Shopper Culture

Starbucks caffeinates sales with a shot of CRM

After two quarters of declining  sales and  executive-level scrutiny on brand health following reports that the company is straying too far from their brand roots, Starbucks is introducing five new initiatives to realign the company with their true identity. Interestingly, the most attention is being placed on CRM (customer relationship management) approaches to reward their most loyal customers and better understand their needs and desires. One of these initiatives is a standard customer loyalty-rewards program at retail, and another is a new style of website for customers and employees to share thoughts with the people who run the company.

It appears Starbucks is practicing these concentrated CRM tactics to reclaim their position of being the customer's "Third Place" with home and work being number one and two. Third places are social environments generally revolving around beverages. Starbucks is fulfilling on this mission as having become a nationally accepted "Third Place" where consumers spend lots of money, time and collaboration. With their now declining sales, Starbucks recognizes that they must take consumer interaction and entertainment  to  a more subtle but effective level without being too obvious. Who wants a "Third Place" that feels uncomfortable, forced or inauthentic? But that doesn't mean you have to be home-grown and primitive in your communication or approach.

Consumers will soon be seeing something new in Starbucks retail environment with a loyalty-rewards program starting in mid-April. These "on the house" perks are for anyone who buys a Starbucks card and registers the card online, because Starbucks knows they can convert them to loyal users once they get to know them better. Participants will get free refills on coffee, a free cup of coffee when they buy a bag of whole bean coffee, hours of free Wi-Fi a day and "on the house" upgrades including syrups, soy milk, and extra whipped cream on all lattes. The in-person experience will also integrate online through monitoring and MyStarbucksIdea.com.

MyStarbucksIdea.com will initially include about a dozen categories. People can post, discuss and vote for ideas in categories such as coffee, atmosphere, food, music and social responsibility. Forty-eight Starbucks employees will respond to the posts then channel suggestions back to management. "Their job is to show up every day and engage with customers about their ideas," says CTO Chris Bruzzo.

We see two important aspects of CRM at work.

Better understanding core customers. Starbucks is embracing a highly streamlined approach in communicating to and understanding their customer with this online initiative maximizing on a CRM tool which is a smart way to "get to know" your customer, communicate directly with the customer, increase their purchases and monitor and enhance their overall brand experience (Starbucks is using Salesforce which is a top CRM/Sales tool with over 800 applications like these.)

Creating a customer-feedback protocol. Starbucks is getting great ideas directly from their customers creating a sense of involvement in the experience and overall ownership and participation by the customer. They actually show when the consumer's suggestions are "under review" or "coming soon". Each suggestion is acted on; people can view results by participating in this forum. While the suggestions are a form of user-generated content that others enjoy to read, vote on and celebrate successes when Starbucks adopts the new ideas, these comments are also indicative of Starbuck's general business model. The comments imply that Starbucks moves fast and get things done.

Other companies like Dell have joined Starbucks in implementing these innovative tools. Visit www.dellideastorm.com to see the Dell CRPM application taking hold.

We suggest more brands step outside of the comfort zone and taste-test CRM and digital technologies to understand how simple and straightforward they can be. Cost-effective technology is at your fingertips where consumers literally "tell you" what they want, and the tools allow easy customization of direct communication to niche audiences. These techniques could make a venti difference in your sales.

- Contributed by Tracy Kollker

FNAC Video Wall

Interesting idea. Engaging use of sound and motion. Interesting way to sample music.  Disappointing when it doesn't respond properly.  When you touch the CD in the wall it is supposed to change tracks, and it doesn't do that quickly enough, look what happens. 

- Contributed by Ian Whitney

Point De Ventre - Paris

Paris recently hosted a Retail Marketing event called Point De Ventre. Ian Whitney from our Paris office went along, shot some video and made a quick presentation of some of the innovative technology that delivers meaningful shopper engagement. 

Great sign-off Ian!

Shopping behaviour in electronics

Our Dallas office does a lot of work in the consumer electronics category and late last year undertook a study looking at what influences behaviour in this category.  This generated a fair amount of interest in the media including an interview on Fox with Kim Menier, who heads up the strategy group in Dallas.  Have a look at the interview here, and if this is your category let's start a conversation. We'd love to know your thoughts on the findings and comments Kim makes, so leave us a comment.

Toshiba after HD-DVD: Down but Not Out

If you read the recent post on Sony's Blu-Ray's recent victory over Toshiba in the HD-DVD space, you know Toshiba pulled out of the race the moment they calculated they couldn't win. In today's Wall Street Journal, Toshiba's CEO, Atsutoshi Nishida commented on the move:

"One has to take calculated risks in business, but it's also important to switch gears immediately if you think your decision was wrong. We were doing this to win, and if we weren't going to win then we had to pull out, especially since consumers were already asking for a single standard."

