ABSTRACT

How many stores have you seen closing down as you walk around your neighbourhood? It’s a truly devastating scene. Each shop that has closed down tells a story of pain and sadness.

Yet, haven’t you also seen queues in some bakeries that sell products that are far from cheap? Haven’t you seen queues outside restaurants? Or at Nespresso? What is actually in crisis then: business or a certain approach to things?

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We had learnt that sales depended on something akin to an equation, a recipe known by us experts as Marketing Mix, a set of methods mixed together to ensure that clients would perform as it was expected from them, as if they were robots: shopping.

Display many high quality products in a well-lit shop window, and place them perfectly on the shelves. Apply the normal margin to the retail price, except for a few heavily discounted products. Then arrange the best selling products at the bottom of the shop, make sure your staff are attentive and, above all, open shop in a promising location.

It’s with these methods that we have reached this point.

Thanks to magnetic resonance-based findings, we know that shopping decisions are basically unconscious or implicit. That is, these decisions are not reached through reasoning, but are fuelled by any of the many human emotions at play.

Those who work in their shops have an advantage over those who work in offices, as they are closer to customers and can thus detect their reactions first-hand. They can easily feel that the 2010 downturn is quite different from the situation in 2008. For most, the current crisis is fuelled by fear. Two years ago, it was all about making your ends meet every month.

Once traders understand what is happening to customers in their area of influence, it’s time to act accordingly.

Rather than focusing on reminding people of the economic distress by launching anti-crisis promotions, the store should be turned into a fear-free area, a relaxing, positive, fun place where customers are treated as individuals, not as robots with wallets. No longer a mere store, but a decompression zone.

Promotions don’t build continuous customer loyalty. Small businesses must focus on providing some meaning to a small part of their customers’ existence.

Lluis Martinez-Ribes
Source: La Vanguardia
(14th July 2010)

__________

ABSTRACT
Structural problems are emerging in the printed press industry and affecting its business model. A result of new consumer trends, decreasing number of points of sale, the sensibility of newspaper sales vis à vis special offers, and the high percentage of contents produced from agency releases or inserts. The “keep up to date and know more” industry, however, will never enter in crisis. Hence, all that needs to be done is to adopt a new approach, stopping short-sighted debates about printed information vs e-information and start adopting the new mindsets emerging from putting the customer at the heart of the innovation process.

__________

Some industries have problems. Cyclical problems that disappear when demand picks up, or structural problems affecting the business model. The latter affects the printed press.

This industry is battling against a tide of trends that are here to stay: the impact of new communication channels, the co-diffusion of ideas, and the environmental sustainability affected, for example, by paper consumption.

Another factor is the closure of many newsstands. Buying a newspaper is sometimes quite an achievement.

A third factor that disperses concern is the high influence of special offers on newspaper sales. Is the core element – information – worth so little?

And with turnover plummeting, which publishers can afford to pay journalists to conduct in-depth research into a subject? What percentage of our newspapers is based on press agency notes or inserts?

Just as I announced, back in April 2008, that the launch of the eBook Kindle¹ would start off a revolution in cultural retail, I now suggest that the printed press business model has been mortally wounded.

Press: bad, curiosity: good
People have an innate desire to know what is happening in our local and global village. In psychology, the factor responsible for curiosity and the desire for news is known as “novelty seeking”. David De Lorenzo, Professor of Human Genetics and Nutrigenomics in the School of Medicine at Lleida University, explains “it has been observed that there is a considerable genetic component, i.e. children inherit it from their parents. Consequently it is controlled, at least partly, by our genes”.

The “keep up to date and know more” industry will never be in crisis, but the printed press sector might – and perhaps permanently.

Technology is not the problem
Focussing merely on the debate between information on paper or the internet would imply a lack of foresight. Market studies have shown that we are informed on many news coming out in a certain week (albeit superficially), but are unable to say whether we found it in the press, on the radio, on TV or in the internet.

New assumptions
If we set customers at the heart of our innovation, they might ask for:

·  the company to keep them up to date.
·  not get charged for things they are not interested in.
·  to allow for flexibility each day.
·  access to their information wherever and whenever.
·  to be environmentally sustainable.

