on brand’, these two ads also clearly share the Ralph Lauren brand heritage.

The ads signify the SAME things to their male and female audiences.

  • Both advertisements show a male and a female  (ROMANCE  is a two-way street)
  • Both advertisements are in black white, but as one compares both one can notice that the male advertisement has much darker tones.
  • Both models have the ‘perfect’ figure, which signifies health and beauty.  The male is perfectly toned whilst the female is very slim and attractive; her hair is flowing to signify femininity. 
  • The visual codes within the advertisements signify gender; in both advertisements the male takes on the active role

I am pretty confident that few people would have looked at those two pictures and entertain the notion of ‘syntagmatic patterns’.

That is kinda the point: Good brand design is invisible.

But semiotics can be and is much bigger than studying ‘signs’. And semiotics is not an esoteric art practised by hipster-designers in Paddington or Chapel Street.

Most designers will do what designers do and focus on the symbols, but if you think about the definition carefully, retail is awash with signs – more than just ‘signage’ – there are many other signifiers.

Have you thought about these signifiers in your store?

  • The way a diner puts the cutlery on the plate
  • The way a customer looks (signals) for assistance
  • The message on your carry bag
  • The height of the hook, the size of the mirror and the absence/ presence/ style/ comfort/ colour of a chair in the change room
  • The smile on a sales associate’s face (and the colour of the lipstick)
  • The volume of the music (and the name of the band)
  • The pile  in the carpet
  • The sign above the cash register about shoplifting
  • The font size of your tickets

EVERYTHING signifies something.

Ten of the basic lessons of brand management I have learned in the school of life are:

  1. Creating and maintaining a brand cannot be simply outsourced to an agency.
  2. There is more to the brand than the logo and a sign above the door.
  3. It takes a long time to create a brand.
  4. You only get one chance to create a brand (because they are built on impressions).
  5. It is cheaper to create a new brand than to ‘re-position’ one that you have screwed up.
  6. You may own the logo, but you don’t own the brand since it is what people think about you
  7. What people think about you is an accumulation of all those little things (signifiers) you say and do and don’t say and don’t do.
  8. You build a brand by living it, not advertising it.
  9. You are always building or destroying your brand by the things you say and do.
  10. Whether you do it by design or by accident, BRAND happens.

CONCLUSION

The challenge is to think about these things consciously, and to manage it proactively.

The list of signifiers (including the long list I did not write down) can equally be seen as brand touch points. To build a successful brand requires the brand owner to do two things:

  • Create a brand idea and express it across ALL the signifiers
  • Maintain that idea consistently in the face of constant change and the human propensity to lose interest

Step one takes creativity and step two takes discipline; both of which are in scarce supply.

Dennis

GANADOR: Strategies, Systems & Solutions to make Retail People Perform.

 

 

Invisible Retailing

 

When people buy a product or a service, they do not only pay with money, they pay with many ‘invisible dollars’:

·        They invest their very precious time

·        They risk their reputation

·        The opportunity cost of not pursuing a different product/outcome

Forgetting these invisible payments can cost us dearly.

Similarly, the retailer pays with those same invisible dollars (i.e. indirect costs) for the products.

·        We don’t factor the opportunity cost of the working capital,

·        We don’t price risk of obsolescence and damage into our cost of sales.

Forgetting these ‘invisible costs’ can cost us dearly

 

The past, present and future of customer service

In the past, customer service was seen as being ‘friendly’. The smile and the greeting were the manifestation of great customer service.

Today, we recognise that courtesy is a part of customer service, but just the first (albeit necessary) part. Convenience, accessibility, being in stock, offering warranties and so forth all add up to the customer experience.

The future of customer service is seen as the ability to seamlessly integrate online and offline ‘experience’.

None of these views are correct.

Most businesses cannot quantify the directly influence of customer service on their bottom line and many business seem infused with a doom about customer service. There is an almost fatalistic acceptance that customers will go on line looking for bargains.

