Shopability » Business Strategy

No more flat-earthing: the Path to Purchase is round

lee — Thu, 03 May 2012 21:30:33 +0000

The recent Path to Purchase Summit held in Sydney brought together a host of international and national speakers to explore what a 360 degree view of shopper marketing means now, in the most rapidly-changing period in retail history. The team from ShopAbility share their key take-outs from the event, for Retail World Magazine.

Amongst all the diversity of perspective in the industry on ‘where to shopper marketing?’ – in the broadest sense, there is one thing upon which everyone seems to agree – the need for a genuinely holistic approach; resulting in real integration. Between supplier and retailer, consumer and shopper, among currently disparate marketing tactics, and around concepts of value.

Within that, four key areas are standing out in the current landscape:

1. Digital and mobile – the new black
2. Holistic marketing – from consumer to shopper and back
3. Language and vision – supplier versus retailer
4. What ‘value’ means now

The first one, in particular, is the biggest ‘buzzword’ around, and consequently gets the most attention!

1. Digital and mobile – the new black

Speaking of flat-earthing, up until recently in Australia the importance of digital and mobile has been pooh-poohed to some extent by the argument that 90% of sales are still physical. Well, yes, but that doesn’t mean you can’t use the technologies to influence and create the sale, not just to transact.

Digital/mobile is under still utilised in Australia for influence. Referencing Google’s ‘Zero moment of truth’ approach, we’re currently undercooked at all points (Stimulus, Zero Moment of Truth, First Moment of Truth, Second Moment of Truth) given we are approximately 60% smartphone penetration in this country.

As a result of this lag, many of the Path to Purchase presentations focused very much on digital.

It is evident that many companies aren’t using digital very well. If they have it tends to be something like “hey let’s put our brand on Facebook” with little thought on how can we communicate with our audience and more importantly what do we want to communicate with this medium.

One company that is using digital media particularly effectively is Coopers. Here is a family-owned company rooted in tradition (in fact celebrating 150 yrs in 2012!) that has embraced digital and in the process shown the bigger players in the industry that you don’t need a big budget to be effective. Their Coopers Clear campaign used augmented reality to make a connection with both male and female shoppers but it was much more than that – it is one of the first examples in this country where a manufacturer has effectively utilised digital media to promote and bypass the retailer. (http://digitalmarketinglab.com.au/index.php/2011/07/17/augmented-reality-on-the-rise-in-oz/coopers-clear-ar-campaign/). One simply scans their smartphone over a symbol on the pack to see if they’ve won. Even better is that they didn’t even have to educate their shoppers on how to access the promotion. Coopers sales reps simply showed the store manager how to do it and got them so excited they were showing shoppers how to do it. “Clean store policy?” – not a problem. They’ve also used their “order of Coopers” website to make a fantastic connection with consumers. In fact, I feel like a Coopers now.

While some are using digital effectively (Coopers obviously, Supre and Debenhams come to mind), examples of integrating it in a combined effort with other forms of marketing have historically been light on. Toby Desforges made a good point when he said that in the same way that marketing isn’t just advertising, promotions isn’t just shopper marketing. The point is that a marketing campaign needs to encompass digital, print, TV and in-store – and in fact whichever are the most appropriate marketing tactics to bring the bigger picture to life. Ann Mooney, ex P&G, shared some excellent examples of how they have been able to achieve this in the USA – which relate also to the need for a holistic and integrated approach, so we’ll discuss them under those points.

Moving forward, one of the ‘holy grails’ will be how to effectively measure the impact of digital media in the shopper process. There are lots of models around but the ones that are measured really focus solely on in-store. Speaker Ben Grill who made a good point about the traditional ‘pathway’ approach, suggesting “we should call this the path to purchase and repurchase”. Indeed. And this is where digital can potentially help to keep the connection with the shopper and consumer so as to encourage repurchase.

A cautionary word on social media, however…

‘Social media’ and ‘shopper’ have now become buzz words that are bandied with gay abandon but a lack of depth of understanding and strategic rationale. John Bastistich from Westfield made the point that some of the biggest brands have either closed down their Facebook online store or view it purely as brand engagement with no commercial expectations from it. Companies need a meaningful reason beyond ‘having a presence’ behind where they invest in the social media landscape, and what they invest with. When it comes to forums like Facebook, the gulf between awareness and purchase is wide. Back to the point around influence – the acid test is how can each element of the mix influence the shopper decision-making process?

2. Holistic marketing – from consumer to shopper and back

Back to this business of a 360 degree view. In this era of rapid change and a fragmented marketing environment, it’s clear that a holistic whole-of-customer view is required, from consumer to shopper and back again (pre/in/post store) rather than shopper in isolation.

This is a re-emerging theme that also came up strongly in the POPAI / ShopAbility Shopper Marketing Industry Survey. That shopper is not just about in-store, and nor is it ‘just a mindset’ (as clearly stated by Ann Mooney at the Summit).

Shopper marketing involves pre, in and post-store and we need to understand the relationship between consumer and shopper.

Consumer needs and desires drive shopper purchase. At the point where those consumer desires and needs become purchase choices and decisions, we’re speaking to the shopper, whether or not they’re in-store at that point. And there is any number of influences along this ‘path’, which is somehow no longer the right word to use, since it’s clearly not linear. And to that point, when the shopper becomes the consumer again; using the product is also an ongoing expression of their choice. And then there’s post purchase.

Post purchase is also currently underutilised (expressions versus impressions, to quote Ben Grill from Google).Post purchase hasn’t really been thought about for repurchase and transactions, just for ‘loyalty’.

This all points to the importance of tailoring offers based on an understanding of individuals as whole-of-customer. And technology enables us to do this now. We can find out more about our customers than ever in the history of marketing. The era of ‘mass communications’ is over, for those of us who still haven’t got the message and cling to our TVCs.

3. Language and vision – supplier versus retailer

Another theme is the need for a common language for suppliers and retailers (and within suppliers) by putting shopper and store back, or ‘store first’, as Ann Mooney from P&G likes to call it.

It’s not just about ‘doing shopper marketing’, which isn’t a term retailers use anyway; all shoppers are ‘customers’ to a retailer.

From the successful examples given at the conference, it seems internal structure dedicated to shopper is less important than having a common language, clear vision and clearly understood process for getting things to market and using insights.

Several of the speakers, and in particular Ann Mooney (formerly of P&G), spoke of the need for genuine integration in shopper-led marketing initiatives. In order for all facets of a campaign to sing from the same hymn book (including digital) with shopper-focused messaging, this integration needs to be built in to process before a single campaign light bulb goes ‘bing’. Ann spoke to the realities involved in making that happen, including:

Nominating lead agencies to coordinate other agencies (and the politics of that)
Ensuring that Insights not only have a seat at the table, but that shopper insights actually inform all integrated marketing initiatives
Building in processes for Retailer engagement from the outset (i.e. during the insights gathering stage) and a seat at the table for every stage

At this stage, the Australian market is still very tactical and for many working in the industry, the task feels overwhelming to get from where they are operating now and where they would like to be. There is a real need to get the attitude and processes (including who holds particular budgets and how they work together) within businesses right to ensure that the strategy (or in many cases tactics disguised as strategy) are not determined by company structure.

What ‘value’ means now

Low price is not a differentiator anymore, it’s a given. There is a need to define the types of value different shoppers look for, and this means retailers will need to move away from a ‘lowest price’ to defining what ‘value’ actually means or find a different platform altogether.

Jon Bird of Ideaworks delivered a brilliant presentation which spoke to 8 Paths to Value; being:

Basic Buys
Proven Performer
Creative Solutions
Expert Advice
Built to Last
Affordable Chic
Small Indulgences
Everyday Heroes

Arnaud Frade from TNS also spoke to Values and Concepts being beyond price, and certainly in our own experience of category strategy and the development of category drivers, there is a need for a holistic approach to what value means to our customers, just as there is a need for a 360 degree view on the points we’ve mentioned earlier.

Ann Mooney also made the valid point that packaging is underleveraged for shopper communications and activations, not just as a brand platform. Packaging is often the only guaranteed communication medium there is. So, what are we communicating on it and how does that address this broader concept of ‘value beyond price’?

And… finally, back to being human.

Simon Small of Nestle Switzerland reminded us of the fundamental truth that ultimately it’s all about emotional connection. Which can be easily forgotten while trying to navigate what ‘shopper’ means now in an increasingly fragmented and complex communication world. Simon’s stories of powerful emotional connections between shoppers and brands in surprising environments, such as developing nations where retail channels are unsophisticated at best and chaotic at worst, prove that when you hit the emotional ‘sweet spot’ with shoppers, the dividends can be enormous.