Let’s imagine that I register with a company that supplies information. I tell it about my likes and dislikes, my occupation and my stage in life (for example, if I have two small children). I also tell it about my hobbies and, of course, my bank account and credit card. The company then gives me an RFID card and an access code for all the media: not just for computers but also for 3G phones. At the end of the day I can adapt it to my preferences.

If I feel like reading “my newspaper” whilst having breakfast in a café, I can pop over to a newsstand nearby (not necessarily always the same one), swipe my card through a terminal and print “my” newspaper: with fewer pages but completely personalised.

If I said I wanted to improve my English, part of the newspaper would be in that language. The articles would then not be translated, but bought from another publisher they have an arrangement with. My newspaper could also be a combination of things produced by different information companies.

Of course I would not have to pay at the newsstand: they would have an arrangement with my information supplier.

When travelling on the underground, I would receive the news I need on my 3Gphone (after identifying myself). I might read about a recommended concert and buy tickets. Later I’d say if I liked it. This would help tailor the system to my preferences and fine-tune its recommendations.

And over the weekend, the newsstand at the beach I usually go to would have a copy of that full-colour magazine about my favourite hobby waiting for me. And all this would be charged to the same account twice a month.

Lluis Martinez-Ribes
Source: Distribución Actualidad, the spanish magazine of retail
(nº 414, April 2010)

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1. See Martínez-Ribes, Ll. (2008), “La innovación en el retail cultural ha llegado. Interpretando el Kindle de Amazon”. Distribución actualidad, No. 389, p. 44.

ABSTRACT
If you want to innovate in retailing it is as important to find the solution as starting with the correct ideas or approaches.
If you do not have a profound understanding of your public your final outcome will be like playing lottery.
Moreover, trying to innovate within set boundaries and only researching the point of sale – neglecting that the purchasing process goes a lot further- will merely help to improve the existing. Hence, the store is the end point and not the starting point of innovation.

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Chatting over dinner my brother told me one day: I’ve been sent an email with some terrible blunders made by highschool students. Take a look at this… He showed me the “corpus delicti” on his computer screen:

They were indeed absolutely hilarious. But after having a good laugh, I suddenly realised one obvious aspect: the students had in fact only answered the teacher’s question. They’d been asked to “find the X”. And they’d found it and pointed it out. So who deserved 0 marks, the students or the teacher?

This has happened to me a couple of times at ESADE: when setting an exam, the answers provided by several students showed me that a question had not been clearly formulated or was badly written.

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Wrong question, wrong answer

The same thing could happen when trying to innovate in retailing based on incorrect inspirations or approaches. Here are some of the most common mistakes in the innovation process:

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Relying only on new technology

If you try to base your innovation on a specific technology the result will be a lottery. For one simple reason: technology in itself is neither good nor bad, but might be right or wrong for a particular type of public.

Technology may help to convey a specific message that the store wants to get across, but some technologies are so intrusive (e.g. advertising slogans on shopping trolleys) that they may in fact create an irritating shopping experience.

Besides, if you do not start with a profound understanding of your public your final outcomes will be as certain as gambling in a lottery.

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Basing what you do only on research at the point of sale

Some experts delve deeply the customer behaviour in stores, bringing in electronic methods or virtual reality to detect where customers look and what aisles they use. Later, they try to innovate based on their findings.

The current technologies for visualising customer behaviour are extraordinary, but only useful for improving what you already have. For instance, when improving the category management or optimising a shelf display.

One of the characteristics of innovation is that it transforms something existing. In fact, one of its aims in retailing is to help re-think the whole buying process.

While doing so we must not neglect current buying habits. However, we should also remember that a company can influence its customers by proposing a new way of shopping resulting in a higher quality of life.

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Concentrating solely on what happens in the store

If your inspiration for innovation in the buying process focusses only on what happens in the store it won’t take you very far. The buying process starts at home, continuing on the way to the store, and even carrying on once left the premises.

Hence researching pre-and post-store conflict points can inspire innovative solutions.

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Only considering customer opinions in a market study

When innovating, qualitative techniques are the best way to study your current or potential clientele. Rather than trying to innovate the typical surveys are ideal for improvements – for example when asking about things that the sample has experienced.

However, qualitative studies are not the universal remedy per se. A focus group could be ineffective if it only considers what the sample says. To innovate you must reach aspects submerged occasionally in the unconscious, and this requires the use of projective techniques.

