Coffee, Community, and Consumers in Complicated Times

M Coffee at Half Moon Bay from Half Moon Bay Review April 2009

As predicted, with the uncertain economic conditions and drooping retail sales, more and more marketing and business articles are focusing on the possible shift in consumer attitudes – the new frugality (simple is good), the suddenly cautious luxury market, and the joys of hanging out together at home. All of these “modes” are probably a reflection of some real behaviors and attitudes among Americans, but let’s take a look at one segment and consider whether these shifts really amount to something that marketing and development needs to consider today.

So, today, let’s start with coffee: before we were using the “r” word at all, there were some red flags signaling that Starbucks expected world domination was hitting its Waterloo. Dunkin Donuts and McDonalds were taking advantage of oversaturation and pricing issues to promote their own coffee, packaged in that perfect slot between “cheap” and "cool.” After all, Starbucks’ success was based on the experience of the space, the coffee, the brand, as much as it was about a really good cup of coffee. As price becomes more of an issue, customers can see the writing on the billboard (for in fact, McDonald’s has seriously steeped up its outdoor advertising to focus on the McLattes and other drinks that compete directly with Starbucks: the price wars campaign in December has moved toward showing the coffee itself in attractive photos).

If, for Starbucks, the brand focus shifts from ambiance towards value, it becomes a dangerous game of seesaw for a chain that is as much about the overall package as the item being sold. This is less so for McDs, which can make it up in other ways if this gamble fails – after all, they are a hamburger shop, despite the coffee, salad, healthy meals, you-name-it advertising. Unfortunately, for a coffee chain, it’s all about the coffee. Interestingly, the Washington Post reports that Starbucks is betting on major revenue from international sales of Via – that’s right: instant coffee (the ultimate downscale coffee beverage to most Americans).

But let's compare: many areas report that local coffee shop sales are not down -- from State College PA to Pueblo NM, to Seattle (that’s right: Starbucks’ old home location!) local coffee shops seem to be doing okay (with the caveat that there are more stores closing or not doing well in areas that are generally hardest hit by unemployment and the housing slump). Part of the reason is that these shops do more than sell coffee – food accounts for a large percentage of their sales (something Starbucks is recently considering expanding) as well as ground or whole bean coffee to take home. Finally, the significance of social and communal interaction in a local place. Interestingly, the Seattle Times reports that people who’ve been downsized in corporate jobs are opening small businesses like coffee shops. Despite worries about regular sales (and that two year startup time where profits are nonexistent), the equipment and leasing costs are low right now, making it possible for some who might not have attempted this at another time to give it a go. Despite the ways in which Starbucks has become a McDonald’s-like symbol of the homogenization of culture, one thing that’s been well documented is the ways in which the coffee chain has actually spurred on the development of competing local businesses. Capitalism occasionally works the way it was intended.

What’s important to note here is that people’s spending habits are driven as much by social as economic needs. Consider how a coffee shop – whether it’s the Panera in the strip mall at the center of town, the Dunkin Donuts near campus, or the funky locally run place – actually does become Oldenburg’s “third place,” where those who have lost their jobs, are searching for new ones, or need a cheap place for a meeting for the price of a cup of coffee. These sites provide community, something that isn’t driven by budgetary considerations.

Consider this: one of the Starbucks slated for closure is in the Oak Park neighborhood in Sacramento. Locals (including a cinema owner whose site depends on the coffee shop traffic and celebrity mayor Kevin Johnson) are campaigning to keep the store open. Mayor Johnson said he personally called Starbucks CEO Howard Schultz and asked that the coffee chain keep its investment in the neighborhood's revitalization.

Ironically, in March, CEO Schultz announced that, rather than pulling back, they are expanding in Eastern Europe and China, along with 140 new stores in the US. This week, despite a community petition and phone calls from Oak Park activists, the corporate offices announced that it was closing the store (along with 400 others in the US) to “help its bottom line.”

Some would argue that it’s not good priorities to fight for a high-priced coffee shop in an area of town that boasts high rates of homelessness, unemployment, and few jobs: indeed, perhaps it’s not what the community and politicians should be doing with their time. But if Shultz is serious about making Starbucks an investment in local environments, the great good place rather than the only alternative, they might consider it a form of brand-building: a bit more consistency and goodwill in the overall policies would put the foam back in the latte.

Niche Marketing: Tailoring the Goods as Well as the Pitch

Many of the posts on this blog have talked about segmented markets, core customers from specific demographics, and good marketing design that speaks to the right audience. Smart companies develop or streamline their products for the needs of that key group, often with good PR that travels over and beyond the dream demographic. But sometimes companies have to be pushed to recognize that they’re missing out on potential sales. Ten years ago the Wall Street Journal noted that some companies were beginning to notice that people with disabilities were an important market with some disposable income. According to Suzanne Robitaille, approximately 54 million adults-- one in five Americans -- have a physical or mental disability. She argues that “People with disabilities have a combined income of more than a trillion dollars -- and are willing to spend it on products and technologies that make their lives more productive…Brands that ignore the needs of this group relinquish an opportunity to reach this growing demographic.”

