Giving It a Slight Twist: The Gimnàs Visió Case

“But the centre is about to open in just a couple of weeks!
Before talking to you I was relaxed about it… Now, I feel shaken up with this new approach,” Manuel Roure exclaimed.


Own photo

An appointment with Manuel Roure

On December 2nd, 2016, I arrived in a small Catalan town called Mollerussa (about 15,000 inhabitants) to give a speech on neuroscience applied to marketing and human relations.

My friend, Manuel Roure, a recently retired optometrist who’d been awarded many times during his career, was going to launch a new business venture, and I was invited to have a look at his soon-to-open venue.

Right next to Federóptics Roure, his successful optician’s store – now managed by his daughter Nuria – he was going to open a new centre called Salut Visió (Vision Health). The centre would offer training to improve the vision of people with sight problems.

We were standing just outside the optician’s watching the construction of the new centre, nearing its completion, and the installation of the store front’s final details.


Photo courtesy Federòptics

As visual training is quite a recently introduced activity in many countries, I begged Roure to look deeper into how he would explain this activity.

Visual training consists of exercises that may sound quite cryptic to the average person – behavioral optometry, stereopsis improvement, and motility training are professional terms likely to sound unfamiliar to most.

To explain it in layman terms, these visual training exercises help people improve their vision when, for instance, they are having difficulties with learning, reading, motor coordination or concentration problems.

These exercises are carried out with the assistance of a qualified professional assistant.

With great curiosity, I paid full attention to Roure’s careful explanations. 
A few seconds later, the expected question arrived:

“So, what do you think?”, Manuel Roure finally asked me, eager to find out my opinion once his introductory tour was over.

I had just one suggestion:

“The new service centre makes sense, but are we still in time to make some changes?”

While Roure had been explaining the nature of these innovative services, I’d had a gut feeling and an alarm bell ringing: What about the customers’ feelings?

Little Joe

In order to find the right business direction, we should think about —not only think about, but understand— the customers of this new centre: the type of people who would come to a place like Roure’s to train their vision. This will open a completely new perspective.

Let’s take Little Joe as an example.

Joe is an active 6-year-old boy who likes playing football and going to the park. However, in the evenings, when it is time for him to do his homework, Joe often loses his temper and gets easily frustrated. He finds reading tiring and difficult. At school, his teachers try to cheer him up, but he’s noticed he’s different from other kids his age and he feels sad about it.

Joe’s parents love their little boy more than anything in the world. Yet, sometimes, they feel a bit envious when Susan from downstairs talks about how well her son’s school achievements, and when other parents repeat their amazing stories about their little angels in the park. Joe’s parents also feel that their son is different!


Own photo

When their school day finishes, Joe’s classmates gambol happily to their after-school activities —to volleyball training, English classes and art workshops— while Joe’s mummy takes him to the ophthalmologist. This specialist suggested training Joe’s vision to fix his learning and focusing difficulties. That is why, every Tuesday, Joe goes to Roure’s Centre to train and get his problem fixed.

But, wait a minute! Did you hear that?
We’re talking about Joe as a boy who’s got a problem to be fixed. Poor little thing! And poor unlucky parents who need to take care of their son’s issue. It must be so tough!

When we visit the doctor, we become “new persons”. Suddenly, we are called patients. The origin of the word “patient” can be traced back to the Greek term pathos, meaning “suffering”. As patients, we are seen as persons who are suffering. And the same applies to this new visual training centre: a place treating us as patients is actually treating us as “sufferers”!
How does that sound? Not too comforting, right?
Our brain doesn’t like pain at all; it prefers other positive emotions.

Why not give a slight twist to the original idea, which includes quite negative connotations, and try to see it differently? Perhaps we could plan something much more positive and surprising…

“Why not turn the vision therapy centre into a ´Vision Gym´ centre?”
 I proposed to Roure.

“… but we were going to open the centre in just a couple of weeks, before Christmas!” he replied.

After a moment of reflection, he finally said:

“It doesn’t matter if the opening day needs to be postponed. We will reframe the centre in a more brain-pleasing way.”

We go to the gym

Nowadays, everyone goes to the gym. Going to the gym is actually a cool thing to do. No one thinks that going to the gym means you have a problem. You go to the gym to improve your physical condition, to get better, stronger, even emotionally more relaxed.
So why couldn’t visual training be just as cool as going to a regular gym, too?
This is how we conceived the new direction for Roure’s ‘Vision Gym’.

Feeling is the action our brain understands best. So, our job is to start thinking: What should our customers feel? If they don’t feel they’re being patients, they’ll be happier to visit us, and to even spread the word to their peers.

This new marketing frame may provide kids and their parents with emotional, even social, wellbeing. It is based on three elements, like a tripod:

1. The power of surprise

Combine things in an unexpected way:
An optician’s and a gym together is not something you would see everyday. Nor is the look and feel of the ‘Vision Gym’. Who would expect to find basketball baskets at an optician’s? No one, right?


Photo courtesy Federòptics

But still make sense:
However, not everything random and irrelevant will necessarily work. It must still make sense, like the basketball baskets do in this ‘Vision Gym’, which is built around the theme of the gym and the world of sports.


Own photo

Use something widely known to describe something new or less known:
Most people know what a gym is. Using already existing ideas about the gym will help to make people understand the less known concept of “visual training”.

Associate things in a new way:
When thinking about an optician’s, what comes to mind? White walls? Bright lights? Maybe some odd-looking machines? Staff in white coats?
But why not go for something different? And not just something different, but something that will resonate with your customers in a brain-pleasing way. In our case, bright colours and fun sporty styles creating a happy, exciting and child-friendly atmosphere.

2. Simplify

Stop talking “weird”:
Use language that is easy to understand and that is directed to your audience. This doesn’t mean no professional words are allowed at all— just leave them for later and use them only when necessary.


Photo courtesy Federòptics

Using plain language helps readers feel assured that they understand what you’re talking about. That way, you can avoid them feeling stupid! It is called being emphatic with others.

Make it easy:
Give practical examples connected to people’s lives. Training your vision will be much more motivating if your goal is to score more goals in football rather than strengthening your neuronal connections.

3. Make them imagine it

Make your customers imagine how their life would be when using or after using your service or product. And make them imagine it to be something amazing.


Own photo

In the case of the ‘Vision Gym’, kids may imagine how much fun they’re going to have when “playing” with the nice eye-trainers and other kids at the visual gym. They might also imagine how great it will be to tell their classmates about going to such a cool place after school.

Parents may imagine their kid doing better at school. They may also imagine stories they can tell other parents about their talented kid.

So, what happened?

Gimnàs de la Visió (Vision Gym) has ended up being a complete success since its opening in February 2017.

This is proven not only by the optician’s skyrocketing figures (its sales increased by 27% in the first two months, and by 45%+ after just four months), but also by its customers’ smiley faces. People like to come and visit, even if they live quite far from town.

Kids are happy to visit, and so are their parents.
As in the words of one mother: “My kid may not need any vision training, but, oh well… it won’t do him any harm to come and train anyway!”.


Own photo

Retail evolution in parallel with Customers’ life evolution

No doubt. Retail is changing continuously, usually silently, sometimes in a more disruptive way.