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Innovating within set boundaries

If the idea behind an innovation is to find something that will be applicable indifferently across different store formats, you are forgetting that the store (and everything it contains) is the product of any firm in retailing. In other words, the store must be the creation of a specific solution provided to a particular kind of public. In fact, it is the starting point and not the end point of innovation.

So it is not always the students who fail. Sometimes the “professors” start incorrectly!

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Lluis Martinez-Ribes
Source: Distribución Actualidad, the spanish magazine of retail
(nº 412, January/February 2010)

© ESADE Alumni / CONOCIMIENTO. Bcn, January 2009. (video in Spanish)
Lluis Martinez-Ribes. La marca en retail.
Associate Professor of the Department of Marketing Management in ESADE...

ABSTRACT
No communication means no sale. Next to informing communication should also persuade the customer. And in this context (good) sales people are vital. Retail companies used to be person and smile-intensive, but nowadays they have to be capital-intensive too. The context has changed and a new challenge emerged: how to communicate better with fewer sales people? Opting for IT and sensorial solutions offers answers to the dilemma “cheap coffee for all” versus “expensive customisation”.

__________

If the woman selling her fish on her way from Santurce to Bilbao had not sung:

Who wants to buy?!
Fresh sardines
My sardines
How delicious they are
They’re from Santurce
And I bring them to you,
many potential customers would have never known that she was there and she would have sold less.

A sale is not possible if the buyer does not receive a minimum of information. Besides communication is vital giving this information a purpose: to persuade.

And it is logical that the best and most effective communication is achieved by -good- salespeople.

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Change the context and a challenge emerges

Professional salespeople have become an expensive and increasingly scarce resource.

Given the considerable investments assigned to their geographic expansion – absolutely essential in our modern economy – firms in retailing that were people and smile intensive (usually referred to as “labour-intensive”) have to be also capital-intensive these days.

But smiles are always profitable in retail. Statistical evidence shows that those shops blessed with a good atmosphere tend to sell more.

In conclusion, we are facing a serious problem. How can you assure that a shop “talks” – with fewer sales people and without losing the capacity to communicate and hence persuade?

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Some ideas for devising a communication strategy

Communication methods need to be designed as part of a specific selling method (self-service, assisted, personal, etc.) and should be included from the start in the budget of any new business model.

The main aim when wanting that a shop “talks” should not be to simply lower prices, but to ensure that customers get the appropriate, tailored, and reliable information conveying the right tone, meaning, and emotions in a sufficient quantity.

Once this aim has been achieved, the second objective should be to ensure that the total communication cost per transaction, after weighting the impact of all communication sources, is as low as possible.

We could, for example, reserve human involvement – in form of excellent and well-paid professionals- for key moments in the purchasing process. These encounters should be brief but rich in customisation, sensations, and visual contact. Automated and mechanised messages or other non-human resources could be used as a support for minor interventions.

Bi-directional communication from the customer to the company should be encouraged (if we have two eyes, two ears and one mouth we should use them, in that proportion). Or even customer-to-customer communication.

For example, if a software is intuitive and pleasant to use, why not implement tactile screens permitting the customer to take the initiative and interact by looking up and searching for information? In the Aqui é supermarkets middle-aged housewives use the touch-screens to print out recipes as if it was the most natural thing to do.

Another resource gaining in popularity is the remote flex-printing. The Central Services (I don’t find the term “headquarters” very inspiring) prepare semi-finished signs displaying information including the product name, brand, use, etc., that will later be completed and printed out by the individual stores that also add the final price.

The use of Artificial Intelligence applied to databases opens economically viable ways to offer highly tailored solutions to clients. Therefore the “cheap coffee for all” versus “expensive customisation” dilemma is mitigated due to the advanced use of information technologies.

These days, retailing is an activity that could and should make intensive use of new technologies and sensations.

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Lluis Martinez-Ribes
Source: Distribución Actualidad, the spanish magazine of retail
(nº 410/411, December 2009)

ABSTRACT
Before coming up with a solution, we’ve first got to know what we’re dealing with. To begin with, if we’re talking about ‘crisis’, we should do so in the plural. Otherwise, a wrong diagnosis will lead to ineffective decision-making.
To address the crises, we encounter a good ally in the direct marketing, supported by neuroscience. Thus the focus should be on providing a positive shopping experience based on emotions to encourage clients to buy.

