Investing for Retail Growth

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The physical store still rules

After the Holiday season, it’s clear that shoppers bought both online and in stores to complete their lists, with the roles of each becoming more distinct. Shoppers go online to “spearfish”, or find specific items for convenience, whereas they visit brick and mortar stores to get ideas and instant gratification.

But holidays are not indicative of broader shopper behaviors.  Retail is a 12-month business and we see stores as key for overall retailer health, yet few retailers are seeing their value as a pillar of growth. A report last fall in the online publication Retail Dive states that:

“A big weak spot for retailers is their brick-and-mortar stores: Despite the fact that 80% of sales accrue from brick-and-mortar for the retailers keeping their investments flat, just 10% of them are prioritizing remodeling and refreshing existing stores as a key growth strategy to increase store productivity.”

Walmart reduced earnings expectations for the next 2 years, and the CEO announced that he is pushing to make Walmart better at retail basics—neatness, merchandising, and efficiency. More related to operations than store design, these actions recognize the brick-and-mortar factor in growth. But are they enough?

Target is betting on iBeacon and NantMobile technologies as bolt-ons to the current store experience, but these are available to all retailers.  For others, investment in growth means spending to upgrade their eCommerce business, fulfill an omnichannel imperative, and engage shoppers with mobile apps.  Yet the promise of an integrated mobile retail experience remains elusive.

Innovation isn’t only about technology

 Technology investment at the sake of neglecting stores is costly, as tired-looking stores fail to project the new tech enhancements, leaving customers bored and uninspired. For the most part, the modern retail experience is like a 1995 Camry with an iPad duct-taped to the dashboard. Meanwhile, new “pure-play” E-retailers are opening stores that raise the bar for a contemporary well-designed retail experience.

But there are emerging advances in understanding how people shop and engage with stores that can enable productive and delightful shopping experiences. Less tangible than silicon chips and RFID, they are getting second class treatment- but brick-and-mortar innovations can deliver high “bang for the buck”.

New science, new results

The science of shopping has evolved from tricks of the trade to controlled experimentation. Early innovations in retail design, like loop traffic patterns and axioms like “shoppers always turn right” are legendary, but not adequate. Shopper behavior is subconscious and cannot come from merely quizzing shoppers. We can apply findings in behavioral economics, for instance, that can help design displays that make products seem more valuable or desirable. Application of how the brain works when seeking items in a store, how it separates what is relevant from what isn’t, and decoding how shoppers navigate by intuition are all areas of new knowledge that we utilize to revise how the store experience is designed.

So how can investing in innovative store design drive growth? We believe in three distinct ways:

Growth through better Shopability:

“Shopability” is a powerful innovation area for stores. Shopability is organizing stores to help shoppers find what they need faster, so they can better spend time discovering what they want. Using knowledge of how the brain processes by seeking patterns, organizing complexity into clusters, and “de-selecting” what isn’t relevant before selecting what is, inform retail planning innovations.

Furthermore, automated RFID-based scanning and cashless payment methods can lead to multiple points of entry and exit for large stores to enable more convenience and drive more trips, completely changing retail store planning paradigms.

Growth through Demand Creation

Stores have to work not only harder, but differently. Shoppers today are more often on missions and not doing as much browsing. Webrooming, shared lists, and digital coupons are the tools of mission shopping. Triggering desire is the realm of the physical store, and innovations can add surprise and discovery to the routine.

Because retail is a sensorial experience, stores can trigger positive emotions that an online experience cannot. An aroma, a color, even the attraction of an energized crowd can spark an unplanned purchase. Great retail design amplifies these effects to delight shoppers and drive sales; it inspires, educates, and creates demand.

Growth through Brand Strength:

Brand is the secret ingredient in a brick-and-mortar growth strategy. Understanding the desired shopper allows us to craft a relatable brand that appeals beyond product and price; fitting into their values and aspirations. A strong brand idea that is woven throughout the retail experience is a powerful customer retention and acquisition asset. People are attracted to what’s new and fresh, then stick with a brand that goes beyond meeting their needs by providing an experience that understands them- and stores can deliver this better than any other channel. Ecommerce players who are creating bricks-and-mortar versions of themselves get this.

L-Brands’ CEO Les Wexner recently reinforced the importance of stores. At his last investor meeting he stated that remodeling Victoria’s Secret stores has paid off and the importance of physical stores “is way bigger” than the Internet for retail.

At ChangeUp we know that the physical store is the best stage to deliver an experience that attracts attention, builds valuable relationships, and drives growth. The technology arms race will end in a dead-heat as effective strategies are copied and become ubiquitous. In contrast, the store is the true differentiator, and the ultimate way a shopper will experience a retailer’s unique point of view and appeal.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

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Three Good Reasons to Exit Your Logo

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When should you continue to drive forward with your current logo and when should you take an exit?