Moving quickly on bad news is bold step, especially for Japanese CEO, many of whom might have postponed a decision even in the face of the inevitable, in order to save face. Building on this, the Wall Street Journal cited five management tips from the Toshiba CEO:

For those of you who are concerned about Toshiba's future, don't worry too much. CEO Nishida reminds us that HD DVD was one of 45 strategic business units or "areas of growth" and 44 still remain.

Sony vs. Toshiba in the Battle for HD DVD Supremacy

Like competing samurai clans, Sony and Toshiba's corporate rivalry is the stuff of legend in Japan. Their most recent public conflict came to its conclusion today following Wal Mart's announcement to abandon Toshiba's HD DVD format in favor of Sony's Blu-Ray disk technology.

Both technologies offer a significant advantage in their ability to store up to six times more data than traditional DVDs, enabling more content and higher resolution for today's HD television monitors. Analysts think Sony's retail success with PS3, based on Blu-Ray technology, was the factor that ultimately favored Sony over Toshiba.

Wal Mart's announcement was not the first strike against Toshiba, but it was certainly the decisive one. Last May, Time Warner announced it would no longer support titles on both high-definition video formats, choosing Sony Blu-Ray as its format of choice. This was the tipping point. Like the VHS vs. Beta wars of a generation ago (which, ironically, Sony's BetaMax format famously lost), it was clear that the world needed only one standard. Supporting two standards may in theory create competition but is ultimately inefficient. Retailers have neither the desire nor the shelf space to carry two technologies that do the same thing, be they DVDs or the hardware that reads them. When Netflix and Best Buy announced their support of BluRay earlier this month, it was clear the battle was waning; Wal Mart's announcement made Sony's victory complete.

The announcement leaves not one, but two losers. The first is Toshiba, having spent millions developing this technology, leaving them no choice but to move on to the next battle. The other losers are Early Adopters, who pay a premium for buying first-generation technology, and sometimes pay the price for supporting the wrong brand.

For Early Adopters, however, there is a silver lining. Since Wal Mart's announcement, the price of HD DVD disks has suddenly dropped by half. Buy now - supplies are limited.

Ikea - 1 to 1 with Shoppers

Here is an interesting in-store device that comes via Unplugged.  Spotted at Ikea in Seattle was this Mobile Kiosk where you register to recieve product info. and coupons. 

We all know that non of us can live without our cell phone anymore and it's role continually changes. No longer just a means to call home now it's your weather reporter/news aggregator/social networker/information hound.

With Ikea it can be a tool to know when the newest products are available in-store, and a mechanism to deliver digital coupons so you can save cash.

What is also interesting about this technology and the use Ikea is making of it is that it delivers a relevant brand-to-individual consumer (1-to-1) communication - 'Since you bought a couch last month, how about this coffee table to go with it?' - rather than a brand-to-masses communication - the usual 'Hi everyone, here's all of our stuff'. So it becomes a great brand use of data and the deigital medium in the retail space. But is it cool, or will it be annoying to get these texts about a new sofa once a week?

- Contributed by Brian Crawford

The Minority Report takes a step closer

The February 2008 edition of MediaPost had a short article about an interesting technology that was shown at the 2008 International Consumer Electronics Show that took place in Las Vegas recently.  It's a technology that moves us a step closer to a world portrayed in the film The Minority Report - that scene where tailored, targeted outdoor ads are delivered to John Anderton (the Tom Cruise character).

The technology, called the Reactrix WAVEscape, has been developed by two silicon valley companies - TYZX, a 3-D Imaging company and Reactrix, a point-of-sale display company. It uses a 3D camera mounted atop a display and it can capture movements, gestures and at some point in the future, speech.  The system can then mainputale the image (and everything else it captures) on the screen, morphing it with whatever you like.  So it sounds like a Nintendo Wii for the advertising world!

While the report claims the technology is at an early stage, you can see how it could be used in an in-mall or in-store environment (or anywhere there is high traffic) to create a bit more fun for people to play around with ads. Maybe some games for local stores, with promotions and coupons as prizes?  And it is not too big of a leap to see how we could get to The Minority Report biometric recognition to talk directly at (with?) you.

- Image from gizmodo.com

Did You See That Great Commercial Last Night?