Here you can see a possible parallel evolution between Customers’ life and contexts, and the main retail formats.

 

I wonder if this self-explanatory chart may help. If not, you can send an e-mail to us and I will add more details.

 

Text by Lluis Martinez-Ribes

Without context, we are myopic.

In 1994, the Japanese Dr. Masaru Emoto started to feel interested in taking pictures of the microscopic shapes of different kinds of water, once frozen. He detected with a huge amazement that the water crystals that formed after showing it positive words, play good music or praying to it, are much more beautiful than those formed when the same water is exposed to expletives and negative stimuli. It can be seen in his website.

Now, I propose you a less mysterious issue. Please think if you -as a consumer- spend more money during a working week or during a holidays one. Most of the people I’ve asked tell me that not only they spend more on vacation, but that even their price sensitivity during that period is lower.

The two previous examples are showing us something important: context matters a lot.

Context is a great variable in marketing. In the second example, if your company sells to people who are on vacation, not only will it increase your turnover, but also its Gross Margin can increase, because many customers -in a vacation tone- accept a slightly higher price. Therefore, context can also affect your P&L account.

Too “in vitro”

The usual way to approach marketing has been something like trying to understand the predictable behaviour of customers, as if they were “in vitro”.

The renowned method of marketing mix, or the “4 Ps”, is a paradigm of this approach. We have all used (and some of us have taught) it. It something like an equation: Put 4 drops of high-performance Product, plus 3 drops of Price-below-the-average, plus 2.5 drops of a creative Promotion, plus 3.25 drops of Commercialisation-Channels to capilarise the market; and then the result = Success.

This traditional approach has great advantages: it’s easy to understand, it provides self-assurance to those who initiate their careers, it facilitates having a budget, that can be adjusted without great effort the following year. Furthermore, it has been so spread that in all countries and sectors you can find people who understand this method.

However, this marketing and research model approach forgets that customers’ life happens in contexts that influence them, many times in a non-conscious way. You don’t go to the cinema as often before having a child than after the birth.

With this evidence, we have to face two challenges:
is context understandable?, is it manageable?

The “packaging” of life

First of all we need to understand what is the context. Let’s start with a couple of examples.

The famous architect Le Corbusier said: “Paris is a lab that tempts to experiment mysterious (architecture) instruments. Paris is a “packaging”, or what’s the same, a context.

According to Dr. Natalia Fernández Díaz, context is what wraps a message. But not only this, it’s also what wraps a process or an experience. For instance, a purchasing process.

A rather usual type of context is the combination of Time plus Space.

Tesco created in South Korea a renowned initiative in which people waiting for the metro can scan with their phones certain products reproduced on the walls, simulating a supermarket, so that they could purchase before getting on the train. This idea is successful because it takes place when people are bored on the platform waiting for the train. If those walls were on the walking aisles, barely anyone would buy. The “where” + the “when” make an action succeed or fail, without changing the assortment, the price, the aesthetics, customers’ money availability, etc.

Another good example. When the first iPad was launched, this tablet was very critisised because it didn’t have a lot of the features computers had as a default. Its success was based on understanding the context of the users. When someone is working for some hours with a desktop computer or laptop, the most appropriate is having a table and a chair to seat in an ergonomically correct way. On the contrary, when someone is seating on the sofa, a tablet is the most adequate to that context, even if it didn’t have as many features as the common computers. The body position shows a different context.

Lluís Martínez-Ribes. It’s called “relevance” when the message, brand or experience proposed by the company fits the context or contexts of the customers.

Image by artchandising

It’s called “relevance” when the message, brand or experience proposed by the company fits the context or contexts of the customers.

The relevance is equivalent to context management.

Regarding the computer and the iPad the relevance of the product is related to the postural context (table and chair in the office versus sofa at home) allow to predict the success of a product, regardless of its characteristics or features.

Main types of contexts

The model of contexts proposed here is based on Urie Bronfenbrenner’s Ecological framework for human development (Bronfenbrenner, 1994), that has been adapted to the approach we will use here.

Bronfenbrenner-pq-en

(Clic image to enlarge)

The diagram above shows the contexts that might affect customers’ decisions. With it, we can identify those elements of our customers’ contexts that can be helpful to understand them and then devise an adequate solution.

In this model we can distinguish for levels of analysis:

At the centre we find the individual, with the personal characteristics that define him/her, such as age, gender, personality, intellectual oefficient or experiences. Most of these elements won’t be very useful if we want to orient our solution to a wide population segment. However, other elements such as age or gender, in some cases may help us understand our customers.

In a second level of analysis, we find all the elements that we can control as a business, that affect the decision making of the customer in the moment of purchase or later usage of our solution. Semiotics and the other stimuli we generate are part of this level: for example, the lighting in a store, the product layout, its framing, the packaging aesthetics, the functionality of the product when the customer uses it, or the sensations raised by the design of a store or website/app. Generating certain stimuli creates contexts that affect the decisions customers make.

In a third level we can find those contexts that are external to the person, that we don’t have control over, like:

  • The macrosystem, in which we find the family or the peer group. For example, regarding the sale products for companies, this would be the corporate culture of these customers.
  • The exosystem, in which we find local politics, networks, mass media or, in b2b, the patterns of the sector we belong to.
  • The macosystem, which includes the beliefs system, the general available resources, the customs or the influence of the hyper-connected society.

This third level, even we have no influence on it, gives us the necessary information to understand customers better.

From picture to film

One of the biggest mistakes a lot of us have made (mea culpa) is seeing marketing or brand strategy as a static picture, instead of seeing it as a film, scene by scene. And here it’s when the fourth level of analysis comes into play, the chronosystem, that introduces the variable time in the understanding of the contexts that affect the customer.

The chronosystem has two sides. On the one hand, it refers to the changes through time of the context a person is immersed in, such as the changes in the family stage, in the economic status, or the place of residence, for example.

On the other hand, at a more micro level, the chronosystem includes two moments of great interest as an inspiration to devise a brand or a customer experience:

  1. The previous moment the customer has just lived
  2. The subsequent moment the customer visualises he/she will experiment

The customer doesn’t feel the same, or pays the same conscious attention in his/her first purchase from our company as when has become a regular customer. The elements of the “marketing mix” could be the same, but the customer’s own “dynamic context”, makes him/her perceive our brand in a different way.

context-figs-2

With the permission of the supermarket chains, I’ll give you a tip to spend less when going shopping: go after having lunch, meaning not hungry.

Again, the “retail marketing mix” of the store is the same, but the different context of the customer leads to a lower purchase.

All this leads us to a dynamic vision of the contexts. What the customer has felt and will feel can inspire us to devise the “present scene”. For example, the moment of the purchase decision.

Feeling the empathy with the customer and looking for the relevance scene by scene we can create a memorable story in a customer process.

context-fork-2

Abstract yes. Practical, a lot

Dr. Ralf Ebert, Marketing Director at Bayer Veterinary, said during a speech at Esade: “positioning can be expressed as a product in a context. Context gives meaning to that product”.

For example, a fork is for eating, -specially in western countries-. But this fork in Vevey (Switzerland) is a work of art.

