Monday, September 28, 2009

Stop & Shop and Starbucks - A Not So Perfect Union

Update - April 9, 2010: I posted this blog post in September 2009 not yet having read Kevin Maney's book, Trade-Off: Why Some Things Catch On and Others Don't. It ranks well up there in my personal critique of business books. Most of which I think you can "get-it" in the first chapter. Maney's deserves the full-read. In it, Maney, does a superb job of taking a wonderfully simple concept which I think successful companies execute well intuitively. It has to do with the balance of "fidelity" versus "convenience". In his book, Maney uses Starbucks as an example which to me was a rewarding validation of my blog post below. There is an adaptation of the chapter on Starbucks from Forbes, here. With that, feel free to read my post but without a doubt, pick-up a copy of Maney's book. It's well worth the read.

Around early 2006, Northeast grocer Stop & Shop struck a deal to open full-serve licensed Starbucks in 35-45 Stop & Shop stores over a five year partnership.

Our small suburban town boasts three Starbucks which might be an indication of the demographics. Our Stop & Shop Starbucks opened early in 2007 and would be our fourth.

A short two years later, Starbucks and our Stop & Shop would part ways. I can’t say I’m surprised.

Don’t get me wrong. The idea is nice in theory.

Starbucks is trying to steal market share from Dunkin’ Donuts (a New England institution and a master in convenience) and there are Dunkin’ Donuts in about 100 Stop & Shops.

Stop & Shop is trying to elevate its brand to compete with Whole Foods. By the way, right around the time of the Starbucks addition, a Whole Foods opened in our town. So in addition to Stop & Shop refreshing their image, cleaning up the store and offering an organic food aisle Starbucks should be a perfect fit.

Not so much.

I don’t know if either company did much research to decide if this was a good idea or if they did just didn’t ask the right questions.

My guess is that good research would have identified that while the demographics should indicate that a marriage between these two is a no-brainer, the reality is that the two consumer experiences are at odds with each other and the idea is actually inherently flawed.

My wife and I do our “basic” grocery shopping at Stop & Shop. We do specialty shopping at a local market or at Whole Foods. And we relax at Starbucks, with each other, a good friend or a book and ideally no kids.

Stop & Shop is inherently not relaxing. It’s functional. We don’t go wandering aimlessly through the store taking our time. We go with a list and a job to do and that’s complicated further if there are kids with us. There’s no time for a Non-fat White Chocolate Mocha. We don’t have time to place the order, let alone wait for it.

Stop & Shop is for one thing. Starbucks is for another. It seems like it should have been pretty simple to figure that out.

Funny thing is, Stop & Shop is headquartered a couple of towns away from mine. If they had only asked I might have been able to save them a bit of money.

Monday, September 21, 2009

Why it’s important for your customers to say good things about your products AND your company

Right now there’s an all-out war between Comcast and Verizon FIOS. Even though I have FIOS and like the product (and there is a distinction between the product and the company), I’m going to put my money on Comcast in the long run. Here’s why. Comcast is working on getting people to say good things about the company and their products and Verizon is solely focused on the product.

Recently, I was watching a new Verizon FIOS commercial where the cable guy and the FIOS guy are attending focus groups and the cable guy says something about listening to customers being dumb.

The irony is that this commercial came from Verizon.

My wife recently convinced me to switch from Comcast Cable to Verizon FIOS. I’m a creature of habit so this change wasn’t necessarily welcome but it would save us almost $100/month. Nothing to sneeze at these days.

I told my wife that I wanted to look into it because being in the business of marketing and media, I don’t take these things lightly. First I went to the Verizon FIOS web page and of course they have that nifty little “chat with me” link. So I did. Guess what? It’s not an actual live chat function. It’s a bot. This is frustrating because it keeps circling back and saying “Great, let’s get started.” Even though the stupid bot has never actually answered my question. FIOS. Sacked for a loss.

I did some research online to see what folks were saying about FIOS and in general, people were saying good things about the product, channel selection, interface, multi-room DVR and so on. What they weren’t saying was nice things about Verizon. The consensus from various chatter among consumer feedback web sites was that customer service was abhorrent. FIOS. Sacked for a loss. Again.

I told my wife my findings and said here’s the deal, you have to deal with any and all service issues. She say’s “Done.” Much to her regret.