Signs that you need a new logo don’t suddenly appear, and logos don’t have expiration dates. If so it would make justifying a new visual identity much easier. Despite this we see new logos frequently, some we notice some we don’t. In the past few years many familiar brands have changed their logos: Delta and American Airlines, Pizza Hut, Holiday Inn, and most recently Verizon and Google.

A logo, or a visual identity, is essentially a symbol that provides a shortcut to what a company means to each of us. It represents the brand; the accumulation of good will, and enables reflexive decision-making. This cognitive response has “equity” to a company that is truly valuable, so changing a logo can be risky. What if customers can’t find us… or think we are a different company they can’t trust?

And changing a brand’s visual identity can be expensive, especially if changing assets like storefront signage or fleet graphics are involved. Repainting all the airliners in a fleet can cost several millions of dollars. Repainting just one Boeing 777 can cost $100,000 to $200,000.

Some brands have products that can project a relevant or contemporary image (cars, appliances, clothing lines,) so the logo is not burdened with that role. Ford, for instance, has not changed their logo in generations, but their continuously evolving vehicle styling pulls the logo into the future to new generations.

In contrast, packaged brand logos often change more frequently. Companies like P&G or Unilever update the look of bottles or boxes to outmaneuver competitors, and still stay familiar because colors and shapes can combine to retain a familiar look. Often the logo gets refined and adjusted with each new product improvement and we barely notice. Change is driven by ongoing competition for attention at the shelf.

Sometimes “involuntary reasons” do come up to change a visual identity, and these reasons can be a matter of survival for a business. An obvious involuntary reason is a merger or acquisition where two companies need to blend their identities or invent a totally new one. Another less common involuntary reason is that a logo is suddenly offensive due to entering a new market or a shift in cultural norms.

So what is a legitimate, voluntary reason to change a logo, or visual identity for the rest of us? There are three reasons that I have experienced: to signal a change to consumers, clarify what you stand for, or to reinvigorate an organization.

 Signal a Change

Businesses that have lost customers to new or aggressive competitors can use the change of a logo to prompt reconsideration. Often we work with clients whom we have helped truly innovate but their visual identities reflect the past and perpetuate old opinions. A new identity can be effective at triggering renewed interest while retaining familiarity.

 Clarify Your Proposition

Customers’ needs evolve, and how companies respond can either mean amplifying what they already do to meet those needs, or transforming their business to better meet them. Regardless, a new visual identity can be an effective tool to project new brand attributes, and can communicate a new relevance.

 Invigorate an Organization

Often an internal audience can be more important than an external one. Organizations may need to look at ways to galvanize their workforce under a new banner to march forward more cohesively. Management changes, reorganizations or restructuring of a business, or a new mission or sense of purpose can warrant a change of visual identity to mark a new beginning.

Often all three of these reasons to change exist simultaneously and a new identity is the capstone of much deeper and comprehensive re-branding effort. That is a good thing because a successful new logo must signal broader change, and that change should be compelling or else consumers may feel betrayed.

One key thing to be aware of is that consumers will never tell you in any research that you need a new visual identity, and it is ultimately a strategic decision… and lastly, consumer awareness of a logo, or familiarity, does not mean it is appealing, relevant, or hasn’t expired. Exiting may take some time, but if for the right reasons it can be a major factor in success.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

Your Reputation is not your Brand

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Sometimes creating a brand can seem like an exercise in generating adjectives. Brands are, after all, a reservoir of positive adjectives that we want the public to quickly associate with our product, company, or service. But take note, not all adjectives, no matter how positive, belong in the brand discussion because they are actually part of reputation. Brand and reputation are different, but I have had many clients who struggle with the distinction. Reputation is about character and integrity- brand is about personality, attitude, and passion.

If you are using adjectives like trustworthy, honest, reliable, dependable, fair, ethical, sincere, even quality in your brand statement, or tracking them as brand attributes, you are actually managing reputation. Reputation attributes must be earned or “vouched for” by friends and family that have first hand experience. Reputation must be managed, but it is a different sphere than brand… and if reputation gets tarnished, brand can’t repair it. Unless you are in an industry with chronic dishonesty and unsavory behavior, you cannot create distinction with reputation drivers. They are points of parity. Only brand creates distinction.

Reputation adjectives are not subjective, in other words there is a wrong answer. If the opposite version of the adjective would never ever be an acceptable attribute it is clearly about reputation and doesn’t belong on the brand list. The best test for an adjective’s being a reputation driver versus a brand driver is the “un” test. Adding the prefix “un”, as in “untrustworthy”, “unreliable”, “unethical”, (or “dis” honest) are showstoppers.  There is no antidote except to ask for forgiveness and repent.

Brand worthy adjectives are action oriented or descriptive of a behavior, and are subjective with no right or wrong answer. That is why brands always need a target audience. The target will either align with your brand and sign on, or respect your honesty and go elsewhere. Brand adjectives should be words like smart, fast, lighthearted, serious, simple, powerful, spicy, or quirky (obviously not a complete list). Brands present a trade-off, with more of this or less of that, forcing a decision on tastes and preferences not character, and thereby become unique and differentiating. A brand can’t be more or less honest, honesty is an absolute.

