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					Pivot Point

The 5 & 10

What if Woolworths were innovative?

    The events of the past several months have called into question just about every assumption, except one.
That sole exception would be the unstoppable assumption that retail is our best, and perhaps last, opportunity
for innovation and growth.
    Of course, it all depends on how one defines “retail.” If by “retail” we mean discounting our way out of
excess inventory, forget about it. But if by “retail” we mean creating exceptional journeys that help people live
better, happier lives, well, then we’re onto something.
    The funny thing is, this doesn’t necessarily require grand, exciting or cool shopping extravaganzas. All it
really takes is a strong connection to what people find to be, um, relevant (see page 48).
    Let’s take Woolworths, for example. Ostensibly, it’s a terrible example because Woolworths just closed its
doors. Some experts say that’s as it should be, because Woolworths had become a random jumble of cheap,
kitschy stuff.
    But many (if not enough) shoppers are heartbroken, because, to them, Woolworths was a meaningful part of
their lives. The emotional attachment they have for Woolworths is astonishing. It speaks to the power of retail
— even really bad retail — to make a difference.
    It also speaks to Woolworths’ failure to innovate. How much would it have taken to parlay whatever it was
that so many shoppers loved about Woolworths into something that makes more sense in 2009? Not much.
    As we survey the wreckage of the holiday season just past, and the storms yet ahead, why not cast an
innovative eye on the one place where everybody goes to have fun, solve problems and spend their money?

   Tim Manners, Editor-in-Chief


Cool News

Creativity Boom
“The real source of all growth is human creativity and entrepreneurship, which always comes as a surprise to us,
especially in the worst of times,” writes George Gilder in Forbes.
According to George, the surprise is this: “Because the U.S. remains the world’s largest economy and still leads
the world in business and technological creativity, the current crisis is confined to the boondoggles of finance. It
will pass rapidly and evolve into a new boom … ”
He says that “the crucial conflict in every economy … is not between rich and poor, Main Street and Wall
Street, or even government and the private sector. It is between the established system and the new forms of
wealth rising up to displace it — all the entrenched knowledge of the past and the insurrections of futuristic
enterprise and invention.”
However, George sees “structural change” leading to “huge growth in technology” ahead. Specifically, he cites
the advent of “cloud computing” which he says will turn “the internet into a general-purpose computing system,
with huge gains in versatility, speed and efficiency.”
George is also jazzed about “the advance of graphics processor devices” for videogames. He cites the development
of “nanotubes” enabling the “fast removal of all impurities from water … without the use of power, chemicals
or ultraviolet light.”
Finally, he touts iCrete, “a radically new and cheaper way to make concrete” that “is enabling a revival of
architectural innovation,” and concludes: “Creativity is the ultimate source of all forms of power and freedom.”
[S OURCE : George Gilder, Forbes, 11/10/08]

Innovation Economics
“Innovation itself is a field in need of innovation,” says John Kao, a former Harvard Business School professor.
“What we really need is more original thinking about how innovation works in society, and that could come
from the philanthropic sector as well as universities,” he adds.
Carl Shramm is answering John’s call as head of the Kauffman Foundation, founded in 1966 by Ewing Marion
Kauffman, “a pharmaceutical entrepreneur and owner of
the Kansas City Royals.”
Kauffman died in 1993 but wanted “his philanthropy to promote entrepreneurial activity and education.” Today,
the foundation is one of the nation’s largest private supporters of economic research in universities.”
One study involves some 5,000 companies that started up in 2004, and tracks “factors of success or failure.”
Other research seeks “to identify the characteristics of … scientists who are most effective in ushering research
advances into the marketplace.”
Then there’s Kaufmann’s iBridge Network, an online database of inventions, which Carl Schramm describes as
“an eBay for ideas.” He adds: “We try to foster a deeper understanding of the innovation process …
and that is our leverage point to help stimulate economic growth, create jobs and wealth.”
[S OURCE : Steve Lohr, New York Times, 11/11/08]

Mothers of Innovation
Brainstorming could be the worst thing you could do if innovation is the goal. First introduced in 1948 by Alex
Osborn, brainstorming “has been proved in a number of studies over the last 20 years to be far less effective
than generally believed.”
Brainstorming is based on the “premise that to get good ideas, a group must generate a large list from which to
cherry-pick.” A key problem with this, says innovation maven Drew Boyd, is that people tend to clam up when
it comes to shouting out their best ideas in public.
The irony is that while invention may be better hatched in isolation, innovation requires teamwork. In addition,
says Drew, innovation is not about “identifying a problem and then seeking a solution.”
He says it’s really just the opposite — deconstructing “successful products and processes into separate
components, then studying those parts to find other potential uses.”
[S OURCE : Janet Rae-Dupree, New York Times, 12/7/08]

Field Report
Secret Sauce
There’s absolutely nothing about this recession that a little bit of good chocolate and a lot of great retail can’t
cure.

    The other day, I was walking past a row of storefronts in what used to be one of the more vibrant shopping
areas in Greenwich Village. Most of the windows that didn’t stand empty were humbled by red-lettered signs
and the faint hope that the word “SALE” would make a difference. But as I approached the corner of 10th and
Bleecker, something changed. There was one store that was jam-packed. I looked up at the sign, which read,
“Pure Dark.” If the mystery of the name didn’t get me, the aroma wafting out onto the sidewalk certainly did.
Chocolate.
    Inside, deep, dark — and presumably pure — slabs of chocolate beckoned. There was more to it than that,
though. For one thing, you could sample almost everything in the store. Even more important, you could
customize your chocolate with any number of exotic toppings — chipotle, ginger, sesame — from real hot to
just plain interesting.
    All you have to do is buy a few of these little round chocolate wafers — nibs, as they call them at Pure Dark
— and one of their friendly staffers will sprinkle or dip it in whatever you like. The store itself is just really
cool, with a very rustic, rough-hewn kind of look. It’s not what you usually think of when you think of a high-
end chocolate shop.
    Beyond the experience itself, I was struck by how it was communicated — mostly just by being there. When
I went home, I logged onto my computer to check out their website (puredark.com) and was surprised to find
just a splash page with a short description of the store and an email address. The site did not even give a street
address!
    Digging deeper, I started Googling “Pure Dark” and found that the only other mentions of it were on a few
blogs. Let’s think about that for a moment. There’s exactly one store doing well in a formerly vibrant shopping
area. It’s done no advertising other than apparently letting a few well-placed bloggers know about it. It lets foot
traffic and an exceptional shopping experience take care of the rest.

WORLDS ARE COLLIDING
    Here’s what I find so interesting: Marketers and advertisers are so excited about social networks, mobile
phones and the marketing potential for innovative, one-to-one communication therein. A recent Hub survey (see
page 8) indicates that 60 percent of marketers see “social networks” as the emerging media that will see the
most experimentation in the year ahead.
    This was followed by “mobile phones” at 52 percent, with “online video” (27 percent), “microsites” (21
percent) and “digital out of home” (19 percent). Way down at the bottom of the list, at just under 18 percent,
was “retail media.”
    The result was revealing because “retail media” offers one of the best opportunities to form a deeper, one-
to-one bond with consumers. It also suggests that many in our industry have yet to put “two and two together”
when it comes to combining online and offline media tools to enhance one-to-one communications.
    This doesn’t mean “integration” in the usual sense because that’s invariably about tactics. It’s about the
close relationship between what people love about the internet and how that translates to the shopping
experience in stores.
    We hear an awful lot about “shopper marketing.” The focus there seems to be almost entirely on how to sell
more stuff to shoppers. That is important, particularly in this economic downturn. But this discussion is almost
invariably tactical and centered on things like how to build better displays or create more relevant coupon
delivery systems. Seems like that is more of the same old thing.
    The Hub survey also revealed that many of today’s marketers feel they are having “less fun” than in the
past. The sales team at Pure Dark may or may not have heard of “shopper marketing” but they sure look like
they have recaptured some of that “missed fun.”
    Not only do these folks “get” what shoppers really want, they give it to them. And it is not a one-way
communication. They are talking to their customers, asking questions, presumably taking notes, and continually
refining the experience as they go.
     Isn’t this how Starbucks got started? Remember “the good old days” when Starbucks was all about aromas,
customization, and, most of all, conversation? Starbucks did no advertising other than build another one of its
coffee shops in your neighborhood and staff it with a team great at engaging with customers.
    I have no idea if Pure Dark is the next Starbucks. Maybe it shouldn’t be because that might spoil it. But I do
know that Pure Dark points the way to the future of retail because it takes a holistic view of its online and
offline presence, and does so with the sense of fun and imagination that exemplifies great retail.

A TRULY INNOVATIVE PLATFORM
    It is not just a happy coincidence that Pure Dark chose to promote itself purely through online media and
retail as media. I don’t think they decided to get the word out through a few influential bloggers just because
they thought it would be the cool thing to do (although it was).
    They likely went that route because they understood that the online and in-store cultures are remarkably
similar. The most obvious common denominators are the ability to discover new things, tailor those discoveries
to personal tastes, and experiencing them when and where we want to.
    For shoppers, it does not have to be about always finding the lowest possible price. It’s also about finding
out what’s new, exciting and fun on one’s own terms. It’s not about plopping a kiosk in the corner or hanging a
digital sign overhead and calling that “integration.” It’s about delivering in the store on the things people love
about going online.
    This isn’t just about chocolate, of course. If it’s buzz you want, chocolate rarely fails to deliver. But choose
almost any category you want — cars, consumer electronics, financial services or even toilet paper (as can be
seen by the Charmin holiday store in Times Square) — and the same principles apply.
    I can almost hear the sales guys, the shopper marketing agencies and retailers saying, “Okay, that’s
interesting, but it takes too long to build, and I need to make my numbers today.” Well, tell that to Pure Dark,
the one bright light in a New York City retail neighborhood that is otherwise struggling to stay relevant.
    Given the economy today, shoppers still respond to coupons and displays. However, while such tactics may
get a short-term bump, you’ll never get the kind of long-range gain you’ll need to not only survive this
recession, but also prosper through it, and beyond it.
    A little excitement and a lot of insight into the true potential of retail as a platform for innovative marketing
— and not just sales and distribution — will go a very long way.
    Not only will sales happen, but brands will also grow bigger and stronger than ever through increased
demand.
    This is where the focus of “shopper marketing” ought to be — not just on research into how shoppers
respond to various kinds of promotional offers, but also what people really want and expect out of their
shopping experience. n

VINCE WEINER is a senior vice president of corporate strategy at Active International, focusing on
developing retail and OOH digital solutions for their clients. Vince can be reached at
vweiner@activeinternational.com or 845-732-8514.

Research Report
Points of Pain
Is marketing still fun? What keeps you up at night? Which opportunities look best?

    In March of 2007, we ran a survey which consisted of a single question: As a marketer, what is your greatest
point of pain? Given current economic conditions, we thought this would be an opportune moment to ask a few
follow-up questions.
    Not surprisingly, a plurality of our survey respondents said the marketing biz is “less fun” today than it was
a year ago. “In this economy, is anything more fun?” asked one respondent.
    But more than a few intrepid (masochistic?) souls said they relished the challenges of a less tolerant
economic climate. As one put it: “For those with a passion for it, marketing is now more of an adventure into
discovery, rather than a trip down the mediocre road of sameness.”
    Beyond the obvious aches of reduced budgets and increased pressures, the greatest challenge appears to be
improved understanding of, and communication with, consumers.
    One solution, many seem to believe, could be the effective use of social networks. Indeed, 60 percent of
survey participants picked “social networks” as the emerging media most likely to see experimentation in the
year ahead.
    Mobile phones came in second at 52 percent, with online video (27 percent); microsites (21 percent); digital
out-of-home (20 percent); and retail media (18 percent) trailing.
    However, a few respondents voiced skepticism over the true potential of social networks and other relatively new
forms of online media. “When ‘social media’ is touted as the Next Big Thing, we are in big trouble. If it doesn’t
drive revenue, it shouldn’t be allowed to the table,” one respondent said.
    Fifty-three percent cited “inadequate budgets” as the issue most likely to cause restless nights, followed by
“lack of management vision” at 38 percent. Interestingly, when the question concerned “obstacles to
innovation,” the issues flipped — with 68 percent blaming “no strategy/vision” and just 43 percent citing “no
budget.”
    Meanwhile, “cutting through the clutter” was identified as a pain-point by 33 percent. When we asked about
the greatest opportunities for clutter-cutting, one respondent said, “Nudity,” but quickly added, “Just kidding.”
Most answers settled in traditional areas of innovation, better products, services and customer experiences.
    In what might be considered a surprise, relatively few respondents identified historically rocky relationships
between sales and marketing or product development and marketing as problematic. In a similar vein, few cited
the traditionally difficult relationships between brands and retailers and increasingly shaky bonds between clients
and agencies as major issues.
    As to the growing threat of “store brands” to the fortunes of national brands, a plurality of 43 percent
characterized it as “medium,” with 39 percent calling it “large” and just 14 percent saying the threat is “small.”
However, as one respondent noted, “Especially in this economic environment, ‘price value’ will trump ‘brand
value’ if brands are not properly managed.”
    “Loyalty programs,” at 53 percent, led the list of retail programs believed most likely to see the most
experimentation in the year ahead, followed by “online/offline integration” (49 percent); price promotions (38
percent); and “in-store events” (28 percent).
    With respect to the role of agencies, 33 percent said most agencies today are “executional,” with 22 percent
terming them mostly “tactical,” 18 percent saying most agencies are “strategic” and 17 percent calling them
mostly “creative.”
    When it comes to “must haves” for the year ahead, most respondents homed in on the basics — talented
people, great creative, adequate budgets, focus, vision, insights and a solid return-on-investment. Others took
“must-haves” down to a more personal level. “Coffee, music,” said one. “Alcohol,” said another. “A job,” said a
third.

RESPONDENT PROFILE
   A total of 166 survey respondents included brand marketers (26%), consulting firms (22%) and agencies
(21%). Twenty percent worked in packaged goods firms, 7% in media/entertainment and 4% in retail. A
majority were senior-level executives with 78% reporting more than ten years of experience in marketing. n

Roundtable
Next Big Thing
Will the Great Recession bring out the best and brightest?

                                Are tighter budgets good or bad for innovation?
Michael Mendenhall: You could say it’s either good or bad. What is important, in these uncertain times, is that
people remain committed to and focused on their plans. This is not a time to completely overhaul a marketing
strategy or communications plan.
It is appropriate and wise to revisit those plans to make sure that they are nimble and dynamic and that you are
reflecting current market situations and trends. Therefore, you maintain your strategy while adapting and being
flexible and reactive to any conditions that would affect your businesses’ products or services.
Patia McGrath: Whether it’s a tight or an unhindered budget, it’s always the time to innovate. An environment
of tight budgets may cause a company to have a heightened focus and prioritize more diligently, but you should
always be innovating.
John Fish: I think, historically, innovation flourishes under constraint.
That’s because creativity blooms not just from freedom, but also from constraint. Sometimes the challenge of a
tighter budget can bring out the best in a team. An exciting idea with the numbers behind it and the potential to
disrupt will get funding.
When I worked at Continental Airlines, Gordon Bethune invested millions of dollars into his technological
platform coming out of the airline’s bankruptcy. Some people thought he would have taken much more of a cost-
management focus.
But he understood that without having the innovation alongside the fundamentals, he was never going to get that
airline back to first place.
Patrick Meyer: The gut reaction is that everybody thinks that innovation is about medium to longer-term goals.
Some people think it’s more of a “nice to have” than a “must have.” So, they cut innovation back for six months
or a year and figure that they’ll catch up on the other side.
The problem is that innovation is not an option. It isn’t about a new product or a new package or a new service a
year or two out. Innovation has to be everywhere in what you do, at all times. You have to use innovation to
unlock business growth and drive business growth harder in the short term as well as the long term.