On the same direction, Dr. Neale Martin says that context is more important than any other variable.

The variable Context has various applications, such as:

  1. Understanding a type of customers, detecting insights than can be activated lately.
  2. Devising new products and solutions that fit those contexts and that therefore are liked by the customers.
  3. Designing customer experiences, for example purchasing processes, omnichannel processes, post-sale attention processes, etc.
  4. Communicating in a relevant way, and such having more probabilities that the message doesn’t get lost.

Many contexts can be managed

Many times contexts can be managed, specially those at the second level of analysis, the controllable stimuli.

This management can be reactively (we react appropriately to a challenge or complain) or proactively, meaning taking the initiative. Both can be adequate. We can see it in some examples:

context-quadre-en2-pq

(Clic image to enlarge)

If we are aware of the contexts we can reinterpret many functional tools from a higher customer centricity.

For example, omnichannel, this important global trend, can be understood as the relevance -or the adjustment- of the selling company to the customers’ contexts.

The omni-context is a fundamental base of the omnichannel, because the same customer can be in different contexts during a period of time: when being in a hurry, when being relaxed, when being alone, etc.

Great managers are able to understand well the contexts of the customers, interpreting their life and social evolution, and then acting consequently shaping a “next practice”.

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Bibliography
About Dr. Masaru Emoto

  • http://www.masaru-emoto.net/english/water-crystal.html
  • https://en.wikipedia.org/wiki/Masaru_Emoto

Bronfenbrenner, U. (1994). Ecological models of human development. International Encyclopedia of Education, Vol. 3. Oxford: Elsevier.[:]

No imagination, no party.

You walk into the supermarket one evening after a hard day at work. You are frankly exhausted. You have just been to pick up your two kids from school – gorgeous, the pair of them, but they’ve had an argument and now won’t stop crying. But where is the children’s food section? Oh, they’ve moved it! You ask a shelf stacker who, barely looking at you, disinterestedly points to the new location of the kids’ food section. You eventually find what you are looking for but, when you get to the checkout, you are faced with a queue ten people long. There are no two ways about it, today is not your day. You can’t take any more, so you leave the trolley where it is, grab the kids and walk out. On your way to the car, you take out your smartphone, order food to be delivered home and swear that you will never go back to that supermarket again.

main-purchasing-blocks-lm

Let’s repeat the scene

I walk into the supermarket one evening after a hard day at work. I am frankly exhausted. I have just been to pick up your two kids from school – gorgeous, the pair of them, but they’ve had an argument and now won’t stop crying. At the entrance, I see a monitored play area for kids and they ask if they can stay there while I shop. They are both smiling again. I head over to the kids’ food section where I find a notice telling me where it has been relocated. A shelf stacker notices that I hesitate and offers to accompany me with a smile. The music is not abrasive and there is a nice atmosphere. My wife is coming back from a trip tonight so I decide to surprise her with one of those cheese selections she likes so much. Next to the cheese, I see a bottle of wine that would go with it perfectly. She’s worth it! She’ll love the surprise. I make my way over to the checkout where there is no queue and I scan the items myself and then pay. Right, now to pick the kids up. Look how lovely they are! I head home in no time at all to get there before my wife arrives.

The shopping experience

The situations described above are the same but with remarkably different outcomes.

This issue is hugely important for businesses because the same soft drink tastes different depending on where you drink it (try it if you don’t believe me). Therefore, a customer’s predisposition, price sensitively and actual shopping behaviour can end up varying greatly depending on how they feel as they shop.

We speak about the “shopping experience”, a term used casually with as many different definitions as there are articles written on the topic.

There was a long-established theory about how consumers decide what to buy, for instance as proposed by Court et al.(2009), who state that customers consider a range of goods/brands to buy, evaluate each of them based on their characteristics and choose one. After using it, they develop expectations for the next shopping process. However, we now know that the vast majority of decisions, including shopping choices, are made unconsciously. In other words, consumers do not create a mental spreadsheet of pros and cons.

The are two key methods not only for improving customers’ shopping experience, but also for increasing the average spend and getting them to come back:

  1. Reducing effort.
  2. Stimulating their imagination.

Less effort required, please

In an article published in 2010 in Harvard Business Review (Dixon, Freeman & Toman), the authors argue that we do not maintain customer loyalty by offering an excellent service, but rather we lose it when we give them a bad service. Customer loyalty is not achieved by delighting them but rather by reducing the effort they have to make.

This argument is along the same lines as the theory put forward by Blake Morgan (2015), who uses a highly illustrative example to capture this situation: “Can you imagine a customer climbing up 1,000 stairs to reach you for help only to be told they need to go back down the staircase and climb another one?” Many customers feel this way, for instance, when they have to contract telephone packages and similar services.

It is often the case that the efforts that customers have to make are not detected because they are considered to be ‘normal’: queues, unintelligible information, not being able to locate products, doubts caused by excessive options, unsuitable timetables, sales assistants that can’t answer your questions or who don’t give you the time of day, etc. The effortless shopping experience is not simply a question of the points of interaction between customers and the company, but rather it involves the customers’ entire “journey from start to finish” (Rawson, Duncan & Jones, 2013), including the phase before and after going into the store (whether it is physical or digital).

In the digital world, a click is an example of an effort. Each click reduces the conversion rate by 20%. In other words, if a potential customer has to click five times, it is highly likely that they do not end up making the purchase.

Other statistics show that a shopping experience involving lots of effort for the customer means a high risk of losing them. According to research conducted by Avaya into the impact of customer effort (Wilson, 2014), a bad experience has greater capacity to negatively influence future shopping behaviour than a good experience to have a positive affect. Looking at it from a different perspective, according to a study by McKinsey cited in Blake (2015), companies that focus on providing an effortless shopping experience reap positive rewards, with an increase in revenue of10-15%.

The statistics are closely linked to human biology. When we are faced with problems when shopping, we need to pay conscious attention, which means our slow cortex is activated and we consume high levels of glucose. As a result, we get tired and eventually get fed up. Our brain likes being on ‘automatic pilot. It loves routine (which should not be confused with boredom).
Therefore, the best purchasing decision is the one in which no decision is required.

The rise to power of imagination

Imagination makes us human, as we are the only animal that can imagine. Imagination is the capacity to picture in one’s mind things that are not present for our senses at that time (Robinson, 2006).

When we do something that we like, our brain generates dopamine and we feel good. The latest research (Kent Berridge, 2014) shows that more dopamine is generated when we are preparing or imagining something that we like than when we actually experience it. This is known as the brain’s ‘as if circuit’: the same parts of the brain are activated when we imagine something pleasant as are activated when we are actually enjoying it.

The interesting thing is that retail can act as this moment of preparation/imagination of subsequent enjoyment. To do so, the store must not simply be a transactional space (I swap you a nice bottle of wine for some money), but rather in must be a launch pad for the customers’ imagination. This is achieved through stimuli that trigger certain emotions and make customers visualize a future moment of enjoyment, such as a family meal next Sunday.

If the imagination is triggered, I can assure you that revenue will rise.