Brand and reputation co-exist, and the symbolic aspects of your brand (name, logo, product design, color) can trigger good or bad opinions about your reputation, but that is a consequence, not a purpose of branding. Good branding assumes good reputation while adding personality and distinction. In the same way we expect all of our friends to behave with integrity, be trustworthy, and honest, we describe them to others with nuanced adjectives like funny, creative, athletic, and perhaps “a foodie”… thus offering a better picture of their likability.

Talking about your brand with reputation adjectives can sound suspicious, prompting potential “hmmm, why do they have to say we can trust them?” reactions. It’s like selling someone on a blind date by saying the infamous “they have a nice personality”; it sounds like you are hiding something.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

How to Experience an Experience

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BECOMING AN EXPERIENCE CONNOISSEUR

Can someone be a connoisseur of experiences? They certainly can be with wine and roller coasters, so why not? Wine tasting has been raised to an art form (or at least a form of entertainment), with clear steps, techniques, and evaluation criteria. As we think about having experiences it is reasonable to apply the same concepts. How do you experience an experience to get the maximum enjoyment, and create them to get the most impact?

As I look back at my life of both creating and consuming experiences I find that there is a “right way”… so I have created an approach, or means, of becoming an experience connoisseur.

EVERY EXPERIENCE HAS 4 COMPONENTS

Most of us think of an experience as an event, or an accumulation of moments that are linear with a beginning middle and end, but this is an incomplete picture. Experiences actually begin earlier than we think and end later- if at all. The key to being a connoisseur of experiences is to have enlightenment about the components of an experience, and discovering how to enjoy them beyond the event itself.

All experiences have the same 4 components, whether they are simple events like errands or big holiday splurges. These components are Anticipation, Preparation, Participation, and Memory. Knowing these components, their various attributes, and how they add up to an experience can be invaluable. Beyond enabling individuals to be experience connoisseurs, they can be the building blocks of new strategic experiences that most brands today desire to create.

ANTICIPATION

Anticipation is a mental state involving the way we perceive we will feel about a future event. It is the component most often left out when thinking about an experience because it falls outside of the actual event. But the build up can be as enjoyable as the event itself because it triggers the release of dopamine- the brains happy chemical- when we imagine what we will experience. Like a dog getting excited at the mention of a walk, we too experience anticipation when we think about something we enjoy (we just don’t have tails to show it).

Because it involves the mental projection of the future event, a brand that has provided consistently enjoyable past experiences can leverage anticipation. A clear vision of the enjoyment one brand delivers will diminish the role of other competing brands. This is the genesis of brand equity as the anticipation-dopamine connection creates a brand craving. Strong brands foster strong anticipation.

As a connoisseur, learn to relish your brain’s perception of the future event. If you are “spontaneous”, also know that you may be cheating yourself out of a key experience component.

PREPARATION

Preparation is an activity versus a mental state. It involves acting on the anticipation of the event through the making of plans, lists, maps, scripts, and agendas. Preparation is like collecting the ingredients and mixing them before putting a cake in the oven. It is as important as the baking. Whereas anticipation is a personal experience, preparation is more social and often ritualized. When preparing, plans are shared with friends and family, providing positive feelings of validation and a sense of self-confidence. In this way social affirmation can make the actual event more enjoyable through the minimization of anxiety.

Brands that provide tools that can aid in planning with innovative mobile and digital touchpoints, and even coupons and promotions, embed the brand more concretely into the experience.

Connoisseurs enjoy the preparation as a way to externalize their anticipation by acting on it and sharing it. In a way, they can test drive the experience with their friends to see how it fits.

PARTICIPATION

Participation is the event itself, and is usually comprised of many smaller events that happen within a fixed period of time. Ironically the event is often the shortest duration of the experience, yet has the burden of living up to the emotional high of anticipation and the social scrutiny of preparation. Participation is the cake in the oven, and like the cake mix, the goal is to be transformed from one state to another.

Successful participation in an experience changes us, and great experiences change us in positive ways we didn’t anticipate or prepare for. An experience that merely fulfills our anticipation, regardless of how high they were, is not a great experience. Brands that are committed to customer experience need to understand how they can be transformative, and how they can continually innovate to surprise.

Connoisseurs know that the participation is the core of the experience, but is hollow if there is no positive surprise. 

MEMORY

The last component of an experience is memory, and it is the memory that endures. In some ways, the memory component of an experience allows you to have the cake and eat it too- the experience is intact long after the event is over, available to experience again so long as it was worthy of remembering. Since the brain stores negative experiences better than positive ones (likely because we needed to remember dangerous situations), experiences need to be well above our anticipations to stick.

Brands should innovate ways to leave non-physical souvenirs via surprises and delights that are worth remembering and sharing as they create experiences. And memories can begin to seed in the earliest moments of anticipation. (And social media can be an accessory to memory, but not a substitute.)