As I was running errands on Super Bowl Sunday I realized I didn't feel the usual rush to get home.  This was not because I'm not a football fan, but rather because I knew if I missed the first couple of commercial breaks, I could see them online at any number of websites on Monday.  Some of the spots that aired during the game even directed you to their web site.  This got me (among others) thinking, what is the future of TV and TV advertising going to look like with the Web?  Apple's iTunes has fundamentally changed the music business, will another application do the same to TV?

Fortunately, The Atlantic that arrived in my mailbox a few days later had a great article addressing this topic.  Michael Hirschorn begins his article with Apple changing the way we buy music and he quickly transitions over to TV, noting he works in the industry.  He raises some interesting points, primarily that TV should be around for the long run, but that it is up to the TV industry itself to change the definition of TV if they want to remain players in both content and distribution.

In the short term, bandwidth limitations will prevent satisfying web based video offering for anything but short form videos, such as TV spots.  In the long term, TV networks need to bring more Web functionality to TV rather than invest in creating more bandwidth online.  With the switch to digital and HD broadcasting herein the USA due in 2009, the next generation of TV's could begin to include Web applications in their hardware.  The options are varied and appealing - from being able to click from an ad to a retail site to purchase a product (the next generation of shopping channels) to being able to access any movie or any show for a fee to watch at your leisure (the next generation of on-demand services).

I agree with Hirshorn in his wrap up ... will the future look like TV with more interactivity or the Internet with TV included?  The debate will go on, but the future of a billion dollar industry is up for grabs and whoever figures out how to make it simple and intuitive for Joe and Jane Consumer is going to be the big winner.

- Contributed by Todd Cameron
Image courtesy of Jupiter Images

Your Shopping Cart Powered by Microsoft

A number of recent articles, here is one, covered the announcement of Microsoft's partnership with MediaCart and Wakefern Foods (ShopRite) to deliver interactive shopping carts into ShopRite stores. Working at a retail focused agency, it is always interesting to see investment in our arena by major media players, e.g. CBS buying SignStorey.

Along with the creation of Nielsen In-Store and P.R.I.S.M., these types of announcements bring increasing credibility to the industry and attention to the power of in-store marketing. Further, this represents a marrying of online technology (Atlas) and an in-store vehicle, which shows a very positive evolution of thinking.

However, all that excitement aside, I have a certain amount of skepticism about the success of this vehicle. I think for a select group of early adopters, it will be embraced. But for many shoppers, are they really ready for this? 

Grocery shopping used to be simple; go to store, get cart, put stuff you need in it, sometimes there were signs that told you what was on-sale.  Now, you can enter your shopping list online before you go, it'll download to your cart computer; and tell you about specials on a contextual basis when you hit the right aisle. As a marketer, again, think this is fantastic. Love the blend of technology and context to deliver truly targeted ads. However, I'm just not sure your average shopper will think they "need" all this, but that's just my opinion. Time will tell.

On a side note, (and I owe this to a colleague at another in-store company) what happens when carts are stolen? Your average shopping cart costs something like $150 (i looked it up). What happens $1,000 shopping carts start disappearing?  How are retailers going to feel about losses in that arena on a daily basis?  I mean this in all seriousness, and would love to hear how the deals are configured and if they account for loss like this.

Retail Surveillance

As I was reading the December 6, 2007 issue of the Economist, I couldn’t help but think of the irony involved as retailers attempt to create more personal environments for their customers.  The article, Watching As You Shop, points out the very impersonal technologies being developed and utilized by retailers around the world to learn more about their customers in order to provide them with a better shopping experience.

Customer monitoring software can now measure how long queue lines are at registers, which parts of the store are the most traveled, and how long customers stay in one place.  From Tesco in the UK to Walgreens, Best Buy, or Abercrombie & Fitch in the US, the channel is irrelevant as retailers are employing the technology to create a point of difference, and for good reason. 

In addition to a more pleasurable experience for customers, retailers are hoping to increase sales by learning what types of promotions are working and what areas are “hot spots” in the store for traffic flow.  Combine increased sales with more efficient staffing and retailers are not only increasing sales, they are cutting costs.

The players specializing in customer monitoring software range from companies such as Irisys and Brickstream to a consortium including manufacturers such as Coke and Procter & Gamble (P.R.I.S.M.) to university initiatives like VideoMining a spin-off from Penn State.

With this kind of focus already placed on how we shop, the technology to understand our actions in-store is only going to get more specific and actionable, begging the question: As consumers become aware of the technologies used to study their behavior, will they care? 

There is a lesson to be learned here from American Express.  When they openly discussed how they review cardholders' spending patterns to tailor offers to them, they faced a significant consumer backlash.  Even though they had been doing this for years, their cardholders felt betrayed.  My guess is that we as a culture are getting more comfortable with this type of information being gathered about us and as long as we believe we are getting a better deal or experience we won’t mind too much.