So, in summary:

All tactics need good reasons
Shopper marketing is about whole human beings, who are consumers, shoppers and seek ‘value’ (whatever that means for them), and are influenced by a wide range of communication mediums before, during and after purchase
Real integration happens via common language, vision and meaningful process change
Emotion is at the heart of all good shopper marketing. Actually, at the heart of everything, really.

Internal alignment: same story – so don’t expect a different answer!

lee — Wed, 25 Apr 2012 16:21:45 +0000

It may not be new, but it’s still one of the biggest factors holding back FMCG suppliers from achieving business potential – a lack of internal alignment amongst Marketing, Sales, Category and Field Teams. How to get these silo functions ‘singing from the same hymn book’ is a conundrum and a never-ending challenge for many FMCGs, and the focus of this article, by Peter Huskins, for Retail World Magazine.

Comments that we frequently hear when talking to industry contacts:

‘The Marketing team is a roadblock. They don’t get in store. They don’t understand what the Retailer wants, trading terms and the implications or how a store operates”

‘We have developed the product now it’s over to you guys to sell it!’

‘The Sales team only care about achieving short-term sales targets. They don’t get the bigger brand and product positioning story, or the personality of our brand.’

‘This is the first joint planning meeting we have had with Marketing in over 2 years’

And Category and Field teams don’t feel like they are understood by either as they are usually the ones at the bottom of the pile. The old saying that cr*p flows down hill could never ring louder in many companies (go on, have a look in the mirror and deny it!). The ability or inability to execute at store level can be severely hampered by poor planning, communication and inexperienced expectation.

But the biggest issue whilst all of this internal squabbling is going on is:

“who is looking after the Shopper?”

The Shopper is the person who actually makes the BUYING decision at shelf and is the last person we have an opportunity to “talk to” before an item is put into a basket – hopefully our item!

The Shopper may not necessarily be the Consumer – think pet food, kids cereal, fem hygiene, men’s deodorant, hot and cold beverages, vitamins and supplements….and the list goes on.

So how is this really important person usually recognized in our internal structures, processes, procedures and most importantly accountabilities?

Marketing is usually focused on Consumer, Sales on the Customer/ Retailer. The traditional Trade Marketing role is intended to own the Shopper, but is usually the buck-stops-here point of contact for all sorts of other loosely aligned reporting and tactical initiatives that leaves little time to think strategically about our Shopper response

There might be an embryonic ‘Shopper Insights’ department headed up by a person who has had to shift from Consumer insights, Brand Marketing or even Sales to Shopper insights with no additional training by the company. But there is nobody to actually direct Shopper strategy or implement Shopper-focused initiatives, apart from what is contained in BLADS or Trade presenters, and they usually focus on sell ins or on stand placement.

So what to do?

1. Consider Structure Optimisation

It could be that your traditional teams and their reporting structures are no longer effective for your changing needs, or those of your Retail Customer or of your Shoppers.

For example, some leading FMCGs have created a department that is ‘Shopper’. It is on the same structural and reporting level as Marketing and Sales, reporting in to the GM or MD.

Another example is to implement Category teams populated by the relevant Marketing, Shopper and Sales team members.

These examples achieve three things:

a) Ensure that Shoppers as well as Consumers are considered in the strategic decision-making process

b) Create a bridge between Marketing and Sales (including Field teams), thereby improving alignment

c) Ensures a clear focus on the in-store element of the path to purchase.

These are a couple of examples of how to restructure to refocus – not for the sake of it but to change your business approach to include the Shopper in all strategic decisions.

The most important factor is the true function each team is currently performing, whether it is the optimum function for the business, and what, at a higher level, actually needs to be achieved and therefore how the business should be structured to support that objective.

A few things to consider when looking at optimizing your Structure:

How/ where is your current business structured to include the Shopper? Who currently owns it? Has it settled into a dept where it is treated irrelevantly, and will therefore never get the clean air that the Shopper deserves?
Look to the future, how do you want to treat the Shopper moving forward? You could argue that a purely PL manufacturer should be more focused on Consumer trends for example and therefore does not require a separate Shopper function. But rather than ignore it, the question I would ask is “how much do I really need to understand about Shopper behaviour to have the best chance of shelf sales acceleration?” even if I do not own the Brand (but remembering that I live and die by the sales volume!)
Assess the overall internal alignment of the different silos – who does what by when etc., as process and role creep occurs in any business, the larger it is the more prevalent it is.
Compare Roles across the business to identify insight gaps. What do I spend my money on? Where and how is it used? What questions are my Retail Customers asking me that I cannot answer? What are they asking that they cannot answer?

2. Skills Assessment

Have you changed people’s roles, titles and expectations without giving full consideration to their skill sets?

This can become a major source of stress to both company and team members.

For example, the bevy of new ‘Shopper Insights’ roles that have miraculously appeared without adequate training provided to support the new roles. And the growth of Trade Marketing into increasingly complex analysis and forecasting, again without adequate upskilling or needs analysis.

And one of the biggest issues: Marketing people are expected to know all about Shopper when it currently is not even on the radar of most traditional marketing schools and training grounds, leaving a big knowledge gap that can be behind the ‘roadblocks’ the Sales department complain about.

Further, where does this ‘new budget’ come from for all of this ‘new’ Shopper work? Usually from existing Marketing budgets – and how is that usually received, I’ll give you three guesses. New initiatives need to be funded from across the business, as with any new strategic venture, and some areas may make a larger contribution than others but that should be based on something more than a subjective view of where the $$$ are taken from.

When reviewing internal alignment, it helps to conduct a thorough, supportive (non- threatening) skills assessment of the relevant staff.

Things to consider when undertaking skills assessments:

What are the current outputs and deliverables by silo?
What are the duplications and unnecessary outputs?
Where to reallocate responsibilities if necessary?
How do I identify best practice for my business? This will depend also on how ‘best practice’ I want to be.

One MD I worked with had the view that each year you ‘removed’ half of the internal comms that rattled around the office, purely to focus on what we needed vs what we wanted (and it does save costs)

3. Training

Roadblocks to internal alignment and getting things done amongst multiple silo functions are often about people feeling threatened. Because they’re supposed to know something they don’t (because nobody has told them or trained them in it!), so they stick to what they know in order to feel comfortable and appear competent.

This ultimately holds the company back.

Tailored approaches are needed for each team, and the personalities within the team, to harness the potential for alignment.

Things to consider when conducting team training:

Clearly assess current Company and individual skill capabilities and competencies – where are my gaps?
Use a template or roadmap for training that ensures a consistent flow and sequence of subject matter
Match the required skills to the Role, Job Description and review process.
Train the knowledge and skill gaps, rather than everything

4. Culture

Culture, for the purpose of this article, can be defined as ‘how the members of a company experience it’.

Often, in FMCGs with alignment issues, that experience can be fraught with turf wars, impenetrable alliances and the careful navigation of internal politics before any single initiative gets off the ground. If the coffee machine had ears!

That internal friction and disgareement, in turn, results in all those good ideas and strategies sitting on a shelf or being dumped in the ‘too hard’ basket.

Some things to consider to improve your alignment through culture:

1. Co-locate functions that need to work better together.

The classic example is Sales and Marketing. As exampled above, some of the better integrated companies have put Sales, Marketing and Category all on the one floor in an open space. They have to talk and understand the issues other roles must contend with!

2. Musical chairs

It’s an oldie but a goodie: ask people to step into others’ roles for a day (‘walk a mile in the other man’s shoes’) to gain better understanding. A really important one is to get the Marketing people out in field. Get them to see how their brands are brought to life (or not) in the instore environment, and how their brands are being sold by the sales team to retail customers. If Marketing staff aren’t out in field at least once a month, they risk being ivory tower theorists.

Ensure that Marketing co-present that all-important new line to the Retail Customer, not just to get feedback on their creation, but also to start to understand what, when and if their earth-shattering new line will actually get the acceptance and subsequent shelf space that was expected.

If not, what went wrong?

If accepted, how can I use those learnings to make sure the next new line I submit is just as successful?

3. Similarly, ask Sales people to deliver their thoughts on the long term brand building strategy (3–5 years). And so on. The point here is that the company has to invest in enough ‘downtime’ to allow staff to do this i.e. it needs to be seen as valuable time spent.

4. Assign an Account sales problem to another area of the business for a ‘blue sky’ solution. This forces research and understanding of the other functions’ issues and solution frameworks, and the only place to get the answers is from the people who currently do the role. Again they have to talk and understand the issues other roles must contend with.

You may well be surprised with the result!

5. Develop cross functional teams to develop and filter ideas and initiatives. Many companies use this approach for their NPD pipeline, so why would it not work in other areas? You would need to watch that you don’t strangle progress through beurocracy but the principle is worth either discussion or a trial as the end result is clearly worth the investment

5. Category Vision

An interesting question to ask a round table of 10 of your most senior executives drawn from across your business:

“What is our Category Vision and what are the key elements I would expect to see when I am shopping in store?”