                           Does a tougher economy change the focus of innovation?
Mendenhall: HP is in a little bit of a different position because we’re a technology company, so innovation is a
core attribute of ours. So, we continue to invest against our strategy. It’s an important component and attribute
of our company and it differentiates us from our competitors.
We continue to remain focused on our long-term R&D and innovation, even in this down economy. We believe
we will come out in a much stronger position relative to that strategy. We’ve gained the number-one share in
the world in personal computers through great innovation in design, product, and packaging.
McGrath: The focus of innovation should stay the same, be it a good economy or a bad one. Our focus on
innovation always has our customers at heart. We are always looking to ensure that we are providing customer
value.
If the customer’s definition of value or their perceptions are changing, then of course our innovation output
would be altered to suit what the customers are asking for. But the focus is the same; it’s still on the customer.
Fish: In a tougher economy, the balance shifts more towards lower-risk/higher-return ideas for products and
services. Essentially, the review process tightens up and the definition of what constitutes a good idea becomes
more detailed. Obviously, companies are trying to produce a higher yield from their ideas or product pipelines.
Insight also comes into play because you have to contemplate the behavior changes or the buying behaviors that
are going to occur as a result of economic conditions. For example, Wal-Mart sales are going up right now
because people are trying to pinch pennies.
So, insight becomes a more important component of your innovation process during tougher times because you
want to avoid chasing an innovation that just won’t be relevant to consumers’ interests because of bad economic
conditions.
Meyer: A tougher economy brings the focus back to retail, and to product and service. It brings you back to
things that will drive reconsideration in the consumer’s mind. It forces you to look for those things that you
know are going to work, that are absolutely going to get you your ROI.
That’s a short-to-medium focus, but you still need to have an eye on the medium- to long-term horizon, where
you’re exploring and testing new ideas, new approaches and new products. That way, when you are on the other
side of the economy and the customers are coming back, you’ve got new initiatives that you’re bringing
forward.
Smart companies are already preparing for a year or two years out when things do pick up. We’re working on
something right now for launch in 2010. We’re planning for where it will surface first and which groups are
likely to be responding first when the worldwide economy comes back.

                              Is innovation overrated as a competitive advantage?
Mendenhall: I do not believe innovation is overrated. When you look at how HP has created relevant products
that build out the personal experiences that people have with technology, it’s clear that innovation is very
important.
In this climate, we believe that hardware, software and services have a huge role to play in helping companies
weather the economy. So, we do believe that there is a very big role for innovation and technology in this down
economy. For us it is critical and I don’t think it’s overrated.
McGrath: I think sometimes innovation is underrated. Innovation is at the heart of competitive advantage. I
would not be in the camp of saying that it is overrated.
Fish: I look at innovation as a competitive advantage — the numbers speak for themselves across the board. A
company’s ability to innovate has an impact on its sales, stock price, employee recruitment and retention as well
as brand equity.
If you look at the stock price of Apple, for example, it’s based on the strength of its brand to realize competitive
advantage out of innovation. The iPod may not even be the best MP3 player in terms of specs, durability and
sound quality, but its innovative integration with iTunes gives it a big competitive advantage.
Meyer: There is no topic that gets more lip service than innovation. It is completely over-talked and under-
delivered. The smart companies find a handful of areas to focus on where they use innovation to unlock growth.
They do that by looking at innovation in a broader sense, in terms of connecting to consumers, and causing
them to reconsider their whole brand proposition.
In other words, they don’t just use innovation for the sake of innovation, which a lot of companies will do. There
are some companies where the CEO or the CMO yells and screams for innovation and everybody drops what
they’re doing to focus on innovation. So, you end up with a lot of activity, but not the right kind of focus that
you need to achieve innovation.
The key to innovation is to understand what drives your overall business and then use consumer insights to
unlock those opportunities relative to driving your business. You need to create ideas that really drive the
business, as opposed to just getting something new out there that may not be as relevant or appropriate and
doesn’t necessarily drive your business or is even counter-productive.

                 What’s the most innovative thing in marketing you’ve seen in the past year?
Mendenhall: There are opportunities to take digital content and channels and use them as an operational strategy
for the company.
In particular, the possibility of social networks is not limited to marketing communications. We are opening up
the R&D innovation pipeline to social communities — to universities, institutes and individuals — and
allowing them to participate in the research that we’re conducting in our various labs at HP.
We are creating an open innovation model that allows us to get from a concept in R&D to the marketplace in a
much faster way. There are also strategic social-media opportunities in customer service, and allowing
customers to share experiences and solve each other’s problems.
McGrath: Something that we’ve just launched at GE is called “an imagination market.” This is a virtual stock
market where the stocks are ideas. It has been a terrific initiative, since not only are we gathering innovation
ideas, but also through the market we are prioritizing using the collective expertise and wisdom of GE
employees globally as to which ideas should bubble to the top. So, we’re just delighted that this initiative is
focused not just on getting the very best innovative ideas, but the process itself was very innovative as well.
Fish: I’m such a huge fan of Apple because of the way that they’ve been able to take a platform — the
hardware, the application and the distribution — and maintain complete control over it. Because they own that
eco-system, they are able to provide a much deeper foundation for the customer experience.
I see Google doing the same kind of thing. If you look at the Google innovation eco-system, its interaction with its
partners in the context of apps, widgets, gadgets — the different things that they pilot — all happen on their
platform. So, they get all the data, just like Apple gets all the data. That’s a very compelling value proposition.
Google has also created a closed-system, if you will. It’s an open system in the context of the innovation model
because it really is distributed innovation — the Apple App Store is a great example of that, too.
But all of the testing, the applications, the pilots and the data are living in Google’s world. That’s something
that you have to admire.
Meyer: The iPhone application is breaking out as an innovative way to connect your brand. The iPhone app is
accelerating a revolution that was already underway on Facebook, cellphones and elsewhere.
The idea of having a “widget” or an application that’s on your phone, and that can connect your lifestyle to
information, things to do, or to your friends, creates huge opportunities for innovation. It’s an opportunity to
deliver utility, fun and connect your brand as a lifestyle accessory. It’s not on the tube. It’s not in a print ad. It’s
right there in the consumer’s hand.

                     What are the greatest opportunities for innovation in the year ahead?
Mendenhall: The greatest opportunity is that the internet is evolving into a “cloud,” or vast computing
resources through which everything can be delivered as a service, on-demand. Snapfish, HP’s photo
sharing/printing web site is an example of a cloud service today. You upload your photos to your Snapfish site
and then anyone you choose can access the same photos.
Essentially, your photos live in the “cloud” and you are sharing the infrastructure with others and accessing the
service as and when you need to. In the future, you’ll be able to share information in real time, from any device
— although these devices will be “smarter” than anything that’s available on the market today.
For example, suppose you are watching a movie on your flight to Hawaii, but as you’re landing they turn off the
movie service so you miss the last 20 minutes. But when you arrive at your hotel room and turn on the hotel
entertainment channel it asks if you’d like to continue watching the movie.
If the information is shared in the cloud, it is easily accessed and shared to offer a richer user experience.
McGrath: Certainly, there are opportunities to leverage global resources and scale, to overcome the large,
really tough problems — things like a lack of water, energy resources, new opportunities in transportation and
so forth. I also think we’ll see more collaboration between companies to solve difficult problems and accelerate
innovation.
Fish: We’ll see continued acceleration with open or distributed innovation models. We’ll see slow but steady
awareness building around the concept of managing for innovation, with less focus on the pipeline and more on
capability and agility.
Companies like Whirlpool are doing an exceptional job of that, where they are actually training their employees
to build innovation capabilities. We’re going to see a wave of innovation just because of the constraints that this
recession will put on us.
Meyer: The greatest opportunity is to develop new solutions that will differentiate retailers and help drive
people back to the stores. To do that, you need to have insights into consumer lifestyles, preferences and shopping
habits, and understand that all of that has evolved. You need to bring in new technologies and do it now so it’s all
in place coming off of this recession.
You can’t innovate at retail without understanding how consumers use technology to share photos, talk to their
friends and shop. You have to have it all factored in and develop your marketing plan around that. You need to
understand how they operate their life rhythms across the day and where brand occasions naturally enter into
that.
Anybody can come up with a new package or line extension. But build it with consumers and understand exactly
what would cause them to scream with delight and become ambassadors and tell everybody, and it takes on a
life of its own. That’s trickier. That starts with insights and an understanding of the growth drivers behind your
business and your category. n
MICHAEL MENDENHALL is svp and chief marketing officer at HP, where he directs the company’s
corporate marketing operations globally. Previously, he was executive vice president of marketing for Walt
Disney Parks and Resorts.

JOHN FISH is the global director of innovation for information systems at AstraZeneca. He previously led
marketing digital teams at Continental Airlines, BankOne/JP Morgan Chase and Astrazeneca’s global
eMarketing internationally.

PATIA MCGRATH is global director of innovation and strategic connections with GE. Previously she was a
research associate at Harvard Business School, an investment banker with JP Morgan Chase and a research
engineer with Ford Motor Company.

PATRICK MEYER is a founder and principal of Now Inc., a consulting firm dedicated to accelerating
business growth through innovation for leading brands worldwide. He previously held senior marketing
positions with Coca-Cola and Gillette.

White Paper
Solutions without Walls
Innovation demands tearing down walls between consumers and shoppers.

    When I was in charge of new products at Heinz in the late 1970s, times were tough and we were in a
turnaround situation. I remember talking about those challenges with Tony O’Reilly, the CEO at the time. Tony
said, “What if I told you that you were going to be hanged tomorrow at sunrise in the town square?” I said, “I’d
stay up all night and figure out how not to be hanged.” He said, “Exactly. That’s what we have to do with new
products.”
    Nothing focuses the mind like a hanging, and it’s no different with innovation in today’s economy. In fact,
nothing forces you to think about real breakthrough innovations more than when resources are severely limited.
    Everybody talks about innovation as the pathway to success, but the road to innovation is littered with the
bleached bones of the many who tried and failed. According to one recent report, of the 89,000 new consumer
products introduced every year, fewer than two percent earn more than $50 million in sales. Among those that
failed, losses usually were in the millions.
    So, let’s talk about the fastest path to the most growth in the shortest period of time. Let’s focus on the
concept that the way to sell more goods at higher prices is to engage consumers by answering their needs as
shoppers, at retail.
    Let’s turn things around and consider where the purchasing decision is made and why. If we know that, we
know all we need to innovate both products and the marketing of those products. But to do that, we need to
break down the walls that divide what we understand about the consumer, the shopper and the retailer.

A NEW INNOVATION MODEL
     I recently sat down with Ron Askew, the CEO of TracyLocke, and John Dranow, the CEO of
SmartRevenue, Inc., to think through and figure out how to break from the past and join the two percent of
innovation success stories. John brought the concept of “solutions without walls” which linked to our thinking
at TracyLocke (see above chart).
     This model allows us to understand how to convert shoppers into buyers in the retail environment.
     Normally, marketing people look at the issues on the left-hand side of this chart, while the sales people —
or shopper-marketing people — confine themselves to what’s on the right-hand side. In short, marketers
concern themselves with consumer insights while the shopper marketers think mainly about shopper solutions.
     Doing more with less — in today’s tight economy or even under the best of conditions — requires both
sides moving in unison like a pair of bicycle sprockets, driven by a common chain. It means understanding the
critical decision-making factors for the consumer and then translating that into tactics at retail.
    In the final analysis, that’s what true innovation demands. We have to create tactics that engage and convert
the shopper, and align those tactics with consumer needs and retailer demands.
    Simply put, the reason there’s so much failure with innovation is that it’s still being pursued in silos, and
shopper insights is not part of the process.
    The path to innovation certainly will be no easier in 2009 than it was in 2008 — or 1978. The hangman
hasn’t left his post. In ordinary times, it might suffice to innovate with only the consumer in mind, but not
anymore.
    We need to engage the consumer, the shopper and the retailer as part of a holistic, end-to-end approach to
innovation — because if we don’t make it hang together, we will all hang separately. n

AL WITTEMEN is managing director of retail strategy for TracyLocke. He has 35 years of experience in
marketing, sales and shopper marketing of consumer packaged goods. Al can be reached at
al.wittemen@tracylocke.com or (214) 259-3531.

White Paper
An Innovator’s Blueprint
Innovation effectiveness is the key to growth in challenging times

    For many manufacturers, the volatility in the current economic environment has destroyed plans for growth,
especially those concerning innovation and new products. Innovation typically requires investment — and the
bigger the idea, the more investment required.
    So, just when innovation could be a critical lever in stimulating long-term growth, management is most
hesitant to go forward. That’s because new products rarely succeed. According to Information Resources, Inc.,
new packaged goods products fail more than 95 percent of the time.
    The hidden costs of this failure rate cannot be overstated. Companies spend an average of $15 to $20 million
on advertising, trade and consumer promotion behind a new product launch. These numbers double after
accounting for costs associated with the R&D, manufacturing, and market research dollars spent developing and
testing the idea.
    Beyond these “hard” costs are wasted human resources, organizational opportunity costs of time and
resources, and the loss of credibility with consumers and customers.
    The answer is not to abandon innovation in this economic environment or to rely on baby-step product
improvements. The answer is to re-think the innovation process, to make it more efficient and speedier to
market, and to risk-reduce the outcome; in other words, increase the productivity of the innovation process.
    In our experience, the right process will do both. This process focuses on the central issue in new product
failure, that the underlying marketing strategy that drove the creative idea was unclear or imprecise.
    Launching a successful new product calls for a new strategy to identify how and why the new product will
replace consumers’ existing behavior with a new behavior. Marketers and product developers often become
wrapped up in the creativity of an idea. In fact, many new product development processes are little more than
creative brainstorming exercises until relatively late in the process.
    Of course, creativity is important, but only after there is thorough understanding of the existing consumer
behavior that must be changed, the benefits consumers seek through this behavior, the attributes that support the
behavior, and the parts of their current behavior consumers are willing to change and not change. What will it
take to get consumers to make that change?
     The Competitive Frame. The essential starting point is a clear and precise understanding of how
consumers organize their choices; that is, exactly which products and categories compete with one another among
specific targets for specific occasions.
    Called the “competitive frame,” this quantified analysis of both usage and purchase behavior addresses
specific questions such as:
• What benefits are consumers seeking when choosing among a competitive set of products for a given occasion?
• What attributes are critical to achieving the benefit? How satisfied are consumers with their current options?
• What do trends, category impacts, and environmental studies tell us about the future?
    Precise Strategic Positioning. The analysis of the competitive frame-of-reference describes the “what is”
of the way the market is currently organized, and helps identify ways to alter this market to the company’s
advantage. The competitive set, including the target and current critical attributes, are identified from the
“competitive frame” analysis. Additional information — trend analysis, brand imagery, need state information —
aid in developing the benefit and brand personality.
     The result is a precise strategic positioning expressed in the format:
   To (Target), (X) is the Brand of (Competitive Frame) that delivers (Benefit) because of (Attributes) and has
   (Personality).
    For any new offering to be successful, the positioning and the new product that brings it to life must deliver
a higher level of effectiveness than the alternatives consumers already have.
    When a new product is being introduced, its entire marketing — the way it looks, its functional benefit, the
way it is delivered to the consumer, the package, the imagery associated with the brand name — delivers a
satisfaction rating to the consumer that is either equal to, better than, or worse than existing alternatives.