One experience and two roles

We have seen that, if we want customers to choose us repeatedly, we have to ensure that we make things easy for them and that they can make their purchase with hardly any effort. We have to be engineers of frictionless shopping processes.

However, we also have to be scriptwriters, creating a sequence of sensations (the shopping process) in such a way that their imagination generates the sense of wellbeing that dopamine gives.

In short, we have to take on two roles, firstly as engineers and then as scriptwriters of an exciting story. It is well worth the effort.

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Bibliography

  • Castro, D.C. & Berridge, K.C. Advances in the neurobiological bases for food ‘liking’ and ‘wanting’. Physiology & Behavior, 136, 22-30, 2014.
  • Court, D., et al. (2009) The consumer decision journey. McKinsey, June.
  • Dixon, M., Freeman, K. & Toman, N. (2010) Stop trying to delight your customers. Harvard Business Review, July.
  • Morgan, B. (2015) Want a powerful customer experience? Make it easy for the customer. Forbes, 13th January.
  • Rawson, A., Duncan, E. & Jones, C. (2013) The truth about customer experience. Harvard Business Review, September.
  • Robinson, K. (2006) Out of our minds: Learning to be creative. TEDTalks, February.
  • Wilson, M. (2014) Avaya Customer Effort Impact Study Reveals the Cost of Inconvenience. Avaya.

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Lluis Martinez-Ribes

Source: Código 84, number 188

June 2015

Creating a brand in the 21st century

Today has started off well. Last night, you slept like a log and, when you pulled open the curtains this morning, the sun streamed pleasantly into your bedroom. As you enjoy your coffee, you download today’s newspaper on your tablet. Straightaway, a headline on the front page grabs your eye: “Google announces its closure!”.

the-brand-XXI-century-martinez-ribes

image: artchandising

What face would have you pulled had this -completely fictitious- news story been true? What would you have felt?
If your overriding feeling in the face of such news was that somehow things were going to be worse from that point onwards, Google now forms part of your life.

Now change one aspect of the news story. Instead of Google, imagine the article was about your company. Would your customers feel the same way?

If the answer is yes, congratulations! But if the answer in no, it means that they can do without your brand.

What is all this brand stuff about?

When we talk about brands, there are almost as many different definitions as there are articles on the topic. Some of these are along the lines of Jerry McLaughlin’s proposal (2011): “what a customer thinks of when they hear the brand name”.

I feel reasonably comfortable with this approach, although, as I have stated in other articles, we know that we make the vast majority of decisions subconsciously using the ultra-fast limbic system, and we later dress the decision up with reasons and justifications. Therefore, rather than “what we think of when we hear the brand name”, we should say “what we feel when we hear the brand name”.

Lots of writers develop ideas along the same lines, such as Marty Neumeier in his book ‘The Brand Gap (2005)’: “‘Brand’ is the gut feeling people have about your product, service or company”. This very widespread approach focuses the issue on the emotions that a company, product or service generates in its customers.

In our hyper-connected society in which our saturation with stimuli is matched only by our attention deficit, emotion is the key resource to ensure that a product (or service) gets noticed. When something triggers an emotion, our attention is activated and, as such, it becomes visible, and perhaps later something we may buy.

Is triggering emotions enough?

However, is stimulating customers’ emotions enough to make them buy our product repeatedly?

The answer is obviously not. An emotion has a short-term effect on the body. In contrast, customer loyalty requires long-term energy.

For this reason, I find the proposal of Iglesias and Alfaro (2009) more accurate when they say that a brand is a “set of values, sensations, emotions and experiences that have value insofar as they have a meaning that is relevant to the customers”.

I would probably tweak this definition a little. A powerful brand, rather than having “meaning”, can convey a particular “feeling” at certain moments of the customers’ lives.

Nevertheless, the best aspect of Iglesias and Alfaro’s contribution is that the different elements it mentions pave the way to transform a fleeting emotion into feelings, which, by nature, last longer. A purely emotional brand would be a brand with little scope.

Are values enough to create feelings?

Iglesias and Alfaro introduce the idea of the meaning being “relevant” to the customers. In my opinion, this aspect is key.
There are two methods by which a meaning can be relevant, which ideally should be combined:

  • (A) Sharing really significant human values with customers, which are expressed through different media. For instance, ranging from traditional television channels, on to social media (what an impact this has in terms of persuading a customer to say good things about a brand!), right through to the most influential medium, according to Amancio Ortega, the founder of Inditex: “The store is the most powerful medium for creating a brand”. His statement is technically very accurate, because a message perceived through various senses simultaneously is more persuasive. Neuroscience tells us that experiences are more convincing and memorable than a PowerPoint presentation.
  • (B) Providing a solution that really makes their life better. The second approach for making a brand really relevant is for it to be associated to a solution or, in other words, a product or service that really improves the customer’s life in some respect.
    The Google brand is so powerful because it helps you avoid getting lost in an unfamiliar city, because it lets you find valid information in an instant, etc. The Google brand is extremely relevant, despite its logo changing constantly (What a contradiction for classical textbooks on Corporate Visual Identity!).

Creating a brand in the 21st Century is not so much a matter of corporate colours, a witty slogan or even advertisements to trigger occasional emotions, but rather tuning into your customers’ lifestyle and ensuring that the solution that bears the brand name truly enhances their quality of life.

To sum up, creating a brand today requires three essential elements: awakening the emotions required for them to pay attention, creating lasting feelings by sharing deep-rooted values and designing solutions that improve customers’ lives.
This gives rise to the three roles of marketing professionals in the 21st Century: a philosopher contemplating their customers’ lives, an engineer of solutions and a scriptwriter creating a movie of emotions and feelings.

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Bibliography

  • Iglesias, O. & Alfaro, M. (2009) “La marca y la gestión de las emociones” in Harvard Deusto, Nᵒ 90.
  • McLaughlin, J. (2011) “What is a brand, anyway?” in Forbes, 21st December
  • Neumeier, M. (2005) The brand gap. Berkeley: New Riders.

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Lluis Martinez-Ribes

Source: Código 84, number 187

May 2015

What is a name?

Do you know of any company that explicitly states that it pays no attention to its customers? It seems ridiculous to ignore the match referee: the current or potential customer.

It would de hard to find any company that admits that it is not customer-centric and most of them truly believe that they are. However, if we look closely, we see that many of them are really focused on their products or internal process (factories, logistics, etc.). They do not take the customer into account as an individual, with their own profile and contexts. In other words, their relation with the customer is transactional, as if a sale were a case of “I’ll swap you these quality molecules for money.”

How to make a company customer-centric

Many mindful directors undertake actions to make sure that the customer comes first in their company. One extremely interesting method of doing so is to calculate the Customer Lifetime Value (CLTV) or, to put it another way, the value in monetary terms of each customer in the long term if the continue buying as they have done to date (see my article ‘Data-driven retail’).This greatly helps us develop an understanding of the impact of decisions on customers.

Now, however, I would like to propose another method: changing the vocabulary that we use.

dentist-name-EN2

image: artchandising

According the Jean Berko Gleason, an expert in socio-linguistics, the words that we use are immensely powerful in terms of shaping how we see things. He refers to this phenomenon as “framing” (De Waal, 2011). The act of choosing a particular world to name a certain thing clearly affects how we perceive it.