But not all retailers are that fatalistic and there are some success stories.

Office Depot’s president could not understand why all their stores get outstanding customer service ratings done by a third party (we want that!) BUT their sales were declining faster than their competitors. He knew they were not in control of the economy, they only think he could control is what was going on in their store, why are the customers not buying from them. Lots of customers walk into the store, but they come out empty handed. How did he get customers to buy again from his stores?

 “You can say what you want about who you (think you) are, but people believe what they experience”. Jack Mackey, Vice president, services Management Group

Bain and Company after they have surveyed 362 companies and found that:

  • That only 8 percent of customer surveyed describe their experience as superior.
  • Yet 80% of the companies surveyed believe that the service they provided was indeed superior.

Do you understand that what your brand stands for, what is written in your vision statement, what is on the back of your card or on your website is of no value, if the customer believe that you are not what you say you are, due to previous experiences, then that is their reality. This is the most difficult and the easiest obstacle to overcome.

We are living in the world according to the customer.

Dijuilius (author of What’s the Secret) hears it everyday and it is the same thing over and over again. This is true to what I have experienced.

  • Our business is unique (BUT you are selling to people, does not matter what business you are in.)
  •  It is hard to find employees, let alone employees who care about service. (BUT - my challenge to you is: do they want to work for you and in your business?)
  • We cannot afford to pay enough to get quality people. (BUT this is easy to fix-change your payment and reward system.)
  • The younger generation does not care. (BUT - they do not know how they need to care for your customers, because you do not really know anymore.)
  • We have a total different customer shopping with us, it is much more difficult today to understand them. (BUT - they are all people and people want to be treated with respect, friendliness and want hassle free service.)
  • We are understaffed. (BUT you can get more staff, train them to be productive make more money and then incentivise them.

We are battling to solve the H Factor.

The owner of Chick-fil-A understands the H-factor, they live the H-factor and it is part of their DNA. They are not company centric focussed, they focus on their customers. They employ the right people, they create a dynamic and expiring environment to work in, they are trained and it is more difficult to be a Chick-fil-A franchisee than to get into the CIA Cathy the owner likes to joke.

"If we have to keep telling people what to do, it means we're not modelling the behaviour ourselves," says Cathy. "If we're living it every day, we don't need to talk about it."

If we are willing to listen, learn and change then customer service does not need to be such a conundrum. There STILL is only two parts to the equation: Figure out what the customers want, and figure out how to deliver that to them.

1. Know and understand your customer’s reality.

(c) 2014 Ganador

(c) 2014 Ganador

2. People (trained staff) is your bridge to your customers

This from Tom Peters’ presentation in Johannesburg.

You staff are your best spies to find out what the secret is.

  • Talk to staff and ask about customer behaviours and desires, they know it. The thing is you have never asked them.
  • Forecast what can go wrong at any given moment of truth and put strategies in place to ensure a golden moment of truth for your customers. Might be a golden moment but it will be a moment.
  • Stew Leonard once said that you will never need a consultant, all that you have to do is talk to your customers, have a conversation ask what they would like to have and then if possible fix it or implement it. Customers get married in this store.
  • Have service recovery systems in place. “What if they bring the product back?”, “How do you handle complaints?

Don’t just ‘train’ your staff, allow them to train YOU. Involve them in designing the system of service, because they too are customers and they are the ones in direct, day contact with customers. Your job as owner/manager is NOT to come up with all the solutions, but rather to elicit the ideas, prioritise and resource the ones you want to implement.

SUMMARY

The RIGHT customer service is not how we did it in the past (a friendly smile), the present (a pleasant experience) or the future (seamless online/offline interaction).

The REAL FUTURE of customer service is all of the above; that is the real expectation of the customer.

This trend briefing by TrendWatch has several interesting case studies on customer service practices of the future being practised today.

 

© 2014 Ganador Management Solutions (Pty) Ltd PO Box 243 Kiama, NSW, 2533 Australia Tel: (+61)2-4237 7168