CRITICAL EFFECTIVENESS MEASUREMENT
    In most cases, the success of a product is 70 percent to 80 percent dependent on how effective it is against its
competitive set. Yet, managers rarely test their products in a way that measures this number accurately. A concept
called “par effectiveness” makes the process much more precise. It is based on the idea that the current
satisfaction level in the market is a 1.0 or “par” level.
    For a new product to enter the market successfully, it needs to deliver benefits greater than “par” by
improving the different factors that contribute to product effectiveness. It needs to deliver a 1.2, a 1.5, a 2.0, and
so on. The greater the effectiveness, the greater the marketing leverage for the product; that is, the more
effective marketing dollars will be in getting consumers to switch.
    Based on our database of historical norms, these effectiveness numbers are tied directly to classic market-
research testing. For instance, products with a 1.2 effectiveness in market have preference of about 55 percent to
45 percent versus the competitive frame in pre-testing. Products with a 1.5 effectiveness have preference of
approximately 70 percent to 30 percent versus the competitive frame, and so on.
    By applying this effectiveness construct to a precisely defined strategic positioning based on the correct
competitive frame-of-reference, organizations are now armed with a clear, action standard for their new product
offering.
    They now know that, unless they can create a positioning that is more effective than a competitor’s — as
measured by specific preference testing versus that competitor — they are unlikely to be successful.
Organizational creativity can be unleashed against the objective of achieving desired benefit in a new way or by
matching or surpassing the driving product attributes, in a way that generates a specific level of preference
versus the competition.

BULLET-PROOF BUSINESS PROPOSITION
    Now that the competitive frame and positioning are clear, a business proposition needs to be developed. In
this step, the key numbers are the short- and-long term profits required by the company to deem the new
product launch a success.
    From a consumer standpoint, these numbers are dependent on: 1) How many people will switch to this
product, with what frequency, at what price?; and 2) What will it cost to attract and retain these users?
     The answers depend on how well the product meets a very particular set of needs compared to existing
alternatives. In our experience, the “business proposition” is often not constructed with careful attention to
these assumptions and yet ultimately they are the ones upon which success or failure depend.
     We can use validated models based on the quantified “competitive frame” to answer the consumer and the
profit questions, identifying the potential of the proposed new product. Let’s start with our assumptions about
effectiveness versus the competitive frame (a 1.2 effectiveness or a 1.5 effectiveness, for instance).
    Management must choose explicitly, based on the competitive frame, from which product or products the
new offering will source volume, and establish a target level of effectiveness the new product will have versus
the competition. The product must then be constructed to meet these effectiveness levels.
     To these critical decisions are added assumptions on pricing, gross margin, distribution levels, and so forth.
Using all of this information, and the analytics that are the foundation of the competitive frame-of-reference, we
can make accurate, consumer-based estimates of whether the new product launch will be worth the investment
— before development begins.
     In addition, as information becomes clearer throughout the development process, hard facts can be
compared to the critical assumptions created by this phase, and the business proposition re-simulated
continuously to illustrate the impact on profitability.
     Early Development. At this point in the development process, ideas are developed into actual products and
concepts for testing. Consumer language is translated into a concept and then screened. Product ideas are
translated into actual product formulations.
     This step might sound familiar, but in many instances the difference is in the testing approach. The resulting
concept and product are tested versus the competitive set, and then evaluated to determine whether consumer
preferences yield product effectiveness greater than 1.0.
     The new effectiveness number, combined with updated learning on pricing, margin, distribution
assumptions, and so forth, are used to re-simulate the “business proposition.” Now, the “business proposition”
is supported by an exact understanding of the concept and product’s response versus the competitive frame.
     Management then has the opportunity to compare this business proposition to its other investment options.
Assuming it meets profit hurdles, highly-focused resources can be allocated to the next phase, “advanced
development.”
     Advanced Development. In this stage, the concept is finalized, with packaging and advertising readied for
launch. The product is examined one last time before it goes out into the marketplace. The results of the first
concept testing and product testing are considered and appropriate refinements are made. Both are re-tested if the
adjustments are significant. Simulations are revised again if base options have changed.
     This step provides the final quantification for the revised business proposition. If these steps are followed,
the final business proposition should be an improvement in terms of volume, revenue, or profit upon the initial
test.
     The last step is a BASES test — or its equivalent — a system check that evaluates all the elements of product,
positioning, pricing, distribution, and spending as derived from the simulations and the concept and product
tests work in harmony. This should be a final “go/no go,” and the results should be highly predictive.
     By focusing on these central issues in successful new product development, companies can both risk-reduce
the innovation process and make it more efficient.
     This process allows big thinking to go forward and unleashes creativity in productive directions. The result
is ideas that are internally consistent and poised for greater likelihood of marketplace success. n

JAYNE EASTMAN is a managing director with Henry Rak Consulting Partners. Jayne previously was a
marketing vice-president with Kraft Foods and EVP of strategy with Wells Rich Greene. She can be reached at
(843) 200-3001 or jeastman@hrcpinsights.com

The Blue Noise of Innovation

    Can you hear it in your building? The rumble of chairs rolling into new positions, the quick shuffle of shoes,
the swish of moving fabric as people reconfigure and reassemble.
    Innovative work has musical tones with different pitches, different accents creating a new composition.
Waves of sound on a frequency that everyone understands.
    The wind of creativity is whistling through the hallways as the notes of ideas and emotions are played.
    This accelerating electrical charge of ideas excites the electrons in the air, emitting photons of blue light.
The air is pulsing as energy is reflected in sheer blue electrical waves that sizzle and dart. Heated electrons and
luminous photons begin to snap in a catchy tune.
    The white noise piped into the office everyday to drown out voices is replaced by the “blue noise” of
innovation.
    Voices of discussion, debate, agreement, disagreement and laughter can be heard over the rushing air. The
tightly packed, short wavelength of blue light reflects the changing electrical and magnetic fields around ideas.
These waves produce vibrations against the eardrum playing a musical score of collaboration and action.
    When the metabolism of the team increases and the heartbeat of projects beats faster the “blue noise” of
innovation will be heard throughout the company with the same emotional crescendos and galloping speed of a
Beethoven concerto.
    Do you hear “blue noise” on the airwaves in your building? Follow it. n
Donna J. Sturgess
Global Head of Innovation
GlaxoSmithKline

White Paper
Green Pragmatism
Eco-savvy consumers should be at the center of your brand strategy.

    Despite its Hollywood trendiness, the average person doesn’t go out and buy a Prius just to feel good about
reducing his or her carbon footprint. Most people buy cars that meet their motoring needs and end up choosing a
Prius because its environmental proof-points align with their personal requirements.
    It’s the classic emotional/rational balance: a high-mileage vehicle from a respected, reliable manufacturer
means lower consumption of greenhouse-gas producing (not to mention high price-volatility) fossil fuels.
    The Prius appeal is a perfect example of green pragmatism, because the vehicle’s environmental benefits are
used for more than just a “feel good” green spin — they are rational product proof-points. As a result, the
consumers’ emotional motivation is grounded in the fulfillment of their own, personal “value equation.”
    The Prius is also an excellent illustration of how green pragmatism enables customer satisfaction based on a
product’s performance versus its brand promise, while also enabling the consumer to enjoy the intangible
benefits of feeling smart and environmentally responsible.
    Green pragmatism furthermore adds a degree of proof that is critical to building credibility with the greenest
consumers, which tend to fall into the LOHAS (Lifestyles of Health & Sustainability) category. LOHAS consumers
are well-informed opinion leaders who make shopping choices based on their personal values.
    If your environmental claims lack substance, this is the audience who will know it, and call you out to the
mainstream. So, whether or not your product aims at the mainstream or the greenest consumers, you should
always have the most eco-savvy at the center of your bulls-eye, and ensure you develop appropriate
communications strategies to engage them.
    Ultimately, brands will succeed or fail based upon their performance, and green products, whether
genuinely or simply painted so, are no different. If eco-friendly laundry detergent leaves your kids’ clothes
dingy, no amount of environmental-feel-good messaging will persuade you to buy it again. And that all-natural
cleaning spray that leaves a nasty film on your counter is probably going to lead you back to “chemical land”
the next time around.
    The importance of basic product performance can’t be underestimated when it comes to green goods. In fact,
they may even be under more of a performance microscope than their muddier counterparts. Think about the
lighting industry’s first pass as Compact Fluorescent Light bulbs (CFLs). They were large, awkward, humming
beasts that ended up in the trash cans as fast as you could, well, change a light bulb.
     It was only when product performance (better light quality, noise elimination, proper sizing, variety and
versatility) caught up that the category took off, growing steadily as a segment of the market and becoming an
icon of sorts for energy efficiency.
    Consider, as well, the results of the June 2008 ImagePower Green Brands Survey: Americans listed Whole
Foods, Burt’s Bees, Trader Joe’s, Tom’s of Maine and Toyota as the top 5 environmentally friendly brands.
    It’s no coincidence these brands’ green “Unique Selling Propostions” (USPs) are easy to understand —
from all-natural ingredients to less reliance on fossil fuels, each of these companies communicates its
environmental friendliness in a clear and simple fashion.
LET’S GET REAL
    It seems everywhere you look today, people are talking about “green marketing,” and there is no shortage of
experts sharing their ideas on how to enhance a brand with a green halo, or the sins to avoid in doing so.
    We’ve even coined terms like “greenwashing” to denote misleading green marketing and its by-product, the
“green fatigue” which plagues our consumer victims with confusion and frustration. It’s no wonder that
Mediapost called “green” today’s “trendiest marketing buzz word.”
    But let’s get real: Consumers don’t buy green products simply to play “eco-hero.” In fact, true
environmentalists would assert the most sustainable behavior is to reduce one’s consumption in the first place,
and fulfill only your true needs with eco-friendly options.
    Admittedly, encouraging people to buy less stuff is a risky proposition for marketers. But there is something
to be learned from taking a more pragmatic approach to green marketing.
    Consumers today are inundated with advertising messages that aim to create a green halo without any level
of specificity. This is a major contributor to “green backlash” — more green noise with less clarity causing
more consumer confusion, frustration and cynicism. Myriad research studies tell us that consumers want to make
choices to protect the environment, they just don’t know how. Serving up more noise and less real direction
only exacerbates the problem.
    The dreaded “green fatigue” is nothing more than consumers’ sheer exhaustion from trying to figure out
what “green” means, which products really deliver on the promise, and by extension, how to make truly eco-
friendly purchases.
    Making it easy for your target audience to understand your green USP is critical to making it work to your
advantage, and standing out as a truly environmentally preferable green brand.
Think about it: The best brands represent a combination of tangible benefits and intangible associations. It’s no
different in the environmental space. Let’s shift the dialog from how to best color products green to how a
product’s sustainability enhances a platform made solid by tangible benefits and product performance. n

The Energy Star Promise

The US EPA’s Energy Star program is an excellent example of successful green messaging. Over the past 10
years, this voluntary government program has built brand awareness from 40 to 74 percent, and become one of
the most trusted brands in America. Underpinning its success is a clear and understandable approach to
environmental messaging.
From the program’s inception, Energy Star’s brand promise has been clear — superior energy efficiency with
equal or better product performance. Energy efficiency delivers environmental benefits through the reduction of
greenhouse gasses and the risks of global warming.
While the brand’s mission is to reduce carbon emissions, it has always spoken to consumers in clear and
tangible terms that were immediately relevant: save energy, save money and protect the environment.
This mix of emotional/rational, aspirational and tangible has helped this government-labeling program serve as
an anchor for many of America’s top-rated retailers and manufacturers and influence the purchase of millions of
products.
The EPA’s most recent PSA campaign further demonstrates the right approach. It features everyday American
consumers and companies working to fight global warming with Energy Star, and offers distinct proof-points in
terms of the specific actions taken, and the resulting savings.
For example, a Vermont homeowner installed Energy Star qualified lighting, a programmable thermostat,
furnace, and new insulation.
As a result, she is saving $1,150 on her energy bills, 11,000 kilowatts of electricity, and preventing 12,000
pounds. of CO2 from entering the atmosphere: real people, real solutions, real proof-points.
This approach enables Energy Star to build a strong emotional/rational balance; offering the empowering,
aspirational message that average, everyday Americans can help in the fight against global warming, and paying
out that with proof points in clearly articulated metrics.
As a result, the brand continues to grow in awareness, influence and relevance.
CINDY JOLICOEUR, a vice-president at Marketing Drive, leads the agency’s Energy & Environment
practice, providing branding, B2C and B2B marketing solutions to a range of clients. Cindy can be reached at
cindy.jolicoeur@marketingdrive.com

Essay
The Obama Challenge
One should never waste a good crisis ... and by all accounts this one will be a doozy.

    Barack Obama will have more hopeful supporters than any president since FDR, be they Democrats or
Republicans. Is it not some element of fate that Obama, who wants to bring about change in so many ways, will
have a chance to do so under the cover of crisis?
    Obama’s campaign of change, as much as anything, is about changing the mindset of citizens to believe that
investing in the future of the world is a responsibility, not an obligation. His message of responsibility includes
the welfare of the environment, the well-being of each American, and the long-term prosperity of the economy.
His message is about creating energy options, improving infrastructure, and new health insurance and health
care systems.
    He desires a virtuous circle of responsibility, to establish that every person owes something to the country,
while America has a responsibility to its citizens and to the rest of the world; it’s less about “me” and more
about “us.”
    The depth of the economic crisis will allow Obama to inspire, instigate, and trigger change, all disguised as
levers to pull the economy out of its nosedive, thus providing jobs and incentives for new industry and services.
While Obama no doubt would have preferred a little less crisis in his crises, an economy in near free-fall
provides him with a Trojan Horse called “Survival.”
    Is this a gift horse called “Survival?” As the new president becomes the most powerful potential game-
changer of all time, is this an opportunity for every business to change for the better, the smarter, the more
efficient and effective? Can business participate by investing along with Obama in doing something different that
has a purpose beyond just revenue and profit?
    Jim Stengel, the outgoing global marketing chief at Procter & Gamble, thinks so and he’s betting his own
money on it. Stengel has started his own company focused on “purpose-based marketing,” which Mr. Stengel
says is about defining what a company does — beyond making money — and how it can make its customers’
lives better.
    “Marketing is in need of a major overhaul,” and “trust in brands is at an all-time low,” says Stengel.
According to the Wall Street Journal, Stengel points to P&G’s Pampers brand, which several years ago decided
it had a higher purpose: helping moms develop healthy, happy babies, rather than just keeping babies’ bottoms
dry.
    As the Journal reported: “To drill home that message, the company offered parenting advice and teed up
experts on an array of parenting topics. It also did research on why babies don’t sleep, a study that eventually
yielded a design change in Pampers to give them a more cloth-like feel. The new design keeps babies warmer,
helping them sleep better. The brand won market share. Stengel says there were several reasons for the gain.
The repositioning helped inspire employees. It built trust and an emotional connection to the consumer. And it
helped differentiate the brand.”

