From Customer Focus to Customer Obsession

[There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else. Sam Walton]

The above quote by Walmart’s founder said it best – business strategy is all about the customer! The customer-first message has spread to the workforce. During a recent one-week period, I was pleasantly surprised to hear three Millennials call me “boss” during routine transactions at the Fresh Market, Office Depot and Subway. The same week, I also got a “hey, chief” and “I appreciate you”. Yes, the word is getting out – the customer is in charge! Value-creating organizations demonstrate that they value their customers’ business.   

Customer orientation ascribes to David Packard’s (HP’s co-founder) philosophy that marketing is too important to be left to the marketing department. It is the responsibility of everyone in the organization. A customer orientation is a service organization practicing Japanese style marketing - putting the customer first. In fact, the Japanese word okyaku-sama literally means “honored customer” or the “customer is God.”  Is the customer really king in the U.S.? When leaving an American restaurant, sometimes one is barely acknowledged; in contrast, it is not uncommon at a Japanese dining establishment to have several parties graciously bow farewell in thanks for the customer’s patronage.    

 “We must be more customer focused, we need to create new market opportunities!” Undoubtedly, you have heard this management mantra or a variant of this theme recently. Executives use terms such as customer (or market) centric/driven/focused/ oriented and so forth to motivate their people to do a better job relating and responding to customers. While the idea is sound, too often it’s just lip service rather than a major investment to improve all facets of the organization. A true customer orientation changes the business culture to create and maximize customer value which in turn leads to an improved bottom line.

 Customer Commitment > Culture > Customer Value > Business Performance         

The healthcare market is fast growing and projected to be the largest employer in the services-producing economy in the United States. Globally, health care is a major challenge and vital industrial sector, as well. Many healthcare organizations, however, are slow adopters in creating superior value for customers. Successful healthcare organizations have embraced a customer-centered philosophy in the now economy – it’s not just about the care offered, but about the caring offered by service providers (physicians, nurses, technicians, front-desk personnel, and so forth.) 

Walk-in clinics or urgent care facilities are a relative new innovation in the industry as most consumers would prefer to not have to visit a hospital emergency room for a sprained wrist, flu shots, skin rash, common cold symptoms, or other minor maladies. Yet, some of these so-called urgent care centers may be viewed as semi-urgent, at best. They may be closed after 9 p.m. and on Sundays, their website says to call but no one answers the telephone, they have long waits for service, or are even ill-prepared to assist with basic medical issues since they are staffed by nurse-practitioners instead of seasoned physicians. In contrast, the Baptist Health System (17 centers in Miami-Dade and Broward counties) pioneered urgent care in South Florida more than 15 years ago and is all about the healthcare experience [www.GetTreatedBetter.com/]. Patients may call or e-mail ahead for appointments and have reserved free parking. Amenities include comfortable waiting rooms with large flat-screen televisions, wireless internet, and freshly brewed coffee and tea. An efficient expert team of highly skilled and compassionate doctors, nurses and technologists is readily available, and full service imaging services are provided, as needed.

Are You Obsessed about Your Customers?

Great companies such as Amazon and Apple are totally obsessed about their customers. Their CEOs, CMOs (Chief Marketing Officers), CCOs (Chief Customer Officers) and CXOs (Chief Experience Officers) stay awake at night strategizing how to improve the customer experience. They are masterful at creating and delivering value to their highly satisfied, loyal client base. Consider these examples: Federal Express changed its name and repainted its trucks to read FedEx, as that is what customers called them (“let’s FedEx this package to Zurich”).  Nordstrom’s sales associates have been known to buy products from a major competitor, Macy’s, to satisfy an unfulfilled customer’s request. Zappos, an online shoe and accessories retailer and an Amazon company, gives their customers a full year to return their product.

According to the 2017 Global Customer Experience Benchmarking Report by Dimension Data, 81% of companies stated that customer experience is their top competitive differentiator. Yet, only 13% of respondents acknowledged that their company’s level of service was excellent. Also surprising was the fact that more than 30% of organizations do not have anyone in charge of the design and delivery of the customer experience.

Forrester identified four levels of customer-centricity. These are: 1) customer-naïve companies, 2) customer aware companies, 3) customer committed companies, and 4) customer obsessed companies. Based on their research, two-thirds of the firms are customer naïve or customer aware (only 10% were customer obsessed). Therefore, a majority of businesses should restructure to implement customer-obsessed operations. Organizations will need to build a culture to mobilize around customers, high performing teams, developing technologies, processes, and metrics.  Forrester adds that customer-obsessed organizations such as Coca-Cola, HSN, and the Lego Group follow four guiding principles. They are customer-led, insights driven, fast, and connected. They define a customer-obsessed enterprise as, “one that focuses its strategy, operations, and budget to enhance its knowledge of and engagement with customers.” 

Realize that greatness in marketing and customer service is a function of attitude, not resources. Here’s how a local dry cleaner delivers exceptional value. I pulled up in front of the store in a South Florida rainstorm and the owner jogged out with a large umbrella to greet me and my clothes for drop-off. He stated, “I can afford to get wet, but not you!” Another time when I visited there for a pick-up, the store clerk quickly hung up the telephone when I entered. She said, “I was only talking to my boss, customers are way more important.” How’s that for mastering customer value thinking?