__________

The crisis: Without a doubt the topic of the past months. And the two most frequently asked questions are: What’s really going on? What should we be doing about it?

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Human behaviour when facing a crisis

When people are negatively affected by something unexpected, they go through three different phases:

The first phase consists of a shock, characterized by one’s confusion and failure to comprehend what is really happening. It is something similar to the instantaneous daze of the flash of a camera.

The second phase starts once we’ve assimilated the emotional impact. We are now able to analyse what has actually happened, diagnosing the situation and elaborating a coherent plan of action.

The third and final phase is when the planned action is carried out.

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We’ve all experienced it

Practically everyone has noticed difficulties over the past months, especially those of us who live in Spain, one of the countries most affected by the crisis.

But this period of difficulties is not homogeneous: At least two crises have occurred within this so-called crisis ‘in the singular’.

We should recall the level of inflation in mid 2008, both in relation to food and fuel prices. The European Bank rose interest rates, and mortgage payments reached limits that were difficult to sustain.

And now we just observe what is happening these days: prices are falling and are expected to drop even more – deflation -, with mortgage rates being at an all-time low. Families accumulate their savings and stop spending due to a lack of confidence in the future. And the Spanish unemployment rate is well above the European average.

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If you’ve taken decisions only once, it’s likely that you didn’t take the right one

The majority of executives (in both private and public sectors) failed to notice the change of scenery around them due to their big dismay. If you think that there is only one crisis, you may not have conducted a good diagnosis, …and consequently failed to take efficient decisions.

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Direct marketing helps us

If you want to know who is most likely to buy from you over the next month, there’s a valid technique formed by three key variables: frequency, recency and value.

Those who will buy from us in the near future are those who buy from us the most frequently, those who bought from us recently, and those who spent more than the average. Of the three variables, the one with the greatest statistical impact is the frequency. Consequently, our focus should be the clients that buy from us most frequently.

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Neuroscience also helps

95% of our decisions (e.g. those that are purchase-related) are made unconsciously and generated in the limbic system, a part inside of our brain that is also responsible for the processing of our emotions. On the contrary, our rational decisions that account for the remaining 5% are taken in the cerebral cortex.

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Suggestions for the latest crisis

It seems obvious that one’s objective should be to prevent habitual customers to stop buying our brands or in our shops.

From a neuro-scientifical perspective, the regular customers should not switch from unconscious to conscious actions. Moreover, they shouldn’t think only in terms of price – generated by the cerebral cortex – but also in the emotional part of the shopping experience – dealt with by the limbic system.

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Lluis Martinez-Ribes
Source: Distribución Actualidad, the spanish magazine of retail
(nº 403, May 2009)

ABSTRACT
The day previous to the Formula One Grand Prix in Monza, 200 international journalists witnessed how Emilio Botín, the President of Banco Santander, and Luca di Montezemolo, Ferrari’s President, signed a five-year sponsorship agreement during a press conference. The actual amount was never disclosed but rumours name a sum close to 40 million euros.
Until present, it has been the most important marketing action in the history of Banco Santander. Becoming the main sponsor of the legendary F1 motor-racing team Ferrari permitted the Spanish bank to position itself as a serious contender in the international league. Moreover, this leadership attitude conveys a positive message of economic strength and confidence in the future.

____________

Sharing common aspects among the concerned parties is a prerequisite for any successful sponsorship. Banco Santander and Ferrari, for instance, started both their businesses on the countryside, share a common passion for competing, invest heavily in cutting-edge technologies, are born winners, and aspire to be ranked among the best in the world: Santander is the world’s third largest bank in terms of profits, while Ferrari possesses an enviable track record of victories. Personality-wise, they are soul mates.

Additionally, Santander will gain something important to complement its image: Ferrari is a luxury company, luxury with a sporty connotation to be precise. Gaining a sense that aspires people will present an enrichment for a financial company whose core business lies basically in mass consumption.