MAKING LIVES BETTER
    Is there a way that every brand can participate in improving the lives of its customers beyond simply selling
a product? Certainly, there are many products and services like Pampers that can have a larger purpose in
improving peoples’ lives or by improving the environment. What are the humanistic elements to look for that
can become the new “added value?”
    Home improvement and hardware retailers can inform customers about products that are renewable, and use
renewable resource, or are better for the environment, either in their use or in the way they are discarded. What
if apparel retailers provided a service to distribute unwanted or used clothes to the various charitable agencies
like Salvation Army, Goodwill, or the local community charities? Wouldn’t more unwanted or used clothes find
their way to a second life and wouldn’t more than a few customers appreciate the service and feel more
connected to that retailer?
     Apple’s newest MacBook is entirely recyclable and uses less toxic materials, like mercury. Every brand
should be looking for ways to improve its contribution to the planet beyond the consumption by the consumer.
     Restaurants could provide more information about the dietary content of their servings to help diners make
informed decisions on taste versus health. Restaurants could partner with qualified health services to offer
further information and guidance to customers looking for more help and offer incentives that are health-related.
     What about products and services that do not inherently offer added value in their use? Can the brand extend
its value to the customer by linking it together with a community need, an environmental need, a social need?
As the economic crisis worsens, businesses of all kinds will disappear, both large and small. Deflation and
recession mean fewer brand choices, a lower tax base in each community, and fewer corporate citizens to
sponsor community events.
     If the local car dealer who supports the Little League team fails, who will pick up the sponsorship? While it
is meaningful to keep it local, wouldn’t Wal-Mart or Best Buy gain immeasurable goodwill by sponsoring the
local team?
     Couldn’t most brands provide incentives or discounts that would enhance the environment? Obama’s
programs will create tax incentives and other business incentives to involve the private sector in promoting a
better place to live. Perhaps there’s an opportunity to develop promotions that involve “green” transportation
vouchers in return for customer participation with the brand.

A MARKETING SEA-CHANGE
    The term sea-change has been used often in the last 15 years to describe how new technologies and
information alter how consumers live their lives and how they consume products and services. Those changes
were organic and evolved from entrepreneurial and natural circumstances. For the most part, marketing has not
been a major contributor in elevating the art to meet the new opportunities.
    It seems as if, like other industries, marketing has refused to realize that it needs (as Jim Stengel puts it) an
overhaul. During the heyday of television, from the ’50s through the ’80s, marketers were responsible for the
success of brands and the upward mobility of the country through good ideas. There was a saying in those days
that applied to many brands, in this case, coffee: General Foods made coffee; Ogilvy made Maxwell House.
    Since the decline of the thirty-second commercial and the rise of technology and finance as the governing
bodies of corporate America, the art and science of marketing has been relegated to a media-planning function
with the sole purpose of sticking a brand name in front of every eyeball regardless of whether it is in a bathroom
stall, a taxicab, or viewing a handheld device. Context doesn’t matter, message is irrelevant, entertainment is
the content.
    Not only has marketing squandered its heritage of ideas but it has squandered its responsibility to be more
productive, effective, and important in the grander scheme. Obama’s cult of change for the greater good has
already inspired hundreds of thousands of people to apply for jobs in his administration. People are ready to
contribute and participate.
    Business, through its marketing leaders, has a new opportunity to make a contribution by developing ideas
that make a long-term contribution to the welfare of its customers beyond the next sale. This time is a new
opportunity for marketing to lead, leaving a mark every brand can be proud of, while creating a fan base of
enthusiastic and grateful consumers. n

SPENCER L. HAPOIENU is president and co-founder of Insight Out of Chaos, a database and direct
marketing company. He can be reached at spencer@iooc.com or (212) 935-0044.

White Paper
Box of Tools
Innovation is a set of philosophies and methods to help solve problems in creative ways.
     As I write this, I’m looking at the magnificent sycamore tree behind my house. It’s laden with thousands,
maybe millions, of seeds. Over the course of our dank English autumn, they’ll fall gracefully from the tree and
perform a ballet on the breeze.
     One in 10,000 of these seeds will be lifted by the wind, its perfectly designed rotor spinning it high into the
air. It will land in an opening in the right position to sprout roots, and it will begin to grow.
     Ideas are the same way. We may have thousands of them, but it’s the conditions for growth and harvest that
are crucial. Great ideas without an environment to support them go the way of decomposed seeds. Providing that
environment is the role of innovative thinking.
     Innovation. The “i” word. In more than 10 years of working with and consulting on innovation, I’ve heard
dozens of interpretations of what it means.
     Innovation is not a single tool—it’s a toolbox of philosophies and methods. Great innovators embrace the
method or philosophy that is most likely to yield a successful result for any given problem, and realize that this
may be different every time.

LATERAL THINKING
    Lateral thinking, a term coined by Edward de Bono in 1967, is one of the most powerful innovation tools.
Whilst breakthrough thinking will help you create a full system to work with, lateral thinking gives you the best
raw material from which to start.
    One of my favorite techniques to stimulate lateral thinking is rule breaking, or thinking about customers
who don’t use your products rather than those who do. Another is putting yourself in someone else’s shoes,
although it’s important not to be too literal in this exercise.
    We challenged an electronics company to think about how some other famous brands might approach their
problems. What would a Disney-designed laptop be like? Because Disney is all about family entertainment, its
version might be a less solitary and more interpersonal experience, for example.
    The idea we got back? A laptop with Mickey Mouse ears! This is linear—not lateral—thinking. Linear
thinking is what we’re all trained to do in school and what keeps us afloat in business: “Hey, that one worked, let’s
do the same thing in a different flavor.” You know your thinking is linear if it’s obvious to others.
    Einstein famously said, “If at first the idea is not absurd, then there is no hope for it.” Whilst this may be
true in particle physics, business is not quite so straightforward.
    Linear ideas have their place in generating sales and keeping brands fresh, but they’re unlikely to produce
the kind of meteoric growth most businesses aim for. Trying on a new perspective can radically differentiate
your offer from your competitors’ and help your brand grow into new spaces.

DESIGN THINKING
    Also known as empathic design, this is a technique long used by the best inventors. History shows that the
optimal conditions for design thinking are a lack of means, a fervent curiosity, and a shed. Middle-aged British
men in sheds have been engaged in design thinking for the past 200 years. What sets this group apart as leading
design thinkers? They act on real-world observation.
    The top innovators in the corporate world go into people’s homes and watch them interact with products in
the course of their daily lives. They then use this information to guide development of new products and
services.
    Simple observation of teens playing games on their cell phones provided Nokia with key insights that led to
the creation of its gaming-optimized N phones. Nokia isn’t alone. Companies in fields from consumer goods to
pharmaceuticals have embraced design thinking as a means of improving their products.
    Does this mean the armchair inventor’s days are over? I think not. It’s the men and women who live with
problems, come up with great solutions, and then find ways to implement them who will always have a head
start when it comes to invention.

OPEN INNOVATION
   Open innovation involves sharing your problems with the world. It relies on the premise that people get
immense satisfaction from problem solving and that the solution to a particular problem may already exist in
some form. In the past, companies held their innovation cards close to the chest, worrying about competition
and corporate espionage.
    This is slowly changing as more corporations realize that opening up the challenge to a wider audience
vastly increases their chances of success. The benefits far outweigh the risks.
    Procter & Gamble is ahead in this arena. Through its Connect + Develop program, P&G makes public its
wish list of chemicals, product functions, and solutions. Academics and experts are invited to submit ideas.
    Ten years ago that target list would have been one of P&G’s most closely guarded secrets—yet publishing it
does nothing more than multiply the number of potential solutions. No doubt competitors study the list
carefully, but if they had the answers themselves, they would already have put them into practice. Similarly,
Toyota invites its commercial partners and suppliers to solve various innovation challenges.
    Starbucks tried a rather inelegant form of open innovation—asking its customers to suggest ways of
improving the Starbucks experience. I’m not a fan of this method of execution; soliciting input without a
specific brief or problem tends to generate responses that are unfocused and of no commercial use.
    It also seems opportunistic and cheap. Companies should reward engagement even if the reward is nothing
more than the improvements the ideas bring about.

INNOVATION FUNNELS
     The innovation funnel is the most popular way for companies to manage the flow of ideas from the heads of
their employees into the market. Many companies use funnels to guide the process of new product development.
Ideas go into the wide end, and after a series of tests, stage gates, and iterations, a product comes out the narrow
end and arrives on the market.
     The major downside to this system is its slowness. The world moves fast: A company can reasonably expect
only six months to capitalize on a great idea before competitors are snapping at its heels. In Asia, this time
frame may be as short as three weeks. The funnel is designed to accommodate volume, not deliver quick results.
These days it looks like an increasingly inefficient mechanism for getting ideas to market.
     But even the innovation funnel has its place in modern business. There are different types of innovation
needs, and all ideas deserve to be given a chance. Funnels are a democratic way of handling this.
     So what is innovation?
     The simple answer is that innovation encompasses all these approaches but may rely on none of them. With
so many methods and philosophies in the toolbox, it’s no wonder that the “i” word is perceived as complex and
nebulous.
     The secret to great innovation? Embrace every new trend enthusiastically. Anything that offers a fresh
perspective on your customers or a new way to create or assess ideas is worth trying out. And don’t assume that
the latest hot method is necessarily the answer; it’s just another tool to add to the box.
     There are no silver bullets—just lots of techniques to experiment with and a world of opportunity. If your
business has only one answer, or one definition of innovation, it’s time to try something new. You’ll be amazed
at the results. n

LUKE MANSFIELD is head of innovation in the London office of Landor Associates. He works with clients
to uncover their potential in a number of areas, from developing new products to extending brands into new
markets. He can be reached at hello@landor.com

Cover Story
Key Of IKEA
Bill Agee of IKEA says innovation begins with a culture of courtesy and a sense of community.

    It’s not every day that hot, spicy cinnamon is the first thing you smell when you go shopping for furniture.
But it is the sweet scent of sticky buns in the oven that greets shoppers as they approach the front doors of
IKEA’s New Haven, Connecticut, store.
    Bill Agee, marketing chief of IKEA U.S., agrees that sugar and spice is not a bad way to say “hello” to
customers, but says it’s just a coincidence. “It’s not planned,” he says. “It’s just that the HVA system wafts out
into the parking lot at some of our stores.”
    Either way, the aroma certainly helps put shoppers in a pleasant mood before they take an escalator up and
begin winding through the store, following IKEA’s well-planned path through a Scandinavian wonderland of
tables, lamps, chairs, sofas, dressers, beds and … meatballs.
    You have tried IKEA’s meatballs, haven’t you? It’s actually a good idea to eat before you venture into the
store, because you’ll likely be there for a while. You can get a full plate of IKEA Swedish meatballs for just
$4.95. They’re served on real dishes, with real utensils, along with drinks in real glasses.
    Sure, it’s quick-serve, but with “real restaurant” trappings — except that you must clear your own table
afterwards. A well-placed sign explains that clearing your own table enables IKEA to offer a quality meal at a
low price.
    As Bill puts it: “At IKEA, it’s this idea that, ‘you do a little and we do a little’ … and together we save.” A
Princeton poli-sci major who went into the advertising agency business before joining IKEA about 15 years
ago, Bill suggests that this simple idea is behind much of what drives innovation at one of the most innovative
retailers in the world.

                     What is the connection between Swedish design and American life?
The connection between Swedish home design and how it lands here in America is really manifested in many
different ways. We all have an interest in creating light in our homes, even if we’re living out in the desert
where perhaps light, at least during the daylight, is not such a big problem.
Our experience in Sweden, where the days are very short for half the year, gives us a real appreciation and
expertise in lighting. Of course, it’s important wherever you’re living not only to be pleasant and functional, but
also to be low-energy and economical.

                              When I was in your restaurant, the lights were off.
Yes, during daylight hours the windows usually let in enough natural light. Any company today needs to be
extremely conscious of their energy costs, so in that sense I don’t look at ours as a brilliant example. But for the
last 15 or 20 years we have been seriously combining our need to be a low-cost company with the obvious
opportunity to be a responsible company.
We went through the retrofitting of all of our lighting fixtures to be low energy many years before others did. We
use natural light in our warehouses and in our stores whenever possible. It’s part of our global effort. This is not
just something we decided to do here in America. We take all of these things pretty seriously.

                                  Has IKEA always had the maze-like format?
The natural path, as we call it, has been our format from the very first store, or shortly thereafter. To set up all
the rooms, there wasn’t a natural way to do a traditional store with aisles. So, to accommodate the room
settings, it was really the only way to do that without feeling very closed in and boxy.

                          Do all the stores worldwide have the same look and layout?
The merchandising is generally the same. The colors and the trade dress are the same — everything is pretty
similar. But it’s not cookie cutter in the sense that we don’t just send out a merchandising solution and have it
implemented exactly the same way in all of our stores around the world.
The lighting department will have completely different dimensions in Seattle versus Budapest, for example. Or
the sofa area will come in at a different angle. So, plan-o-grams don’t work for us. But the gist of it, from a
consumer perspective, is approximately the same.

                                       What brought IKEA to Brooklyn?
This was an opportunity that we had planned for for a very long time. I’ve got to tell you, it took guts and a lot
of very hard work on the part of the U.S. organization, working very closely with the city of New York, the
mayor and many community organizations to make that happen.
But we are so thrilled to be there. We had such an exciting day when that store opened — to see IKEA with a
view from the restaurant to the Statue of Liberty and the bottom of the battery in lower Manhattan. It was really
cool.

                           How does IKEA make itself part of the neighborhood?
We need to help people understand what we’re all about and become part of that community before we can be
accepted. We try to be true to ourselves, focus on those things that we are good at and stay away from those
things that we’re not good at or that we don’t know anything about.

                                      How did that play out in Brooklyn?
We went into an area where there was a lot of lost opportunity. It was waterfront. It was not accessible to the
people living in the community. It was actually only accessible by water and yet there was such a heritage there
that we wanted to protect. We did quite a lot more than is typical for us for any IKEA site in the rest of the
world in terms of preserving, but also in terms of preparing, the land.
There was a lot of clean up that needed to be done. But it’s got a great promenade there. It’s got some parkland.
Even the parking area is rather hidden, so it’s not just one big parking lot. A lot of trees have been planted and
the docks have been repaired along with the lighting structure where the ferries go back and forth. So, it’s really
quite a delightful area now.