Other companies do not do a very good job in customer service - you probably can identify many of these firms. We have all been put on hold endlessly when calling for technical support, been ignored or treated indifferently when visiting a retail site, and sold inferior goods or services upon occasion. While second-rate firms may survive in the short term, they will not last in business unless they become value-creating for customers.

So, is your company truly obsessed about its customers? If not, WHY NOT? How can your organization design and deliver outstanding value to your customers in the now economy?

This blog post is the second in a series extracted from Superior Customer Value – Finding and Keeping Customers in the “Now” Economy, 4th Ed. (2018 forthcoming, Routledge Publishing/ Taylor & Francis). For further information, contact Art Weinstein at art@nova.edu, www.artweinstein.com/, 954-309-0901 .

 

 

Misconceptions about Store Brands

National or manufacturer brands have been for a while the choice of consumers and a signal for quality. Consumers usually trust manufacturers’ brands and associate them with a certain level of quality. However, this is not the case for store brands. US consumers still lack the knowledge about private label and avoid buying them unless the product does not generate any risk. Private-label brands success is strongest in commodity driven, high-purchase categories and products where consumers perceive very little differentiation (Nielsen 2014) . While, store brands or private label market share keeps growing in many European countries counting sometimes even half of brands' market share, this is not the case in the United States. Indeed, the market share in several European countries is more than 30% with UK , Spain, and Switzerland having the highest market share among European countries. (PLMA’s International Private Label, 2017). The United States private label market share has been lower than its counterparts in Europe and it is only lately that this trend has been changing.  Today, the market share of store brands has reached nearly 25% of unit sales in the U.S. and is expanding faster than national brands (PLMA 2017).
 

So What is Private Brand or Store Brand?
Private brand is any brand that comprises the retailers’ name or any name created by the retailer (PLMA 2017). Target, Wal-Mart, CVS pharmacy, Walgreens market their own brands. For instance, Target has a store brand “up and up” in their household product line that is much diversified. Some retailers, such as Wal-Mart, see private label as part of the road to their future success. Indeed, Doug McMillon, president and CEO of Walmart, when speaking at the Bank of America Merrill Lynch 2017 Consumer & Retail Technology Conference in New York stated that “The widespread availability of name-brand products online will compress the margins of private brands over time.” He also added that "having a private brand from a margin mix point of view has always been important, but it is even more important now.”  Therefore, it is important to educate customers about private brands. Indeed there are some misconceptios about store brands:
1. They are of  lower quality than manufacturer brands
2. They are manufactured by the retailer
3. There is only one category of store brands
4. They have low prices
5. They generate high risk

 The truth about store brands is that they are indeed similar to manufacturers’ brands and sometimes even of better quality. Here are some clarifications about store brands:
 

Who Manufactures Store Brands?
According to PLMA (2017), there are different ways that store brands are manufactured. They can be produced by:
• Large manufacturers who produce both their own brands and private label products.
• Small and medium size manufacturers that specialize in particular product lines and concentrate on producing private label almost exclusively.
• Major retailers and wholesalers that operate their own manufacturing plants and provide private label products for their own stores.
 

Categories of Store Brands
Private label brands are classified into generic brands, standard brands or copycat brands or flagship brands, premium brands, and value innovators.
1. Generic brands are usually cheap, inferior products. Usually they do not carry the name of the retailer on the package , but simply the name of the product, such as ‘milk’ or ‘butter’, in plain script . They usually use very cheap packaging .
2. Copycats or flagship brands or standard brands. They usually carry the name of the retailer and tend to copy the main manufacturer within that category, they have packaging and price points very similar to the main manufacturer.
3. Premium store brands are usually of higher quality than the manufacturer brand  and compete directly against the manufacturer’s  brand. Kumar and Steenkamp (2007) define two types of premium brands: the premium private label which is exclusive, higher in price, and superior in quality to competing brands; and the premium-lite store brand which is promoted as being equal or better in quality to the competing brands, while being cheaper.
4. The fourth category is value innovators which consists mainly retailers cutting down costs and processes to simplify the production and marketing of product ranges, so that a good quality product can be offered at very low prices. They are usually limited in number.
 

Benefits of Store Brands
Store brands provide retailers with some benefits. It gives them exclusivity to offer their customers special products, which make consumers loyal to them. In addition, store brands create a unique brand image and generate more retailer brand recall and recognition. Finally, store brands increase retailers’ revenues and have higher profit margin.
 

Attitude Towards Store Brands
The positive or negative attitude towards store brands has been attributed to several causes. Consumers evaluate store brands based on price/value of those brands, the products’ attributes, on the perceived risk and on their own self-perception (smart shopper). Consumers who buy store brands realize that when they are indeed purchasing store brands they are paying for certain “marketing” practices for  manufacturers’ brands, which is not the case of retailers brands.

References:
Hamstra M (20017) “Walmart CEO cites growing importance of private label Store brands seen as driver of margins, loyalty” www://www.supermarketnews.com/walmart/walmart-ceo-cites-growing-importance-private-label
Kumar, N  and J.B  E.M. Steenkamp, ‘Private Label Strategy’, Harvard Business School Press, 2007. 
Nielsen (2014) https://www.nielsen.com/content/dam/nielsenglobal/kr/docs/global-report/2014/Nielsen%20Global%20Private%20Label%20Report%20November%202014.pdf
PLMA (2017) ; http://www.plmainternational.com/in

The Role of Family in Hispanic American Financial Planning

More than half of Americans are living paycheck to paycheck and household debt has risen to $12.68 trillion in 2017, a peak that has not occurred since the Great Recession of 2008.  According to Northwestern Mutual, fifty-eight percent of Americans believe their financial-planning efforts need improvement.  Record high credit card and student loan debt combined with lack of savings for emergencies and retirements (The Federal Reserve, 2017) have necessitated a need for a better understanding of financial planning. As financial planning falls under the domain of financial well-being, it is important for marketers in wealth management to conduct research about consumer choice in such areas as insurance preference and investment portfolios, among others.   

