New technologies

Insights from the First Day of NRF

by Lora Cecere on January 15, 2012 · 0 comments

It is cold in New York.  My feet are tired, but I have enjoyed the first day of the National Retail Federation (NRF) Big Show.  (Twitter hashtag #NRF12).

I had the luxury to stay in the same room and hear some great presentations. Here are my insights.

 1) Shopper Insights are the Way to Drive True Collaboration.  I got up early.  I moderated a panel for Coca-Cola for a session at 8:30 Am on Sunday morning.  Yep, you got it.  A very early morning….  I thought that an early session on a holiday weekend would be empty; but believe it or not, the session was packed.  In fact, it was standing room only. The session was on shopper insights.

Retailers are hungry to learn about demand insights from iconic consumer product brand manufacturers.  The retailers attending the session were  new at it. Only six hands in the audience were raised when asked, “Do you have a shopper insights group?”  I leave the session firmly believing that the sharing of consumer insights is the way to establish a true win/win value proposition.

2) MicroSegmentation is Now Feasible.  Craig Riner, RiteAid delivered my favorite presentation of the morning.  His focus was on Real-time Merchandising.  <My friends in consumer products (CPG) would call it improving the Digital Path to Purchase (#DP2P).> Craig presented a case example of how RiteAid used their loyalty card–Wellness + — to build a new brand.  As he explained, “26 million adults in the United States today have adult diabetes.  When they are diagnosed, they are in shock.  They don’t want to be defined by the term “diabetic”, but they need help with meal planning, fitness and lifestyle. We redesigned our loyalty card to be a brand card to meet these needs.”  They used their loyalty program to provide relevant content, offers and programs to this target consumer.  They teamed with WebMD to build content.  It now has 20 million videos, directly connects consumers to a nutritional counselor and allows shoppers to load the Wellness + card online.  This wallet feature enables targeted coupons to be downloaded based on relevance.  There is no need for paper or scissors for coupons.  It is easy.  When the loyalty card is swiped in the store, the coupons are applied to the purchase automatically.

GlaxoSmithKline also spoke on how they, a supplier to Rite-Aid, had partnered with RiteAid to also use the Wellness+ features.  Using the data base from the RiteAid program, Glaxo was able to reach consumers directly with targeted programs.  Using the program, they were able to drive double digit growth.  Their advice:  “this powerful program increases the need for planning.”

3) Social Enables New Business Models. Supply Chain is back in Vogue.    Kerry Cooper, Chief Operating Officer of ModCloth also delivered a compelling presentation on the redesign of the apparel value chain using demand insights from crowdsourcing.  The average apparel supply chain is 9-12 months long.  Modcloth brings 50-70 new products to market each day with a supply chain of 6-8 weeks with 20% less inventory.  Yep, you got it.  ModCloth, a small apparel company in Pittsburgh is able to deliver more variety with fewer mark-downs and less staff.  The secret is a new business model based on crowd sourcing.  (According to Wikipedia the official definition of crowd sourcing is: the act of sourcing tasks traditionally performed by specific individuals to a group of people or community (crowd) through an open call.)  Using social/eCommerce convergence in a crowdsourcing model, they focus on delivering vintage clothing to a customer that wants to be unique.

The number of companies successfully using mobile/social/ecommerce convergence to drive new business models is growing.  Gilt Groupe was featured on stage at one of the Super Sessions, and Threadless was onstage with Modcloth.  Each of these companies have used social to define new business models.  We have moved from experimentation to mainstream.  What I found interesting was that for the first time in three years, each of them described their business models in “supply chain terms.”  Yep, you got it.  Supply chain is getting  cool again. As the cycles are getting shorter, the need for good information increases, and supply chain fundamentals of perpetual inventory and supply chain visibility are growing in importance.  Signs on how to improve your supply chain were everywhere.  I smiled because the supply chain was not everywhere at the show for the past two years.  <I love being a cool kid. >

4) Mobile is Shortening Data Cycles and Reducing Latency. Big Data is Fueling the Need to Rethink Supply Chains:  Retailers are aggressively working on mobile/social and eCommerce convergence.  The tone has changed.  It is no longer a science project.  The NRF program drips with it. The tone over the last two years has accelerated.  <It should be a WAKE -UP CONSUMER MANUFACTURERS>  This program is so MUCH more advanced in the understanding of disruptive technologies than the Consumer Goods Technology (CGT) program in October or the Grocery Manufacturers Association (GMA) conference that I am attending in two weeks. The gap is widening.  I leave my first day session thinking that the supply chain for retail is like the cell phone in China. You might say what? Has the Shaman lost her mind? Let me explain.

Today, you will not find a traditional handset phone in a Chinese home.  They skipped a generation of technology and went straight to mobile handsets.  I find this situation on the use of disruptive technologies in retail analogous.   Retailers have been late adopters of supply chain technologies.  <I smile every time a retailer wants to talk to me about implementing a Perpetual Inventory (PI) signal or implementing a new ”advanced technology for allocation logic that sits on DRP (linear optimization).” > Today, as I drag my tired feet out of NRF, I firmly believe that retailers skipped a step in supply chain maturation and consequently are able to move faster on the adoption of these new technologies.   While consumer products companies are on a forced march to implement the licensed technologies of ERP/APS and CRM, retail is leapfrogging.  They are investing in Big Data analytics, mobile applications, social/mobile and ecommerce convergence.  They are not hamstrung by the maintenance upgrades of client/server applications of the last ten years.