My wife talks to a sales person at FIOS more than once and is told our savings would be about $100 per month. They tell her we’ll also get a $150 gift card and $300 in savings in gas and groceries. TOUCHDOWN FIOS!

We get FIOS installed. I agree. The product is far superior to Comcast. But there’s a problem. We only get a $50 gift card. My wife begins to deal with customer service. I’ll save you all the gory details but my wife has two full pages of notes and once she started keeping track of how much time she spent dedicated to resolve getting what we were promised she has spent approximately 22 hours on the phone with Verizon. The offer for the $300 in gas and groceries was through a 3rd party. Funny thing is, no one at Verizon Customer Service knew about it or how to go about signing someone up and even gave my wife an 800 number to call that was disconnected. At one point a customer service person said, “Well you can always go back to cable?” WHAT!?

When you go to the Verizon FIOS web site, there are testimonials about how great FIOS is. The product that is. One of them compares FIOS to a VCR. Really? You don’t say. Although I’ll readily admit and do that the physical product is better. Customer service however is another story and that’s what has the potential to make the product irrelevant.

The greater irony is that while Comcast may need to up its game with making the product better, they’re at least making an effort to listen to the customer.

The bottom line is that Verizon has bigger issues and they just don’t know it yet. Because in the long run while of course it’s important for people to say good things about your products, it’s even more important for people to say good things about your company.

Tuesday, September 15, 2009

Where Automakers Fall Down

My wife and I recently bought a used Land Rover LR3. We bought it from a gentleman who will buy a car at auction on your behalf for a minimal fee. They’re usually cars that have just come off a lease and still retain the remaining manufacturer’s warranty. All in all we probably saved about $7,000 versus what we would have paid if we had bought it from a dealer.

When we brought it in for a service recently, my wife inquired if she could have a loaner vehicle. The response was “No”. Why? Because we didn’t buy the vehicle from them.

Here’s exactly where auto manufacturers fall down.

Regardless of the where we bought our car, we still chose their brand. It’s still a luxury brand. One would think it would be a corporate mandate for someone driving a car that has $50K sticker price a loaner would be a minimal expense for enhancing our brand experience. I'm sure the brass at Land Rover will say, loaner vehicles are up to dealer discretion.

Jim Morton, the former Vice Chairman of Nissan once told me over lunch, “It’s pretty easy to sell the first car. The second, third or fourth is where we have a lot more trouble.”

I understand why. I’m by no means the first one to espouse this but at the end of the day, your opinion about your car and the car company begins the second you first show up in the service department.

A friend of mine used to work on the Audi business for their ad agency. The agency was in a situation where they had to defend the account. They had uncovered research that basically said that about 65% of first time Audi buyers wouldn’t buy another one. Why? Because of their service experience. I’ve owned about four Audis and can understand why. Maybe I’m a glutton for punishment but I’m in a different category of loyalty and that’s a topic for another post. If you go to Audi forums you can actually find banner ads from local mechanics that say, “Tired of your service experience at your dealership, come to us.”

Ummm, call me crazy this might suggest you have a problem on your hands. Oh and by the way, Audi fired the agency.

Dealer and manufacturer relationships have always been contentious but they are still inextricably linked. The manufacturer is of course required to provide competitive, attractive and reliable product but it becomes up to the dealer and specifically the service department to sustain the brand.

With this sentiment, in my mind, when my wife showed up to drop off her car, someone should have said, “Thanks for buying a Land Rover! We’re happy to serve you.” These days people have numerous ways to buy a car and I'm sure dealers will talk about their margins being squeezed but we're still a customer and punishing a customer because they didn't buy the car directly from you in my mind is just dumb.

I’ll tell you what Land Rover, you let us have a loaner and I’ll let you put your dealer license plate frames on to at least make people think we bought it from you.

Twitter Traffic Flattening?

Recently, John Battelle of Federated Media and author of the book, Search posted a tweet with data alluding to Twitter traffic flattening.

Oddly enough about a week ago, I was with a friend who is the President and COO of a company called Best Doctors. He’s very active on Twitter and within the blogosphere. He uses both to expand and educate people on health care issues and connect with other professionals in his business.

I suggested to him that I thought Twitter seemed to be slowing down. I didn’t have the sophisticated data that Quantcast has. My conclusion was purely observational. I use a Twitter app called TweetDeck. Call it a Twitter dashboard if you will. One of the several features to TweetDeck is a column called TwitScoop that shows what people are talking about and how popular those topics are. Other Twitter applications offer similar features. Several web sites such as Yahoo have similar features generally based on search activity.