Thus far, research in financial planning has focused on an individual’s financial knowledge or financial literacy as the main antecedent to future-oriented financial planning.  In other words, prior research has mainly viewed whether or not a consumer makes a financial plan for their future (e.g., retirement, college education) as a function of how well they are informed about financial products.  Some research has also investigated the emotional aspects of consumers in their financial decision making or in their financial well-being and satisfaction. While one’s knowledge about financial products and one’s emotional status are important factors, these works have overlooked a person’s value system that might impact their future-oriented financial planning behavior.  Much of the planning toward future financial health in retirement, college education, and life insurance rests on how much one values their own immediate and extended family. Missing from the extant research is an investigation that captures cultural values as an antecedent to future-oriented financial planning. 

Investigating cultural values in financial behavior is particularly important in the United States. U.S. is a very diverse country with many ethnic groups. These ethnic groups are laden with diverse cultural values. One such group is Hispanic Americans.  Hispanic Americans are the largest and fastest growing ethnic group in the United States. From 2000 to 2010, Hispanic Americans had  a 43% increase in population, and are expected to grow 167% from 2010 to 2050. There is an urgent need for financial service managers to understand this ethnic group in their behavior as there are limited conclusive research findings other than that they are reported to behave differently than non-Hispanic groups.  There is a lack of research that investigates the causes of  WHY this group act differently than non-Hispanic consumers in the U.S, particularly  when it comes to their choices of financial services. 

One of the most distinguishing aforementioned features of Hispanic culture is its collectivist and family-centric cultural value, known as familism.  Familism is the most important value in the Hispanic culture when compared to other cultural values. Because of this cultural value, many Hispanic Americans have extensive strong family ties and multigenerational relationships.  As a result, financial matters are often viewed as family matters that are influenced and supported by parents, grandparents, and relatives. We therefore suggest that it is appropriate to investigate familism as an important factor in Hispanic consumers’ financial planning. Consider the following questions:

1. What are your thoughts on this topic?

2. Are there other cultural values that could have an influence?

3. Can you relate to this topic?

4. What are some managerial implications of this suggestion to incorporate familism when trying to understand/influence Hispanic American financial planning behavior?

Building a Sustainable Competitive Advantage - Salespeople’s Linchpin Role

The criticality of salespeople as linchpins within the buyer-seller relationship cannot be overstated. Given that the development of strong sales representation with customers is key to success for many industrial firms, the unique position of professional salespeople is firmly entrenched within today's global economy. Skilled salespeople are the principal sources of informational and relational resources to both the firm and its customers as well as being key to nearly every decision and in nearly every industry by helping businesses define their needs, understand and evaluate their options, make effective purchase decisions and forge enduring relationships.

In today’s everchanging B2B environment, the competitive landscape and salespeople’s role in meeting customer expectations changes rapidly. Given the complexity of the sales role, it is understandable salespeople now face unprecedented pressures in an ever-evolving global market. With increasingly changing customer-salesperson relationships, the boundary-spanning role of salespeople positions them in a precarious balance between satisfying the customer and meeting organizations’ performance expectations. According to data from the Sales Education Foundation (2017), “nearly 40% of a customer’s decision is based on the added value the salesperson brings to the relationship, far above product quality (21%) and price (18%)”.

Salespeople are in a unique position to connect organizational resources between the firm and customer. Salespeople bridge inter-organizational boundaries and increase the connectivity of human resources in each firm. While existing research has discussed the importance of relationship marketing and the growing importance of adding value to the buyer-seller exchange, there is little that examines the critical role of the salesperson as a resource within the buyer-seller relationship. As postulated by Hunt and Morgan (1995), resource-advantage theory categorizes resources as financial, physical, legal, human, organizational, informational, and relational. For an organization, salespeople can be not only a human resource but can provide informational and relational resources through their boundary-spanning role. For firms to build a sustainable competitive advantage, executives and managers must understand the criticality of their salesforce as an informational and relational resource within the buyer-seller exchange.

How do you see firms positioning their salesforce? How can a salesforce add value for a) their firm and b) their customers? Please share your thoughts in the comments section below.

Sources:

Sales Education Foundation. (2017). Retrieved August 17, 2017, from http://salesfoundation.org/.

Hunt, S.D. and Morgan, R.M. (1995). “The Comparative Advantage Theory of Competition,” Journal of Marketing, 59 (2), 1-15.

Ricky Fergurson, Ph.D., is an Assistant Professor of Marketing in the Huizenga College of Business and Entrepreneurship, Nova Southeastern University. He can be reached at jfergurson@nova.edu

100,000 Views (and counting) !

101,000 + views;  2,300 + comments ;  81 important marketing topics in 25 categories

> On behalf of NSU's Business College and Marketing Department, we truly THANK YOU for your strong interest in Real-World Marketing Ideas and Strategies. Wishing you continued marketing success !