Most companies would generate certainly over 6, and up to 10 different answers to that simple question.

Why? In most instances there is not a single aligned Company approach that has been developed across the different silos, so that each is subtly and without intent, working against the other.

It is critical that your Company speaks with the one voice with your approach to in store marketing – the impacts are clearly evident to your Retail Customer and may just be the reason why your competitor is considered the thought leader and overall category driver – regardless of market share, npd, promotional spend or rolled up margin.

The fact is that better internal alignment enables a more strategic approach to developing your categories and therefore your business, less time navigating politics, better skilled staff with higher morale, all leading to increased sales due to a stronger end-to-end offer.

Most important is the single business focus that is initiated – one Company one voice.

So, time to empty the silos and critically review your structure with a clear line of sight to the future!

What’s the role of the store in a brave new digital shopping world?

lee — Tue, 13 Dec 2011 11:06:41 +0000

What impact does and will proactive shopper online search prestore have on planning and shopper behaviour instore? What is the ‘new role’ of the store? Norrelle Goldring looks at some likely scenarios, for Retail World Magazine.

There’s been a lot of media huff and puff lately about the growth of online shopping in Australia. But the larger revolution – albeit quieter from a media point of view – is the change in shopper behaviour before they purchase, brought about by the ability to search online for product information before they even get to a store.

This has implications for the ‘path to purchase’ and for impulse purchases. As the degree of prestore search increases, so does the degree of planning.

I thought it worthwhile having a look at this and its implications for what stores will need to do in order to retain a role broader than being a mere transaction zone. The game SHOULD be much bigger than just range and layout, which are hygiene, navigation and deselection (narrowing down) factors, they’re not strategy. Once you’ve got your range and layout right, then what are you going to do to increase your category sales in an environment where shoppers are getting harder to influence?

THE PATH TO PURCHASE IS BLURRING

Traditionally the path to purchase was thought to be prestore and instore.

Prestore was when shoppers were making lists and were the passive subjects of advertising and promotional stimulus. Prestore was about consideration.

Instore was where the shopper was influenced on which of their considered products in a category they would buy. Instore was where the conversion happened.

Now the model is blurred. We have conversion happening prestore, and consideration happening instore.

The advent of mobile search and compare is creating consideration at shelf, not just conversion. An example is a shopper standing in a shoe store looking at training shoes. The shopper can whip out their mobile phone and price compare the shoe in the store they are in versus somewhere else. And if the somewhere else is nearby they may change their store choice. You’re then relying on your store staff service and sales capabilities to keep the shopper in your store. Or they might be looking at a shoe on shelf and if a staff member isn’t available, look up the product information online using their smartphone.

This isn’t just for the ‘few’ who have smartphones, by the way. Australia has one of the highest smartphone penetrations in the world, currently nearing 40%, and set to hit 60% by the end of 2012.

THE ‘FIRST MOMENT OF TRUTH’ – JUST ONE OF A SERIES OF TRUTH MOMENTS

P&G are largely credited with coining the expression the ‘First Moment of Truth’ to describe the shopper experience at shelf, where theoretically all the prestore and instore marketing and category management efforts come together to create a purchase decision at the shelf (or offlocation display).

Now we have not only a First Moment of Truth, but a Zero Moment of Truth (prestore) and a Second Moment of Truth (post store, when the purchased product is actually trialled).

Google’s recent report (April 2011) on the Zero Moment of Truth (ZMOT), whilst not expressing a new idea, has probably been the first to articulate it clearly.

It identifies the shift in shopper behaviour by differentiating advertising and promotional stimulus (considered passive) from online and mobile search (proactive).

The ZMOT is when a shopper actively searches for product information online. This may be from a retailer’s website, manufacturer’s website, product reviews, social media such as Facebook, and blogs (which are a form of organized word of mouth), among other things a search engine may dig up. ZMOT is everywhere because it can be accessed whilst mobile, and it’s not just for high involvement purchase categories like cars and entertainment systems. Shoppers are actively searching prestore in product categories ranging from plasticware to pet food.

The Second Moment of Truth (SMOT) – product trial, usage and experience – has an impact on ZMOT. Users of a product when they get it home may post a comment about the product (and their purchase experience) on a social media website, or a product review on a blog or website. These reviews then contribute to the next shopper’s ZMOT findings. In a recent report from IBM it was stated that a shopper is more likely to believe a review from a stranger than what a retailer or manufacturer says about a product. This demonstrates the need/role for informal product advocates and ambassadors (rather than paid celebrity sponsors).

Whilst marketers can’t control what shoppers post for SMOT, smart marketers in manufacturing can use ZMOT tools – including offers – to mitigate retailer clean store policies.

So now we have a model where advertising stimulus and promotions (Stimulus) may be prestore or instore. The ZMOT is everywhere (accessed prestore, instore, in transit) as is the SMOT. The First Moment of Truth may now be online, or in bricks and mortar stores, or multichannel (eg order online, pick up instore or order instore, have delivered to your home).

I haven’t figured out how to draw this yet in a pretty diagram. Stay tuned. It’ll probably look like one of those communication network diagrams like a cloud with lots of lines where everything connects to everything else.

THE DEGREE OF PLANNING IS INCREASING

The more ZMOT proactive product search that occurs, the greater the degree of pre-store product planning.

Depending on the channel, category and trip type, there may be a lot or a little impulse. On average in Australia across a number of shopper research projects in the past few years, we’ve found that most categories in grocery are planned down to product or brand level between 60% and 70%. That is within a specific category.

But this doesn’t mean you can’t get switch, upgrade or impulse instore, or that a shopper doesn’t buy other categories/products on impulse. We know that around 80% of shoppers deviate from (add to) their grocery shopping list once instore. That is, they come in for 4 things totaling $20 and wander out $50 and 8 items later.

What it does mean is that you need to work harder to interrupt them within a given category.

Interestingly, the recent Coles and Woolworths smartphone apps have a number of functions that will actually increase the degree of planning (My List, My Specials, where items are located in my store so I can find them faster etc) with fewer of the apps to increase browse time/impulse/engagement (recipe finders being the main one at this point).

In an environment where retailers have trained shoppers to expect low prices as the cost of entry and promotional strategies have simply shifted the majority of a category’s sales to on promotion (and deflated category value in the process), the crying need instore is for INTERRUPTION. Shoppers want to discover, be surprised, delighted, and informed … this requires engagement and theatre.

THE NEED TO PLAY TO EMOTIONAL, NOT JUST RATIONAL

In ‘The Buying Brain’, Dr AK Pradeep emphasizes that 95% of human decision making is unconscious and emotional not subconscious and rational. He outlines 7 shopper experience dimensions. In no particular order, these are Information, Interaction, Entertainment, Community, Education, Simplicity, and Self Worth. These serve as a useful ‘retail health’ scorecard for a brand or category.

It’s evident from this list that grocery retailing only really talks to simplicity (ease of shop) at the moment, with perhaps some bits of information and some Community (charity) activities. But supermarkets have work to do on the interaction, entertainment, education and self worth dimensions.

When you look at the traditional point of purchase drivers (range, space & layout, visibility & display, price, promotion and persuasion) there are 3 that are rational (range, space, price) and 3 that are more emotional (display/theatre, promotion, persuasion).

Clean store policies are effectively stripping the emotion out of a shopping trip that for many is already a grudge trip or considered a chore.

When we run shopper research typically the retailers want to understand what their range and layout should be, and most of what shoppers want is not just a layout that makes sense but typically category information, samples, tastings and demonstrations. They want things that will help them with solutions and keep them entertained.

Interruption and engagement – the levers to pull for impulse sales and category growth – will come from more theatre; better thought through relevant/tailored/interactive promotions that pull levers other than price, and from personalized service.

In the brave new world of shopper-controlled retailing, the retailers who retain relevance will be those who can interrupt, surprise and delight by playing to emotions.

The Business Operating Model. What is it and why should I be interested?

lee — Fri, 30 Sep 2011 23:46:33 +0000

ShopAbility has partnered with the Bevington Group, Australian structure and process change leaders. Here, Bevington’s Roger Perry discusses the ‘Business Operating Model’, why and how it is applied, for Retail World Magazine.

In my last article I discussed the importance of thinking about the design of a business. I encouraged you not just to rely on fast cost cutting, but to think about what the real drivers of low value activity are. I encouraged you to think about whether there were better ways to design your business.

In this article I will go much further in discussing the conscious design of a business. First of all I will define what I mean by a Business Operating Model: this is important as there are several conflicting definitions. Then I will describe some examples of business model principles, and their consequences on the model. Finally, I will describe how organisations go about rapidly, but thoughtfully, considering the design of their organisation. Business Operating Model design can be a complex business, so unfortunately I will not be able to achieve more than an introduction to the concepts.