What I noticed with TwitScoop was that what people were talking about on Twitter were for the most part niche topics.

When I first started using Twitter what I discovered was that Twitter is essentially a place to begin a conversation with like minded individuals or as I like to say, “affinity groups”. You’ll of course see anomalies. A timely example is the passing of Patrick Swayze in which lots of people will post some commentary on a popular event. I myself posted “Pain don’t hurt”, a quote by the Swayze character Dalton from the movie Road House.

My belief is certainly that Twitter is here to stay. However, I predict that it’s finding its stride as a very effective tool to connect to various affinity groups and begin meaningful conversations globally, not just a place to tell people what kind of sandwich you’re having.

Thursday, September 10, 2009

Who will be the next Bill Bernbach?

Yesterday on NPRs Marketplace with Kai Ryssdal, I listened to an interview with Director Doug Pray who talked about his film, "Art & Copy," which explores the creative forces behind some of the most famous ads of the 20th century. The film has been out since last year (Aug 2008) and was produced in conjunction with The One Club.

The film is enjoyable especially to those in the ad/marketing world. Ad people love looking at and critiquing ads and we all have our favorites (my personal favorites were Fox Sports/NBA-Alan and Jerome).

But I digress…

The interview was interesting in my mind because at one point Pray says, “Myself, Shirley, and everybody in the movie would agree that 98 percent of most advertising is pretty much garbage.” This I agree with. There’s a lot of crap work out there without a doubt and people’s filters for advertising are outstanding. Most of it is just white noise. The issue that I have is with Pray’s rationale for why there’s so much garbage out there. He continues… “A lot of businesses and certainly advertising has kinda fallen prey to this idea [that] market research and analysis and everything is what it's all about. And if you can figure exactly what the customers are already buying, then you can figure out what exactly they're going to buy, and then you know how to advertise it.”

First let’s look at the rationale for purchase decisions. Purchase decisions boil down to two fundamental things:

Needs and Wants.

There are certain things that I don’t really care about that I might need to purchase and advertising may or not have an effect on my purchase behavior. Let’s say my wife politely suggests as she gives me a kiss goodbye before I leave for work, “You might want to pick up some gum.” Read: Your breath is kickin’.

I stop at a store and am faced with a wall of chewing gum and breath mints. I’ve noticed Stride gum commercials lately and because it’s in my head I give it a shot. It’s all pretty much the same. I don’t care but advertising has done an effective job of driving my decision just by being in my sub-conscious. Gum is a category where being remembered is half the battle because for the most part, people don’t care.

Now let’s say I need waterproof rain jacket. Here is where a need and a want come together. This is a purchase I actually care about and several factors go into my purchase decision. Among them are brand, price, functionality and look. All of these things fall into the category of a quote from a previous blog post "Often what we buy is not some thing but some idea that is embodied by that thing." Because this is a product that I’ll wear and will be noticed in, I’ll fall prey to this phenomenon. Understanding where brand, price, functionality and look rank as purchase drivers is helpful but perhaps most important is understanding how much anyone cares.

I spent most of my career in advertising and I’m staunch defender of great creative and despite having been on the account service side of the business, some of my best friends are creatives, and good ones. Seriously, though, I’ve thrown down with clients on behalf of creatives I’ve worked with and have earned a good deal of respect in doing so.

One point: We should make a distinction between great, really good and good. Great should be designated as once in a lifetime… we talk about it for years. Really good means it stands out in the category and continually performs well and perhaps is imitated. Good means it basically does its job. And let’s not forget, the company and product have to stand behind the work.

The latter portion of my career has been focused more on account planning, strategy and research. So here is where I disagree with Pray. I don’t believe that the fault of bad advertising is “research and analysis.” Of course there are always instances of analysis paralysis and research that goes right to the bookshelf and we all know the story of the Herman Miller chairs. The flaw of the Herman Miller chairs research was the design of the research not the design of the chairs. At the end of the day, you get out of research what you put into it.

I approach research with the mindset of “this is what I think, we’ll see if I’m right.” If I’m wrong I’ll seek to find the value in that and chart a new course. Lately, my view is that segmenting your customers based on how much they may or may not care about any one product or category is a critical jumping off point. It’s not however “figuring out what they’re already buying” because trends move far too quickly.