Art Weinstein, Ph.D., Professor of Marketing, art@nova.edu

10 Ways Your Blog Post Can Lay an Egg

As a social media marketing professor, I am embarrassed to say that some of my blog posts were complete duds. After garnering one comment, a “like” from my wife and a couple of shares on one post, I realized I am not practicing what I preach. Have you been there? The following is nothing new. But it’s a compilation of what leading bloggers and researchers suggest we do to make our posts comment-worthy, share-worthy and link-worthy.

> Making Posts Comment-Worthy

Without a trail of comments, blog posts are essentially articles. Lost are opportunities to spark engagement and showcase our content’s popularity as measured by likes, shares, comments and views. And without this social proof from commentary, what confidence do readers have that your post is worth reading?

A sizeable body of evidence also suggests that trails of commentary indeed contribute to search engine results. So what mistakes are made in trying to attract commentary? Media communication and PR literature seem fairly consistent on this subject.

Mistake #1: Shying Away from Controversy

A former wrestling extraordinaire and colleague of mine at Rockwell Collins, Dave Deal, often schooled us marketers on the art of guerilla warfare. As a regional sales director, Dave’s inputs on marketing strategies were followed by his infamous rally cry to “go pick a fight!”

Although intended to steer a competitive strategy, shouldn’t the same apply to blog posts? Without hitting a nerve or fueling a debate, why should readers park a comment on your post? Many bloggers likely fear that controversial posts can spoil a professional image or derail a discussion. But some academic research suggests that by stirring controversy, you can reap a lengthy comment trail devoid of your own biases.
 
Mistake #2: Failing to Solicit Input
A second way to make your posts comment-worthy is to leave your post open ended. In effect, this argument for commentary building suggests that readers have a clear understanding of their role. But consider how you would respond to the proverbial “what do you think?” or “please share your thoughts.” My own reaction is “where do I start?”

Instead, watch what happens when you ask “what have I missed?” Here is where you will find experts coming out of the woodwork. I found this works when I ask students what I did wrong after sharing a story of a professional screw-up. I often have to interrupt with “okay, I get it!”

Mistake #3: Going Silent
One sure way to stop a comment trail is to avoid replies and thereby imply your readers’ comments don’t really matter. In their study of newsgroup participation, Joyce & Kraut (2006) found that those who got a reply to their comments were 12% more likely to post again. The authors attribute this to the commenter’s desire for positive reinforcement. 

Mistake #4: Not Reciprocating
There is a great deal of practitioner support for the case that successful solicitation of comments is largely influenced by the activity you spend on your potential readers’ blog posts. Consider how we feel when our contributions to others’ blogs are not reciprocated. Although much of these claims on comment reciprocation are anecdotal, theories of reciprocity have shown that social media engagement improves as bloggers demonstrate their empathy in the form of comment replies and sharing generosity.  

> Making Posts Share-Worthy

Did you ever have a post with long comment trails and likes but few shares? By ignoring strategies to amplify sharing, you miss an even greater opportunity to bump search engine results and build followers. And likes without shares can amount to a mere thank you that offers only temporary boosts in social activity and newsfeed bumps. The mere fact that shares are often augmented with a reader’s own spin suggests a more vested community interest and message relevance. This, in turn, could translate to new followers. So how do we blow this opportunity? 

Mistake #5: Lack of Emotion
It’s hard to find any practitioner or academic research that does not highlight the importance of emotion in encouraging readers to share content. Whether through tearful joy or excitement, emotional content represents over 97% of the viral content (> 50K views) shared on YouTube. And the remaining 3% applies primarily to informational videos supporting innovative product launches (e.g., Lexus and Apple).

Mistake #6: Too Much to Visualize
And few would debate the accelerated trends towards visual content. In fact, Cisco claims that video traffic will account for 82% of all consumer Internet traffic by 2021. But beyond just the simplicity and clarity afforded by imagery and videos, don’t most of us want to share something that looks digestible (e.g., photos, bullets, short paragraphs, simple titles, plain English, etc.)? Anyone waiting for a steady stream of white papers? My 6 year old at the time asked me who was going to read our journal publications. There are no pictures.

Mistake #7: Underestimated Reader Bragging Rights
Having 4 sisters, I could attest to their desire to be “the first to tell.”  After all, don’t they lose their social capital if I already heard the news? So many would argue that posts on breaking news encourage readers to share your content. But have we gone overboard with town criers? An argument could be made that instead of breaking news, we should focus more on interpreting or providing our unique perspective on emerging trends. I found the latter to be more promising than the hackneyed news jacking we get when everyone is live video streaming. Another way to encourage bragging rights is to highlight one of your fan’s comments (e.g., shared personal experience).

Mistake #8: Saturate Audiences with Education
Guilty as charged. As much as I feel compelled to inform and explain, my students will fall asleep if I don’t inspire or entertain them. Renowned philosopher, Herbert McLuhan, perhaps said it best: “Anyone who tries to make a distinction between education and entertainment doesn't know the first thing about either.”

In our own studies of social media influence, Dr. John Gironda and I found that entertainment value and inspirational motivation impacted social capital as much as helpfulness and foresight. This would imply that readers are just as motivated to share something that boosts the spirits of their followers as they are in sharing news.
  