A Business Operating Model is the combination of roles, skills, structures, processes, assets and technologies that allow any organisation to deliver on its service or product promises. It is in effect the way the business is set up to deliver. For example, it can refer to the way the organisation is vertically or horizontally integrated. It can refer to the way the organisation thinks about its staff (e.g. contract or permanent). It can refer to the way personnel work together. It can refer to the way responsibilities are divided up within the enterprise.

Let’s imagine an extreme example which might help make this clear. Imagine a retailer with the following characteristics.

It is a retailer of fashion clothing and footwear
It has a catalogue and web based model
Management, IT, product development and buying operate out of the Middle East where it has been granted favourable tax status and has access to both Middle Eastern and European talent pools
Procurement operates out of Asia
All manufacturing is outsourced to Asian enterprises
The target markets are Australia and NZ (first), followed by Canada and UK
The business is a low cost in comparison to its physical shop front competitors

There are a number of factors which can be considered in this operating model and we will step through some of them.

Firstly we have to understand that the company is very clear about what it is trying to be. It is a catalogue and e-channel company of fashion which offers reasonably priced, good quality, and conveniently available goods. It is very clear about its target demographic (which will not go into here).

This enterprise has thought about the following dimensions of its Business Operating Model

Capabilities. The capabilities are actually essential elements of core competence e.g. product development, buying, procurement, pricing and web retailing: but not manufacturing, not physical retailing
Functions. The functions that need to be together and those which can be separated in order to deliver on the essential capabilities e.g. web skills and manufacturing do not need to be co-located.
Geographies. Which geographies are best placed to accommodate different functions e.g. Asia for procurement because it is intended to source most manufacturing from Asia.
Role and Process Design. It is important to think of these together and separating them is a fundamental design error which many companies make. It is essential to understand who is accountable for what, how big the roles are, and how the processes will work to string together a truly multi-national operation.
Structure. How are the roles and processes integrated? For example is the organisation structured along process lines such as Design to Order process, or Order to Cash Process (each of which can have a separate GM), or is it along functional lines (e.g. GM of web development) or is it along geographic lines (e.g. country head of Australia) or is it some combination of these (or other alternative e.g. Product Category).
Technology. What technologies are required? It is not just the obvious tools like web retailing and catalogue development technology, but also the enabling technologies such as those that support effective communication and knowledge management in this very fast paced fashion business.

The dimensions above to NOT even begin to fully describe the operating model options available to this imaginary enterprise. However, they suffice to give us an example. As you can see, if you break up the design of your organisation into dimensions, it is possible to make rational decisions based first on your strategy (including target markets) and secondly on available data. Some of the dimensions need you to have more professional support to make your decision. For example, role and process design is a real skill that (if done poorly) will cost you a small fortune. It is helpful to ensure you have professional design in detail. The same is true of technology choices.

So, hopefully this provides you with some insight into just what a Business Operating Model is. Now in the above example the enterprise is relatively new, and in our imagination had the advantage of some early advice. However, most of you will already be in the midst of a Business Operating Model which has evolved rather than been designed from a clean sheet of paper. This design might never have been optimal, and it may (at this point in time) be largely out of alignment with today’s realities. In such a circumstance just what do you do?

Fortunately there are structured approaches to dealing with this situation. What I am about to describe is an outlines. Please be careful with this. I did once have a call from a client who said “I read your one page article, and tried to design my business around it.” Naturally it did not work as I cannot possibly mention all you need in a short article. Nonetheless, the following will give you a flavour of the approach.

Firstly, it is important to be able to integrate a number of factors into your design:

A clear understand of what you want to be as an organisation, and, at least at a high level how you intend to get there (for the sake of simplicity let’s call this the “strategy”)
A set of principles which will inform your design (more on this below)
A willingness to look outside of the organisation and even outside of the industry for different ways of doing things
A willingness to challenge the organisation’s assumptions and sacred cows
An ability to capture role and process information in detail quickly (so you can plan how to get from where you are to where you want to be)
A willingness to involve a broad representation of personnel and management to an intensive organisational design workshop (so the design is not just done at the desk of the CEO – but is done in a way that will actually maximise buy-in).

We do not have time to consider all of the above factors so we will look at two of them.

Principles to inform your organisational design.
The personnel and management workshop to define your organisational design options.

By organisational design principles we mean a short list of bullet points that guides the way you design your organisation. Let’s consider the example above and think about what its design principles might have been.

Functions will be placed where there is access to appropriate high quality skills and resources at a globally competitive price
Processes will have clear ownership at an executive level, and clear accountabilities (leaving no staff member in doubt) will be designed into the roles, processes and structures
The organisation will be structured first of all along process lines (e.g. Design to Procure), then along functional lines (e.g. Buying), then lastly along geographic lines (meaning that leadership is genuinely global)
The business processes will be designed for speed (as we are in the fast fashion business) and Ease of Use for our customers (as convenience is a key customer value propositions)
We will not endeavour to deliver on all our capabilities in-house. We will outsource to the most appropriate provider where the function is not core to our competitive success
Functional co-location will be considered based on the level of intense interaction required between functions: if it is not necessary to co-locate then we will place the function where it is most advantaged
There will be a full investment in the required technologies to ensure a ready interaction between all functional units in a value stream

I have just made up the principles above. However, hopefully, you get the idea. There is no doubt that this organisation will go where it needs to go to geographically, will source externally as required, will design processes which ensure clear accountabilities (because without clear processes and accountabilities you cannot have speed), and will invest to make this technically possible in a globally dispersed enterprise).

Such principles are essential because they limit the possible design options. Without a clear set of design principles then you will end up either with too many options to consider, or you will apply a subconscious set of principles (which is probably worse because you should rationally test these principles).

Naturally, having a set of principles is not enough. How do you go about developing the organisational design? Well you could just get the top three executives together and nut it out, or hire a globally recognised consultancy to give you a report. However, both of these options are probably a poor way to proceed. You really need a design that can be implemented, not one that just sits on a bookshelf as a report. What this means is that you need to engage the people who know about the realities at the front line, and who are influential enough to help you get buy-in to the changes you need. If you are going to get resistance every step of the way then you may not ever finish implementation.

In practice the way forward is a design workshop with the following characteristics.

It brings together personnel who know the problems of the business today, are influential on the ground (they can be change champions), and are hungry for change
It integrates the deliberations of the above people with sessions with executive management to agree the problems to be resolved, the design principles, and the design options
It must produce a series of design options, with executive management making the final decisions
It must be carefully organised and facilitated (preferably by experts who have done this before and have seen this through to implementation)
It must incorporate different thinking and practices which are likely to be sourced from other markets and possibly from other industries.

Typically these design forums last from three to five days. They are a major commitment so they do require a great deal of preparation. You need to have thought about the dimensions of your design and also thought about external options. Some of the workshop will involve education on different possible models, and you need to think about the best way to get this through.

These workshops work so well because they force timely decision making. At pre-set stages in the workshop’s progress, executive management need to enter and approve (or otherwise) of the progress to date. This can save many months of deliberations, condensing it to just a few days. At the end of such a Design event the executive leadership should have no more than three options from which to choose, with a description of the options along each dimension.

These workshops are also powerful because they consciously engage the potential influencers. These influencers may not simply be the managers, but personnel generally who are willing to change and who have earned broad respect. These people will have felt part of the decision making process and will therefore be more willing to back the solutions. This leads to a more readily implementable program.

OK. So you have a high level design. What next? This will be the subject of my next article, but to give you an early indication of the next steps, we can safely say that they must encompass the following.

A clear understanding of the current state of affairs so you can develop a pathway from the As-Is state to the To-Be state. In our case we use a methodology known as XeP3.
A way to split up the implementation into phases. In our case we call this Wave Based Implementation Design.
A way to manage the change with agility so that solutions can be tested monitored and promptly responded to. In our case we use a method call Momentum Management.

In conclusion, the Business Operating Model which you are currently living with may have been consciously designed in a different era for a different set of conditions, or it may have evolved over time. Fortunately you are not stuck with this model, and it is eminently possible to design your way out of trouble, as long as you can also robustly implement. Such design must consider a broad range of dimensions such as functions, processes, geographies, roles, processes, technologies etc. A conscious and informed decision will produce a better result; one that engages critical change champions will produce an even better result. This sort of redesign activity will unquestionably become more common as the pace of global change accelerates.

Back to thinking about unit costs

lee — Tue, 16 Aug 2011 00:55:37 +0000

Here in our second of a series of six insightful articles about business structure and process change, Roger Perry the CEO of the Bevington Group discusses the fundamental principles behind restructuring your business in a changing and improving trading environment. For Retail World Magazine.

