Category: Point of view

Sharing personal opinion

Putting the shopper (and the retailer) into innovation

Creating new products that retailers want to sell and people buy.

In an earlier post, I alluded to the importance of putting the shopper – and the retailer – into the innovation process. Today, I’d like to elaborate a bit on this topic.

The fact is that across countries and categories, people have an appetite for new products and services. But big organizations struggle to quickly sense and respond to new opportunities. The result: they fail to put to market innovations that can turn into a sustainable business. According to industry specialists, 9 out of 10 new products launched in the United States fail within 2 years.

For most organizations, innovation is still hit or miss. “Companies know a lot about the characteristics and attributes of their customers, but they don’t understand what causes customers to buy their offerings,” says Clayton M. Christensen and his colleagues from the Harvard Business School. “And without grasping causation, they can’t be sure whether their R&D spending will yield a winning ticket.”

In the book, “Competing against luck”, Christensen et al. propose that companies get to understand causation by asking customers, “What job did you hire that product to do?” Building on Theodore Levitt’s famous drill example, they developed together with an approach to innovation they called the theory of jobs to be done – in short form, the ‘Jobs Theory’.

The ‘Jobs Theory’ states that to create a product or a service, you must first understand why your prospective customers will “hire” it. Then, you must translate that understanding into specifications: “what do I need to design, develop, and deliver in my new offering so that it does the consumer’s job well?”

In other words, you can create a product that perfectly meets the needs of the consumer but it’s the shopper who ultimately buys. And there are multiple barriers between the shopper and a new product or service. If you don’t take purchase barriers into consideration early on, you may design a product everyone loves but nobody buys. Ooops.

Bringing the shopper – and the retailer – into design-thinking

Shopper marketing can help organizations be more successful with innovation, by incorporating the points of view of both the shopper and the retailer into the process. Here are five practical tips based on experience:

  • When you build your cross-functional team to attack market opportunities, make sure the shopper marketing team is represented together with R&D, supply chain, consumer marketing, finance, and external partners.
  • As part of the market immersion, make sure your team spends time in retail – but not just cool places in Shoreditch, Brooklyn or le Marais. Put on comfortable shoes and visit ordinary stores, observe what’s going on, talk to shoppers to find why they buy what they buy. Visit e-commerce sites too.
  • Ask your project team to find out how the needs of the consumer and the shopper could be fulfilled in a new way: core business, intermediaries, new usages. Is there a job we can do better than the products and services people currently use? Is there a gap that can be filled? Are there underserved needs?
  • Think about go-to-market and channel strategy early on. Retailers love innovations as soon as they fit with their strategies. Because unless you plan to sell direct, you will have to partner with a retailer to list, stock and merchandise your innovations in the end. So, understanding what can make them tick is as critical as satisfying consumers and shoppers.
  • Finally, when ideas, concepts, and prototypes are developed, make sure shoppers are part of the test plan. Home tests are great to assess consumer love but they cannot predict shopper purchase. Do a real market test in a few physical stores or a ‘smoke test’ online. Results will be a better indicator of future sales than purchase intent.

Putting the shopper at the core can help design and deliver new products and services that retailers want to put on their shelves and shoppers in their carts. If you do so, you are likely to hit higher success rates for your new product and service introductions. Which means you build a bigger business, and faster. And ultimately a better ROI of the innovation spend.

[This post is the current state of a reflection that started a year ago as I was working on a breakthrough innovation project for a major FMCG company. Thank you Julie, Philippe, Shantanu and Tomas for giving me the opportunity to participate in this project]

Retail trends… and fads

How to identify and respond to the true macro forces that really matter for a business.

The 2017-18 retail trend season is ending. Unless you were retired from the world on a deserted island over the last few months, you have been hearing and reading about the trends that are disrupting the retail world. There has been no shortage of articles, reports and even books predicting the adoption of e-commerce, the emergence of voice, the revolution of AI or even the death of stores. Every day, we were bombarded from countless sources with ‘trends’, often coined with fancy names, but not always backed by a deep understanding of people’s behaviors. Those that incorporated behaviors often talked out of both sides of their mouths – with trends diametrically opposing one another without giving a clue on how to deliver against them simultaneously.

In fact, when you review those ‘trends’, you quickly realize that most of them have their opposite, grounded in existing or emerging shopper behaviors. People are adopting e-commerce: true. Voice search is going to grow big: true. Artificial intelligence will revolutionize the retail business: true. But it’s also true that people still visit stores, type search terms on keyboards, or talk to customer service agents or sales assistants – and they will continue to do so for quite some time.

4 tensions facing marketers:

  • Digital vs Physical
  • Convenience vs Exploration
  • Budget vs Premium
  • Curation vs Control

Brand owners and retailers are under extreme tension to fulfill those expanding – and often opposing – expectations. My view is that they can only resolve the tension if they understand precisely what people really want and need in the context of their categories, their channels, and their journeys. By identifying what’s driving people to behave the way they behave at the moment, brand owners and retailers can precisely balance opposing trends – or macro-forces – to ensure they design and deliver the right proposition, with the right value, at the right moment of the journey and in the right way. Yes, the 4 Ps of marketing, but made contemporary.