> Making Posts Link-Worthy

But these tactics for building commentary and encouraging shares may not invite links. Unless you somehow authenticate those linking to your site, why would they want to interrupt their own content with disruptive hyperlinks?

Link-worthiness is about enticing audiences of high social influence to transfer their social capital to you in response to your rewarding them or validating their claims. And search engines like links especially from sites with high traffic. So what keeps influencers from linking to your site?

Mistake #9: No Meaningful Influencer Outreach
How many of you received links when you validated the claims of an influencer with even the simplest of research (e.g., a survey)? When influencers consume their day with podcasts, blogging and TED Talks, many are left with little time to empirically back their expertise or perspectives. If you can cite and tag their claims in your research findings, many may link to your supportive findings and even invite you to elaborate on their own blogs or podcasts.

Mistake #10: No Meaningful Influencer Rewards
And if you can’t help them, then why not reward them? My highest performing pieces acknowledged thought leaders as featured contributors or industry pioneers. But rather than name dropping with pretentious and invalidated top expert lists, the leading influencers were tagged more as leading examples of the discussed concept.

At this point, I believe that many of you may argue that blogging in the traditional sense will die out in favor of live video streaming. But the goal for talk-worthiness will likely remain. Unless our content attracts commentary, encourages sharing and invites links from reputable sites, can we really expect our readers to join the dialog?

So what am I missing that you found to be effective in boosting comments, share and links?

 

Crafty Business - Big Beer May Soon Buy Up Your Favorite Craft Brewery

The craft beer industry has experienced explosive growth in the last 10 years. According to the Brewers Association, craft beer has gone from a 5.9% dollar sales share of the U.S. market in 2006 to a 24.84% dollar sales share in 2016. This growth hasn’t gone unnoticed by the giant “megabreweries”, which have seen sales of their beers flatten or even decrease in recent years. This rise in craft beer consumption has led to a number of major industry shakeups such as the merging of Anheuser-Busch and Belgian beer giant InBev back in 2008, as well as AB InBev’s subsequent purchase of SABMiller in 2016.

Recently the big breweries’ strategy has been to simply buy up popular craft brewers. For instance, AB InBev has now acquired 10 craft beer brands including Goose Island and Blue Point; while Constellation Brands, the makers of Corona, bought San Diego craft brewer Ballast Point in late 2015, and MillerCoors purchased a majority ownership stake of the Terrapin Beer Company in July of 2016. 

This trend has been met with backlash by many craft beer enthusiasts and industry members alike. For example, after North Carolina craft brewer Wicked Weed announced its sale to AB InBev in May of 2017, it drew harsh criticism from numerous customers and was subsequently stripped of its voting rights in the NC Brewer’s Guild. The issue has drawn attention once again as popular South Florida craft brewer Funky Buddha was purchased by Constellation Brands on August 10th of 2017. 

Where do you come down on the issue? Do you think this recent trend in the industry is a good thing? Will it change your view of your favorite craft brewer if they were bought up by the “big guys”? Please share your thoughts in the comments section below.

John Gironda, Ph.D., is an Associate Professor of Marketing in the Huizenga College of Business and Entrepreneurship, Nova Southeastern University. He can be reached at jgironda@nova.edu

The Dramatically Changing World of Retailing

TROUBLE AT THE MALLS AND IN RETAIL STORES

Store based retailing is going through an agonizing transformation with an uncertain future.  Not since the recession of 2008 have we seen numerous store closings, bankruptcies, and consolidations for both retail stores and malls.

Brokerage firm Credit Suisse paints a troublesome picture of the retail sector in a recent report.  Store closings are at an alarming rate with 5,077 stores closed in 2015, 2,056 stores closed in 2016, and an estimated 8,600 stores set to close in 2017.  The current rate of 2017 closings exceeds the closing rate of 2008 during the recession when 6,163 stores were shut down.

The closings affect all types of retailers including Macy’s (15% of stores closed) American Apparel, Staples, CVS, Payless, Guess, Abercrombie and Fitch, Sears/K-Mart, and many others.  Starbucks just announced the closing of its Teavana retail tea stores due to lower mall traffic.  Chains such as Sports Authority, Gander Mountain, Limited, hhgregg, Gymboree, and Radio Shack have filed for bankruptcy.

Several factors account for these issues:

• Retailers rushed to open new stores in anticipation of increased consumer spending and to counter competition.

• As shopping mall construction increased, retailers saw opportunities to locate in new high traffic areas.  The result of the mall overbuilding is a dramatic difference in malls in the United States versus other countries.  According to Zero Hedge, the US has 24 square feet of retail footage per capita versus 16 for Canada, 11 for Australia, 5 for the United Kingdom, 4 for France, 3 for China and 2 for Germany.  This overbuilding compounded by the closing of many anchor stores, has caused a glut and bubble with the prediction by Credit Suisse that 25% of malls will close by 2022.

• The changing consumer and the rise of e-commerce are both a threat and an opportunity for brick and mortar retailers.  Consumers are pressed for time, want convenience, and want an easy way to make a purchase.  Online allows them to sit down in front of the computer or mobile device to find the right product at the right price, in the right place.  According to Berkeley Research Group, excluding the impact of e-commerce which increased 13.4% in 2016, brick-and-mortar retailers increased sales only 2.5%.  Online shopping grew 17% CAGR since 2010 with online sales share newly doubling to 10.6% in 2017.