[Image: Irisys]

- Contributed by Todd Cameron

Amazon's Kindle: Ambitions to change the way we read

Last month Amazon released the Kindle e-book priced at $399, which sold out in five and a half hours. The device allows you to electronically purchase and store up to 200 of your favorite books. For about $10 you can purchase one of 88,000 books electronically including 100 of the 112 New York Times best sellers. And no need for a computer: Kindle downloads content over a free wireless Sprint network.

Selling out in a day shows the interest is there, but will it outlast the buzz and become the next handheld device that Americans can’t live without, like the iPod , Blackberry, or iPhone?

The device looks thick and bulky and external buttons limit the screen size. It’s brand new yet prehistoric looking, giving me flash backs of that red Speak-and-Spell I played with 20 years ago as a child. Kindle feels like the MP3 players pre-iPod, the idea and functionality are clearly here but Kindle V.1 is not refined enough to become a cultural icon. Imagine if Apple had came up with the e-book idea before Amazon, the device would have certainly been slimmer and more attractive, with touch screen functionality that increases the actual screen size. Apple wouldn't have rushed a great idea out the door with a device that looks like this. They probably would have had an adequate inventory too: selling out in half a day isn't necessarily a good thing.

Cost and functionality aside, will Americans be open to making the transition traditional to digital reading? I do see Kindle being more compelling as a replacement for newspapers and magazines, which are generally thrown away after reading.

From computers to cell phones, technology is cold. Books are warm and calming and allow us to get away from the fast-paced technological lives we live in. It is convenient not to have to go to store, but isn’t browsing a Barnes & Noble an enjoyable part of the experience? No more libraries of your favorite titles in your home or office proudly displayed like trophies, conquests of knowledge. No more conversations sparked up at your local coffee shop as a passer by recognizes the book your in your hands is one they just read. No dog-ears, circling a word you don’t know, or highlighting a memorable excerpt you want to revisit later.

Will consumers find the ease and convenience of technology more important than the experience? Or is traditional reading a part of our life that is too nostalgic to let go?

Big Cable: Too Big?

15,000 attendees turned out to the 2007 Cable Show in Las Vegas earlier this year, and more than a few must have been perplexed by this year's improbable show theme:

"Competition works. Consumers win."

For an industry many consider anti-competitive and consumer-unfriendly, the show theme seemed counter-intuitive, if not outrageous. Competition? Perhaps the idea was to pacify Day One's featured speaker:  Kevin Martin, Chairman of the FCC.

The FCC under Chairman Martin has been publicly critical of the Big Cable. This chart, compiled by the New York Times, helps explain why. The cost of cable television in the United States has outpaced  inflation by a significant margin. This fact seems to indicate that the cable industry - led by Comcast, the nation's largest cable provider - is taking advantage of a monopoly status to raise rates at will.

The cable industry strongly insists there is no monopoly. While Comcast is by far the largest provider of pay TV, they go head-to-head with other cable providers, like Time Warner, in many local markets. What's more, phone companies like Qwest offer the same bundled packages - phone, high-speed internet and pay TV (through satellite partners) nationwide. Comcast would point out that they lost 65,000 subscribers in the last quarter. There's plenty of competition, the cable industry contends. The cable industry has been deregulated since 1996 through an act of Congress, and that's just the way Big Cable likes it.

Chairman Martin has been pushing the other members of the five-member commission to invoke the "70/70" rule of the Cable Communications act: when 70% of U.S. households are cable-ready, and 70% of those households subscribe to cable, the government is empowered to regulate the industry in favor of lower prices and more diverse programming. In an agency meeting last week, the commission rejected the "70-70" finding, citing unreliable data, in a vote considered a blow to cable consumers in general and Chairman Martin in particular.

Despite this defeat, the FCC have recently affected other, smaller changes that benefit consumers and the competitive landscape. For example, as of last month, specific cable companies may no longer have exclusivity on apartment buildings; building managers must allow competition between rival cable companies and satellite TV.