Alliances are essential in today’s business world. No company, whatever size, possesses all the resources needed to be competitive on its own. And in every alliance some aspects might be more difficult to agree on than others, like the fact that the official name of the sponsored party includes a tobacco brand: Scuderia Ferrari Marlboro. Nonetheless, its impact is estimated to be minimal since the days are numbered.

When playing at a global level size matters. If not, how could they dedicate such an important sum of money? Don’t forget that over 60% of Santander’s turnover comes from abroad. In this aspect, Santander has a lot to teach to other Spanish companies that seem well managed, but are close-minded.

Since so much money is at stake, the sponsorship needs to be complemented by additional activation funds to yield results. If not, the return on investments will be minimised or could even be lost. Santander understands this perfectly, but I sense that Escuderia Ferrari is more interested in engines than in any marketing activities, so vital for its sponsor.

There is one exception: The Ferrari stores are much more exciting than those of its sponsor Santander. Santander’s corporate leadership is not well reflected in its points of sales, whose semiotics are rather conventional and little innovative. In the stores the customer is not made aware of the leadership attitude – without being arrogant – and the new routes forwards the firm has been demonstrating in so many ways.

And what are the implications of Fernando Alonso’s exclusive agreement for Ferrari? Despite being flattered by Emilio Botín’s compliments, I think that Santander cares much more about the recuperation of the Brazilian pilot Felipe Massa, who is considered an idol in his home country, seeing that the Brazilian market has four times the size of the Spanish one. I further believe that the Spanish bank wouldn’t mind if Ferrari were to contract Hamilton one day, since the United Kingdom represents a strategic market, and Santander is already in a leadership position in its home country. Finally, both the United Kingdom and Brazil coincide on two aspects: their passion for the Formula 1 and their important domestic markets.

As I heard my colleague, Professor Francisco Vilahur, once say: “Strategy is a denial exercise.
Sometimes you need to say “No” to things that, under different circumstances, would get a “Yes.”

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Lluis Martinez-Ribes
Source: Cinco Días
(October 6th, 2009)

ABSTRACT
Against all odds, there are those who are capable of seizing the opportunity to grow in times of crisis. And they do so because they have the courage to cast off old-fashioned concepts; they invest in their brand, and transmit their brand culture in the stores. They make the world their market based on ‘insight’ and innovation. And all of this configured in one complete business model. This means that now is the best time to start a solid project in retailing.

____________

On February 3rd of this year, I participated at the Italian Ambrosetti Marketing Workshop alongside of Jean-Claude Larreché, Professor of Marketing at INSEAD, as we were both giving a lecture on the new frontiers of marketing.

Larreché is author of The Momentum Effect, which has been considered on Amazon as one of the ten best Management books published in 2008. It is based on the idea that – even in times of economic turbulence – many companies can expand; greatly expand, by using their own internal energy. Hence the ‘momentum’ metaphor, which lent its name to the book.

This assertion, which may appear shocking at first sight, is accompanied by a method on how to use the internal capacities fruitfully to promote growth. It courageously responds to a question most customers had previously no answer for.

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Growth is not just a dream

Despite the grey economic climate, there are many companies that see an increase in their sales figures. Apple, for instance, whose growth is unfaltering, or Desigual, probably the world’s fastest-growing fashion chain.

Both companies are in sectors heavily affected by the crisis and characterized by numerous strong competitors. Nonetheless, they know that they have to invest resources to develop one thing in particular: their brand. A brand is the greatest asset in economic terms, and much more valuable than any material assets or buildings alone.

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The factors those who grow care about

First of all, both companies no longer consider themselves simple ‘producers’ in the old-fashioned sense of the word, and understood the immense benefits of selling – though not solely – to the general public.

Secondly, they do not use their stores merely as selling machines, but also as a preferred vehicle to express their brand meaning in an experimental way: the theatrical positioning of Desigual is quite remarkable in this respect. In addition to their shops, they also use other resources with a leader-ship attitude: eye-catching presence at trade fairs, spectacular events, the web, etc.

Thirdly, their mindset is clear: they go beyond their own geopolitical borders. Their market is the world.

And finally, when considering a new product, they intend to look at and understand well a particular public, in order to detect an ‘insight’ that will serve as the backbone of their innovation.

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They create business models and systems

The most interesting fact is that the above-mentioned aspects are not used separately but are integrated into one single business model.