• Savvy consumers figure out the place to shop.  About half of them do showrooming, that is, go into retail stores check merchandise and pricing, and then purchase the product online.  About two thirds of consumers admit they research online and then purchase at retail.  Online offers 24/7 access to product information and product ordering.  Amazon Prime just reminded me that I saved 15+ trips to retailers by ordering online with them

WHAT CAN BE DONE

> For malls faced with this changing environment:
• Large mall owners such as Simon are increasing investment in their A malls, modernizing them and adding new outlets to replace those retailers going out of business.  The new outlets fall into two new categories, innovative retailers such as fast fashion outlets such as Primark, Zara, Uniqlo, and Forever 21.  They have added over 200 restaurants to their malls including Cheesecake Factory, all to enhance their customers’ experience.

• Consumers need reasons to come to malls beyond retail shopping.  Adding an exciting environment with events, special displays, fashion shows, art exhibits, entertainment, and other community activities helps bring in traffic.  Adding nontraditional mall services such as medi-centers, fitness centers, gourmet grocery stores, pharmacies, banking, Apple and Microsoft stores, Tesla showrooms, as well as smaller specialty stores will build traffic for the malls.

• Mall operators such as Simon have divested B and C underperforming malls and placed greater emphasis on high traffic, high-volume malls.  If divestiture is not possible, mall owners are exploring whether the mall can be repurposed into another facility such as a medical center, apartments, distribution center or other types of business.

> For retailers faced with this changing environment:
• Retailers need to continue to rationalize non-productive outlets by eliminating marginal stores.  Productivity metrics must be used to determine the optimum number and location of outlets.  Rethinking store size and merchandise mix may be important for retailer survival.

• The omni-outlet customer requires new services to allow online ordering and home delivery, online ordering and in-store pickup, as well as in-store returns regardless of the point-of-purchase. Major improvements in computer systems and logistics are required to achieve high levels of expected customer service.  In-store service delivery of online orders, handling online returns, and processes for product exchanges require  new in-store facilities ranging from storage space for online orders to be picked up, computer terminals, and well-trained employees to handle the service desk.  Importantly, signage at the store entrances must direct people to where they can pick up their online ordered merchandise.

• Customer experience is key to increasing store traffic.  Retailers must stay current in changing customer lifestyles and merchandise changes that drive altered shopping behavior.  Having high demand items in stock and enhancing the shopping experience as a treasure hunt can increase traffic and the number of items bought.  Surprise customers with a small gift or token of appreciation.  A local grocery chain offers a free cookie to children when they approach the bakery department.  Compete on the basis of customer experience and merchandise selection rather than price.

• Retailer websites must be inviting, easy-to-use, and above all engaging.  According to research cited by HubSpot, 81% of shoppers for high ticket items conduct online research before making their purchase, 44% of people go directly to Amazon to start their product searches compared to 34% who use search engines such as Google or Bing.  Therefore, it is imperative that retailers use search engine optimization and other tools to make sure that their websites and product offerings show on the first one or two pages of search results.  Beyond the inviting website, retailers must develop a strong social media presence and use it to communicate new merchandise and promotional offerings.  Digital media can be used to drive in-store traffic.

• New merchandising techniques need to be added.  Consumers who order online miss the ability to touch, feel, and try on merchandise before they buy.  Several merchants are offering customers the ability to order online several different items, select the one they want, and return the others at no return shipping charge.  Amazon is testing Prime Wardrobe which allows customers to do this. Warby-Parker allows customers to receive up to five eyeglass frames to try prior to purchase.  Customers of Trunk Club and Stitch Fix receive merchandise for selection and return.

• Offering unique or highly customized merchandise can add value and exclusivity.  High quality store brands such as Costco’s Kirkland brand now accounts for 25% of the retailers sales.  Many Costco HDTV and other electronic products have unique model numbers making comparison shopping difficult.  Retailers who can develop unique or customized products can compete more effectively.

• Clarity of brand positioning is critical.  Having the consumer know who you are and what you stand for can differentiate the retailer mean the difference between success and failure.  Retailers such as T.J. Maxx and Marshalls have clarity in positioning as outlets for newly available brand-name merchandise on a regular basis at competitive prices.  Walmart has low everyday prices, but service is low on consumer expectations.  Publix Super Markets are well-positioned for convenience, customer service, fast checkout and helpful employees.

• Using market research and data analysis studying customer behavior can be turned into actionable marketing strategies to increase traffic.  Insight into customer loyalty, what influences them to buy and to buy again, why customers are lost, should be used to enhance marketing decision-making.

• Mobile apps are a critical part of the communications with customers.  According to Internet Research, mobile commerce makes up 30% of all United States e-commerce.  More Google searches take place on mobile devices than computers.  Careful use of mobile apps can help build consumer engagement and the selective use of emails can increase online sales, store visits, increased order size, and should be part of business building marketing strategies.

• Strategies to reduce showrooming must be developed and implemented to turn a shopping customer into a purchasing customer.  Matching online pricing or providing added services such as extended warranties can be used as an added value to the customer to keep them in the store and prevent them from going online.

The world of retailing is changing dramatically from the anticipated growth rates of the past.  Malls and retailer overbuilding have caused issues in this sector.  The changing consumer and e-commerce have had a dramatic impact in industry restructuring.  Both malls and retailers must move quickly and decisively to reconstruct their marketing to be assured of having a profitable future.