ShopAbility has partnered with the Bevington Group, Australia’s most experienced process and productivity improvement specialists.

Coupling the experience of ShopAbility’s senior strategy team, all of whom have decades of CEO and Board level experience in Retail and FMCG companies, with the Bevington Group’s experience in improving business operational processes, we can deliver a unique suite of services that centre on real Organisational Insight using XeP3.

The Organisational Insight Approach using XeP3 consolidates lessons from over 400 assignments in some of Australia’s largest and best recognized companies and ShopAbility is exclusively licensing Bevington Group patented technology and expertise for use in the Retail & FMCG sector.

Here, Roger Perry the CEO of the Bevington Group discusses the fundamental principles behind restructuring your business in a changing and improving trading environment.

Back to Thinking About Unit Costs

Most of us will be now be convinced that the Australian consumer is a much more conservative spender than in the hay days of retail. To add to that, the nature of retail business models seem to be changing at a rate that continues to accelerate: the rise of internet shopping, and supply change transformations, are examples of this phenomenon. For some organisations margins are under pressure, for some volumes, for many both margins and volumes are under increasing strain.

So many of you will have already been thinking about costs, and many will have been doing something about it. However, there are different ways to conceptualise the cost challenge: some of which can get you over a short term challenge, some of which can lead to a downward spiral, and some of which can lead to genuine innovation and creativity. In this article I will endeavour to provide you with some brief insights into all three scenarios. In this review there is both good and bad news for the executive team considering costs. Starting with the bad news, I will describe how even apparently simple changes can have materially negative consequences. However, the good news is that, done properly, a real review of costs can lead to lasting benefits whereby costs are truly aligned to value creation and the nature of enterprise you wish to be.

For convenience we shall start with cost cutting to deal with a short term challenge. In this case executive decision makers are looking for costs that can be dialled up or down for short term benefit. For many this is the classic review of discretionary expenditure, literally by looking at cost categories within the profit and loss statement. This cost category focused analysis can address the small changes such as cutting the biscuits in the coffee room or terminating newspaper or article submissions; but it can also cut more deeply, for example, by reviewing buyer expenses or addressing sales force expenses such as mobile phone costs. Short term action might include the reduction of entertainment or catering budgets. In many senses this is the simplest of the cost cutting scenarios. Unfortunately, even this apparently easy approach to cutting costs carries inherent dangers. Firstly, some of the changes may in fact reduce morale without having much impact on costs. One needs to be very careful in deciding whether the action being taken is a signal to staff, or a real cost cutting activity (i.e. it delivers a real financial return). For example, if done clumsily the cutting of sales force expense budgets can punish both those who behave appropriately and those who are more profligate in their spending relative to the market they are serving. The end result might be a sales force which feels that they are not trusted, and that they are shackled from doing the job that they are supposed to do. Cutting the staff’s biscuit allowance or reducing meeting catering seem like the most inconsequential of changes, however, one must question whether it is worth while raising the hackles of staff without a significant financial return. In some of these cases you will need to assess the costs of productivity losses, against the savings of the actions you undertake.

For example, I was invited to a client conference last week where the catering was not available. This is fine in a low cost culture, however, such a culture had not been imbedded. As the cost reduction was implemented overnight, with poor messaging, much of the time taken in the day was a debate about the merits of a “no catering” policy. This was not a discussion which had high strategic value. Indeed we lost the cost of a cut lunch many times over in missed opportunity to cover the big issues.

However, it is not all bad news. Much of the success you can achieve at the smaller item end of cost reduction comes down to the strategy you are pursuing. For example, if you wish to build a sustainable cost conscious structure in a low margin industry then you can use the current downturn to create a rationale to bring staff with on a journey to cost consciousness. If done with plenty of explanation and communication, if done intelligently (by assessing the value of the costs not just their absolutes), then cost cutting activity can help you create much greater commercial awareness in the workforce. For many this is the real game, it is about creating a sustainable cultural and capability change. Now to do this means you need to go at cost reduction more carefully, with more analysis and a lot more communication. This can be a great opportunity.

There are genuine examples of using hardship for real and positive change. One supply chain client:

has spent time travelling the country explaining the financial challenge
has talked to personnel about the need for a different way of thinking
has stressed that leadership are determined that the organisation will once again thrive BUT that they need the help from staff.

On the back of this communication a range of cost cutting measures were taken, however, they led to no noticeable reduction in productivity, and no noticeable decrease in staff goodwill (indeed shrinkage reduced).

This starts to take us to the second cost cutting scenario whereby the executive lead the team into a downward spiral. This is the challenge of the old adage “it is hard to shrink to prosperity”. Note it is not impossible to shrink to prosperity – just very hard. Vicious cycles can emerge, many of which are difficult to foresee, simply because the world is so complex. For example, we might look at training expenditure. This is an absolute classic for short term spending reductions. You will have all have seen situations when the training budget is seen as one of the real discretionary spends, which can be dialled down to help meet the budget gap. Now in situations where training is ill conceived and not fit for purpose, then cutting the training budget might be valid (I will come to this point later, because often role design, not training is the problem). However, in many cases cutting the training is just a downward spiral. For example, one organisation had reduced its sales force training consistently for three years. The consequences were far from happy because the sales forced ended up with:

insufficient product knowledge
insufficient understanding of the processes for ensuring timely and accurate product delivery
and little understanding of the way in which the brand was to be represented.

As you can imagine, this led to declining sales, poor information capture at the sales front end (leading to delivery delays and errors), and even to problems in brand perception. In this case, the training really was worth the money, and the first round of cuts only led to a vicious cycle of later cuts as the organisation tried to shrink in order to make profit objectives.

However, it is not all doom and gloom for unit cost reduction. It is possible to reduce your costs in ways that are strategically sustainable, and that provide you with a real advantage. Firstly, note that I have just switched from talking about costs, to talking about unit costs. This is an important switch, because it is critical to understand costs in relation to what you sell. This starts you (but only starts you) on a journey to think about the value of expenditure in an appropriate way. To help elucidate this point I will take the example of training budget, and from there I will take you on a journey to a smarter way to think about “value for expenditure” and fundamentals of your operation.

In one example where I saw a sales force training budget cut it was done for a very good reason, and was only the first stage in an overall transformation to the way the organisation did business. In this particular case the turnover of sales personnel was especially high. There was insufficient return on investment for the training being delivered. The difference here was that the customer service enterprise we were dealing with started to ask the next level of question: why was staff turnover so high? In this case the answer lay partly in the clumsy processes of the organisation, and partly in the real design of the job. It transpired that the sales staff were spending much more time correcting delivery errors than they were planning for and executing sales activity. This was happening for two reasons:

the organisations processes just did not work well
and many members of the sales team had become more comfortable with customer service than with sales.

Under these circumstances this enterprise had the opportunity to make a real breakthrough by concentrating on the value of its costs. Actually the sales force cost a great deal more than the training, and most of the sales force time was not spent on selling. So taking the whole story into account the costs needed to be restructured not just reduced.

So what did they do? Well the logical steps were taken:

A customer service team was built in order to take on those “service recovery” tasks which had been previously conducted by the sales force;
Process improvement was deployed to dramatically reduce the incidence of customer service failures (because the costs of many customer service failures are hidden – but they get you in the end);
Training was redesigned and initiated for the sales force;
Sales activity and closure targets were reset to take the sales team to real sales growth.

The end result of this story was increased sales. Actually, some of the sales team left (because they did not want to do the new job) and some of the sales team really found their wings. Customer service problems reduced over time, but in the meantime a customer service team dealt with more of the issues at a lower real cost than using the sales force.

Overall, costs reduced significantly as a percentage of sales.

This is an example of digging deeper into the cost problem by seeing it for what it often is – a business design problem. In this case, if your business has designed the wrong role for the sales team it is going to consistently underachieve.

Another example may help to further illustrate the point. Offshoring of administrative and customer service activity is common (indeed increasingly so). It can deliver significant benefits but often the control costs are very high. What I mean by this is that the process of handing off to the offshore partner, and of controlling the quality of the deliverables, becomes much higher than anticipated in the business case. In one example we saw up to 30% of the activity that was sent offshore was returned to personnel in Australia with a query. This is just a complete waste of money and, of course time. In this case the enterprise was paying for offshore time and for the time of onshore personnel. This is a classic business design problem that must be solved by looking at the root cause of the problem (which may be in process, in form design, in training, in behaviours etc). Once resolved, this can liberate costs, free up time, and improve customer service. It is not an examination of the P&L by itself that has driven this opportunity, but an examination of the way the business works. It is a design issue. It means asking more questions to dig deeper.