Being a connoisseur of experiences means appreciating the anticipation, preparation, participation, and memory of the events in your life. Memories get stronger when shared and richer with retold to include the anticipation and preparation, not just the participation.

Like eating a cake versus creating one, experiences are not just the event itself, but also include what comes before and after. Being a creator of experiences means addressing these 4 components as a brand innovates customer experiences and seeks to delight their audience. Focusing on the event is cheating yourself, and under-delivering a brand’s experience potential.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

Celebrating What a Brand is Not

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In a marketplace that is flush with options and where consumers are bombarded with promises, less can be more. Complex brands need complex communications and things get murky and out of control. Take the classic Swiss Army knife that has a blade for everything, is it still a knife or has it become something else? Today as we shop at drugstores for Halloween candy, grocery stores for toys, and hamburger chains for salads, the clarity of what a brand means to us is blurred as things are added. That’s why it is refreshing to hear a brand tell us what they aren’t. Chipotle and Trader Joe’s come to mind as brands who clearly tell us what they are about by telling us what they are not about. Strategically, choosing what not to be can powerfully communicate that a brand is special and worth noticing.

And More?

But this road can be scary, and it can be difficult to stay true to the idea. I remember seeing a business in Harrisburg PA for instance with the comical name “Simply Turkey and More!” Apparently a single-minded focus on turkey was not enough to be successful, but too entrenched to abandon. This isn’t the first or the last “and more” amendment I have seen to a name. It takes nerve to stay simple and not be lured into dangerous waters by the sirens of generalism.

In the case of “Simply Turkey”, they likely needed more turkey-centric holidays to grow the business. But for many brands the move from narrow to broad is based on current success and pure opportunism. The brand is popular as a tractor and can be extended to other merchandise via licensing, or a store has traffic and can capitalize with more merchandise variety. Both of these circumstances are legitimate paths to more revenue, but need to be considered with the brand’s long-term health at the core. Short-term gains can create big brand pains down the road. This is why it is imperative to have a clear understanding of what the brand is not, make it a cultural mandate, and stick with it.

This not that

Making clear statements of what you promise not to do is a form of reductive differentiation versus the usual additive approach, and can be more uncomfortable for established brands than new ones. Making choices is more difficult than addingmore reasons a brand is better, and sometimes could strain relationships or mean walking away from sales. It forces brands to say no. CVS  not selling cigarettes is a great example. But there is no shame in saying no. We all honor unwavering focus and dedication. It is easier to understand and to reward brands that draw a line on what they will and won’t do. It makes consumers feel good about their own choices. Olympic athletes train from an early age to be exceptional at one sport with the intentional exclusion of others. In some cases, playing or training for another sport can actually be detrimental to their abilities. Distractions cost… a lot. Brands have the same risk.

Another motive for the “what we are not” approach is that Millennial’s and Gen Z consumers are attuned to personalities defined by “avoidant archetypes”- vegan, gluten free, etc. They are suspicious of accommodation and waffling brands, and brands that trade on fads and opportunism. They embrace brands that are deep versus broad: brands that are “for this… not that”.

No makes yes stronger

Clarifying your brand idea should begin with defining what you are not before focusing on what you are. Brands that clearly are not something benefit by being perceived as being more authoritative, more trustworthy, and having higher quality because it communicates passion and purpose. Of course brands have to stand for something too, but clearly defining what a brand is not is a way of providing more emphasis for what a brand is.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

Beyond Seamless: Retail’s Integrated Future

Close Up Of Man Reading Shopping List From Mobile Phone In Supermarket

RETAIL UNDER SIEGE

Retail today is a paradox. Store traffic is declining, yet over 90% of retail sales still occur in physical stores. Chains like Radio Shack are closing while successful internet retailers like Birchbox are opening locations. We are in the midst of an upheaval in retail that is caused by the ubiquity of the internet and the smartphone. New ways to acquire the things we want and need are undermining the tried and true business models and tactics of traditional retailers, not unlike how “cord cutting” is shaking the foundations of the television industry.

NEW BEHAVIOR

Today the internet has given consumers a massive virtual store, making shopping in the physical store less convenient and limited. Consumers end up visiting physical stores less to shop, and increasingly only to buy. This turns the role of the store, merchandising, and retail design, upside down. How retailers deliver value, stores are designed, merchandise is presented, and customers are served will need to be rethought. There is real risk of things getting worse for store traffic. The recent fear of “showrooming” has now given way to “webrooming”- where shoppers narrow their choices or find offers online before buying offline.

An article on declining retail traffic in the WSJ last summer nails it: “Instead of wandering through stores and making impulse purchases, shoppers use their mobile phones and computers to research prices and cherry-pick promotions, sticking to shopping lists rather than splurging on unneeded items.” Additionally, replenishment and stock-up trips could be increasingly threatened by the emerging “internet of things”; creating in-home technology that, combined with same-day delivery and subscription, promises to automate the repurchase of basic consumables. Over time, these solutions could siphon off categories like diapers, pet food, and detergent that generate traffic for food-drug-mass retailers.