Herbert Brotspies, Ph.D., is an Adjunct Professor of Marketing in the Huizenga College of Business and Entrepreneurship, Nova Southeastern University. He can be reached at brotspie@nova.edu

From the New to the Now Economy

There are only two types of companies: the quick and the dead.

           -Michael Dell 

For more than 20 years, we have heard about the benefits, excitement, promise and impact of a digital revolution and a technologically-driven society. Concept albums by iconic rockers such as Radiohead (OK Computer), Rush (2112) and David Bowie (The Rise and Fall of Ziggy Stardust and the Spiders from Mars) sung about the all-encompassing power of technology – for good and evil -- before the new economy was born. And, a half century ago, Rod Serling relayed ironic tech-based themes in his brilliant television series, THE TWILIGHT ZONE (e.g., Time Enough at Last, Third from the Sun, To Serve Man, and so many more spell-binding episodes).

          In the 1990s, Internet pioneers such as America Online, Amazon, Cisco Systems, Dell, eBay, E-Trade, Expedia, and Yahoo! dramatically changed how consumers and businesses bought products and services in a 24/7 global market space. A seismic shift in the new economy has taken shape over the past ten years led by the FAANGs -- Facebook, Apple, Amazon, Netflix and Alphabet’s Google. These digital leaders focus on speed, service, selection, sociability and solutions.  

        What has been the result of this 5-S transformation? Welcome to the now economy! Just as a toddler cannot possibly wait for a chocolate chip cookie and absolutely, positively must have it right now -- today’s consumers are equally impatient and demand immediate satisfaction. Hence, the rise of Amazon Dash, Fresh, and Prime; Apple’s iTunes; Couchsurfing; TaskRabbit; ZipCar; and a multitude of other “I gotta have it now!” business models.

          Strategic differentiation combined with technology and consumers’ interest in choice has led to industry disruption. Marriott and Hilton have sure felt the effects of Air BnB in the lodging industry. Today, target marketing means segment-of-one personalization. Mass promotion has evolved into two-way dialogues with consumers and business users. Customer relationships lead to lifetime brand advocates. The new economy has morphed into the now economy!

           The now economy is service dominant. This includes business, consumer, professional, and government services. Knowledge workers and the creative class turbocharge this economic sector. In addition, digital services (the platform economy) and consumer-to-consumer services have surged in the past 5-10 years. Realize that a strong traditional backbone of manufacturing, agri-business, construction, and infrastructure is still a key economic priority in industrialized nations. And, let’s not forget the trade segment (retail and wholesale), as well as the burgeoning e-commerce marketspace and the rise of smart products (e.g., appliances, energy regulation, and the internet of things) – see Table 1 which summarizes the key components of the now economy.

Table 1.  Key Sectors of the Now Economy

Services

B2B, B2C and Professional Services

Knowledge Work and the Creative Class

Digital Services and the Platform Economy

Consumer-to-Consumer (C2C) Services/Sharing and Access Economy

Manufacturing +

Customized Manufacturing

High Technology

Emerging Technologies

Agribusiness, Construction, Mining

Trade

Retail, Wholesale

E-Commerce

Internet of Things (IoT)

            The 24/7 now economy is always-on and always open. Buyers will no longer accept shopping from 9 a.m. to 9 p.m. daily and noon to 6 p.m. on Sundays.  Online shoppers will expect their orders to be delivered immediately, within the next two hours, or overnight (not in 5-10 business days). Bricks-and-clicks business models allow consumers to pick up their purchases at a neighborhood store. Sub-par customer service will not be tolerated. Buyers expect to be wowed with amazing experiences and will not settle for yesterday’s ordinary store visits. Table 2 summarizes what customers want in the now economy.

Table 2.  What Customers Want from the Now Economy

The 5 - S’s

Speed

Service

Selection

Sociability

Solutions

Customers Value

It now! – Immediacy and convenience

Superb service

Many options and quality products -- goods, services and ideas

Ongoing, long-term relationships with companies that truly value their business

Doing business with innovative, problem-solving companies that are perceived market leaders

Millennials Also Seek

Technology to manage and simplify daily activities – e.g., apps for immediate access

Interesting, enjoyable and memorable experiences

Product access and benefits -- not necessarily product ownership

Emotional connections with companies, brands and user groups via social media platforms as well as supporting organizational/ environmental causes that they are passionate about

Doing business anytime in any location via multiple channels

Consider this example of the now economy in action.

I recently dropped my dog off at a neighborhood pet spa for one-hour grooming services. I visit the Target Superstore down the street to grab a cup of dark roast in the mini Starbucks. The café is sparsely populated but employees (mostly millennials) drop by to consume premium coffee and pricy pastries. Occasional shoppers, largely female, young and old of all ethnicities, stop by to get their caffeine fixes, too. The fresh produce section in the grocery department is right across from me, part of the one-stop shopping experience. A hundred or so yards away is the embedded CVS Pharmacy -- once a formidable competitor and now a strategic partner. Paralleling the unstoppable movement towards online buying, I notice very few shoppers in this cavernous establishment. Is it any wonder that H.H. Gregg, Sears, Macy’s and dozens of other retail leaders have closed stores or went out of business? (The death of retail is a very real threat in the industry). I get a text message from the groomer – it’s time to pick up Maya.    