The Bevington Group has conducted hundreds of studies with many of Australia’s largest and most respected organisations. All have had opportunities to save costs, all have had opportunities to lift service, and many have had opportunities to lift revenue. The message that we would send today is that these are intimately connected factors, so much so that it is possible to reduce unit costs and raise revenue through the right business design. However, the only way to get to the opportunity is to consider the underlying causes of some of your costs and to ask more questions. This provides the opportunity to understand the value of your spend and design a more effective business solution. Of course this questioning should not constitute an excuse for analysis paralysis. This journey must be pursued with sense of urgency, so the quick changes can still be done. However, even with the low hanging fruit would advise that a little time is taken to design the right communications and to target the culture you really want.

Opportunity abounds in most businesses, the right mindset (one of business design) and the right questions (to dig deeper) using the right people (experienced and knowledgeable) will maximise the returns for any business no matter how well they are currently performing – even yours!

The Seven Principles of a Successful Restructure

lee — Tue, 19 Jul 2011 22:45:47 +0000

ShopAbility has partnered with the Bevington Group, Australia’s most experienced process and productivity improvement specialists.

Here in our second of a series of six insightful and interesting articles, Roger Perry the CEO of the Bevington Group discusses the fundamental principles behind restructuring your business in a changing and improving trading environment.

The 7 Principles of a successful restructure

Even as the economic outlook appears to brighten, the fact remains that many organisations can no longer operate as they had been. A key feature of this changing landscape is the need for organisations to restructure. As process and structure specialists, Bevington Group has observed the good, the bad, and the ugly of restructures. Based on our experiences, we have devised seven broad restructuring principles to help make any restructure a successful one. These principles are:

1. Align structure to strategy

All restructures must align to strategy. This may seem self-evident, yet a significant number of organisations fail to do so. For example, if local conditions are a predominant factor then stress local sales and marketing functions rather than a centralised behemoth which then tries to matrix with local elements.

2. Reduce complexity

Simply put, complexity costs. Whether it is a complex organisational structure, a complex product offering, or complex transactional processes, the added cost of complexity can be a drag on performance.

To mitigate complexity, there are three considerations which help with organisational design:

1. Design structure for strategy before you design for specific personnel. Organisational redesigns which are a compromise between strategic intent and line management preferences inevitably add complexity. So, whilst politics are unavoidable, at least start with a clean and clear design that matches to strategy.

2. Avoid making leadership roles too complex (see principle #5);

3. Minimise the use of matrices. They introduce measurement overhead and a lack of clear direction to the staff;

3. Focus on core activity

Remove noise (inefficiency in processes), and enhance core, before restructuring roles. This means that you will need to know what people are doing today by obtaining a detailed understanding of tasks by role. This ensures that no value added activities are thrown out when removing a role. Similarly, duplication and redundant activity can be removed at the time of the restructure.

4. Create feasible roles

Don’t overload roles – restructures generally leave an organisation with fewer people to do the same amount of work. When restructuring to reduce headcount, make sure you understand the current workload of employees. This will help to ensure you design roles that are neither too heavily laden nor indeed too light. Furthermore, role design must take into account realistic groupings of skills. Packing a role with too many distinct skillsets reduces the pool of durable candidates.

5. Balance Own-Work and Supervisory load of managers

The case of leadership or “management loading” can be particularly troublesome in restructures. Often, the inability of managers to focus on leadership tasks due to increased output requirements can create significant problems for an organisation For example, time spent mentoring and coaching staff drops off; staff become disengaged, more issues arise due to staff errors, and managers end up spending more time resolving them. To ensure management are appropriately loaded, it’s critical to balance three elements: 1) the number of staff directly managed or supervised; 2) staff ability to perform work without supervision; and 3) the amount of “own work” managers have to do on top of their leadership activity.

6. Implement with clarity

Often there is confusion in the first weeks and months after an initial restructure. After all, who is supposed to be responsible for what? The answer is to clarify roles and responsibilities from the beginning, identify all functions (activities, tasks, and decisions) that have to be accomplished for effective operation, clarify who should be involved, and be specific about accountability.

7. Maintain flexibility

Finally, it is important not to cut your resources too fine. If the organisational change is material you will need resource flexibility in the first few months, so even as you strive to operate more efficiently, be sure to give yourself some wriggle room in your staffing. Flexibility applies not only to staff members, but to staff capability. Leave yourself and your leadership team some room to respond to capability gaps in the new structure.

Common ways to do this include: a staged transition so there are fewer capability gaps to manage at a point in time, and a temporary use of contract resources until in-house staff become familiar with their roles.

The Seven Principles of a Successful Restructure

lee — Sun, 19 Jun 2011 12:49:18 +0000

What are the fundamental principles behind restructuring your business in a changing and improving trading environment? ShopAbility and the Bevington Group discuss, for Retail World Magazine.

ShopAbility has partnered with the Bevington Group, Australia’s most experienced process and productivity improvement specialists.

The 7 Principles of a successful restructure

1. Align structure to strategy

2. Reduce complexity

To mitigate complexity, there are three considerations which help with organisational design:

2. Avoid making leadership roles too complex (see principle #5);

3. Minimise the use of matrices. They introduce measurement overhead and a lack of clear direction to the staff;

3. Focus on core activity

4. Create feasible roles

5. Balance Own-Work and Supervisory load of managers

6. Implement with clarity

7. Maintain flexibility

Running a lean, mean, marketing machine

lee — Sun, 19 Jun 2011 12:43:57 +0000

How do you run your Marketing department for optimum efficiency? ShopAbility and the Bevington Group discuss, for Retail World Magazine.

ShopAbility has partnered with the Bevington Group, Australia’s most experienced process and productivity improvement specialists.

Here in our first article of a series, Roger Perry the CEO of the Bevington Group discusses opportunities make your Marketing department run leaner….and smoother.

Tips for running a Lean, Mean Marketing Machine

A key feature of the changing economic landscape has been the push to operate in the most efficient manner possible. As revenue has dried up, organisations have been realigning teams, trimming staff, cutting spending, all in the interest of finding the most cost-effective way to operate.

As productivity and restructuring specialists, we have observed the good, the bad, and the ugly of organisations’ attempts to increase effeciencies, including within marketing teams in various organisations. From these experiences, we have distilled some critical pieces of advice for any marketer that wants to run their team, department or business as efficiently as possible.

Align the thinkers and doers

In most marketing teams we have encountered, there is a split between strategy execution (often called Comms / Marketing Managers, ie. The Doers) and strategy creation (Customer Intelligence, Marketing strategy, ie. The Thinkers).

While important, we have seen this split become problematic in structures that have divided these functions into two separate teams, with separate reporting lines. This can lead to a disconnect between the actual intention of the strategy, and its execution, meaning that strategists’ advise on campaign execution may be ignored, customer insights disregarded, and at worst, an us vs. them mentality can arise between the teams.

Break down this disconnect by creating marketing teams that combine the thinkers and doers. By putting the thinkers and doers into the same team, the barrier caused by the above structure will be eliminated.

Control the ad hoc work

Often, the lack of a clear process for channeling requests into a marketing team can lead to a high volume of ‘backdoor’ activity. Because many people find it difficult to say ‘no’ (especially to a senior stakeholder), ad hoc requests of marketing teams – for data, for new initiatives, for a small (yet inevitably time-consuming) change to a piece of collateral - can become a significant distraction to actually completing the prioritised tasks.

To combat this, it is helpful to have all ad hoc requests go through one person (a ‘front door’), who can clarify the specific needs of the stakeholders, ensure the necessity of the request, and then help prioritise the work. There should also be clear escalation points to resolve any disagreements.

Streamline the briefing process

The campaign briefing process is the most critical process in an marketing team, yet is often inefficient and inconsistently conducted by staff in the same team. This leads to unnecessary use of time for multiple stakeholders – an agency’s account managers, the creatives, marketing managers, and even product and legal teams.

…It is critical that all people managing the briefing process understand and follow a consistent briefing process. This will reduce confusion internally and teach the agency how to deal with your organisation.

Furthermore, make sure that all relevant parties understand exactly what their role is in the briefing process, and exactly at what point they will be engaged. Each role should know where they fit in the process, and whether they are responsible for an action, accountable for the overall piece of work, are being consulted for advise, or are being informed as a courtesy.

Beware the retainer

When agencies are on a retainer, client staff have a tendency to use the agency as if it were ‘free.’ This has two negative consequences: 1) the agency is called for any problem, no matter how appropriate, leading to inefficient use of agency’s time; 2) The marketing team will send campaign work to the retained agency, even when the campaign would have been better executed by another non-retained agency, because the retained agency is ‘free’.

It is important that marketing teams understand the appropriate way to engage a retained agency: agency time isn’t ‘free’ – it just comes at the expense of another, de-prioritised piece of work; secondly, work that can be done internally should be done internally; finally, prioritise campaign spend to ensure that the most appropriate agency does the job.