Digital vs physical

Let’s start with the place – I’d rather say Moment of the journey as indicated in a previous post. Everyone agrees that the rapid adoption of new digital technologies has transformed the relationships people have with brands and the way they shop for them. They research information about products, review the opinions of peers and experts, get usage ideas and purchase online – not only big-ticket items like electronics or travel but also everyday products. Shoppers are also getting more familiar and confident with e-commerce and they shop more often online across a larger variety of categories. True. But at the same time, shoppers keep on visiting stores. And they will continue to do so. Only in stores, people can learn, test, try on products and benefit from personal help and advice from caring associates. Shoppers are also creatures of habit and, despite the success of the digital channels, they keep on entering their usual stores for top-ups or weekly fill-ups. The bottom line is that, for shoppers, there is no such divide as digital vs physical: they blend the two along the path to purchase. They research online, purchase offline; they buy online return in-store; or they browse in-store on mobile, buy online. Shoppers visit stores and sites depending on their wants and needs or the spur of the moment. Retailers need to sense and respond to those wants, needs, occasions, and motivations at every step of the journey to capture a bigger share of shopper wallets.

Convenience vs exploration

The right way – to replace the old P for promotion – is a question that has been stirring up some debate lately: what matters most for shoppers between ‘convenience’ and ‘exploration’? Those who say ‘convenience’ look at voice search as the next big thing in shopping. In a not so distant future, shoppers will be able to fulfill their needs without shopping in a store or an e-store. AI will automatically connect products to needs and self-driving cars will deliver those products directly to shoppers. Those who say ‘exploration’ talk about ‘explorium retail’ to describe the enjoyable experiences that retailers like Selfridges are looking to provide to their shoppers – the term is from Trevor Hardy from the Future Laboratory. Convenience vs exploration: interesting debate for which the true answer is ‘it depends’, mostly on the shoppers’ level of involvement in the purchase. In low involvement categories, shoppers will be happy to delegate the chore of shopping to a machine such as Alexa, Google Home, and their clones. If you are selling one of those categories, be ready to learn how to make it to the shopping list of an algorithm! On the opposite side of the spectrum where involvement is high – so does the price to pay – retailers will have to work hard to delight demanding shoppers with well-crafted experiences that go well beyond the transaction. If you are operating in such markets, make sure some of your executives come from the entertainment industry. Having said that, when the sales season starts, it’s neither convenience nor experience, it’s just bargain and price.

Budget vs premium

Delivering the right Value – not just price – is deeply rooted in occasions, needs, and motivations. The tension between offering budget or premium products reflects on a behavior that has been observed for quite some time but recently reinforced by the expansion of categories as well as retail formats: smart shopping. On the one hand, people monitor their spend. They are saving on commodity purchases at their habitual supermarket – retailers have established the idea that value does mean cheap with their private label brands. Or they go the extra mile to visit a discounter or a warehouse club. Value retailers such as Lidl and Aldi have dramatically improved the shopping experience and more shoppers come to their stores. Popularity drives normalization, and normalization drives adoption. On the other hand, shoppers indulge themselves with premium offerings. They spend their disposable income – or the savings they make on commodity purchases – to indulge or pamper themselves with luxury food, personal care, clothes, home equipment, and so on. There is no shortage of newcomers – manufacturers or retailers – proposing top quality products or services to cater to demanding shoppers. Smart shoppers spend more and more on the extremes of value and luxury and retailers need to know, category by category, what’s driving their shoppers’ behaviors.

Curation vs control

Finally, the right Proposition – encompassing product but also associated services. As a rule, people expect brands and retailers to provide them with a selection of products and services tailored to their expectations and preferences. Nothing new in that statement, that’s the essence of marketing. But what’s new is that technology is enabling marketers to offer a personalized, individualized proposition. Curation, which was initially a human task, is increasingly supported, when not fully handled, by machines – think Amazon or Netflix algorithms. Powered by supercomputers, brands and retailers gather data about who people are, what they buy, and how they shop. Algorithms relentlessly and tirelessly scan data to help predict what people may want or need. And software programs deliver personalized assortments and recommendations. Brave new world! But what happens when the system derails? When people receive a suggestion to buy something they have just bought for example? Well, they probably wonder whether they should keep on relinquishing personal data to inform such irrelevant propositions. Not to mention the fear of security breaches. The value people place on their personal data is bound to increase, creating an increased desire for privacy and control over personal data. And with initiatives like GDPR coming to fruition, we believe the tension can only exacerbate. [Update: even more so since the Facebook hearings in the US]

To conclude this rather long post, there is no question that dramatic changes are happening in shopping and retailing. Some brands and retailers will die, some will just survive but there will be players, big and small, that will thrive. The winners will not just be in the game, they will resolve the tensions facing them and find their own way to win. Firstly, they will develop a growth strategy articulated around a clear and strong value proposition for their brands or their retail outlets – whatever they might be. They will focus on currencies that really matter to shoppers, not just buzzwords or shiny objects. Secondly, they will associate people and technology to develop targeted, relevant actions that connect with shoppers along their journey. And thirdly, they will relentlessly innovate for their shoppers with the obsession of doing the job better. Putting to market products and services that people not only love but also are willing to purchase and recommend others to buy.

To succeed, thriving brands and retailers will need to turn their data into insights. Lots of insights. About consumers and shoppers, categories and products, channels and formats, from their own data warehouses, or via partners and third parties. Armed with those insights, they will develop a holistic yet granular understanding of people: their profiles of course but also their needs, occasions, missions, beliefs, motivations, behaviors,… They will also uncover opportunities to create new concepts and prototypes they can quickly put in front of shoppers to assess future value. Finally, they will identify, very precisely, how they can influence behaviors along the purchase journey, whether if it is through communications or their associates.

Although speed and agility will be critical, reacting to disruption will not just mean being the quickest but also being the smartest. Playing the marketing game is for the brave, not for the timorous.

[I want to thank my colleague and friend Efrain Rosario for helping me write this article.]