                                 You also did a lot of work on transportation.
Yes. One of our goals with any of our stores is to decrease the number of people who arrive in private cars.
We’ve been really successful in certain countries of the world, but not as much in America. So, the Brooklyn
store really provided us with an opportunity to see if we could get to our long-term goal of 50 percent of
shoppers arriving via public transportation.
I’m happy to say that we did achieve that goal. The last thing the neighbors wanted was a line-up of cars
coming in and out of the store area. So, we have a public bus and a private shuttle out to two of the subway
stations, and then the boat line coming from Manhattan, which is quite popular.

                                  How do you promote a new store opening?
The general matter is to take advantage of the excitement that is typically already out there in the marketplace.
There is a lot of word-of-mouth about IKEA and the customers in our existing markets tend to do a very good
job sharing with their friends and families the benefits of IKEA. It’s about taking the energy that is already out
there and ratcheting it up.
There are some misperceptions about IKEA because it is different things to different people. To your daughter it
might be some stuff for her dorm room, but to you or your spouse it’s maybe something for the family room.
So, we explain that it’s just furniture and how good quality is possible at a low price. That’s what we call the
“concept communication.” It’s also another element of opening the store.

                                       Is there a typical IKEA shopper?
I should start by saying we’ve always had a very broad audience. We’ve pursued that intentionally because we
feel we have a home furnishing product for virtually every life stage, income and demographic.
However, we know that certain segments will come to us more easily than others. Certainly, we recognize the
importance of young families. That is a key customer group for us. Another big group is young people who are
living away from home for the first time.

                                  How do you get insight into your shoppers?
We do a couple of things. We do something called Brand Capital, which is our proprietary research, which we
do annually here in the U.S. along with every other market in the IKEA world. It consists of a variety of
questions related to the store experience as well as the home experience, living with the product as well as
demographics.
Then we have our in-store research, and that’s done twice a year among a broad segment of customers. Again,
it’s done consistently around the world. Then, finally, we have special research that we do to track awareness
and perceptions. That is done individually in each market, but it is very consistent from one market to the next
in terms of the methodology.

                             How has the recession affected innovation at IKEA?
The recession has definitely pushed us to be more aggressive in terms of our presence on the web. It’s pushed
innovation in terms of how we drive traffic to our stores. So, it has been in many ways a good challenge for us.
The current economy also allows us to try things that may have been sacred cows in the past. It really demands
that we try different approaches. This is a great time to be more innovative, and to call out the things that really
aren’t working.

                       Has the recession changed the way you merchandise the stores?
It has brought us back to basics. It has reminded us that pocketbooks are thin, which has always been a primary
tenet of IKEA. It has reminded us that we need to be active merchants in our stores and that we need to be
actively selling and presenting our products.
This fiscal year, which began in September, we’ve been doing an activity that’s called “Seize the Day,” where
we’ve taken some of our best-selling items and offered them at unbelievably low prices on a limited time basis,
which is typically not been part of our strategy.
What we’re doing is really just good, old-fashioned retailing, where we’re getting an unbelievable number of
people responding to amazing offers. We’re selling as much as three years’ worth of merchandise in one day in
some cases.

         What is the relationship between your in-store, on-line and your catalog merchandising?
Our goal is to take our shoppers from traditional media to online media to store media — drawing from the
strengths of each of those media — and show a home furnishing solution that people can recognize from
medium to medium to medium. The simpler the message, the more success we will have in breaking through in
all three media.
We also provide online tools that help prepare shoppers for the store visit. The serious home-furniture shopper
really plans things and we need to provide all the tools necessary to help them do that.

                                 Why do you invest so heavily in your catalog?
The catalog is part of the IKEA concept, and we do invest significant amounts of marketing in the catalog. One
part of that is the size. It’s about a 350-page catalog every year, and features about a third of our range.
Another part is the catalog’s broad distribution, which is unusual. We have a goal of going out to a majority of
households in our trading areas with the catalog in the hope that, while it may not impact a purchase today, it at
some future point will.
So, we are very different in terms of the basic rules of marketing, which would suggest that before you invest in
a big product like a catalog, make sure that you’re sending it to a customer who’s already been to the store.
That’s not how we see it.
The other thing is that the prices are guaranteed through the whole year and the idea is that, over time, the
catalog becomes a reference book, kind of like the way the telephone book used to be.

                             How does IKEA encourage a culture of innovation?
There is absolutely an expectation at IKEA that, with our flat organization structure, everyone contributes.
Whoever you are within in the IKEA organization, you’re expected to contribute your ideas — your new ideas,
your old ideas or whatever it may be — and every idea is welcome.
That means that many more innovative ideas rise to the surface, get watched, and actually get executed than in a
traditional, hierarchical organization.
The other thing is that we’re a very process-oriented company, meaning that we have three basic processes:
creating, communicating and selling the home-furnishings offer.
Each of these three processes has a matrix structure, so that there is somebody like me, a matrix partner, who is
responsible for “communicating the offer” in every country in the world. We are equals and we are in constant
communication, which means ideas can spread very quickly.

                                How does that work with product development?
When it comes to product development, we are extremely innovative because we are operating on our own.
We’re not part of the furniture industry here in the U.S., although we do a lot of manufacturing here now. We’re
not part of the design community in Sweden, although we have a lot of designers from there.
Our independence has a lot to do with our innovation because we don’t know any better. I’m sure everybody is
working in oak this year when it comes to bedroom sets, but we’re working in pine. What the heck is that all
about? We feel that we are, to a certain extent, operating outside of standard operating procedures.

                                 How does your office layout affect innovation?
Well, first of all, everybody has the same desk arrangement. That, of course, leads to an accessibility that is
rarely found in American companies. A lot of companies talk about that, but when you actually get down to it,
the CEO has his or her own office. You will not see that at IKEA. Everybody here works in the open landscape.
The other thing is the gathering areas. Many companies might have a cafeteria or something like that. But we
have something we call the Great Room, which is a combination eating, socializing and kitchen area, which you
can visit and use at any time of the day.
Then there’s this idea of having the unscheduled room. We call them “huddle rooms” here in the United States.
Instead of always having to book a room to have a meeting, these rooms are available at any time. It definitely
adds to the spontaneity and to sharing ideas without a lot of structure and organization around it.

                      Have the IKEA hackers influenced any new products? (see sidebar)
Officially, we say no — of course not. But, in reality I do believe that, at the very least, the hackers get us
thinking about some of the products in different ways. It really is an amazing group.
The amount that those IKEA hackers do and the number of creative solutions they have for using our products
is incredible.

                             How do you see the goal of customer service at IKEA?
Customer service has always been kind of a challenge because we are not a self-serve store, but a self-select
store. We’re not out there actively selling to the customer, but we are there to answer questions.
So, we focus on areas where customers have told us they need expert reassurance, such as kitchen planning, living
room storage and mattresses, for example.

                                          What keeps you up at night?
It is questions like that!
It’s how do we reach a broader group of customers. We’re not big in the United States, we have 36 stores.
We’re accessible to 100 million people.
The challenge is, how do we reach out with limited means to a broader group of customers — from a marketing
perspective — and convince them of the great offer we have?
There is a preconception that, when it comes to home furnishings, you have to spend $2,000 on a mattress or
$1,500 on a sofa. And what we’re offering is that kind of quality at a fraction of the price. We really need to
reassure our customers about what we stand for — and that it is value.
As people become more careful with their money, prestige becomes less important and value becomes more
important, we become the natural choice for a much broader swath of the population than ever before. n

IKEA Hackers

Some people look at a pair of red plastic salad bowls at IKEA and see a pair of red plastic salad bowls. Michael
F. Zbyszynski saw a speaker array. “It’s all about not accepting what’s presented for sale as it is,” says Michael,
“about not just doing a ‘paint by numbers’ of your life.”
Michael is actually just one of an apparently growing coterie of “flat-pack” hackers who view IKEA’s products
as raw materials and share their “re-inventions” at www.ikeahacker.blogspot.com. Among the re-inventions are
a dress made from a shower curtain, a table made from broken chairs and a guitar made out of a tabletop.
However, while some IKEA hackers have a certain utility in mind, others are going for something like art. For
example, Christine Domanic used “an old IKEA side table” to create the “Weiner Bench,” which is “festooned
with fat pink crocheted tubes.”
Mona Liss, IKEA’s PR director, embraces the hackers, attributing the trend to “this invisible aura of IKEA,
something in our DNA that is inviting and unspoken,” adding, “we’re a culture that’s asked to challenge
conformity, to speak outside the box.”
[S OURCE : Penelope Green, The New York Times, 9/6/07].
BILL AGEE is marketing director of IKEA U.S., which he joined as an advertising manager in 1993, later
becoming a deputy store manager, managing director of IKEA communications, and global advertising
manager.

White Paper
Retail as Runway
Left-brained brands should take a cue from right-brained retailers.

    If you stand at the end of many center-store aisles in grocery, mass, and drug (even without squinting) you
might notice that they look a lot like the design work of a late 19th century librarian. Painstakingly arranged
cans, boxes and jars look like they are all tidily arranged by “subject and author,” executed and ordered
according to the highly-structured system of Melvil Dewey in 1876.
     Dewey’s is a system based on logic — with an operational underpinning. Many center-store aisles today
look like they are based purely on retailer operational logic as well, and unfortunately the left-brain dominance
of center-store layout often leads to a dull, linear expression of the “come, find me” approach to merchandising
and product presentation.
    At the same time, many brands still take a very scientific and sophisticated approach to the center store. This
is crucial, but often falls short of “activating” shoppers to full potential.
    The growing focus on shopper marketing is helping this situation, but many marketers still have a tough
time taking learnings and strategies beyond packaging, product and assortment. These are of course critical, but
really powerful shopper engagement requires a physical environment and visual framework to create excitement
and even add a little inspiration.
    It’s not enough to rely on mass communications and brand development through traditional channels like
television (and even through new channels!). There must be something about the aisle in center store that
creates a pull into the aisle and then provides an environment that drives trial and interaction. The current
paradigm just doesn’t do it well enough.
UNLEASH PROJECT RUNWAY
     To help this situation, packaged-goods brands can follow cues from the right-brained fashion industry. The
fashion industry is a master of creating in-store inspiration, experience, visual draw, and environments that
encourage interaction between shopper and product.
     It is also very adept at many additional aspects of merchandising and in-store design. Many of these
approaches serve as good models for packaged-goods companies as they develop in-store category design
solutions (and potentially cross-category solutions).
     Take a page from the glamour of the runway and apply it to in-store trial and events. The fashion world
creates an environment that puts product combinations front-and-center, and almost on an altar. That the brand
is the “hero” is not in question at all.
     Consider how much more effective in-store trial and sampling could be with environments and three-
dimensional elements that truly elevate product trial and make it exciting. There is plenty of evidence already
showing that when high-impact graphics are combined with trial, purchases can be driven significantly.
     What might happen to sales and brand equity with trial stations that really come to life and embrace design,
rather then relying on a folding table with a plastic tablecloth? What if in-store sampling and promotion
occasionally had some of the attitude of the cosmetics department at Lord & Taylor?
     The fashion industry is also brilliant at showing pride and passion for its work — passion that comes
through not only on the runway, but also in its in-store display work with powerful graphics, three-dimensional
presentations, and “take me to another world” environments. Think of the Ralph Lauren store on 72nd Street in
New York, Abercrombie & Fitch, or Fred Segal in Los Angeles.
     This is not to say that there are not any examples of really good retail design elements that evoke the fashion
spirit of passion for product. One of these is the shelf illumination that is now built into some gondolas and
aisles at CVS. This use of lighting really does add a dimension of excitement to the presentation and elevates
product as hero.
     Crayola and Hallmark have also both done a great job of creating three-dimensional in-store destinations
and environments that show real passion for their work and respect for product.
     In a redesign of the Wal-Mart Vision Center we executed recently, we followed many of these cues. Before
our redesign, frames and contact lenses were displayed by brand and in separate sections in neutral cases on
neutral walls with little to no graphic communication or personality.
     In the new stores, we redesigned with bold, high-impact lifestyle graphics, added color, and re-
merchandised according to lifestyle and lifestage rather than by manufacturer brand. We also blended frames
and contact lenses in the presentation instead of keeping them apart, and developed a new lighting plan to
further support an inspirational feeling as well as to assist in navigation.

ENVISION THE POSSIBILITIES
    Several retailers, knowingly or not, are taking the same track that many apparel retailers followed in the
’90s as they transformed themselves from being merchants with a small assortment of private label goods to
becoming truly integrated fashion-design firms.
    As part of turning their private label programs into real brands, they also brought fashion talent in-house and
hired fashion designers, sourcing managers, and pattern makers. In addition, they focused on telling the story
about their new brand identity in the store with three-dimensional design work, high-impact graphics, and other
elements that focused on lifestyle, life stage, and other demographic dimensions.
    They also focused on creating a draw and a reason to enter the store. They emphasized (and still do), how the
parts and pieces work together to create an entire outfit. In doing so, they drive higher tickets.
    Aeropostale is one example of a retailer that made this transition, and Abercrombie & Fitch is another.
Currently, Trader Joe’s is a wonderful example of a retailer that “gets it,” that is following a similar path and
“tells a story,” with every aspect of its merchandising, product development and store design. It’s a bit
reminiscent of the stories that Banana Republic used to tell, and that retailers like Ruhl and Hollister
communicate so clearly through their environmental design work.
    Of course, as retailers in grocery and other channels develop their private brands into “real brands,” they do
create a challenge for traditional consumer packaged goods companies — especially since they also control the
real estate and have the direct ability to shape the environment in which their developing private brands are
being showcased.
    There are quite a few categories that could benefit from this approach right away, and several retailers
would do well to allow their suppliers to take a bold, push-the-envelope lead in redesigning these areas of the
store. One category that comes to mind is hair accessories (hair care products is another).
    Since products in this category really are — or can be — fashion items in their own right, this opportunity
looks like low-hanging fruit. It’s an aisle that can be very hard to navigate and that is often completely lacking
visual cues, color, graphics, or lighting to drive incremental sales.
    Another category is office supplies and stationery. It is often a jumbled mess and lacks inspiration; it often
is missing navigation as well. That’s too bad because some manufacturers have done a great job in product
development in this category and have actually turned some commodity products into fun items like multi-
colored paper clips and sticky notes.
    Health and Beauty has made a move in the right direction but could still use a boost — especially in
grocery. Here, one of the skill sets of the fashion industry that is really applicable is credibility and confidence
that it exudes through environmental design and graphics (i.e., “if you come to us in this aisle you will learn and
can be completely confident in your choice”).
    It would be great to see brand teams and shopper marketing teams hire some graduates of FIT, Pratt, and
SCAD — or to see them add to their bench strength with a few hires from some of the apparel or accessories
sectors.
    They understand that helping a shopper make the leap from the accustomed to the new with an environment
that supports the decision to try something new by helping her envision the possibilities.
    Even though the economy is in bad shape, we still live in a surplus society, and the winners will be those who
deliver experience as a significant dimension of their interaction with shoppers. Make the environment do the
work (there is no labor law against making the environment work 24/7) and it is the one asset that is
consistently present around the product.
    Show the passion. We’ll see you on the runway. n

La Choy’s Fashion Sense

We recently designed and executed an in-aisle category destination for La Choy’s family of packaged Asian
ingredients and meal solutions. This 3-D solution has fashion sense, yet maintains a serious respect for the
heritage of the brand and category.
The three-dimensional décor elements create a “pull” into the aisle for the shoppers who normally shop only the
perimeter. Once there, the need states-based communications and experiential bamboo background, soft-toned
woods and stylized characters engage them in the category and drive incremental sales.
A hierarchy of blades and shelf-level communications provide decision-making navigation by meal-solution
type, and a series of meal suggestion cards add inspiration. These integrated, eye-level messages and graphics
further engage the shopper and promote trial and purchase.
The outcome of the solution was a double-digit increase in sales for the previously declining brand as well as a
significant increase in total category sales. Everyone benefited — the brand, the retailer, and even
complementary products and competing brands.
JOHN WILKINS is VP of retail strategy at Miller Zell, Inc., a strategy, design, and marketing firm, where he
leads the development of in-store go-to-market strategies for retailers and manufacturers. He can be reached at
404-526-1327 or john.wilkins@millerzell.com

Research Report
The Shopper’s Journey
A new study reveals what our struggle for meaning and identity says about the way we shop.