Marketing teams that are able to not abuse retainers are able to reduce costs associated with the retainer, and use their and the agencies’ time more effectively.

Don’t create roles just to fit technology

The technology available to marketers is changing rapidly. Google, Facebook, Twitter and their ilk are expanding the ways that organisations communicate to the market. This means more opportunities – and more work.

As these technologies proliferate, it is tempting to create new roles – and hire new staff – to fully harness them. Yet because these roles often have little time to mature, some of their output can be of questionable value. In good times, marketing teams can afford the luxury of the learning curve. In tight times, however, this is not the case.

Rather than creating new roles to harness these technologies at the outset, start off by upskilling existing staff in these technologies, or even outsource the work. Overtime, as your organisation comes to understand its needs in relation to these technologies, the number of staff dedicated to this area can be scaled up.

Review your reporting

Marketers, particularly in large organisations, produce lots of reports. These are an integral part of a high performance organisation, and their quality and timeliness are key to good decision-making.

However, we have witnessed many companies – and marketing teams – that spend far more time reporting than is required. This can be due to a number of factors: inefficient reporting processes, poor data quality, or the production of unnecessary reports.

If the issue is data quality or reporting processes, the solutions can often be complex and costly. For these, it is often helpful to enlist the support of outside experts.

However, a simple reporting audit can provide important insights into the value of reports produced by the marketing team. Start by compiling a list of all reports produced – even seeing them all on one page can expose the sheer volume of reporting done. Follow this by asking the end users about what value they derive from the report and what data they can do without.

Based on this information, it will be much easier to determine which reports should continue, which should stop, and which can be altered to better suit the end-users’ needs.

Maintain flexibility

Finally, it is critical not to cut your resources too fine. As organizational imperatives change and the economy picks up, marketing teams will need resource flexibility to ensure they remain agile enough to carry out new initiatives.

Flexibility applies not only to staff members, but to staff capability. Leave yourself and your leadership team some room to respond to capability gaps in the new structure. This can involve a staged transition to reduce capability gaps, and a temporary use of contract resources until in-house staff become familiar with their roles.

The 10 (+1) Habits of Highly Effective Shopping Centre Retailers

lee — Tue, 26 Apr 2011 02:17:35 +0000

What are the secrets of the successful mall retailers? Peter Huskins and Norrelle Goldring of ShopAbility discuss, for Retail World Magazine.

THE SHOPPER JOURNEY TO THE SHOPPING CENTRE

Whilst the number of Shoppers visiting a Shopping Centre in small groups as a pure leisure outing is increasing, the majority of Shopper trips to the Shopping Centre are still destination based. That is, the Shopper is going for a specific purpose or item, or set of purposes and items.

However, they’re also open to influence – nearly 90% of Shoppers deviate (add to) their shopping list, regardless of whether the list is on paper on in their heads. So as a Centre based retailer you have a good opportunity to ‘interrupt’ them once they arrive at the centre, with ‘while I’m here’ type reminders. More about how to attract that impulse sale a little later.

First and foremost however, you need to ensure that you get on their destination shopping list – to be the reason they’re going to the Shopping Centre in the first place.

Below is a starter list of ‘habits’ of effective Shopping Centre retailers in making themselves retail destinations vs their competitors.

HABIT #1: LOCATION! LOCATION! LOCATION!

Be in the right place to optimise walk past traffic. What we are talking about is the real estate game, and having your store in the right (read logical) location for your categories as well as the best location for Shopper traffic.

It’s all about footfall. You need to be in the main traffic flow areas. These include areas near carparks, entrances and exits as well as main traffic flow paths to public transport. For example changing the location of the bus terminal due to centre refurbishments or extensions can cause major declines in what was once a thriving business as people just don’t walk past anymore, certainly not the sheer volume there once was.

The rule of proximity applies. Stores located near a major or mini major (department stores, supermarkets, major chains with large store footprints) get more traffic, period. The average supermarket would have around 35-40,000 customers each week and almost every household shops there….think about it.

Be in a precinct. For example, if you’re a fashion store you need to be in a fashion precinct or fashion store cluster. Competition actually DRAWS traffic. You’re better off being right next door to immediate competitors than away from them, as a clutch of stores all with a similar offer – eg shoes – become a shopping destination for that type of item. It’s no good being a shoe store and being located near all the services like banks and road traffic authorities.

You might not be able to influence your existing store position, but if your lease is about to expire or the centre is about to undergo renovations you should use this as an opportunity to review your store location in the centre. Get a hold of their new centre floorplans and identify your ideal location based on main traffic flows, proximity, and precincts.

HABIT #2: MAKE YOUR STORE A DESTINATION

Reduce reliance on impulse and browsing foot traffic. Ensure your store is a destination for the Shopper for their shopping occasion – that they have already decided to visit your store for a specific purpose BEFORE they even set foot in the Shopping Centre.

The rest of this article is devoted to ways to do this.

HABIT #3 (and 4, 5, 6, and 7…): CREATE A GOOD RELATIONSHIP WITH SHOPPING CENTRE MANAGEMENT

Your absolute first port of call should be meet and get to know the Shopping Centre’s Retail and Marketing teams, and make sure THEY know YOU. Get involved in any offer and voucher runs they may be doing. Support events they might run such as fashion parades. Get involved in campaigns they are planning. The more you proactively offer, the more preferential and supportive treatment you will receive and the more you will be their first port of call when they are planning an activity. It might sound obvious, but it’s amazing how many retailers don’t make the effort. And it doesn’t cost much. (And might even get you a better deal on your Shopping Centre media and advertising).

Little things mean a lot. Giveaways work wonders. If your centre has hubs – eg fashion hubs, kids hub, food hub – make sure you’re there with a goodie bag of offers and small trinkets.

Don’t look a gift horse in the mouth. Get involved with the Shopping Centre’s giftcard program. Shopping Centre management LOVE retailers who help with their centre giftcard programs and it’s cost effective to be involved. Come up with a prize, gift with purchase, coupon or other offer – it doesn’t have to be big or expensive.

HABIT #4: INVOLVEMENT IN CENTRE MANAGEMENT MARKETING CAMPAIGNS

Ensure you have a presence and better yet, an offer, in major gift guides the centre puts out. You may need to provide a couple of hundred dollars’ worth of stock for photo shoots, or it might cost you a few hundred bucks in redemptions of promo offers, but the traffic it drives to your store and the incremental sales resulting pay for it ten times over. This is increasingly important with new season fashion (clothing AND housewares) launches for example, most Centres publish glossy colour magazines as free Shopper give aways, find out the publishing dates and get involved.

Become a consistent presence in any ongoing or long-running campaigns the centre may have, both with Shopping Centre media and online (see below).

HABIT #5: SHOPPING CENTRE MERCHANDISING AND ADVERTISING

Options may include one or more of billboards and posters, banners, kiosks, toilet media, floor media, car park media, Shopping Centre entrance media. These options can be expensive, but is worth doing when launching your store or when your store has a major seasonal promotional theme running. You can amortize the cost by offering the centre a bundled deal to take up more than one media type for the duration of the promotion.

Shopping Centre media and advertising for retailers is best approached on a centre by centre basis – doing a total media package per centre – rather than on a most-centres-for-least-cost reach and frequency type basis. But understanding how this option could fit as part of your total promotional/ marketing spend is critical.

HABIT #6: ONLINE SHOPPING CENTRE PRESENCE

Most Shopping Centres have a loyal Shopper on line data base that can be accessed by their retail tenants with special offers or seasonal promotions. This will give you and your business, via your Shopping Centre data base, the all important 1:1 contact with potential customers. These can be Brand driven, category driven or even Service driven – how about promoting that new staff member with extensive experience in kids clothing or shoe fitting?

Get involved in online campaigns offered by your centre or centre group. Because Shopping Centre trips are fairly frequent, Shoppers use centre websites to check out what’s coming up at their ‘local’. By having a presence on your Shopping Centre’s website you are more likely to turn your store into a destination – rather than relying on walk past traffic – next time Shoppers who have browsed the centre’s website visit the centre. Take out banner and click-through ads. Ensure you have online specific offers running that they can redeem when next in the centre (this will also help give you – and Shopping Centre management – an idea of how effective their website is).

HABIT #7: EXTEND YOUR RETAIL SPACE

An additional store space – kiosk style – within eyeline of your current store can double your sales, particularly in key retail periods like Christmas where your core store may be too crowded to fit all potential Shoppers.

Yes you’ll need to pay additional rent, but you can mitigate this cost by offering the centre’s management a package deal on the combined rent.

Pop up stores have been wildly successful overseas and some Centres offer these temporary options to tenants for short periods of time (– these are not the sock retailers that seem to appear in major traffic flow pathways!). Usually implemented as a ‘stunt’ that fits with an overall marketing program, these can sometimes be attractive to your supplier base to launch a new range of products or a new service. Banks are using this as a way of extending their reach.