Science has demonstrated that the words that we use have a direct and immediate impact on our emotional response and the way in which our brains react (Meacham, 2013). Recent research shows that the different words that we use activate different areas of the brain and end up influencing our behaviour in distinct ways (Sammarco, 2014).

The idea that the way we perceive the world is highly influenced by the concepts (words) that we use is far from new. In fact, throughout the 20th Century, this idea grabbed the interest of many scientists (Stanford Encyclopaedia of Philosophy). The most notable of these was Thomas Kuhn (1970) who believed that “what people see depends both on what they look at and on what their previous visual-conceptual experience has taught them to see”. When we change the way we refer to things, we change how we think, and this modifies how we interpret reality and, in the end, how we act.

Taking advantage of science

To emphasize the importance of the customers’ voice, we have to introduce a vocabulary in which they are the protagonists. A change in the language we use can help us to gain a better understanding of our customers (Ehman).

If our vocabulary regularly talks about statistics, ratios and numbers of orders, our activity will tend to be transactional. If we add different facets regarding our customers to our control panels, we will have a far greater chance of becoming part of our customers’ lives.

For instance, it you went to a dentist, think how you would feel if you saw the appointment schedule (see the image above) depending on the different names used in the column showing the people who will be coming.

Let’s look at another example. If I talk about “the Internet of things”, what ideas come to mind? Probably devices connected via the Internet. However, if I say “I can change the colour of the lights in my house from work using my telephone”, you would probably smile, picturing somebody empowered.

In both cases, we are talking about the same thing, but the perception is very different. The terms used can change the understanding of something new and make it more client-centric.

Speaking in a different way is practical

Obviously, changing the vocabulary that we use does not instantly mean that the customer has become the focus of the company nor that the processes automatically change. It takes time. Our ideas flow with their own momentum, based on certain mindsets that we have inherited and use non-consciously.

In order to change our habits in terms of thinking (and taking action), we have to identify them and bring them into our consciousness. As soon as we are able to create a different habit, the mind, as it is can be molded, is reinforced and customer-centricity is achieved. It is well worth the effort.

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Bibliography

  • De Waal, M. (2011) “Jean Berko Gleason on how words influence thought”. Daily Maverick, 26th October.
  • Meacham, M (2013) “How words affect our brains”. Talent Development, 11th July.
  • Sammarco, G (2014) “El futuro de tu cerebro está en tus palabras”. Semana económica, 21st November.
  • Stanford Encyclopaedia of Philosophy.
  • Kuhn, T. (1970) The structure of scientific revolution. Chicago: University of Chicago Press.
  • Ehman, L. “Create a customer-centric vocabulary”. Selling Power.

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Lluis Martinez-Ribes

Source: Código 84, number 186

April 2015

THE SALES EQUATIONS Data-driven retail and neuromarketing

Each year sees the publication of reports on the retail trends in store for us over the coming months, such as those published by Price Waterhouse Coopers and TNS Retail.

data-driven

Image: Carla Vallès

At the start of 2015, one forecast on which most of these reports are in agreement is the consolidation of data-driven marketing (Honaman, 2015). Applied to retail, this involves using business data to be able to carry out actions, such as special offers, for a particular customer based on their location in the store, whether through screens or the customer’s own smartphone. This can equally be applied to physical and digital stores.

Such personalized action activity is based on the use of technologies such as multimedia installations fitted with cameras to detect the sex and age of approaching customers, instantly showing them a promotion adapted to their profile on the screen. The other technology underpinning such initiatives is currently growing in double figures and is paid for by the customer: their smartphone, linked via Bluetooth, iBeacon, NFC (Near Field Communication) and, logically, the CRM.

The sales equation

The usual method of quantifying sales in a physical store and estimating potential growth applies the following parameters:

  • Size of the scope of influence.
  • Number of people of the main target segment.
  • Achievable market share, taking the competition in the area into consideration.
  • Frequency of visit.
  • Conversion rate (% of visits that end in a purchase).
  • Average purchase (= quantity of products x price).

The last of these parameters should be broken down into two parts, depending on the customers’ behaviour:

  • Items they planned to buy, that were on their ‘shopping list’.
  • Unplanned purchases. The relative weight of this part varies significantly depending on the sector and retail format.

It seems clear that many of the aforementioned technologies tend to focus on this last part of the equation nowadays. Lindsey (2014) also confirms that the majority of inter-related technologies on which data-driven retail is based are highly focused on increasing impulse purchases.

Neuroscience’s interpretation

Most people know that the vast majority of human decisions are subconscious or implicit, activated by the limbic system, one of the fastest parts of the brain which, paradoxically, consumes the least glucose. The cortex, the part of the brain that activates when we do something consciously, is much slower and consumes a lot of glucose.

When we do the shopping, we pick out the planned items almost semi-automatically. However, when an offer catches our eye or we get a promo message on our smartphone, we switch from the ‘automatic pilot’ of the limbic system and turn our newly-activated attention to the message we have received. This is when the cortex kicks in, meaning that we are making a mental effort, as we consume more glucose that just a moment earlier.

As Dr. Ralf Ebert explains, when somebody makes effort while shopping, the same part of the brain is activated as when we suffer physical pain: our brain interprets it as an implicit pain. For this reason, when we ask for customers’ conscious attention, it must be compensated for with a relatively large reward (for instance, a real bargain or a moment of happiness).

Customer loyalty is quantifiable

It is well-known that customer loyalty is one of the two founding pillars of the retail business model. Nobody can make a living from customers that buy just once. We want and need them to keep coming back and purchasing repeatedly.

As such, in other words, the company must perceive itself not as a seller of products or services, but rather as a customer cultivator.

This can be quantified. The measurement for calculating the value of a specific customer over the long term is the Customer Lifetime Value (CLTV) or, to put it another way, how much each customer is worth (in € or $) if they continue shopping with the same pattern and habits as they have done so far.

On the following website, Harvard Business School has developed a simple tool for simulating CLTV.

So, how can we stimulate loyalty? Many people think that the key is a fascinating and highly sensory shopping experience. However, one study (Dixon, Freeman and Toman, 2010) shows that customer loyalty is achieved more effectively by reducing the efforts they have to make while shopping, providing what could be referred to as a friction-free shopping experience.

Do these trends work against customer loyalty?

If enhancing the sales equation involves tiring out our customer’s brain, we need to get rid of any unnecessary loads on this journey. To put it in a more contemporary way, if sales are encouraged using ‘push’ promotional strategies, tired out customers may stop coming to our store. This is what many tourists end up doing, crossing the street to avoid waiters who stop them to persuade them to enter their restaurant.