These new risks are the unintended consequences of technology, and are driving the need to reinvent what makes a brick and mortar retailer relevant. It is a push toward extinction for those who stick with the status quo. How retailers create value will need to shift away from competing on the current right product, right price approach. Retailers today must differentiate on emotional and personalization dimensions, by knowing their customer better, using the very technology that is changing consumer behavior to their advantage. This shift is already underway, and requires the blending of the customer’s online and offline retail journey with shopper data to create something that is greater than the sum- an integrated experience.

INTEGRATED EXPERIENCES

Addressing “omnichannel” is a requirement to be efficient. It provides what customers are already expecting: continuity of promoting, selling, and returning merchandise across a retailer’s ecommerce and physical stores. But it is not a differentiator or guarantee of ongoing success, it only creates parity. “Seamless” goes a step further and ensures that moving from digital to physical channels is not a bumpy ride. Both are important, but not sufficient. Integrated experiences are more powerful: blending the physical and the digital to create a way to not only shop and buy, but also experience a brand.

Enabled by technology that did not exist 5 years ago, shopping and buying can merge under a bigger idea that is not a place, but a brand idea, fostering a two-way relationship that is valuable to the customer and the retailer. Brands like Lowe’s with their “My Lowe’s” approach to managing home projects, and Macy’s industry-leading digital efforts deploying iBeacon technology, are at the forefront of experience integration that successfully moves beyond omnichannel. Integrated experiences don’t have seams at all- they are fluid. The role of the store is to be the confluence of the digital and physical worlds.

NEW EXPERIENCE BENCHMARKS

The new breed of internet retailers like Nasty Gal and Warby Parker see the need for their experiences to have a physical component to better connect with their current, and better communicate with potential customers. For these brands, the physical store is unlikely to usurp their digital store as the driver of revenue, but instead create realness to the brands in ways that a digital experience alone can’t. Not unlike a performer who goes on a concert tour to promote a new album you will download on iTunes, physical stores  for these retailers provide an opportunity to create an experience more interpersonal, more sensorial, and thus more memorable. The physical stores that these online retailers are opening don’t have the same financial motive or ROI as a typical retailer. They should be viewed as brand building efforts- delivering the brand idea in ways it is best experienced and embraced. As such, they do not have the same sales productivity pressures and can seemingly over invest in technology and “brand ambassador” staffing. As the physical component of an integrated experience, they serve as spiritual centers that believers of the brands can make pilgrimages to, and in which new believers are converted. As a result, traditional retailers face a higher benchmark for their own experiences, despite the different business model.

GETTING IT RIGHT

For traditional retailers, getting mobile right is the first battle, but needs to be approached with the physical store in mind. Many retailers are getting the idea that mobile is not a threat, but a tool. More than half (55%) of retailers believe that the main purpose of mobile marketing, point of sales, and other activities is to drive sales at stores, according to a study from retail systems analysts company RSR Research. But all too often this tool is insulated from overall customer experience in the store itself, and not integrated into a unified experience that builds the brand. Retailers need to evolve to offer customers an integrated experience that maintains a robust role for the physical store, wherein mobile is an indispensable shopper resource AND a means to stay meaningfully engaged with the customer. This goal of an integrated experience will require a re-assessment of the business model, different organizational design, new skill sets, new retail design strategies and technologies, and a passion to understand and manage the customer journey.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

Amazon Dash Button Leapfrogs the Shopping List

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The shopper path-to-purchase just got shorter—a lot shorter. In a move that may smack of being an early April Fool’s prank (it’s not), Amazon today announced theDash Button as a product replenishment system to Prime Members, which enables instant re-ordering of many of life’s simple needs.

The branded widgets work with 255 products from 18 brands, including Tide detergent, Keurig cups, Olay face cream, Huggies diapers, Bounty paper towels, Gillette Fusion shaving products and anything else that can typically trigger a trip to the store and now can be ordered with the push of a button.

Place the gadget close to the shelf where you keep the items, push the button when you feel you are running low, and Amazon sends your phone an alert to place the order with your Amazon app.

While still invite-only, device-makers are already developing with the Dash-based Internet of Things ecosystem in mind, including Whirlpool’s smart washing machine and a coffee pot by Quirky.

Disruptive Implications

The implications of the Dash Button—an extension of its Dash scanner announced last year—are huge for retailers and CPG companies. It will disrupt the path-to-purchase model that has been effective for marketers of consumer packaged goods for years. The model focused efforts and investment on creating preference for their brands and consistently getting them into the shopping basket- bridging the in-home and in-store experience. The model has been a basis for influencing shoppers by managing the predictable path of identifying a need (replenishment), to getting a brand name onto the shopping list, to influencing the shopper to trade up or add on a sale in-store.

P&G’s classic “first and second moments of truth” approach to branding and marketing has been the Gold Standard of this path-to-purchase discipline. In their influential approach, P&G divides efforts to create preference into the shelf (first moment of truth where packaging and product claims rule) and the home (second moment of truth where the product performs). Retailers also jump onboard the path-to-purchase model by driving shoppers to their store for convenience, price and promotion, private-label brands, and their own apps with shopping lists.