Indeed, American Airlines just announced that it will run a contest for advertisements featuring people with disabilities, promoting both its own efforts to create services that are accessible while highlighting other companies too. The winners receive free advertising on the airline's in-flight network.

As new technologies make access to a wider world possible for everyone, creating devices that are user-friendly for people with physical challenges has not been as much of a high priority as it could be. And that represents a loss of core customers. Recently, the state of Massachusetts and the National Federation for the Blind, (which successfully sued Target) went after Apple for the inaccessibility of iTunes products. In response, Apple will rework iTunes U, the college and university online course content section of the iTunes music store and make it "fully accessible to the blind" by the end of the year. At the same time, as Robitaille points out in her ablebody blog, Apple has produced some assisted technologies, such as an iPhone app that provides a talking email keyboard and another that uploads glucose readings from connected blood glucose to the iPhone, which allows diabetes patients to track blood sugar levels over the course of the day. While creating specialty products for a niche market is a tried and true formula, technology companies also need to face the fact that their main products may be used by different groups in profoundly different ways. The product itself -- as well as the pitch -- needs to take that into account. For example, many of the applications designed for people with disabilities are also more user-friendly for older consumers who might find regular interfaces difficult to navigate.

For a positive example, note the marketing news about Panasonic's Toughbook laptops which have "carved out a niche among people who use computers under the most trying circumstances -- think utility linemen, the military, construction workers -- but in this age of belt-tightening, marketing executives with the brand are thinking the brand's durability message may play to a wider audience." The success of designing and then selling to that specific market has encouraged Panasonic to create a multi-platform campaign of television, web-based, print, and out-of-home ads that considers how other users might also want a more resiliant laptop. The new campaign, which carries the theme "Toughbooks for a tough world,” is being promoted in airports and on shows like "CNN in the Morning" to capture the business traveler who might not realize the advantages of a more resilient product. In the same way that sportswear and hiking gear morphs into business and street wear, the "tested under extreme circumstances" approach entices users from a slightly different occupational group. Indeed, I suspect Panasonic has not yet exploited the full extent of its crossover from successful niche sales to larger markets. One of its Toughbooks is geared towards doctors -- another group that can appear authoritative or innovative to "regular" consumers. Toughbook provides the "first fully-rugged mobile clinical assistant (MCA), will be one of its many mobile healthcare solutions innovative engineering, resulting from its own proprietary global healthcare industry research and Intel’s mobile clinical assistant (MCA) reference design. The device improves workflow and eases clinical loads for doctors and nurses, helping healthcare organizations maximize efficiency and reduce errors... [It] is a secure and intuitive platform for barcode medication administration (BCMA), vitals capture and electronic medical records (EMR) capture and review." Given the popularity of hospital-based on television, philanthropic work in the field by Doctors without Borders, and concerns about emergency medical response in disasters, Panasonic might also consider how to promote its product even more.

Change is not always good

Orange juice giant Tropicana has recently been taking some flack for redesigning the packaging on what was, essentially, already a successfully functioning brand and look. Pepsico, its parent company, recently announced that after less than two months of the new design, it will return to its original packaging due to customer complaints. Consumers said that the new look (which replaces the now iconic orange with a straw for a more abstracted glass of juice) made Tropicana blend in with generic brands on the shelf and presented problems when hurried shoppers tried to distinguish between the varieties such as “no pulp,” and “extra calcium.” At a time when private label brands are surging and an item already has a strong brand image and core customer base, this definitely wasn’t a great move (especially when the volume of complaints was not that huge, but they were from people who labeled themselves as long time brand users).

Interestingly, the actual packaging differences are not enormous: the color scheme, the single color item emphasis, and the logo offer some carry-over from the original design.

But perhaps the marketing folks at Pepsico misunderstood the power of its original design in relation to the place Tropicana holds in its customers’ brand memory. You would think they’d have learned their lesson with the recent trouncing of its parent company for re-vamping the Pepsi logo to be more in sync with the Obama “O” and piggybacked off of its message of hope and, well, change. While the change brought media attention to the brand, it wasn’t the kind that marketers had in mind.

Another recent change that’s also been universally disliked by users is the new Facebook interface. While logo changes are mostly for cosmetic and visual appeal, the complaints about the new Facebook, while not reducing its phenomenal growth in any way, means that users will have to adapt in more interactive ways. Interestingly enough, the petition against the new Facebook, signed by almost two million people, is of course, hosted on the Facebook site itself. The COO of the company talked about the interface as an evolving platform, always in the works and that they are interested in taking users’ concerns into consideration with each new iteration. While not a perfect incorporation of consumer feedback, it’s probably the right tack to the take for this kind of product.

Some manufacturers have gone one step further and gotten customers more deeply involved in the actual package design process. Stoneyfield Farms redesigned its yogurt packaging and logo--- although they’ve already finished getting input and made a choice based on it, still asking its online community to rate the various choices. Their online poll is a bit stilted, but it has the nice feature of allowing survey respondents to invent their own answers and then have those answers integrated into future version of the survey. Not only does this give the brand more of a transparent image with its core customers, it fits with the overall presentation of the company as engaging a larger community of consumers who buy Stoneyfield as part of a commitment to a particular lifestyle and set of values. Perhaps if Pepsico had paid more attention to those kinds of sociometrics, the desire for change would not have hit them quite so hard.