To avoid such problems, the following seven tips may be of use:

  1. 1. Interlinked with the CRM, commercial and contextual data (weather, events, etc.) represents a powerful source of opportunities for gaining greater understanding of the customers, to later be able to implement suitable actions to grow the business. Market intelligence is a key part of any good marketing and sales department.
  2. When we do the sums, the CLTV is greater when customers keep coming back to the store, despite their average purchase each time being lower.
  3. Take full advantage of the fact that smartphones know their owners’ context (space and time) so that they can receive offers adapted to their present situation.
  4. Avoid excessive promotions or communications that force customers to pay too much conscious attention. If we fail to do so, we contaminate the store and cause their psychological self-defence mechanisms to kick in.
  5. Whenever we want to grab the customer’s attention, we have to offer them some kind of reward by way of compensation.
  6. As far as the customer’s brain is concerned, one strong promotion is far better than twenty weak ones.
  7. The rewards must be relevant. In other words, if we possess customer data, we have to be able to offer them something that is truly adapted to their needs. There is no point sending them a promotion for nappies if their kids are all grown up. If we do not manage this, the store may be seen as rude or, even worse, irrelevant to the customer’s life.

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Bibliography

  • Price Waterhouse Coopers & TNS Retail (2007) “Retailing 2015: New frontiers”.
  • Honaman, J. (2015) “Top 6 retail trends to watch in 2015” in Retail Info System News, 5th January
  • Lindsey, K. (2014) “Sealing the deal: Six digital tools targeting impulse shoppers” in Retail Dive, 27th May
  • Dixon, M., Freeman, K. & Toman, N. (2010) “Stop trying to delight your customers” in Harvard Business Review, July.

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Lluis Martinez-Ribes

Source: Código 84, number 185

March 2015

THE BEST OF LUCK TO YOU, NEW PRODUCT! The Orchestrated Solutions model

According to an article published in the Journal of Product Innovation (2013), the failure rate of new products is 41%, although this figure varies depending on the sector (Castellion, G. & Markham, S., 2013).

It is surprising that almost half of all new products fail when, aside from simply allocating resources, companies normally employ well-known processes for innovation, customer insight, marketing and also sales.

There are several causes behind such commercial tragedies, but they all have a certain aspect in common: the majority of companies that launch new products do so on their own, without strategic partnerships with other companies in the sector with the aim of achieving more comprehensive solutions for their customers.

orquestrado1

Another way is possible

Imagine breakfast time on any given day. You open the fridge and pick whatever you fancy: milk, juice, cookies and so on. You sit down to enjoy your breakfast as you read the papers on your tablet.

While this may appear to be a perfectly normal situation, this is not the case for the 8% of the European population who suffer from diabetes. With this group of consumers in mind, in 2013, the mass market manufacturer Calidad Pascual and the pharmaceutical laboratory Esteve decided to launch DiaBalance, a range of everyday food and drink products suitable for diabetics to be sold in supermarkets, as well as a selection of products for exceptional situations, available in chemists. Moreover, they offered advice on their website to help people with the condition.

Each of the two companies contributed their own respective knowledge and experience in their sectors in order to offer a fairly complete solution to people with diabetes, with the objective of making life easier for them.

The boundaries between the food and pharmaceutical industries have been blurred in the project and the companies have managed to offer a full solution to diabetic consumers in a single purchase, a fact that they appreciate (Bröring et al., 2006).

The commercial start-up of the new solution may have been a slow process, but both of the companies are extremely happy with the project and the lessons they have learned from it.

Two other cases: Nike+ and Nespresso

Nike+ iPod were more than just trainers, they were a complete solution achieved through a partnership between Nike and Apple. The shoes enable wearers to monitor and track their physical activity and share their experiences with other users.

Nike’s revenue rose by 10% in the second quarter of 2006, when these trainers went on sale (Angell, 2006). The following quarter saw sales continue to rise by 9%. In less than 6 months, three million pairs of trainers were sold (Nike Inc., 2006).

Due to technological progress in electronics, Nike has now been able to develop this solution without the need for an iPod and, as such, Apple is now longer a necessary partner in the project.

Meanwhile, working together with Miele, Krups, Delonghi and other companies, Nespresso offered its customers a complete solution: a top-quality espresso, highly optimized coffee makers and an extremely well-planned after sales service. All of this was offered with an apparently luxury appearance.

After a slow start, the company’s sales rose by 22% in 2009 in the depths of the recession and the Nespresso Club reached 7 millions members, even with a significantly higher price than the competition.

What underpins these three examples?

Just like Nike+ and Nespresso, DiaBalance is a practical illustration of what is known as convergence. In other words, this is the partnership process between two or more industries that were unconnected up to that point, in a world in which the lines between sectors tend to be blurred (Weaver, 2007).

orquestrado2

Orchestrated Solutions

There is extensive literature on convergence. In 2010, I published an academic article with Katia Premazzi in which we coined the term “Orchestrated Innovative Customer Solutions” (OICS):

  • A network system with permanent and visible horizontal and/or vertical and/or diagonal links, involving companies that complement their key resources (primarily knowledge) in order to offer a complete, innovative, branded solution to end customers, thereby satisfying their needs.

For a partnership with another company to qualify as an Orchestrated Solution, it must fulfil 6 conditions:

  1. It must provide a complete solution to one of the customers’ needs, not a partial solution that ignores part of the problem, avoiding the short-sighted attitude that ‘It is nothing to do with us”.
  2. The response must be truly innovative, not simply an improvement.
  3. To achieve this solution, the participation of third party companies is required (usually from other sectors), which share their know-how and expertise. A flexible partnership process must usually be adopted with a desire to learn, thereby enabling the partners to increase their capacities dynamically (Teece et al., 1997).
  4. The partner companies know the solution that they want to conceptualize and create. It is not simply a case of working with good input suppliers. In addition, all of the partners’ brands are visible to the end customer on the end solution.
  5. Operating as a system, it must involve a new business model, including the visible facets of both the front-end (range, prices, services, customer service and relations, type of sale, website, etc.) and back-end (production, logistics, finance, technical service, etc.).
  6. Long-term contracts must be established between the partners, ensuring a stable relationship between the companies involved (Weaver, 2007). As large-scale investments are required, albeit not always in equal proportions, the contract must run for a long period in order to ensure an effective ROI.

In short, the Orchestrated Solutions system is currently the most innovative way to launch new products.

It is a method that demands a lot of input: strategic vision and desire, a firm customer-centred focus and a great deal of internal support in terms of time and money.

However, luckily the benefits to be reaped are great: effective differentiation, preference creation, brand development and bigger margins.

To sum up, this is a great management approach for executives who are striving to transform their business, rather than those who are happy to stay in their comfort zone.