   Most marketers agree that consumers don’t really buy products or brands. Consumers buy what those brands
promise to do for them — how they make them look, feel and how they contribute to their own self-identity.
     So, then, does the everyday act of shopping contribute in some way to the ultimate brand experience of the
products we purchase?
     While many path-to-purchase models have been developed in recent years, is there something more latent as
a foundation for our shopping behavior and how we perceive the act of shopping?
     To begin to answer these questions, we first looked to the social sciences. In one of the best known and
frequently cited explorations of mankind’s struggle for meaning and identity, Joseph Campbell explored the
application of the so-called “monomyth” as a construct for some of the best-known stories that have been told
throughout history.
     As Campbell summarizes the monomyth, “A hero ventures forth from the world of common day into a
region of supernatural wonder: fabulous forces are there encountered and a decisive victory is won: the hero
comes back from this mysterious adventure with the power to bestow boons on his fellow man.”
     The act of shopping shares the same monomyth structure, containing all the elements of a great story —
drama, emotion and action. However, in this story, the shopper is the hero, the retailer is the stage and the brand
is the prize.
     This great adventure, the shopper’s journey contains seven distinct phases that capture the universal
experience of shopping (see sidebar).
     Curious about the application and validity of the shopper’s journey as a strategic model and basis to derive
true insights into shoppers’ behaviors, we embarked on a cross-country odyssey during the late summer/fall of
2008 to better understand and interpret shopping behavior.
     This qualitative study consisted of two phases, resulting in input from nearly 60 men and women across the
country and more than 200 hours of interviews. The first phase used online journals to record typical shopping
patterns and events across a number of categories. These ranged from highly involved and expensive products
(e.g., consumer electronics) to categories with relatively inexpensive and routinely purchased products (e.g.,
alcohol and health-and-beauty).
     We then immersed ourselves in the homes and lives of 16 men and women who allowed us to observe
several shopping journeys. Our observations included their initial research of products or retailers; their pre-trip
preparation; and the in-store trip to select a product from the shelf.
     Through these efforts and the resulting meta-analysis, we found that the seven stages of the shopper’s journey
do, in fact, represent the shared structure of many of the stories and myths that have historically been told and
retold across human cultures.
     However, while experiencing the stages of the shopper’s journey was universal, what varied significantly
was the amount of time and level of consciousness afforded each stage. For many low-price and low-
involvement categories, the journey is highly subconscious and nearly instantaneous, needing only a spark in the
form of a reminder or usage suggestion to ignite a purchase.
     By contrast, the gestation period for purchases in other categories can take days or months with a majority of
time spent in the initial phases of the journey. This is where less formal shopping takes place by way of
researching professional and user reviews, and consulting friends and family. It also involves sleuthing shopping
conglomeration websites in an attempt to “shop” on one’s own terms before entering a physical store.

SIX SHOPPER ARCHETYPES
   We identified six broad “shopper archetypes” that relate to the shopper’s purchasing motivation and
behavioral patterns:
    Task Shoppers don’t necessarily enjoy the shopping trip, and view it mostly as a means to procure the items
on their lists.
    Bargain Shoppers approach shopping as a strategic game to be mastered, and attempt to maximize the return
on a personal “value equation.”
    Price Shoppers view shopping as a zero-sum endeavor that’s focused narrowly on cash outlays and
choosing brands and retailers that meet the need-of-the-moment.
    Discovery Shoppers may know their needs, but often rely on the store environment as a catalyst for
purchases and are open to new products.
    Comfort Shoppers are focused on mitigating any frustration or anxiety associated with shopping, and have
a stronger aesthetic orientation. They are often willing to compromise on price and selection for a more
enjoyable experience.
    Experiential Shoppers are much more engaged while shopping and seek to become immersed in the
culture of the category while shopping.
     The primary driver for behavior during the shopping journey is the role that the category being shopped
plays in a given consumer’s life. An individual’s general orientation to shopping, defined by which archetype he
or she tends to reflect, is a strong secondary influencer.
    The combination of these two drivers has significant influence on retailer and brand selection. Shoppers
ultimately not only choose brands that align with their value systems but also choose to shop for those brands at
retailers that optimize the experience associated with that brand. This can occur through sales associate
knowledge and interaction, floor layout or merchandising practices.
    One’s orientation to shopping also has a dynamic quality, depending on one’s enjoyment and involvement of
the product being purchased — whether it’s a need or a want. Decisions are made and trips planned either to
mitigate the experience of shopping for rote needs or enhance the experience of the product for emotionally
driven wants.

SHOPPING AS BATTLE
    An additional and important finding from this study was the emergence of a cultural model of shopping
where shopping is thought of and experienced as a type of “battle.” This manifested itself in two variations of the
model. The first variation of the “shopping as battle” cultural model is “shopping as a battle of self-control.”
    Central to this concept is the notion that shoppers are conflicted within themselves — harboring a more
responsible and deliberate self that is at odds with a more primitive self, driven by impulsive desires.
Classically, this manifests itself as “what I want versus what I should get.”
    As we observed throughout the research, people often experience a high degree of ambivalence throughout
the shopping process. A spike in emotion occurs in the final stages of the “purchase,” the “reckoning” and the
“prize,” that largely relates to the culmination of these conflicting orientations.
    The second variation of this model is “shopping as a battle against the other” — namely retailers and
manufacturers. Here, shoppers view their shopping goals as contrary to those of the retailer or manufacturer. In
this variation, shoppers view themselves as vulnerable to the obstacles, distractions and temptations to make
unplanned or unnecessary purchases created by the “other.”
    Additionally, there is a common undercurrent and latent fear that they will find a better product or lower
price after making the purchase, having “been had.”
    Most interesting of these, however, was the prominence of shopping a category after a purchase had been
made as an important reinforcement of a purchasing decision. This happened most often with larger purchases,
but not exclusively so. In some instances, the research and shopping continued with the same fervor as it did in
the stages of the journey leading up to the purchase.
    It continued until shoppers finally decided to use the product and resigned themselves to living with their
decision — and were satisfied that they, in fact, had made the right purchase — or until they realized that a
better product or better price was available and they had “been had.”
    These emotions can be addressed in a number of ways, although providing a level of competitive
transparency or communicating a limited guarantee would go far towards establishing loyalty and trust.

ALIVE WITH STORIES
    While changes in our approach to shopper marketing may need to be transformational, some fundamental
applications can be immediately implemented.
    One opportunity is to view shopping more holistically, as encompassing the vacuum between the time when
a brand has predisposed a consumer and created a demand and when the shopper physically enters the store to
shop for, and buy, the brand.
    Many opportunities exist to influence a purchase along the shopping journey before a retailer has been
chosen or a product has been selected. It’s important to understand how that comes to bear in your categories and
your stores, and to align your merchandising and marketing communication efforts accordingly.
    Allow the store environment to come alive with stories. While there is certainly a proliferation of in-store
vehicles and messages, thoughtful and resonant interruptions that demonstrate an understanding of shoppers and
allow them to participate in a broader narrative are powerful motivators for purchase. They should not always be
categorized as unnecessary clutter.
    And lastly, we can collectively ask the right questions as they relate to framing what will make our
categories and brands grow—what is it that the shopper desires of this retailer in this category?
    In the end, it’s shoppers who ultimately wield the true power. The more we can move beyond an
understanding of simply what they are doing in the store to understanding the motivations for those behaviors
and the journey that led them there, the better we are positioned to anticipate their needs.
    Only then can we begin implementing practices that create a meaningful shopping experience that aligns the
ethos of brands, retailers and shoppers as a basis for devotion. n


 The Awakening
A message breaks through the noise, snagging a consumer’s attention. Now the shopper is ready to heed the call and
embark upon a journey.
À The Call
The quest begins with the hero receiving a call to action, a new desire or a need that transforms him or her into a
shopper — an individual with a purpose.
à The Crossing
Our hero enters a world full of tasks, trials, temptations and decisions. The shopper pursues his or her quest,
exploring, seeking, researching and ultimately entering the store.
Õ The Path
The shopper now faces a succession of brand, retail and messaging distractions, seeking clues to help navigate the
path to the prize.
ΠThe Reckoning
Presented with various choices, the shopper becomes gradually more confident and a decision is made, with his or her
emotional pulse-points in sync.
œ The Prize
This is the ultimate moment, when a shopper touches a brand. It’s a sliver in time that no marketer can influence. This
moment is solely about shoppers fulfilling their quests.
– The Homecoming
The shopper returns home with his or her prize, sometimes filled with excitement or perhaps simply content with the
mission. The shopper experience then radiates outward to friends, family and co-workers.

TIM SCHOLLER is senior vice president of account planning at MARS, where he directs a team focused on
research, trend analysis and shopper-insight generation. Tim can be reached at schollert@marsusa.com

White Paper
T-minus Ten
A Hub benchmark study says the shopper-marketing rocket ship is ready for liftoff.

    The first time that The Hub ran a survey on shopper marketing was in March, 2006. At that time,
approximately 160 people responded. Of these, more than 50 percent noted that their companies’ state of
readiness to pursue shopper marketing was either ‘average’ or ‘not so good.’ Another 11 percent claimed ‘no
interest.’
     My, how times have changed! When The Hub, in collaboration with Jason Buschlen’s Shopper Insights and
Marketing Group on LinkedIn, updated this survey in December, 2008, 247 people responded — an increase of
53 percent. Of these, 50 percent noted that their companies had been involved with shopper marketing for more
than three years while another 34 percent had jumped in within the last two years.
     More remarkable was the breadth and depth of participation: Procter & Gamble, Kimberly-Clark, ConAgra,
Novartis, L’Oreal, Pepsico, Coca-Cola, Cadbury, Johnson & Johnson, S.C. Johnson, Bayer, Schering-Plough,
Energizer, Nestle-Purina, Reckitt-Benckiser, MARS Advertising, Saatchi X, TracyLocke, A.C. Nielsen, IRI,
RPM Connect, Marketing Drive, Cannondale Associates, EMAK Worldwide, TNS, D.L. Ryan Companies,
Carlson Marketing, Momentum Worldwide and Ogilvy Action, among others.
     We believe the results from this survey are the most accurate representation to date of how the industry is
approaching shopper marketing. So, how do the results of this survey differ and what are the key benchmarks
that one might take away from this?
     Reporting Relationships. Contrary to expectations, two-thirds of respondents note that their shopper-
marketing departments report either to Marketing (41 percent) or to General Management (26 percent) — the
latter on the same level as Marketing and Sales. Only 24 percent report that their shopper-marketing
departments report to Sales — a significant departure from three years ago, when 56 percent of shopper-
marketing departments reported to Sales (see chart one).
     Along these lines, more and more companies appear to be understanding that shopper marketing is an
extension of Marketing and not an extension of category management — and cannot be made to work
effectively as an extension of category management. If we isolate the companies that have just “officially” gotten
into shopper marketing over the past two years, 63 percent have started out by structuring their shopper-
marketing departments to report either to Marketing or General Management — only 31 percent to Sales.
     Survey respondents whose shopper-marketing departments report to Sales report the lowest level of
satisfaction with results versus those whose shopper-marketing departments report either to Marketing or
General Management. Only 38 percent of those whose shopper-marketing departments report to Sales cite “very
good” or “excellent” results. This is compared to 48 percent for those whose shopper-marketing departments
report to Marketing and 54 percent for those whose shopper-marketing departments report to General
Management — a significant difference.
     Departmental Staffing. Almost 50 percent report shopper-marketing departmental staffing of five people or
fewer. Of these, more than 50 percent staff their departments either with people who have “predominantly” or
“exclusively” brand marketing backgrounds — versus only seven percent who have shopper-marketing
departments with no marketing people at all. Versus the averages, those who staff their shopper-marketing
departments exclusively with brand-marketing people report significantly higher satisfaction levels with results
than those who do not (60 percent versus 46 percent).
     Not surprisingly, more than 70 percent of start-ups staff their departments with five or fewer people. What is
surprising, however, is that three or more years later, 33 percent still have staffs of five people or fewer.
     At the other end of the spectrum, 21 percent of respondents report shopper-marketing departments of 20 or
more people. Contrary to what one might expect, only 36 percent of these companies are more than $10B in
size. Apparently there is not much correlation between size of company and size of one’s shopper-marketing
department.
     Budgeting. Sixty-five percent of respondents report that they now fund their shopper-marketing initiatives
with established budgets which shopper-marketing department personnel (and others) can count on to develop
long-term, account-specific shopper strategies and initiatives (the balance continues to fund opportunistically).
In addition, as opposed to the caution exercised three years ago — when almost all shopper-marketing start-ups
funded opportunistically — approximately 52 percent of those starting up within the past two years report
starting with established budgets.
     Predictably, those who fund opportunistically are at the bottom of the scale in terms of satisfaction with
results. Unable to utilize the potential of shopper marketing because of a lack of predictable funding, almost 60
percent report “average,” “not so good” or “nothing different than before” in terms of success with shopper
marketing. In contrast, more than 53 percent of those who can rely on established budgets report either “very
good” or “excellent” results.
     Only 38 percent who do fund shopper-marketing initiatives via established budgets fund at three percent or
less of their total marketing budgets. The majority of the balance currently fund at between four and six percent
while a surprisingly high number (20 percent) have developed the confidence to fund at over 10 percent.
Typically, this latter group has been involved in shopper marketing for five years or longer (58 percent) and,
again, do not necessarily represent the largest companies.
     The dominant criterion for measuring results for all respondents is R.O.I. (43 percent), followed by retailer
category growth (34 percent), share gains (33 percent) and marketing mix analysis (26 percent). Many,
however, use a combination of the above to gain a balanced perspective. Only 10 percent confessed that they
still do not do post-event analysis.
     Scope of Activities. Almost 64 percent of respondents collaborate with up to six retailers in planning their
shopper strategies and initiatives (the most frequently mentioned number is between four and six retailers).
Another 24 percent collaborate with 10 or more retailers, but this group is largely confined to those companies
with five-plus years’ experience in shopper marketing or those whose budgets exceed 10 percent of their total
marketing budgets.
     More important is the number of retailers for whom manufacturers do account- or shopper-specific research.
This is because it is only on this basis that manufacturers can offer proprietary programs that help both parties
differentiate in ways that are uniquely relevant to sponsoring brands and different shopper segments.
      Overall, 35 percent of respondents report doing customized research for up to three retailers, while another
32 percent report doing so for between four and six retailers, and another 20 percent for 10 or more retailers.
These tend to be companies with relatively large and established budgets (35 percent) or companies with five or
more years experience in shopper marketing (38 percent).
     Impediments to Progress. Only 45 percent of respondents report that their companies have an integrated
process in place for planning and executing shopper-marketing initiatives. Another 33 percent are currently
developing a process, while 24 percent have no process in place whatsoever. As might be expected, 50 percent
of this last group consists of companies that have decided to support their shopper-marketing initiatives with ad
hoc funding.
     Fifty-three percent of companies whose shopper-marketing departments report to Sales cite “sales not
trained or incented to focus on equity-building pursuits” as the number-one impediment to success, followed by
“no cross-functional integration with marketing” (40 percent) and “difficult to develop shopper insights that are
meaningfully different from category-management insights” (38 percent) as number-three impediment.
     In companies where shopper-marketing departments report to Marketing, the number-one impediment is
“difficulty in long-range retailer strategic planning” (45 percent), followed by “limited access to retail decision
makers” (38 percent) and “lack of integration with customer business planning” (36 percent).
     Clearly, companies that have structured their shopper-marketing departments to report to either Sales or
Marketing face a conundrum: As illustrated in chart two, “insufficient training/understanding across all
departments” is now cited as the number-one impediment to the success of shopper marketing in more than 50
percent of companies, followed by “lack of cross-functional integration” (43 percent).
     Apparently, companies that want to become truly great at shopper marketing may wish to put more
emphasis on training their sales people to better understand the fundamentals of brand marketing and,
conversely, training their marketing people to better understand how to approach and strategize with retailers.
     What constitutes “Excellence?” If we cull out the responses of those companies that consider their
shopper-marketing progress to be “excellent,” we get some very different responses:
• Sixty-eight percent have five-plus years of experience with shopper marketing — indicating that pure
  perseverance is one of the keys to success.
• The dominant reporting relationship among these companies is to General Management (40 percent).
• Thirty-three percent have shopper-marketing departments numbering 20 or more people, of which 68 percent
  are staffed exclusively with brand marketing people.
• Seventy-two percent are funded via established budgets, of which 26 percent total 10 percent or more of total
  marketing budgets.
• Twenty-nine percent collaborate with between one and three retailers; another 29 percent with between four
  and six retailers; and 25 percent with 10 or more retailers.
• Ninety-six percent cite “collaboration with key retailers on shopper understanding” as their key shopper-
  marketing activity (versus 70 percent for all respondents), while 38 percent of these cite this as their dominant
  shopper-marketing initiative (versus 29 percent for everyone else).
    As opposed to “insufficient training/understanding across all departments” cited as the number-one
impediment by all respondents, companies that view themselves as “excellent” at shopper marketing cite “lack
of cross-functional integration” and “insufficient funding” as their top concerns (both 44 percent).
    To be “excellent” apparently does not require a lot of people. While 33 percent of these companies’ shopper-
marketing departments do comprise 20 or more people, an equal number comprise five or fewer.
    As one respondent put it: “Shopper marketing is in everyone’s DNA. The whole company has by now
gotten in the groove of understanding consumers as shoppers for communicating at retail as well as
understanding consumers as segmented targets for communicating through DTC advertising. The function of our
relatively small (five people) shopper-marketing department is now to identify opportunities and coordinate
shopper-marketing initiatives throughout the organization, not — as it was at first — to attempt to manage from
the middle-up or to beg for funds.”
    Prognosis. With the Wall Street Journal reporting that 2008 “will go down as one of the worst holiday sales
seasons on record” (12/26), and virtually all companies cutting back or in hiring freezes, one would expect this to
extend to all aspects of one’s operation.
    Not so shopper marketing. Despite “the worst economy since the Great Depression,” 72 percent of the
companies responding to this survey expect their shopper-marketing budgets to increase over the next three
years — a remarkable number given the present situation (chart three).
    In fact, this is not significantly different from the 82 percent of companies that expected their shopper-
marketing budgets to increase in the first survey we did on this subject in March, 2006, when the economy was
significantly better. And look what has happened since then. n