HABIT #8: EVOLVE YOUR OFFER

Oddly enough, the major retailers that created the furor late last year around the growth of internet sales effecting their business, have now “opened” their own on-line retail offer, one from a virtual shop front in Asia. Surely all of that fuss last year wasn’t to cover up the fact that they had strategically and financially underinvested in the growth options available for their business. No way!

So what is the salutary lesson to us all with this example? Understand that your Shopper’s wants and needs for products and services evolve as much as the options that are available to communicate with them – iphone apps, social media options and direct marketing to name a few.And you need to understand which applications are best to attract and stick Shoppers to your business.

HABIT #9: VISUAL MERCHANDISING

The front of your store is what potential Shoppers see first so why not treat it as the critically important element that it is? Initial impressions count, either good or bad – windows, the entrance path and internal visibility construct that all important initial impression of the front of your store.

Regular Shoppers visit Shopping Centres every 2-3 days and if your front of store treatment does not get a positive response, why leave it unchanged? Two week turnarounds are common for front of store window treatment, but theming the content is also important. Planning your front of store treatment to align with the key events on your promotional calendar is fundamental for any retailer. If you need help to understand or implement, ask an expert to advise you on your best options. Most Centres have experts available who can provide advice free of charge.

Basic housekeeping underpins great Visual Merchandising. If your store looks messy and disorganized why would a Shopper even be attracted to enter and look at what you are offering?

Look at Osh Kosh or Country Road for lessons in managing your VM messages from the front window right through to the fixture, especially with new seasons merchandise all combined to create a fantastic story.

And they illustrate great solutions to their Shoppers which is the intention.

HABIT#10: IN STORE MARKETING

How is your business ‘categorized’ in store? Does it align to a logical sequence and flow? Then, do the key messages and call to action prompts subtly sell your offer?

What ticket types do you use? Tickets for ‘New Line’, “Sale or “Special” and “clearance” should be in every retailer’s toolkit, and probably not many more. Be disciplined about their use. For example ‘Sale’ should be exactly for that and used strategically 2-3 times per year. Shoppers see through permanent Sale events and it amazes me to see how many retailers cycle the same ‘Sale’ offer each week and wonder why there is little Shopper interest.

‘Clearance’ should be used to clear old stock with depth of mark down that ensures quick movement.

The old adage “the first mark down is the best mark down” still rings true. If a line is a dog and has not sold at the regular price, cut it hard and sell it out. Small 10-20% off will not clear a dud buy.

‘New Line’ or just ‘New’ on a product is a powerful message for fashionistas and can create a sale, and not just to introduce new seasons clothing but can be extended to any product in any category.

And now for HABIT #11……DO SOMETHING….ANYTHING!

It amazes me to see Centre based Retailers wondering where their business went. If your business is not growing, or declining, you have a responsibility to do something – anything is better than nothing (which has got you to where you are in the first place)

Who have you talked to you about your business? Your accountant reports on numbers and is not a retailer by trade. Talk to your Centre Retail management, see what they can offer by way of supporting activity or providing an experienced retail expert to advise you on a few options to consider.
Have you asked your Shoppers? Ask them, you may be surprised.
How are the other tenants around you performing?
Is your decline in customer numbers or in spend, or both?
Has the competitive set changed in the Centre?
Have you changed or not changed your range or offer?
How old is your fit out?
How shop blind have you actually become as the landscape slowly and subtly changes…..but you haven’t??

Most Shopping Centres have independent retail expert consultants who can provide independent advice on alternatives to grow your business. Ultimately the decision is yours, but talking to and getting advice for someone who has been there/ done that may help you either save your business or get you back on the path to growth.

To sum up, your approach needs to be both internal and external – to cover the bases with both traditional retail media, new media options, your overall initial Shopper front of Store impression and with the Shopping Centre management for incremental opportunities to increase your destination Shopper footfall and thus your sales.

Solving the internal alignment conundrum

lee — Sat, 19 Feb 2011 02:26:43 +0000

It may not be a new trend, but it’s still one of the biggest factors holding back FMCG suppliers from achieving business potential – a lack of internal alignment amongst Marketing, Sales, Category and Field Teams. How to get these silo functions ‘singing from the same hymn book’ is a conundrum for many FMCGs, and the focus of this article. For Retail World Magazine.

Comments that we frequently hear when talking to industry contacts:

‘The Marketing team is a roadblock. They don’t get in store. They don’t understand what the Retailer wants, trading terms and the implications or how a store operates”

‘we have developed the product now it’s over to you guys to sell it!’

‘The Sales team only care about achieving short-term sales targets. They don’t get the bigger brand and product positioning story, or the personality of our brand.’

And Category and Field teams don’t feel like they are understood by either.

And the bigger issue: who is looking after the Shopper?

The Shopper is the person who actually makes the BUYING decision at shelf and is the last person we have an opportunity to “talk to” before an item is put into a basket – hopefully our item!

The Shopper may not necessarily be the Consumer – think pet food, kids cereal, fem hygiene, men’s deodorant, hot and cold beverages, vitamins and supplements….and the list goes on.

So how is this really important person usually recognized in our internal structures, processes, procedures and most importantly accountabilities?

There might be an embryonic ‘Shopper Insights’ department (headed up by a person who has had to shift from Consumer insights or sales to Shopper insights with no additional training by the company). But nobody to actually direct Shopper strategy or implement Shopper-focused initiatives.

What to do?

1. Consider Structure Optimisation

It could be that your traditional teams and their reporting structures are no longer effective for your changing needs.

For example, some leading FMCGs have created a department that is ‘Shopper’. It is on the same level as Marketing and Sales, reporting in to the GM or MD.

Another example is to implement Category teams populated by the relevant Marketing, Shopper and Sales team members.

These examples achieve three things:

a) Ensure that Shoppers as well as Consumers are considered in the strategic decision-making process

b) Create a bridge between Marketing and Sales, improving alignment

c) Ensures a clear focus on the in-store element of the path to purchase.

These are a couple of examples of how to restructure to refocus – not for the sake of it but to change your business approach to include the Shopper in all strategic decisions.

Things to consider when looking at your Structure Optimisation:

How/ where is your current business structured to include the Shopper?
Assess the overall internal alignment of the different silos
Compare Roles across the business to identify insight gaps.

2. Skills Assessment

Have you changed people’s roles, titles and expectations without giving full consideration to their skill sets?

This can become a major source of stress to both company and team members.

When reviewing internal alignment, it helps to conduct a thorough, supportive (non- threatening) skills assessment of the relevant staff.

Things to consider when undertaking skills assessments:

What are the current outputs and deliverables by silo?
What are the duplications and unnecessary outputs?
Where to reallocate responsibilities if necessary?
How do I identify best practice for my business? This will depend also on how ‘best practice’ I want to be.

3. Training

This ultimately holds the company back.

Tailored approaches are needed for each team, and the personalities within the team, to harness the potential for alignment.

Things to consider when conducting team training:

Clearly assess current Company and individual skill capabilities and competencies – where are my gaps?
Use a template or roadmap for training that ensures a consistent flow and sequence of subject matter
Match the required skills to the Role, Job Description and review process.

4. Culture

Culture, for the purpose of this article, can be defined as ‘how the members of a company experience it’.

That, in turn, results in all those good ideas and strategies sitting on a shelf or being dumped in the ‘too hard’ basket.

Some things to consider to improve your alignment through culture:

1. Co-locate functions that need to work better together.

2. Musical chairs

If not, what went wrong?

If accepted, how can I use those learnings to make sure the next new line I submit is just as successful?

3. Similarly, ask Sales people to deliver their thoughts on the long term brand building strategy (3–5 years). And so on. The point here is that the company has to invest in enough ‘downtime’ to allow staff to do this i.e. it needs to be seen as valuable time spent.

4. Assign an Account sales problem to another area of the business for a ‘blue sky’ solution. This forces research and understanding of the other functions’ issues and solution frameworks, and the only place to get the answers is from the people who currently do the role. Again they have to talk and understand the issues other roles must contend with.

You may well be surprised with the result!

5. Category Vision

An interesting question to ask a round table of 10 of your senior executives drawn from across your business:

“What is our Category Vision and what are the key elements I would expect to see in store?”

Most companies would generate certainly over 6, and up to 10 different answers to that simple question.

Why? In most instances there is not a single aligned Company approach that has been developed across the different silos, so that each is subtly and without intent, working against the other.

Most important is the single business focus that is initiated – one Company one voice.

So, time to empty the silos and critically review your structure!

ShopAbility’s Peter Huskins has a wealth of experience with structure optimisation and internal alignment. Call him to discuss your needs on 0412 574 793.