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Bibliography

  • Angell, LC. (2006) “Nike profit boosted by Nike+iPod sales”. iLounge, 21st December
  • Bröring, S. et al. (2006) “The front end of innovation in an era of industry convergence: evidence from nutraceuticals and functional foods”, R&D Management vol. 36. Oxford, Blackwell Publishing Ltd.
  • Castellion, G. & Markham, S. (2013) “Perspective: New product failure rates: Influence of Argumentum ad Populum and self-interest”, Journal of Product Innovation Management, pp. 976-979
  • Martínez Ribes, Lluís; Premazzi, Katia. “Orchestrated innovative customer solutions: an emerging trend to master convergence?”, Finanza Marketing & Produzione, Vol. 28, nº 3-2010, 09/2010, pp. 89-122
  • Nike Inc. (2006) “F2Q07 Earnings Call Transcript”, 20th December
  • Teather, D. (2010) “Clooney’s Nespresso steams ahead with 35.5% sales growth in UK”, The Guardian, 9th April.
  • Teece, D. et al. (1997) “Dynamic capabilities and strategic management”, Strategic Management Journal.
  • Weaver, B. (2007) “Industry convergence. Driving forces, factors and consequences”, Lund, The Institute of Eco

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Lluis Martinez-Ribes

Source: Código 84, number 184
February 2015

WHERE HAVE ALL THE CUSTOMERS GONE? An overview of showrooming

An MBA student from ESADE who was taking my Retail Innovation course (September 2014) mentioned to me that, in Shanghai, several shopping centres have repurposed entire floors, with a shift from stores to restaurants.

martinez-ribes-showroom

(image: artchandising)

There are lots of countries in which retail chains are struggling to keep up sales and productivity, with many cases ending up in store closures. In the United Kingdom, the proportion of empty stores in 2008 was 5%. In 2014, this figure rose to 13.4%, according to statistics from the Local Data Company.

Forecasts in Europe predict a 3.5% increase in conventional retail sales in 2014, compared to an estimated rise in e-commerce of 11% in the same period. This figure reaches 18% in countries in Southern Europe (Reingold & Wahba, 2014, and Enright, 2013).

However you look at it, the statistics show that the retail sector is undergoing a profound transformation for one main reason: customers now buy in a different way. One of the best-known new ways of shopping is showrooming, the cause of so many headaches lately.

As EKN defined them in 2013, these showroomers are “channel agnostic customers” who completely interconnect all of the interfaces or channels.

Showrooming

Warc (2013) defines showrooming as the phenomenon by which customers see the product in a physical store and then buy it online at a lower price.

However, the practice of buying a product cheaper elsewhere was commonplace long before the internet existed. For instance, people often find out about and look at a washing machine in a department store in the city centre and then end up buying it cheaper at a neighbourhood shop.

A second subtle yet important point that is often overlooked by this common definition is that showrooming only becomes a concern for city centre stores when they miss out on the sale of a non-exclusive product. Zara does not worry unduly about a customer looking at an item of clothing in-store and then buying it on the chain’s own app or website.

Therefore, showrooming occurs when somebody checks out a non-exclusive product in a physical store and then buys it at a better price usually but not always online. Bearing in mind the growing number of people using smartphones, it seems clear that this is the great catalyst that has triggered the recent boom in showrooming around the world.

At its root, showrooming is a case of a multi-interface shopping process (physical store, smartphone, tablet, laptop, other physical stores, etc.) that takes place in various contexts (at home, in-store, somewhere outside the home with an internet connection, etc.)  [1].

When showrooming occurs, the main activities or functions traditionally performed by customers in the shopping process (see attached diagram) no longer have to happen in this order, nor through the same interface.

lmr-showrooming-en-b

(Click to enlarge / image: artchandising)

The fact is that, as a result of showrooming and even more so when smartphones come into play, the shopping process is no longer linear, but rather less predictable and subject to more stimuli that traditional ways of shopping.

Why do customers go to the physical store?

We know from experience that, when we make a decision, two things can happen: we get it right (making us feel good) or we get it wrong (making us feel bad) [2]. All purchases require a number of decisions, including which store to go to, which products to rule out and which one I end up choosing. To reduce the risk of error, we need information.

The information required for decision-making is different depending on the interface (digital or analogue) that is used to obtain it:

Type of information about: Analogue media Digital media
Functional aspects (product performance, price, etc.). Limited information (labelling).

Often higher price.

The information may be more detailed.

Often lower price.

Sensory aspects (user-friendliness, style, weight, etc.). Perceived with the 5 senses. Perceived with 2 senses (3 in the case of touchscreens).
Symbolic aspects (associations with the chain and the product). Depends on the case. Depends on the case.

We can see, therefore, that stores in which customers can see the product physically have an advantage from the perspective of the sensory contribution, while online stores tend to win in terms of functionality (sometimes with respect to greater information and often with a lower price). In symbolic terms, the influence of the brand has to be weighed up on a case to case basis. This could equally be said for both physical stores (e.g. Carrefour) and online operators (e.g. Alibaba).

The usual way of tackling the challenge

Faced with the reality of showrooming, chains have mainly responded along three lines:

  1. Penalizing showroomers when they are in the physical store, for example by not offering them WiFi or making them pay if they leave without buying anything. Obviously, this is not the most common solution nor, of course, the most suitable approach.
  2. Ensuring the exclusivity of the majority of their products. This lets them prevent other stores offering these products and stops customers being able to compare. This approach is often impossible if the chain does not have enormous purchasing power. A slight alternative of this approach involves achieving exclusivity in terms of a small variation of a model, which is given a slightly different code, thereby preventing direct comparison. If this response is feasible, it may be appropriate, but it is often not enough.
  3. Lowering prices to undercut competitors, especially those that sell online. Although this approach may improve the rate of purchase avoidance, its side effect is a reduction in gross profit and, as a result, the equilibrium point is much higher. If we take into account the fact that costs tend to be higher in a physical store than for their online competitors, companies taking this approach run the risk of making losses.

A proactive approach for city centre stores

The first part of the response is to play to your strengths, in this case, the sensory side of shopping. Turning the store into a launch pad for the imagination (e.g. as Ikea does in certain parts of its stores) and a place that inspires a particular emotion triggered by the simultaneous stimulation of various human senses. Let’s not forget here the important role that sellers play in this respect. All of this goes towards creating a packaging or micro-context, a crucially important aspect of any neuromarketing strategy, as we have seen in earlier articles.

The second part of the response is not only “stemming the tide” but rather facilitating the other part of the shopping experience: being easy to use from an operational perspective. In specific terms, this means enabling customers to access the information through various interfaces. Let me explain.

The information found on a physical label on a product is often insufficient, if the customer wants to feel more confident about their purchase. In this case, the retail chain can offer information on demand, whether that is through interactive screens activated with the product code or with a code than can be activated using the customer’s smartphone.

When the customer uses their smartphone in the store, there are two possibilities: the chain’s app (or website) opens, or this app belongs to a third party. In the ideal scenario, the customer could activate a code on the product shelf to activate a code in the chain’s own app, without having to type anything in. This would give customers more information about both the product and the additional benefits offered by the chain when customers choose to buy from them (e.g. methods of payment, delivery outside the standard timetable, extra warranty, etc.).

Ideally, when customers use the chain’s own app, it shows them something relevant or, in other words, personalized for that customer. For instance, if somebody has a baby, they could be recommended the option of a promotional pack suitable for that context. This would be a case of big data being applied to showrooming.

It is worth highlighting here that anything that reduces the effort required (e.g. easily accessible information, non-technical language, avoiding repetitive tasks such as entering personal details or customer card details again, etc) is likely to generate greater sales.

Moreover, from the same platform, all of the information could be sent to somebody for them to give their opinion, reserve the product and maybe even buy it.

As a third response, albeit complementary to the others, a sales promotion can be added that is issued to registered customers who have given permission for their smartphone to be identified. For instance, customers who spend a long enough period in a particular section of the store could be sent a digital coupon for a certain amount that is only valid for the following half an hour. Technologies such as iBeacon can help, as long as they are not intrusive; the cortex would take issue otherwise.