Tomorrow, I am booked from 9-5 pm on the show floor.  I will be in search of cool technologies.  Look for my blog post and insights. One thing is for SURE,  I will be wearing comfortable shoes. It will be a long day.  You would never know that it was a holiday weekend at #NRF12.  The show is packed.  There are lines everywhere.

Stop Yelling. Start Listening. Become Market-driven.

by Lora Cecere on November 17, 2011 · 2 comments

A presentation was due on Monday.  The IT team was trying to respond to a new program. They wanted break through thinking on how IT could improve the consumers’ path to purchase.  So, last week, I changed my schedule and flew overnight to respond to an urgent client request.  The client, a major Consumer Products (CP) company, needed help with a topic that I am passionate about.  So, I rolled up my sleeves and went to work.

I started the session by asking the team,  “What is the goal?  Why is this important?  What are you trying to achieve in the market?  And, when I got their answer, my question was “Have you thought about the differences between a marketing-driven and market-driven company and how this defines the program? ” They scratched their heads, and asked, “What is the difference?”  …and the fun began.

What does it mean to be Market-driven?

We reward marketing-driven programs.  This is VERY different from a market-drive approach.  How much difference does ING make? Let me explain.

Historically, marketing-driven initiatives fueled growth for the CP company. Internally, the brand manager still wields power.  It is the world of advertising, trade promotion, line extensions, and brand positioning.

Externally, the tide has shifted. In the last 20 years, power has shifted from the manufacturer to the retailer to the consumer.  In the face of this trend, and to better compete and serve retail, the CP company built multi-disciplinary sales account teams.  The average CP company now has 22 sales account teams focused on channel activities with major retailers. Due to the importance, these teams can be very large (I have met with teams over 150 people). They are also autonomous.

These efforts are anything but market-driven. Instead, they are marketing-driven (focused on market share) or sales-driven (focused on volume).  The design is inside-out (from the company) not outside-in ( a process built on how a shopper buys).

It is all about them.  Consumer products companies continue to yell their message into the market with limited sensing.  The team, I was working with laughed at my comment that “They have big mouths and no ears.”  To be able to listen and learn, based on new forms of data is a huge opportunity.

What is the difference?  In our session,we quickly outlined four major differences on the white board.

 
Marketing-driven
Market-driven
Design
Focus on the Company and the Company’s products
About the consumer. Processes designed to serve the consumer/shopper at the moments of truth
Behavior
Yelling the message. Pushing products. Programs largely based on history.
Listening, testing, and learning. Adapting programs based on a market-driven approach.
Focus
Selling into the channel
Testing and learning with a focus on sales through the channel
Process
Inside-out
Outside-in

How does Market-driven tie to unleashing New Opportunities at the Digital Path of Purchase?

The opportunity is effectively connecting with the consumer to inform, delight and serve on the Digital Path to Purchase.  Through the use of new technologies– business analytics, mobile applications, social and e-commerce programs– CP companies can drive significant growth at each of the moments of truth.  It is an opportunity to put disruptive technologies to work.  At the session, we worked with three moments of truth:

  • Kitchen table:  The decision to put the product on the list.
  • The Shelf:   The decision to put a product into the shopping cart.
  • Usage:   Delight when the product is used to drive new sales

When the market-driven principles are applied, the IT strategy becomes VERY different from a marketing-driven IT plan.  Unfortunately, and sadly, I seldom see the IT organization being asked to come to the table to help.  Much of this work, based on recent research with 25 CP companies, is being designed within marketing to drive a marketing-driven approach.

It is not about you or your brand.  It is about the shopper and improving their experience.   This is a hard concept for a brand manager, but it is a fundamental concept.   Let’s take an example.  To take advantage of mobile/social convergence, the CP company will often have a goal to launch their own mobile applications, or their own virtual currency or loyalty program.  My question is why?  First of all, most of the mobile application ideas that I hear do not improve the digital path to purchase, and in my opinion, it is no coincidence that the highest rated applications on itunes are not ones built by the consumer products companies.  My suggestion to companies is to work with sales account teams to build a mobile/social/digital strategy for each retailer.  My advice is that “it is about them.  It is less about you.”

I believe that every CP company should have a mobile applications team that is an overlay to the sales account teams to speed time to market in developing winning programs with retailers.  The team’s focus could be federating review data, building excitement through gaming, mobile wallets and social couponing, redefining the in-store experience through QR code and RFID usage.  This work is experimental, ever-changing, and represents huge potential to redefine the shopping experience if it is market-driven.

Influence at each Moment of Truth.  Yelling no longer cuts it. A major opportunity for consumer products companies is providing value-added information at each moment of truth.  For the kitchen table, it could be syndicated review data, recipe information, or content on an ecommerce site (Amazon or Peapod) to influence the shopper.  One of the companies that I feel is doing some interesting work in this area is Kraft.  Another company doing great work in this area is McCormick.  Both McCormick and Kraft are working on recipe programs, special offers and tailored programs with eCommerce sites to influence the decision to buy.

Power has shifted to the consumer.  Change your channel strategies to be outside-in.  Starting with the three moments of truth, spend time to look at how you can inform, influence and build customer loyalty at each moment of truth.  Empower test and learn programs through investments in downstream data, retailer and consumer insights and business analytics to understand what is working.  Adapt your programs based on analysis of effectiveness between control and test stores.

What do you think?  Would love to hear about your progress on redesigning the path to purchase through the use of disruptive technologies.

 

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