But the Dash Button’s Internet of Things bolt-on ease threatens to destroy the first moment of truth and the path-to-purchase as we know it, merging the home and the store shelf and switching more power to the CPG brands. It makes the shopping list and the store irrelevant for consumables purchases.

Incumbent Brands, Incumbent Retailers

Amazon’s innovation leapfrogs the shopping list by creating an immediate means to reorder an incumbent brand at the point-of-use. The Dash button replaces the idea of preferred brand (a cognitive bias) with incumbent brand (an enduring decision). It eliminates the store and channel decision, obsoletes in-store marketing, and further elevates the smartphone as a primary means of engaging the shopper with new items, deals, and brand-switching messaging. It redefines convenience, and perhaps most importantly, it gives brands a new permanence in the home versus an ephemeral and fickle “preference”.

Because the products that lend themselves to the Dash Button are in traffic driving categories, fewer trips to brick-and-mortar retailers will result. Target, for instance, is relying on increasing their relevance to shoppers by emphasizing consumables. They will have new challenges to their strategies to drive traffic if and when the Dash Button and similar frictionless replenishment technologies become mainstream. Amazon will become the incumbent retailer. This development will likely cause tension between traditional bricks and mortar retailers and CPG companies.

Amazon Dash Button app

Unintended Consequences

Many questions will need to be answered as the Dash Button rolls out. Will there be a third party that starts to play, where shoppers can chose the retailer? Will CPG companies take cost out of their packaging and in-store marketing as the shopper switches away from making purchase decisions in-store and their products get delivered directly to the home? Being a premium service, will technologies like the Dash Button create further social polarization between the haves and have-nots, relegating shopping for consumables a chore only the lower income shopper must endure? Could the Dash Button potentially mean that affluent shoppers will be harder to get into Walmart, Target, and the Dollar retail channel?

Like the Operant Conditioning experiments in the 1930’s, Amazon has now created a way to turn our homes into a virtual “Skinner Box” that fulfills our needs for nearly immediate gratification. The implications for retail cannot be overstated, and retailers will need to match the innovation with their own innovation to stay relevant and give shoppers reasons to shop beyond price and convenience

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

The McDonald’s Dilemma

Keoni Cabral/Flickr.com

Keoni Cabral/Flickr.com

What are we supposed to be Lovin? As sales decline this is the question that McDonald’s needs to help us decide. McDonald’s has a big brand problem and an even bigger relevancy dilemma: should they compete head-to-head with new premium competitors or redefine fast food? To get consumers to start lovin’ again, they need to communicate why they exist and why we should care.

McDonald’s original innovation, the breakthrough, came from applying mass-production industrial technology to food service, and applying big marketing. This was perfect for the times. Americans believed that ingenuity and process were the answer to prosperity, and McDonald’s was the product of this era. And Americans consumed mass media, which fanned the flames. McDonald’s was modern, and modern was sexy. Customers ate the product with their families, but ate the idea of McDonald’s in the collective spirit of progress. The expectation seems to be that this original booster rocket of innovation created enough velocity to propel McDonald’s into the hearts of future generations.

Advertising built the brand

McDonald’s did not start life acting like a brand of today. Back then a brand was merely a logo and “trade dress”. McDonald’s has thrived as a marriage of operations and marketing. Their shear ubiquity, and recognizability has resulted in a giant, familiar company and a world-wide brand. As their signs used to celebrate “Billions and Billions served”… This required an emphasis on operations, efficiency, and market penetration. Hence the business model, but what’s the proposition? What exactly is the brand?

Through the years, McDonald’s has become a textbook example of what happens when advertising drives the brand. From the original “you deserve a break today” 44 years ago, to the 1970’s era child-friendly Ronald and friends characters, to today’s “Lovin’ it,” McDonald’s has created myriad media-based images of itself. We have developed our mental image of McDonald’s through a collection of tactics, versus a consistent, compelling brand idea. This is admittedly hindsight analysis. It worked spectacularly well for decades, but today, like most of us will experience ourselves, its youthful behavior has caused health issues in old age.

Speed, quality, price- pick any two

The axiom “speed, quality, price: pick any two” has adorned many shop walls, and it rings true in our own experiences. McDonald’s found the magic combination of speed and price, and was given a hall pass on quality due to its innovative delivery system. For many of us, they invented the way burgers and fries were supposed to taste.

Today consumers are presented with branded concepts focusing on a higher standard of quality, and we assume the operations can deliver. What is now known as fast-casual (i.e. Chipotle) is just a premium tier of fast food. Consumers pay more with both money and time, believing they are receiving a higher quality product. Fast casual approaches the market with a new denominator: experience per dollar versus the calories per dollar of traditional fast food. Meanwhile a new lower tier is thriving in convenience stores like Sheetz, Wawa, and Speedway in the east and Midwestern US. This fills the need with a lower socio-economic segment for speed and price, putting McDonald’s in a two front war and a dilemma.