The result of all this is that city centre store companies have to adopt a multi-interface strategy or an omni-channel approach as it is commonly known. In fact, a more suitable name would be a fully customer-centric strategy, as it offers a complete, personalized experience that is interconnected throughout all of the interfaces.

Operating through all of the interfaces, chains have more opportunities to gather information about customers and, as a result, to general a more enjoyable, personalized and stimulating shopping experience.

John Lewis, a good example

One really good example of the integration between interfaces is the British chain John Lewis, winner of several awards for offering customers an omni-channel experience.

The products in-store have two codes: the traditional one and another in-house one. By scanning the latter with their mobile phone, customers access the product information on the company’s own app. As well as the technical specifications being provided there, customers can also see other complementary benefits that John Lewis offers customers for shopping on their website, personalized discounts generated from previous purchasing data, information on demand and other aspects that make the shopping process easier.

As a result, the chain has managed to establish itself as many customers’ preferred option, even though its prices, while competitive, are not the lowest on the internet.

Finding our bearings

The objective of retail chains is not to prevent customers shopping online, but rather ensuring that they do so using the chain’s own range of interfaces. As Ann Zimmerman (2012) says, competition is not between stores or website, but rather between your website and the rest.

Showrooming is just the tip of the iceberg that shows the deep-rooted transformation that is happening and going to happen in retail, the cause of which is the fact that customers live and shop differently now. Achieving harmony with customers’ lives should be a greater trigger for companies to transform, rather than simply reacting to a rival’s initiative.

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[1]  Context refers to the combination of a particular time and place.

[2]  For this reason, what people like most is not having to make a decision.

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Bibliography

  • EKN (2013), “The future of the store”.
  • Enright, A (2014) “U.S. online retail sales will grow 57% by 2018”. Internet retailer, 12th May
  • Internet retailer. “European E-Commerce Forecast 2013-2017”.
  • Local Data Company (2014) “Vacancy report H1 2014”.
  • Reingold, J. & Wahba, P. (2014) “Where have all the shoppers gone?” Fortune, 3rd September
  • Warc Staff (2014) “Retailers face the omni-channel gap” Warc, 18th March
  • Zimmerman, A (2012), “Can retailers halt showrooming?” The Wall Street Journal, 11th April

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Lluis Martinez-Ribes

Source: Código 84, number 183.

December 2014

IF IT’S FREE, EVERYBODY WINS. Interpreting “free” in business

According to Flurry, a company of Yahoo group specialist in the use of apps, approximately 90% of the apps in Apple Store are free. Google also gives free access to their search engine services. Hours of work of talented people given for nothing!

Let’s explore this business practice and see what we can learn from it.

freemium-14

From a customer perspective

Even if it’s permanently or just for a short period of time, customers are delighted when they find out that a product or service is free. It’s a nice surprise, something pleasant.

For this reason when someone gives us a gift, our body releases dopamine, a neurotransmitter associated with pleasure and reward feeling.

Scientists affirm that human beings need to enjoy small pleasures in everyday life (for instance, a glass of wine after work, leafing through that attractive magazine before going to bed, etc.), not only to make our life more pleasant, but also to prevent depressions, anxiety or poor performance.

There is also another interesting aspect for the customer who is offered a new product for free: if he doesn’t like the product, the risk assumed is almost zero.

Prof. Sandro Castaldo, from SDA Bocconi, explains this saying that the relationship between the company (or product or brand) and the customer can begin with a first stage: new customers must not feel the risk when pondering over a new product. And one of the best ways to get this is by experimenting it for free; being it for a period of time (e.g. two free sessions of fitness), or in a small amount (e.g. a sample of moisturizer inserted in a magazine).

So from these two perspectives -biological and relational- the surprise of seeing that something is free is really good for the people.

From a business perspective

At a first glance it might seem that firms shouldn’t be interested in giving their products or services for free. However, if we go further into the issue this statement can be qualified.

In a society in which the things that are sold are not always “squeaky clean”, if a company gives their customers the chance of getting in touch with their product for free -without risk-, this is the best possible marketing, both for the first product launch and for when new customers are sought. As Ariely (2008) says, the true attractiveness of free is related to the lack of risk of loosing something due to a bad purchase decision.

So, the cost of what is temporally free must be considered by the company as the “seed” of a new customer.

After all, I encourage (most of) the companies to feel like “customers growers”. Like farmers do: they plant a seed, take care of it, they water the plant, and then they harvest the fruits, and if everything goes well, the amount will increase in every harvest.
I think this agricultural approach is more interesting than the one of hunting customers -they are usually called “target”, “hitting” them with a given “intensity” of advertisements and without listening much to them, except when a market research is conducted.

Apart from this temporal investment of giving something for free, there is another approach, this one of a strategic kind. Companies can take a business model which is colloquially known as “freemium”, the contraction of free and premium. Like well-known companies such as Dropbox, Evernote or many games do, it consists of offering a service for free in its basic option, and a much more complete one -usually without advertising- if the customer pays for this premium upgrade.

Once the customer becomes familiar with that service, he usually desires to go further. And then he is willing to pay for that second premium level, in which he won’t find advertising. For this reason, Pujol (2010) says that freemium is a way to generate demand.

There is life beyond freemium

One of the methods I propose to innovate in marketing and retail is to “move away from the trade guild”: instead of selling good products, try to be of customers’ life (including such good products).

If we sell more or less the same as the competitors, the result is clear: due to the similarity, there is an evident risk of a price war. If such a tragedy happened, the gross margin would decrease, and this would reduce the company “energy”, because the gross margin is like the sap of the plants.

There are companies that know how to sell something apparently more abstract, but very relevant for the customers in certain moments of their life. For example, the company Ziferblat has cafeterias with a very relaxing atmosphere in Russia (Moscow and other cities), London, and soon in New York, in which they don’t charge customers for what they consume, but for the time they spend in there. In Moscow an hour costs around 2.5€ and in London, around 3.75€ (*).

Here, products are free. Instead of selling what the guild sells (with the risk of similarity and the feared price comparison), this retail chain happens to sell something very relevant to their customers’ life: quality time.

Beneath the pavement, the beach

This famous sentence of May 1968 in France is enlightening of the naughty look we can use in business. Instead of remaining in the surface (“the pavement” – what’s free) some managers decide to transform the reality changing their job: they want to be part of their customers-person’s life.

This business transformation may also be called “innovation”. Actually, this is the core part of a sound neuromarketing strategy.

(*) Calculation made in mid September 2014

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Bibliography

  • Ariely, D. (2008) Las trampas del deseo. Editorial Ariel.
  • Busacca, B. & Castaldo, S. (2002) “Trust in market relationships: an interpretative model” Sinergie, Vol. 58: pp 192-226
  • Flurry, The history of app pricing
  • Pujol, N. (2010) “Freemium: attributes of an emerging business model” Social Science Electronic Publishing.
  • Ziferblat

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Lluis Martinez-Ribes

Source: Código 84, Special number AECOC Congress.
October 2014