But this represents only a minor victory for consumers. In the remaining 13 months of his appointment, Martin's goals are more ambitious:

• Cable ownership limits, imposing a 30% cap on Comcast's share of the pay-TV market while preventing other giants like Time Warner from making substantial new acquisitions
  
• A la carte legislation, allowing cable subscribers to pick and choose which specific channels they want, instead of paying for large bundles of channels that go unwatched
  
• Increased diversity programming, lowering the price of channel access to minority and women programmers
• Dual carriage, forcing cable operators to carry local TV signals in both analog and digital form until all cable subscribers have upgraded to digital reception equipment 

Chairman Martin is drafting a revised proposal for a possible vote at the agency's next meeting, scheduled for December 18th. Consumer groups and cable proponents alike eagerly await the outcome. Is Big Cable too big? Does the pay-TV industry require government regulation? How will TV viewers benefit from greater competition? Stay tuned.

Can you really tell shoppers what to buy?

An interesting piece in the Weekend Wall Street Journal this Saturday prompts a question regarding how shoppers are engaged to buy a product.  The article talks about high-end boutiques and retailers in New York City calling or emailing consumers to tell them which expensive items their loved ones would like or might be interested in.  It's part of a growing trend by these retailers, both on and off-line, to increase their holiday retail sales...and for some consumers it's a god-send, yet for others it's an unwanted intrusion.

While the article depicts a fairly "narrow" circumstance, it does point to the opportunity to engage consumers differently.  The idea of reaching out to consumers to guide their purchases is not new - we've all received Catalina coupons in grocery stores that offer an incentive to buy a like (or competitive) product based on our purchase the clerk just scanned, and it's hard to avoid Amazon's "If you like this, you might also like this" approach to suggestive selling (which, by the way, really works).  Starbucks this past year began leveraging Apple's iPhone and the iTunes music service - shoppers walk into a cafe to buy a latte, hear music in the store, and are automatically contacted via WiFi on their iPhone with a message "If you like this song, please hit 'purchase' " and the song is downloaded to their phone. 

There are new technologies coming that will further enhance these opportunities to reach out to consumers and "help" their shopping. The advanced mobile phones from Europe and Asia that store credit card data on handsets and read RFID tags are coming to the U.S.

And the ability to scan UPC codes at shelf with a mobile handset and automatically receive product information and, more importantly, consumer reviews to help select (or worse de-select) a particular product at the exact moment of purchase decision is right around the corner.  The downside is that consumers can also then determine where to go to find the best price for that product, which might not be in that particular store.  But rather than feel defensive, brands should embrace that "moment of choice" for the shopper to proactively engage the potential buyer with information (and better yet an experience) that helps them close the sale right then and there.  And ideally sets up a repeat engagement with that same buyer the next time they're in the market for the product.

Brands need to think about a broader range of influences on their shoppers.  The myriad of communication vehicles traditionally deployed to reach consumers will continue to be important.  But it's the combination of those elements with new, different contact points that will create the newest, best ways to influence purchase behavior.  As shopper behavior shifts, so the need for brand behavior to change increases, and finding ways to effectively reach out and "suggest" a specific purchase is something to add to the communication arsenal.  While right for some brands, it is appropriate behavior for all?

Contributed by Marc Ducnuigeen

Customer Choice meets the Coffee Shop

Coffee shops have become remarkably innovative over the past 10 years, offering everything from decaf soy chai lattes to bestsellers, music, and coffee-paired food items. But the cup of coffee itself hasn't really changed since Starbucks and other chains perfected their proprietary brewing methods several years ago. Until now.

Meet Clover. Following a visit to the Denver Art Museum the other day, I stopped for a coffee at Novo, a new-concept coffee shop in the Museum Residence complex. While most coffee shops generally feature two or three daily brews - a dark roast, a light roast and a decaf - Novo features individually-brewed servings of a dozen or so rare beans from around the world. Exotic varieties like Aricha from Yiragaffe, Ethiopia and Esmeralda Geisha from Boquette, Panama. Daily selections are presented at the counter in green, roasted and ground states for discerning drinkers to feel and smell before they choose. Whole bean and ground coffee can also be purchased for home brewing at a rate upwards of $15 - $40 for an 8-ounce bag.

The ingenious Clover machine enables the barista to brew one cup at a time in about 1 minute per cup. The barista told me the required training is minimal: you grind a small amount of roast beans, drop the grind into a cylinder in the top of the device, set the cup size and flip a switch. The cylinder fills with boiling filtered water, the barista stirs, and (the really cool part) the water is pulled through a reusable filter at the bottom of the cylinder. The cup is filled, a piston in the cylinder rises to the top, and the barista uses a squeegee-like device to clean the used grounds from the filter.

Novo in Denver and other independents are among the first, but a recent article in The Economist hinted that larger national chains may soon be next.

What we love about Novo is the emphasis on coffee, not accoutrements. What we love about Clover is its ability to enable smaller coffee shops to compete with larger ones - and its ability to offer coffee customers a wider range of choices.