Choose your battles

Much of what McDonald’s appears to be doing is fighting this two front war by trying to become broader, versus focusing. They need to pick a denominator, (experience per dollar versus calories per dollar) and start there. Testing table service from Australia and made-to-order “Build your Burger” kiosks in some US locations will further confuse, and looks desperate without a clear brand proposition driving brand clarity.

Today consumers want a concept, not a delivery system. What should we be lovin’ about McDonald’s that doesn’t rest on ancestor worship and the latest menu re-tooling? McDonald’s needs to mean something modern again, and that is going to be tough, but it’s not impossible.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

How Apple Re-invented Premium

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It was 1991 when we got our first Mac. It was a Macintosh LC, nicknamed “the pizza box”, and “LC” I now know stood for Low Cost, but I don’t remember it being cheap. In fact, at over $2000 it was the most expensive thing I had ever bought, next to my car. A relentless series of desktops, PowerBooks and MacBooks, and now iPhones and iPads later, I still buy Apple products and expect to pay substantially more than for non-Apple choices. My new iPhone is at least two-times the cost of an Android smartphone.

By definition Apple products are premium because they cost more. But what needs to be recognized is that Apple has re-invented what premium means, and this re-invention is as profound as the innovation of the products they sell.

Luxury is a very old idea

Premium is often regarded as synonymous with luxury, and signaling luxury relied on showing off what society regarded as scarce or difficult to attain. Luxury is an extraverted idea. The display of a Rolex on a wrist, or Mercedes in the driveway is display of achievement and status. Yet over generations of marketing, many of the signals of luxury are whitewashed over mundane products to give them a premium aura, creating nothing but hollow bling. Additionally, manufacturers and retailers look for a range of pricepoints on the shelf… to trade-up shoppers to higher priced items via cosmetic upgrades or additional (often unnecessary) features. Lastly, luxury can be associated with being pampered, but many comforts that used to be exclusive, like air-conditioned vehicles, have been made common. Overall, arriving at premium based on the symbols of luxury is often an illusion, and consumers, especially millennials, are realizing it.

Premium is now introverted, not extraverted

Today premium is no longer an extraverted, but an introverted idea, thanks to Apple. There is certainly social currency in having a Macbook, iPhone, or the soon to be cool Apple Watch, but they represent a new kind of premium not about scarcity or pampering, but about potential. The luxury of potential does not rest on the cultural symbols of a society based on privilege, aristocratic splendor, or the imperialistic conquest of exotic furs and spices. Apple represents the unlocked potential of achievement, not the spoils. This is a game-changer for all premium brands, and will require re-tooling or we will see new, introverted premium brands quickly overtake the old guard. For younger affluent consumers, a Tesla is more desirable than a Mercedes, and the Apple Watch may well be more desirable than a Rolex, because they are more than products- they are accessories for a new attitude. This new attitude redefines what is valuable around who is in our lives, our sense of purpose, and how we engage, not what we own.

Apple may not have set out to redefine premium, but whether intentional or not, it is the result of their behavior as a Brand. To reverse-engineer Apple’s formula for the new premium idea, here are three phenomena that have added up to the “premium of the future” based on a change from extraverted to introverted.

Introverted Premium is the Why, not How or What

Traditional luxury often originates as fine craftsmanship, but it creates objects that are coveted and displayed, not ideas that are scalable. I will credit Simon Sinekback in 2009 for illuminating the idea of “Why” as a powerful way to lead and inspire organizations and appeal to consumers. Apple is obsessed about its “why” and as a result it creates products and experiences that are premium. To quote Sinek regarding his why-centric Apple idea- “Everything we do, we believe in challenging the status quo. We believe in thinking differently. The way we challenge the status quo is by making our products beautifully designed, simple to use and user friendly. We just happen to make great computers. Want to buy one?” These are introverted motivations. Simple, user friendly, even beautiful are qualities that we value personally, not to be broadcast socially. The simplicity allows one to express oneself and work more effectively, and beauty is both a metaphor for simplicity and an inspiration for our own great works. This earns our respect and creates desire. “Why” is the center of the circle, but how we all connect with the why is more mysterious, and just as important to being premium.

Introverted Premium transforms the Brand idea into a religion

Since the birth of the Macintosh with it’s graphical interface, “simple” has been the singular idea underpinning the Apple brand. The quest for simple unleashed computing on the masses in a way that may never have happened without Apple. But having a strong idea, a “why”, can only have success if it becomes religion and drives action. Apple made simple-ness into a kind of religion (albeit a “lowercase” religion). It had a prophet in Steven Jobs, a “spiritual center” in Cupertino, a liturgy in the famous Macworld EXPOs, and zealots from the creative class. Apple’s advertising and communications felt different and amplify “simple” into the belief that Macintosh is for smart, creative people who need a way to express their individuality, which attracts evangelists. The religion of Apple is always moving forward and bringing our own stories along with it. The brand provides us with technology-based optimism: an introverted doctrine of progress based on the individual’s escalating ability to achieve and connect.