CHRIS HOYT is president of Hoyt & Company, a Scottsdale, Arizona-based marketing/sales consulting and
training organization that specializes in shopper marketing. Chris may be reached at (480) 513-0547 or at
chrishoyt@hoytnet.com

White Paper
A Mighty Wind
Shopper marketing isn’t about the shopper. It’s about the retailer.

    The notion of “shopper marketing” has spawned a whirlwind of activity rarely seen in the marketing
community. But amidst the tsunami-level of noise there is a quiet rumbling that all might not be well in shopper-
marketing land. Big wind. Not much rain.
    The issue is whether real, sea-changing programs are truly being activated at retail. After all the data has
been tumbled, the insights wrung out, and the need-states defined, then what?
    What, exactly, is happening to change shopper behavior to the benefit of the brands that have been
expending all this time, effort and resources? Alas, all too often, the end result is merely another FSI or
promotional display.
    Except at Wal-Mart. In the land of the “sea of blue,” real change is really happening. Successful marketers
have established themselves in Bentonville to be close enough to Wal-Mart to foster true collaboration. This
collaboration happens at many levels, including supply chain, marketing, and sales. Top-to-top meetings help
facilitate win-win scenarios.
    If this is working at Wal-Mart, you can bet the rest of the retail industry will not be far behind. The
implications of this cannot be underestimated because it underscores what some practitioners of shopper
marketing may be missing.
    And what is that? It’s that Wal-Mart is a retailer. Could it be that shopper marketing isn’t really all about the
shopper? Maybe it’s first and foremost about the retailer?
RETAILER INSIGHT FIRST
     It’s wonderful to bring shopper insights to retailers. It’s very cool. But do retailers really find value in
insights presented from a marketer’s panoramic view of things like the “aspirational” shopper versus the
“value” shopper?
     What retailers want to know is how your brand can contribute to growing their categories or build shopping-
basket size as part of their marketing strategies. They need to improve throughput efficiencies at checkout and
differentiate themselves from competitors. They may or may not find sustenance in our pontifical presentations;
what they really need is for us to help them solve their business problems.
     That’s why brand-focused “shopper insights” may be far less important than “retailer understanding.” If you
don’t know where Wal-Mart — or any other retailer — is headed, or how they feel about the importance of
your categories to their strategies, no amount of “shopper insight” will take you there.
     Maybe shopper marketing isn’t about the softer side of awareness and attitudes; maybe it’s more about the
hard truths of categories and sales.
     If that’s the case, we need to think about what might be the logical conclusion. And that is that shopper
marketing should report to the sales department, not the marketing department.
     Heresy? Maybe. This notion certainly appears to be at odds with where the industry is heading. According
to a recent Hub survey, 40 percent of brand marketers have shopper-marketing reporting to the marketing
department, while just 25 percent say it is reporting to the sales department.
     Maybe companies should reconsider, though, because Sales is closest to, and has the keenest understanding
of, retail. Marketing people often don’t have a broad understanding of retail because generally they are not
tasked with going into stores and figuring out what makes them tick. It’s just not what they were trained to do.
     Another important argument for shopper marketing to report to Sales is that the primary evaluation of
shopper marketing programs is R.O.I. The sales organization understands that the ultimate goal is to move
product and drive growth.
     Then there’s the additional reality that 75 percent of marketing budgets ends up in the hands of Sales in
some way, shape or form — be that trade deals, promotion or shopper marketing. So, if you’re spending 75
percent of your dollars to make things happen at retail, it might make sense to spend the other 25 percent to
make sure it happens. That’s just Marketing 101. We can put whatever kind of lipstick we’d like on it, but at the
end of the day, it appears that shopper marketing is really all about retailing. It’s really about sales.

REINVENTING THE FUNCTIONS
    There’s only one problem with this picture. A big problem. In many organizations, the sales department may
be close to retailers but is not tasked to sit down, listen, learn and collaborate with them.
    Shopper marketing has to start with top-to-top meetings with retailers. The retailer talks about the categories
in which the manufacturer competes, the challenges they are having, and their objectives with those categories
and where the manufacturer can help. This is not a typical role that sales people are used to playing.
    What’s required is a cross-functional team to assure optimal outcomes, which might impact research,
category management, and yes, marketing programming. It’s not a pure brand sell and it’s not about
transactions. It’s helping retailers grow their businesses. Sales and marketing people both now need to think and
perform new and different tasks to fulfill the true promise of shopper marketing.
    It’s not about appearing smart and presenting research that proves it. It means sitting down with retailers,
learning their business, understanding what they are already doing and what they already know about their
shoppers.
    Then it means determining what value you can add and returning to the retailer with a plan. The first step
should be about engagement, building a bond with the retailer, a bond of trust. Otherwise, you risk having the
retailer perceive that you are trying to sell them something and they are likely not to be impressed by your
expensive, but perhaps self-serving, shopper research.
    The end result might not be a brand-specific effort, but a shopper solution that includes a number of brands
from synergistic categories — many times from more that one manufacturer. Isn’t that what shoppers are
looking for when buying your category — a solution? A meal solution, a cleaning solution, an entertainment
solution, a get-me-out-of-the-store-fast solution?
    This cross-functional approach is behind what is happening in Bentonville. How do we make it happen
elsewhere? Marketing organizations need to be re-focused; they need to be prepared to operate on a more
strategic level with their retail customers.
    Annual planning should start with cross-functional business planning in conjunction with top customers.
Before launching research studies on new product initiatives and shopper-marketing programming, perhaps
retailers should be brought into the picture.
    This is a process of creating plans and programming in alliance with your top customers. The selling
organization might well be charged with leading this process, because they have the closest relationship with
the customer, but they need cross-functional support. In some organizations this will require rethinking, re-
training and even a whole new process of engagement.
    These thoughts may bring a storm of protest. But before you blow me off, put your finger to the wind. Can
you feel a powerful new front moving in? n


Marketers should …
‹ Start engaging retailers up front.
‹ Stop relying on brand-driven shopper ideas.
‹ Deliver solution ideas that can build categories.
‹ Collaborate with other brands.
‹ Provide a platform to engage shoppers.

Agencies should …
‹ Realize that execution is everything.
‹ Learn how to make ideas work at retail.
‹ Invest in people who know retail design.

JON KRAMER is chief marketing officer of Alliance, a division of RockTenn, an in-store marketing solutions
provider. Previously, Jon was chief marketing officer of MediaCart Holdings and ceo of J. Brown Agency. He
can be reached at jkramer@rocktenn.com

Essay
Shoeless Cobblers
Agencies must re-invent their business models.

     I just got off the phone with an old friend of mine, a senior executive at a large agency. He was bemoaning
that everyone in his shop was working at 135-150 percent of capacity … that they had just won a new piece of
business, but were struggling with how to staff it profitably without burning out staff that is already overworked
… that they just lost a piece of business to another agency that had under-priced them by more than $500,000, a
rate that was so low-balled that there would be no way to meet client expectations on anything but the price.
     His big question was, “how did we get here?” This used to be a business where you could do great work,
make good money, build strong relationships with clients and have a little fun along the way. Now it’s a
business where the price pressures are relentless, where the only way to be profitable is to strain the
capacity of your key players, where loyalty between agency and client goes only as far as your last idea, and fun
is relegated to your spare time, of which you have little.
     To quote Mark Twain, “everybody talks about the weather, but nobody ever does anything about it.” The
same holds true for the current state of client-agency relations. I’ve spoken to many key players on both sides of
the desk and their complaints are remarkably consistent.
     It’s generally accepted that a tension exists between client and agency. Clients complain about the lack of
thought leadership and attention to their business, or the fact that the people who pitched the business aren’t
involved enough, or at all, in the day-to-day. Agencies complain that services have become commoditized and
that it is impossible to make money with existing fee structures.
     It’s funny, I am sure that whatever side of the desk you are on, you were expecting to find articles in the
Hub issue on “innovation” talking about new trends in shopper marketing, or new media.
    Well, I’m here to say that innovation can and should be applied more broadly to the way we, collectively as
marketers, organize to address the complaints registered on both sides. A great-looking car with a bad engine is
a car that doesn’t perform. A great looking agency with poor infrastructure probably isn’t going to consistently
deliver as promised — either to its clients or shareholders.

A NEW SCOPE AND SCALE
    There’s an old saying that we fight today’s wars with yesterday’s tactics. If you examine today’s agency
organizations, the structure is strikingly similar to any time period you want to examine over the last 40 or so
years — vertically integrated one-stop-shops designed to meet all of their clients’ marketing needs. We all
acknowledge that much has changed over the last several years and the scope and scale of marketing challenges
continues to grow. We know more about individual consumers more quickly today than we did about broad
demographic clusters not too long ago.
    There’s new media, old media and media that fall somewhere in between that have to be evaluated and
implemented as part of a far more complex communication solutions than was the norm just ten or so years ago.
Yet, for some reason, we continue to attack these challenges with agency organizations for which clients have
already demonstrated an unwillingness to pay “fair-value.”
    By deploying outdated organizational structures, an agency risks mediocrity, which isn’t to say that they are
incapable of doing great work, but rather of doing consistently great work. Mediocrity erodes loyalty, and
weakens the client-agency bond. Mediocrity results in the “musical chairs” environment present in many client-
agency relationships.
    I often hear agencies complain about the “what have you done for me lately” attitude many clients apply to
their relationship. The fact is that clients should take this approach and agencies should want them to.
    Why? Because this view is about the work (i.e., how did your campaign deliver?) versus the cost. It’s how you
move the discussion to “how high is up?” Instead of justifying lackluster performance because the client
squeezed you on cost, find ways to optimize your organization to consistently exceed expectations.