           The now economy is also about sharing and access. Users are bypassing traditional market structures and business channels to work directly with other consumers to solve individual problems – think about an Uber instead of a taxi. The redefinition of buyer behavior has spawned a vibrant consumer-to-consumer sector and impacts the future of work.

            While most of us would love to be like Tim Ferriss, rich and only work four hours a week, such incredible wealth is unlikely. In the now economy, many individuals are turning to multiple entrepreneurial ventures to pay the bills to survive or thrive. Just as struggling musicians work hard and hope for that big break, many millennials (and others) are juggling multiple gigs such as driving for Lyft, creating apps, writing blogs, posting YouTube videos and starting innovative businesses as they seek the “big deal” and navigate their individual path to success.  

Consider:

1.      What impact does the now economy have on your personal life?  

2.      What impact does the now economy have on your professional life?

3.      Is your company creating superior value in the now economy? If not, what strategic changes are called for?

4.      Identify 1-2 other companies that may ascend as a potential rival(s) to the FAANG giants.

Art Weinstein, Ph.D., is a Professor of Marketing in the Huizenga College of Business and Entrepreneurship, Nova Southeastern University. He can be reached at art@nova.edu

Country-of-Origin and its effects on International Marketing

Global marketing studies have proven time and time again that knowledge of where a product is made influences purchasing decisions. The attitudes and perceptions people have in their minds about a particular country are transferred to products and brands originating from that country. If you don’t believe me, think to yourself: would you rather buy electronics made in Japan or in China? According to research from Futurebrand, a brand’s home country ranks higher than traditional purchasing choice drivers like price, availability, and style (Roll, 2014). This bias is what marketing literature calls the country-of-origin-effect, and it is common in product categories such as automotive, electronics, fashion, beer, and certain food products (Keegan 2016).

The country-of-origin effect presents both challenges and opportunities for global marketers. Marketers need to carefully study the markets where they do business and decide where and if they want to prominently associate their brands and products with their home countries through integrated marketing communications strategies.  On the one hand, positive country associations can generate interest, acceptance, preference, and brand equity; facilitate foreign market entrance; and allow marketers to capitalize by charging premium prices. Germany is a case in point. This country has long been associated with innovative engineering and performance. Luxury car brands like BMW, Audi, and Mercedes-Benz have used these associations to their advantage, developing an image of prestige and quality. These brands make sure that customers around the world know their cars are made in Germany. Country of origin can reduce perceived risks by acting as a guarantee of quality (Adina, Gabriela, & Roxana-Denisa, 2014).

On the other hand, negative country associations can be detrimental to a brand. These perceptions can negatively affect demand and make market entrance difficult. Animosity towards the country of origin can lead to product avoidance and sometimes even hatred (Adina et. al, 2014). Negative feelings and associations can come from a history of questionable product quality or nationalistic sentiments. For example, in March 2017, political disputes between China and South Korea over missile defense produced a spur of violence and restrictions for South Korean brands (Doland, 2017). In a video that went viral on Chinese social media, a man smashed an LG washing machine and a TV set with a sledgehammer in front of a banner that read: “We would rather damage these than sell them.” Coincidentally, Chinese authorities also banned imports of South Korean beauty products citing issues of quality and closed dozes of stores owned by a South Korean supermarket chain citing safety code issues (Doland, 2017).

            Country associations are fluid and can change overtime. There are strategies that both countries and marketers can implement to overcome country-of-origin challenges. Countries can build the nation’s brand by emphasizing and diversifying their sources of competitive advantage, being conscious of foreign policy’s impact on popular global brands, publically recognizing their best brands, and improving health and safety regulations as well as intellectual property rights (Roll, 2014). In turn, marketers can focus on making branding and innovation the center or corporate strategy. Brands must pay attention to the smallest details, ensuring that the customer experience is outstanding and well differentiated. Ensuring a positive response to the brand can minimize the country of origin effects.  

What are some of your personal bias for or against products or brands from certain countries? What has a larger influence on your purchasing decisions, where the product is made or where the brand is from?

Sources:

Adina, C., Gabriela, C., & Roxana-Denisa, S. (2014). Country-of-origin effect on perceived brand

positioning. Procedia Economics and Finance, 23(2015), 422-427. Retrieved from http://www.sciencedirect.com/science/article/pii/S2212567115003834

Doland, A. (2017, March 17). China Is Lashing Out at South Korean Brands; Here’s What Marketers Should Know. AdvertisingAge. Retrieved from http://adage.com/article/cmo-strategy/china-lashing-south-korean-brands/308309/

Keegan, W.J. & Green, M.C. (2017). Chapter 10: Brand and product decisions in global marketing. In Global Marketing (9th Ed., section 10.4). Retrieved from

https://etext.pearson.com/#/book/5MFEDOLN4UQ?deeplink=true&platforms_id=xl&id=afa61c765255d6d20213af6ba83fd9d4b7dc22612&referrer=nav&bookId=5MFEDOLN4UQ

Roll, M. (March 2014). How nations and brands overcome country of origin challenges. Retrieved

from http://martinroll.com/resources/articles/marketing/how-nations-and-brands-overcome-country-of-origin-challenges/

Ivy Velasquez is an MBA Marketing student at the Huizenga College of Business and Entrepreneurship, Nova Southeastern University. She can be reached at iv98@mynsu.nova.edu

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