In my view, research and analysis isn’t the problem. Often it’s clients who are inherently averse to risk and who wouldn’t be with the brevity of CMO tenure and accountability to shareholders in what is arguably one of the hardest disciplines to defend.

I would also argue that bad work has more to do with too much of a continued mass market approach which insures a lowest common denominator approach to creative. Clients are too fearful of disenfranchising potential customers with any creative that may push the envelope. Undoubtedly it's a numbers game which is built based on market opportunity. Clients have to show the greatest market opportunity which means the widest swath of people must be reached.

This is as opposed to accurately identifying sustainable groups of your customers and presenting to them in a manner that allows for less watered down creative. This however continues to challenge the existing models as we know it. But if networks only account for 30% of the pie things have to change soon. There’s also the distinct fact that as Bill Bernbach revolutionized the advertising world in the 60s pairing together art and copy teams which represented a shift in advertising we should also admit that we’re probably at the precipice of another shift. The question is who will be the next Bernbach?

Tuesday, September 8, 2009

Consumer Segmentation Flaws

"Often what we buy is not some thing but some idea that is embodied by that thing." New York Times Magazine 7/26/09

It is this sentiment that has allowed companies like Target, Mrs. Meyers, Whole Foods, Apple and a myriad of others to flourish. It also to some degree what anchors my philosophy about consumers today.

We all know that the marketing landscape has changed but instead of talking about tweets and screens and changing business models of network TV, my marketing philosophy is generally driven by the consumer.

Consumers can no longer be defined solely by household income, gender or ethnicity. It’s not that demographics don’t matter it’s that demographics aren’t necessarily the best indicator of a consumer’s personal brand DNA. Consumer brand selection has become intensely personal and is a reflection of the consumer’s sensibilities. It’s their calling card. And consumers I find are less about their say, “blackness” and more about their “me-ness”. Let’s be honest, your race, ethnicity or religion might determine who you marry but it won’t determine what toothpaste you’re going to buy.

Marketing to me as an “African-American” is relatively useless. It's not because I'm not black... I am. It’s not that I’m not proud of my heritage or that I don’t acknowledge my blackness, it’s that you will make assumptions that I can guarantee will be wrong. Yes I listen to hip-hop but I also have Ani Difranco, Dave Matthews Band and the soundtrack to Oklahoma on my iPod (Did I really just admit that?). I’m a member of Yacht Club. I’m into mountain biking and tuned European cars. Connect with me through my lifestyle driven affinity groups, not through my ethnicity.

Take my friend Darin. Darin is a successful attorney, married with two little girls. He’s also a large black guy. Most companies would approach Darin based on his ethnicity, I mean after all, he went to an HBCU but do you know the way to Darin’s heart? Internal combustible engines. Mostly European ones. The guy tracks his Ducati a few times a year and drives a Turner Motorsports tuned BMW 540i. For his birthday one year his wife bought him a shifter kart. This doesn't solely define him but it's guaranteed the best way to get his attention.

Or take Audrey (pictured on my web site). She’s 26, pink and bleach blond hair, heavily tattooed, pierced and listens to hardcore rock music that is likely to make most people cringe. She’s also a stylist with a Roth IRA and is close to opening her own salon… Wouldn’t she be an ideal customer for American Express Open? You wouldn’t know unless you got to know her.

Not too long ago I was approached by the agency for New Era the baseball hat and apparel company. They said that there was a flaw in their segmentation of customers and wanted help understanding what it was and perhaps a better way to segment their customers. They segmented them by “Urban”, “Suburban” and “Fan”. The flaw was simple. You could reside in suburbia, have urban sensibilities and be a fan. Furthermore it didn’t really tell you anything about their customers. We designed a segmentation based on how people wore their hats. The initial breakdown was as follows:

· fabric (cotton vs. wool vs mesh)

· style (flat brim, curved brim, front/back)

· colorway (one color, multi color, custom)

· team/non-team

From here, New Era is able to gain tremendous insight into their consumers and identify what various sub-cultures and affinity groups they belong to and how to better help retailers market products and adjust inventory.

Furthermore, as racial lines blur and intermarriage grows it will ultimately be harder and harder to bucket people into strict ethnic or racial confines. Having a solid understanding of your brand and the types of consumers it appeals to is critical.