Desigual cleverly combines its direct sales channel with sales through independent retailers. Apple perfectly combines the iPhone with direct sales of their applications, creating an integrated whole whose profits astonish.

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Danone also understood this

Designed to experience the brand culture, Danone is putting the finishing touches to its first store in the centre of Barcelona.

Danone store in the construction phase.

The photo shows an aesthetical entity in the store’s entrance, which I hope won’t become the reception. This would mean that they had failed to grasp the semiotics of retailing. At the Sony store, you are first taught how to edit videos and then sold a camera. The order in which the store is used is not neutral.

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Innovation in retailing takes time

Based on our guidelines, it wouldn’t take an architect long to design a store; but devising a whole new business model – including the intervention of the architect at the end -takes just over a year.

Smart companies are starting their projects at this precise moment in time. Once the crisis is over, they will be in pole position, since they will have purchased stores more cheaply than the competition and gained access to customers with the largest amount of savings ever seen.

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Lluis Martinez-Ribes
Source: Distribución Actualidad, the spanish magazine of retailing
(nº 400, March 2009)

ABSTRACT
“Retail brands” -the inaccurately called “private labels”- can be innovative too. In fact, if they align their strategies and collaborate together, products like the Bosque Verde shoe cleanser emerge, which was awarded the Liderpack price for being the most innovative in Spain. The preconceptions that arise when touching on the issue of brands selling to the wider public can lead to errors in decision-making. Those who define a problem badly, have a hard time finding a solution.

__________
On Monday 11th of May 2009, the Liderpack 08 prices, the most famous Spanish recognition for packaging design, were awarded. Two of the finalists were proclaimed by the Jury as the”Best in Show”, and will now represent Spain at the “WorldStar Packaging Awards”. One was Camper, the shoe company, for some window display figures made out of shoeboxes, and the other one was a medium-sized business, Francisco Aragón S.L., for a shoe care product.

This is “an authentic and efficient solution for polishing shoes”, produced in collaboration with Menshen Iber S.L., specialists in sponge applicators.

Both companies are passionate about their work and about doing it well, and both have very clear ideas about what they want.

I had the opportunity to interview the two General Managers, Francisco Sánchez and Ramón Pradas, shortly after they received their award.

Pradas, of Menshen Iber S.L., rejects requests for low-quality sponge applicators, “because, in the medium-term, the category would be negatively affected by unhappy customers”. This is a good example of something I heard previously from Paco Vilahur, a fantastic professor at ESADE: “strategy is the art of saying no”.

Five years ago, Sánchez, of Francisco Aragón S.L. bought an important stake of the company’s shares. The firm, a producer specialised in plastic closures and packaging systems, works with different product categories (home air fresheners, furniture cleaners, insecticides, etc.) and for many different brands, such as Mayordomo.

Yet producing excellent products is not enough anymore to stay competitive. Sánchez realised that he had to compete with very powerful multinationals and needed about thirty sales representatives just to sell his products, without having any guarantee of success. So he reorganised the sales strategy of his company.

He analysed different retail chains and believed that there was one with which he could align himself in terms of strategy, “because, unlike the rest, they do not just focus on the price”: Mercadona. In 2004 they reached an agreement and began to “brainstorm, develop, manufacture and pack” various Bosque Verde (Green Forest) products, the brand that currently accounts for 90% of its sales.

From 2004 to 2007 their turnover multiplied by 3.5 and their operating profit by 9.8. When they launched their multi-fragrance air freshener, they rapidly captured 40% of the Spanish market share, and this has now been consolidated at around 30%. In 2007, their average payment terms were 114 days.

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Who gets the credits?

Mercadona asked for one type of shoe cleanser and they came up with a different, an even better one, which has been considered recently the most innovative in Spain.

The “Retail brands”, also called inaccurately “private labels”, can be very innovative too… although sometimes the party stimulating the innovation is the almost-exclusive supplier, similar to Mercadona in this case.

But Mercadona has yet another admirable attribute. As said in previous articles, the company’s main competitive strength is its supplier strategy based on long-term agreements. This is more profitable than buying in a speculative manner, similar to bidders at an auction.

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Lluis Martinez-Ribes
Source: Distribución Actualidad, the spanish magazine of retailing
(nº 407/408, September 2009)