WHAT MAKES GREATNESS
    The old saying, “think global, act local” needs to evolve to “think global, act global.” Agencies should (and
clients should encourage agencies) to take an inventory to identify core versus process services within the
agency. Core services are what make your agency great.
    If you can finish a sentence with “clients hire us because we do great ...” then a service or function is core.
All other services are process, which is not to say that they are unnecessary. I always say that agencies don’t get
hired because they execute well. They get fired, however, for not executing well.
    So, during the services inventory process, we are looking more for services and functions that, while
important, don’t set us apart. As Bill Gates said: “If we are not realistic about what we are good at, then there is
a chance of going backwards …”
    To avoid going “backwards,” agencies must get back to what they are good at — helping clients build and
sustain business momentum — while finding ways to optimize their organizations to allow them to profitably
focus on what sets them apart.
    The question that all must ask is, “If I were building my agency today how would I structure it, what
services would I offer, how would I cost optimize from insight/strategy through execution/analysis?”
    Technology and the emergence of new and varied external resources offer options worthy of consideration,
such as virtual office opportunities, especially in smaller satellite offices, or eliminating internal functions such
as HR and finance/accounting.
    I had dinner the other night with a former partner of mine, who started a new agency a few years back that
they operate virtually — with absolutely no office or associated overhead. Clients are advised that this is their
approach, that it allows them to deliver great work without overhead cost pressures. Have clients accepted this
approach? Yes, because they deliver great work.
    Globalization can provide some answers, as evidenced by the wide range of companies (e.g., GE, Microsoft,
Ernst & Young) that are increasingly using outsourcing to shift from vertical organizations to more nimble
process-optimized businesses poised to succeed during times of rapid change.
    While many believe that outsourcing is purely a “cost” play, these companies and many others recognize that
there are actually five key reasons to consider it as an alternative for process-oriented functions:
      Cost savings/increased margin
      Flexibility of model: shift costs from fixed to variable
      Organizational focus: ability to focus on key business drivers
      Improved quality: best-practice model for continuous improvement
      Increased speed: 24 hour operation (overnight services)
    Tom Friedman’s book, The World is Flat, speaks to the fact that with the digital global infrastructure,
proximity no longer matters. If the work can be digitized, it can be done wherever cost and time efficiencies are
favorable. Further, agencies have been outsourcing for years, just by another name ... freelance.
    What we have today is an opportunity to organize for the present and the future, versus the way we have
always done it. Free-up core human and capital resources to focus on what makes your agency different while
meeting more stringent client financial requirements. Give clients a reason to buy that goes way beyond price.
    Who knows, you might get clients to invest in your services based upon where you can take them, versus
how cheaply you can get them there. n

CHRIS MAHER is managing director of GreenLight (go-greenlight.net), specialists in using world sourcing
to improve marketing efficiencies. A former CEO of MarketingDrive Worldwide, Chris can be reached at
chrism@zslinc.com or (203) 940-6069.


Essay
Everyone Matters
You’ve got to give to get … but the best gift is the one that comes from your heart.

    Our lives will never be the same again. Lots of people said that after the September 11th attacks, and it was
true. Lots of people said it again after the economic meltdown earlier this year, and it was just as true.
    Back in 2001, we were scared and angry, and for good reason. Today, we are just as scared and angry, but for
different reasons. When we were attacked seven years ago, it was with violence, by outsiders. This time the
attack was with avarice, and it was an inside job.
    Then, as now, nobody is exempt. We’re all in this mess together.
    The good news is that, as a result, many of us are re-considering our lives. Some of us had most or all of our
savings wiped out. Others lost their jobs. Many have hit bottom. It’s only when we hit bottom that we really
wake up, start looking around and re-evaluating our lives and our life strategies.
    Once again, we’re reminding ourselves about what really matters, whether our lives really have been all that
meaningful. We’re thinking about whether we really were that happy in the first place. There’s a search for
validation. Many of us are older now and thinking about our legacies. We’re thinking about whether — and
how much — we matter.
    That’s healthy. We all want to know that our lives have a purpose that’s larger than ourselves. The more I
think about that, the more I realize that the real issue isn’t about how much I matter. It’s really that everyone
matters. No matter what.
    This is just as true in business as it is in daily life, but you’d never know that by watching what’s happening
out in the marketplace. If most businesses were truly going through the kind of self-examination that most
people are going through right now, we’d be seeing something new and different. We’d be seeing companies
transformed by the idea that their role is to serve us, and not just to sell to us.
    Instead, we’re seeing more of the same old thing. We’re seeing advertising campaigns ostensibly meant to
comfort us. Was anyone ever comforted by an advertising campaign? No, because the ads really aren’t about us
and our discomfort; they are mostly about their brands and their images.
    We’re seeing huge sales offering 50 percent — or more — in discounts. Is it because these retailers care
about us and understand our needs? Maybe a little, but it’s really more about solving their problems, not ours.
The message they are sending certainly isn’t that everybody matters. It’s that they matter, but we really don’t.
    If these retailers really believed everyone mattered, and wanted to let us know that we mattered, what would
they do differently? Not too long ago, my daughter purchased a new outfit from Express for an event that
evening. When she got home she discovered the checkout clerk had forgotten to put the belt in the bag. After
calling the store to explain the error, the manager personally drove out to our home after she got off work at 6:00
p.m. to deliver the belt. No questions asked.
    Just this week, I was looking for an accessory to complement an outfit I already owned but Macy’s didn’t
have what I needed. The sales associate went ‘on break’ and walked with me to their competitor in the mall to
help find what I was looking for.
    Most likely neither of these two good deeds were written in store policies. The employee was motivated by
a sense of human giving … to me, a stranger! I was so grateful for her help, but even more for the feeling that I
mattered.
    Too many corporate leaders forget the ancient adage, “you got to give to get” in their daily business
decision-making. Yet ironically, they probably live by that adage when they go home to their personal lives.
Somehow there is this separation that exists between business and personal values and morals — the
Corporation is saying “legal entity” while their personal life is a “human endeavor.”
    Henry David Thoreau said that corporations don’t have a conscience, but a corporation with conscientious
employees is a corporation with a conscience. Perhaps that suggests a powerful strategy for marketers to win
customer loyalty and competitive advantage. We should take a page from the 2008 Presidential election and
start a bottom-up movement — one consumer, one employee, one investor, one supplier at a time.
    All the stakeholders are in it together, just as our whole country is in it together. It doesn’t require a complex
strategy or a massive budget to treat us like we matter. It is so simple to do and yet, for the most part, it never
happens. This isn’t just about putting a “green” gloss on new products or services. It’s not a matter of borrowing
equity from a charity or cause.
    That has its place, but it’s not the same thing as what I like to call creating a deep soul connection that
brings meaning and purpose to others. Every ounce of my being believes that the greatest opportunity for brands is
to help us live better, more purposeful lives. Treating us like we matter is a huge step in that direction and
sometimes it’s as simple as looking us in the eye and being yourself.
    Humanity is all it takes. n

DORI MOLITOR is founder and CEO of WomanWise LLC (womanwise.com) a WatersMolitor Company, a
hybrid consultancy-agency specializing in marketing brands to women. Dori can be reached at
dmolitor@womanwise.com or (952) 797-5000.

Essay
Crisis of Relevance
If irrelevance got us into this fix, then relevance can get us out of it.

    An epidemic of irrelevance has brought once-powerful brands to their knees. That’s the very first line of my new
book. But when I wrote it, about 18 months ago, it was arguably a bit over the top.
    If anyone had challenged me on it, I probably would have backed off a little. I would have conceded that what
we had on our hands was maybe an “outbreak” of irrelevance, something short of a full-blown “epidemic.”
    All of that’s changed now, as we face an economic crisis that even some of the most cautious observers are
calling a “meltdown.” The question on nearly everyone’s mind is, how did things get so bad? How did we get to
this point?
    No single or simple answer to that question is at hand. But as marketers, we owe it to ourselves, our
shoppers and, yes, our country, to take a good hard look at how we may have contributed to the sad state of our
economy today.
    I would begin by pointing to a single word that most marketers know and tend to use with reckless abandon.
That word is relevance.
    If I had a dollar for every time a marketer said the word “relevance” to me over the past ten years, I could
probably bail out the auto industry and have enough money left over to buy what’s left of Las Vegas.
     The truth is that even though most marketers would agree that relevance is critical to brand success, they
would also confess that most of what happens in marketing is not relevant. It shouldn’t be that way.
     Without a doubt, every brand you could name had to have been relevant at some point, or you never would
have heard of it. By the same token, nearly every brand you could think of has either flirted with, or succumbed
to, irrelevance at some point.
     Take FAO Schwarz, for example. Five years ago it was in Chapter 11 bankruptcy. FAO got there by
attempting to compete with Wal-Mart on price and merchandise mix.
     But FAO reasserted its relevance by returning to its heritage of high-quality (but not necessarily high-cost)
toys that spark the imagination, combined with a stellar shopping experience. As a result, FAO is back, and
poised for sustainable, long-term growth.
     The FAO Schwarz example is worth thinking about as we watch big brands like Starbucks, Circuit City and
General Motors struggle. It’s also worth noting that the troubles facing these brands pre-date today’s economic
catastrophes.
     Well before the stock market crashed, Starbucks built stores where nobody wanted them, Circuit City fired
its best employees, and General Motors designed exactly the wrong kind of cars. All three lost sight of what
made them relevant in the first place.
     All three are also very strong brands that probably will find their way back on track before it’s too late. Far
be it from me to prescribe what any of them should do, other than to think long and hard about where they fit
into the lives of real people, in the real world. Obviously, that’s something every brand should do, but it means
reassessing some of our assumptions.

MAKING A DIFFERENCE
     For one thing, it means disabusing ourselves of the idea that we marketers are in the fashion business. Yes,
there is much we can learn from the fashion industry. But that is not the same thing as changing out our images
on a regular basis in a desperate attempt to appear to be trendy.
     It’s all but impossible to remember who you are when your entire focus is on trying to be something you
really aren’t. Wal-Mart fell into that trap a couple of years ago when it attempted to go upscale. Target is now
falling into the same trap by trying to re-position itself as more high-value than high style.
     Even the mighty Microsoft fell prey to “fashionista” tendencies with its Seinfeld/Gates video vignettes. At
best, this was an attempt to be as hip as Apple. At worst, Microsoft was trying to burnish an image tarnished by
the apparently disappointing Vista operating system.
     Either way, it was a misguided attempt to generate 15 minutes of buzz, and it was irrelevant. The real
challenge isn’t generating a little bit of buzz. It’s figuring out how to help solve people’s problems and,
ultimately, live happier lives. That’s not about making buzz. It’s about making a difference.
     Staples makes a difference by eliminating extraneous products from its shelves and providing better
customer service. IKEA makes a difference by offering solutions to home furnishing problems. Dunkin’ Donuts
makes a difference by serving up a workaday pink-and-orange cup of joe.
     Perhaps you noticed that all three examples are retailers, and this is no coincidence. I would make two
points about that. First, retail represents perhaps the greatest untapped opportunity for relevance because people
go to the store looking for solutions.
     Second, retail represents perhaps the greatest threat to brand relevance because retailers are taking greater
ownership of the consumer relationship than ever before. This issue is no longer limited to the tactical realm of
private label brands; it extends to every facet of the shopping experience.
     We also need to think differently about what we mean by “innovation.” To many marketers, innovation is
an exciting but also very big and scary word. While much magic and mystery swirls around innovation, it’s
really just a fancy word for problem solving. Innovation is creativity that actually works.
     Kleenex innovated its way to relevance by adding germ-killers to its tissues. Hasbro innovated its way to
relevance by creating shorter versions of its board games. Levi’s innovated its way to relevance by coming up
with wardrobe solutions for men.
     There’s nothing terribly earth shattering about any of these innovations — except that they solved problems
and created relevance where it had gone missing.
PEOPLE ARE PEOPLE
    Finally, we ought to stop thinking about our customers mostly in terms of demographic profiles, which is
really a vestige of the old mass-media model. Demographics still have some utility, but clearly they are no
substitute for understanding people as people.
    Costco’s Paul Latham told me that even though he has lots of data about his customers, he doesn’t use it
very much. “The bulk of what we do for our members is done pretty much across the board,” he said, adding,
“To a large degree we rely on our intuition.”
    Similarly, Leslie Kilgore of Netflix told me that her brand’s appeal was based less on demographics than it
was on creating a better movie-going experience. When I asked Jim Adams whether Chipotle Mexican Grill
targeted particular demographic groups he replied, “Yes — people who eat.”
    The real issue is that too much emphasis on demographics can be a limiting factor. It can shrink your frame of
relevance among a larger group of people.
    So, no easy answers, but plenty of ways out of this fine mess we’ve created for ourselves. No cut-and-dried
prescriptions or clear-cut pathways, but plenty to think about and problems to solve.
    This is a painful moment for marketers, no doubt about it. But it is also a moment when those of us who live
up to all our chatter about being relevant will flourish. n

TIM MANNERS is editor of The Hub, and author of Relevance: Making Stuff That Matters
(Penguin/Portfolio), a book about what it takes for brands to become and remain relevant in good times and bad.
Tim can be reached at tim@hubmagazine.com

Cool Books

Cooking with All Things Trader Joe’s
Cooking with All Things Trader Joe’s is not authorized by the retailer, but so far it has not done anything to stop
it, reports Jeffrey A. Trachtenberg in the Wall Street Journal (11/3/08).
The idea came from two former M.I.T. classmates, Wona Miniati and Deana Gunn, who first published the
book a year ago, and have since sold some 20,000 copies.
The breakthrough came when a story about the book appeared in the Sacramento Bee, causing Borders to begin
stocking it. Obviously, this isn’t the way things normally work with cookbooks, sales of which “are primarily
driven by chefs featured on the Food Network.” Not only that, but cookbook sales in general are declining.
As Wona explains: “I used to cook from scratch but as my career took off and I had kids, the time I had for
cooking was squeezed out.”
The only real glitch is that Trader Joe’s sometimes discontinues items featured in the cookbook. In such cases,
she and Deana post substitutions online (cookingwithtraderjoes.com). The co-authors say they recently laid in a
fresh supply of 50,000 more copies.

The Customer Is Always Wrong
Twenty-one writers — including “two comedians, a musician and a poet” — contribute essays to The Customer
Is Always Wrong, edited by Jeff Martin and reviewed by Mark Lasswell in the Wall Street Journal (11/12/08).
All of these writers have worked at retail, and nearly all of them “considered the work an ordeal.” Michael
Beaumier, for instance, a regular on NPR’s This American Life, said his job in the “home section of a
department store” was depressing because he had nowhere near the star-power of the kitchenware.
In fact, his boss even told him, “It’s not about you. It’s about the merchandise.” Michael claims his boss could
make a display of “toothpicks and used Kleenex,” and be sold out by afternoon.
Another writer, Becky Poole, managed to find happiness at retail, however. Her job was at a wine shop “in the
hipster-magnet Williamsburg section of Brooklyn and the store wasn’t so much a commercial enterprise as … a
place to swap naughty stories, share thoughts, poems and songs.”
The lesson here might be that retailers should never hire writers, poets or comedians. Or maybe it’s that they
should just let them tell their stories and have a little fun with their customers.


Horse Trading in the Age of Cars
Car dealers, “despite their seedy reputation in general, are often linchpins of their communities,” writes John
Stoll, in a Wall Street Journal book review of Horse Trading in the Age of Cars,” by Steven M. Gelber
(12/3/08).
John bases this observation, in part, on his car-dealer father, who was “a leader in our church, who bought 15-
passenger vans and gave them to homeless shelters.” His great-grandfather, on the other hand, felt his
“crowning achievement was selling a black Packard to Al Capone in the 1930s.”
Steven Gelber traces this conflict back to the mid-1800s, when haggling was the norm for just about every kind
of transaction, among both men and women. But as most household products became standardized, pricing did
too.
Not so for horses, though, because there was nothing “standard” about a horse. And so horse-trading, and then
car-selling, became something of a man’s game, with guys doing their best to trick each other into paying more
than they should.
As one ’70s-era car dealer bragged: “I make most of my money off my friends. They aren’t looking for you to
screw them so you can really sock it to them.” He went on to boast about how he sold his own sister a fully-
loaded car at top dollar.
Steven suggests that this “moral obtuseness is virtually guaranteed by the structure of the business, in which
supply outstrips demand.” Lucky for us, today there’s Edmunds.com.

				
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