Introverted Premium is an experience, not a thing

Apple is an experience above all else, and the majority of that experience happens when we are alone with our devices. After all, we unlock our experiences with our own personal Apple ID’s. We have our music, our apps, and our friends all personalized and organized in an Apple way. We create our own versions of the experience inside of a digital world tethered together and enabled by Apple.

It is easy to equate experience with a place like the Apple Store, but when your Brand is like a religion the store becomes a temple. The Apple Store creates a place to gather as a community and see other Applepostles. The store is a locus for the Apple idea that is experienced personally everywhere, without walls. The Apple experience is portable and omnipresent, and introverted. It is tactile in the products, aesthetic in the interfaces, audible in the sounds, human in the sales and support, empowering in the functionality, and it is well managed at every touch-point.

Characteristics of the new premium

The experience delivers consistently in these three areas, providing the clearest definition of the new introverted premium:

  1. It consistently presents a “why” brand idea through design, communications, and behaviors, and does not rely on the extroverted motifs of status and luxury that can be obstacles to acceptance or irrelevant to many cultures and groups.
  2. It allows the triumph of our own stories over its own. It pulls the believer into an optimistic view of the future, with an endless well of innovation that will give us more power and control- the keys to new capabilities. The Apple Watch, for instance, promises to take our Apple experience into a new story of healthcare and wellness. We don’t doubt that it will.
  3. Finally, the brand experience of Apple is about how we feel, not how we want others to judge us. This is the ultimate change in the premium paradigm.

There will always be luxury goods in the classic sense of Louis Vuitton and Prada because there will always be elitism. The future, however, will require a new perspective on premium, pioneered by Apple. Brands that seek a premium position in sectors like automotive, retail, travel, and dining will win by embracing an introverted, experience based mindset, the sooner the better.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

Big Retailers Push to be Small

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Of the 15 new stores Target plans to open in 2015, the majority will be the smaller format TargetExpress and CityTarget stores. Meanwhile, Walmart, Office Depot and Best Buy are also adding smaller format stores to their fleets.

This makes a lot of sense for retailers that have maxed out their suburban presence and are looking to urban areas to add stores. Expanding into underserved markets is a business basic, even if those opportunities can seem few and far between.

But the challenges of being small are not small. Unlike Starbucks or Dunkin’ Donuts, which can build stores within throwing distances of current locations without cannibalization, these larger retailers face a different “zero sum” marketplace. More locations do not translate to more consumption—or sales.

Sales volume must be obtained from other sources, which can include e-commerce sites, same-day delivery services and even entrenched local retailers.

What to sell

The challenge with smaller stores is getting both the breadth and the depth of the merchandise assortments right. A big-box store’s reason for being is to be a one-stop shop for everything in the category, the classic “category killer”—or in Walmart’s case, a super-center providing virtually everything in abundance.

Downsizing assortments and eliminating categories is messing with the recipe. And it is not a matter of proportionately reducing everything to fit. There is an interdependency of merchandise that can make or break the concept, and some categories that need space because of fast inventory turn can crowd out slower turning but essential categories. Having enough bottled water or printer cartridges can mean too little frozen food or backpacks. The trade-offs can ruin the store’s overall appeal.

Assortment is not the only challenge. There is also the constraint of transportation. The number and size of items a shopper in an urban context will buy are impacted by how much they can carry. Purchases are smaller but visits are more frequent. More footfall is required to see similar sales per square foot performance, which is a dynamic many retailers are not used to managing and can take some experimentation to master.

The brand is a mixed blessing

Often these smaller stores betray the brand expectations, or create new store types that shoppers have difficulty assimilating into their shopping repertoire. Retailers like Aldi and Trader Joe’s, who are inherently smaller, have unique, differentiated propositions and products that shoppers value and know how to fit into their lifestyles. A small Best Buy, however, can be confusing. Is it a great place to shop for a big screen TV, or a convenience store for cables?

For the big stores that want to re-scale to smaller stores, opening under the banner of their larger namesake is a blessing and a curse. While they do offer familiarity and tap into the broader promotion and marketing engine, the risk is over-promising and under-delivering. Communicating the nuance of store size and store promise is a brand naming architecture challenge, with names like “express” or “neighborhood” that are often lost on shoppers in this short-attention-span world.

Tesco’s failed small-format Fresh & Easy experiment in the US is a great example of the challenges faced by even the best retailers. Creating retail concepts derivative of the parent can be a big risk but is a necessity, especially considering the retail saturation in suburbia.

A requirement, however, is starting from scratch with the store idea for the urban environment vs. adjusting the existing recipe. In the end, the best-situated retailers are the drug chains that already reside in the urban landscape. Urban-friendly, innovative stores like Walgreen’s and CVS may never carry big screen TVs, but they will certainly continue to update themselves over time and prove to be formidable competition to urban invaders.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com