Candy is Dandy

What sells? That is the bottom line in retail, but it’s also a huge question in turbulent times. While President Obama’s economic advisors work hard to convince the public, investors, and the world that we will return to productivity and consumption, even they can’t completely answer the question of what products, services, or goods will be the key items in the new, post-fiscal-traumatic-stress market. But here’s a pretty interesting answer:
Candy.

Well, yeah, probably not the first item that came to mind (imagine the headlines: “Hersheys Saves American Economy”).

But despite the hype about drastic and dramatic change, some aspects of recovery are necessarily conservative. And what’s more conservative than comfort foods? The recent surge in candy sales (The Times reports an 80% increase since last year in one major Chicago candy store) can be seen as a sign that folks are anxious, eating what makes them feel better in anxious times. Candy is always a good bet -- especially on what seems like a bad day that keeps repeating -- notwithstanding the things I'm sure my nutrition-savvy friends will say about sugary sweets adding to hyperactivity rather than calmness, but hey, that’s background noise.

The cultural history of sugar is as both luxury and necessity. The great anthropologist and author of Sweetness and Power, Sidney Mintz, points out that by the 1500s, sugar production was already pre-industrial in the New World, which generated a whole host of other industries, including the tools and gears, molds, and iron casts used to refine the substance and food production (think: canning). Within the next 200 years, Europeans colonized the Caribbean, imported slave labor from Africa (after wiping out much of the indigenous population), and produced sugar in large quantities that could be shipped back to be consumed by the working populations who were fueling the industrial revolution on that side of the Atlantic. As Mintz points out, what was once a luxury item soon became a necessity for survival (most workers subsisting on sweetened hot tea or jam and bread, foods that provided energy for long days of factory labor). But sugar retains its connection to luxury, with its use in desserts and confections. Nobility were no longer the only ones to have their cake and eat it too.

In terms of today’s sweet tooth, candy may be a quick pick-me-up for difficult times, an indulgence and a necessity that most people feel they can still afford.

And finally, there’s that whole pantheon of choices. American consumers have been deeply indoctrinated in the value of choice. When asked what makes someone or some thing American, my students almost invariably answer, “we can choose what we want to do, how we live, and what we eat.” Food marketers in particular have had to hone the message of variety – a type of Oreo cookie for every mood, every personality, and every season – in order to keep selling when it’s possible to have fed the world three times over with the excesses that generally flood our marketplace. Having wholeheartedly taken that message in, the shift in attitude can be a little rough for some consumers: yes, people are suddenly saving more, making frugality sexy, and adapting to the green “less is more” mantra. But does it mean they have to give up variety everywhere? The endless pleasures of a fertile marketplace? An inexpensive and satisfying treat? Not in the candy aisle! The last ten years have seen an explosion of types of new candy and re-introductions of old favorites. The candy section in many supermarkets is the last refuge of those 70s co-op bulk bins, no longer filled with dry lentils and granola, but colorfully bursting to the brim with Smarties, Mary Janes, Starbursts, and Jelly Beans.

But as for Hershey’s saving the economy, don’t bet the last of your nest egg just yet. Questions about its stock value, mergers, and steady sales after the last of the big candy holidays (Easter) suggest that you might be better off buying a few bars to sooth the soul and waiting to see if demand is more than just a recessionary sweet tooth.

Marketing milk and detecting demographic differences

By now, almost everyone is feeling the reverberations of the economic crisis, whether immediately in their wallets or less directly through stress – and smart marketers have been attending to these shifts, designing campaigns that demonstrate what a good value one can get by shopping at WalMart or eating at McDonald’s. Most of these campaigns are spun in a positive fashion rather than blaring red sale signs (except of course, Circuit City, where it is already too late to resuscitate).

But not everyone is worried about the economic crisis in the same way nor shops in the same way. Even before there was an official crisis, we suggested that retail markets were not attending to the differences between consumer segments. As the low income category grows in all directions, IRI (which has been exploring this demographic group since 2007) helps track, categorize, and explain segments. While their catchy names for population segments seem a bit arbitrary to my skeptical eyes, the study does show some general trends and highlights the need to see differences even when they resist categorization. For example, many of the people they surveyed are more interested in good values than in sale items. However, price is only one factor in how they choose stores. Issues like health and well being, family and media use vary across the age cohorts, regional pockets, and cultural differences based on race or ethnicity.

Although we can critique the idea that baby boomers (a group that spans a huge age range) have anything consistent in common, we do know that those who are closer to retirement age are obviously more concerned with investment, savings, and health. Other huge aggregate segments like Latinos and African Americans seem consistently worried about managing and keeping full time work. For most of these groups, family is extremely important, but younger low income shoppers worry about more debt than savings and are more focused on friends.

In marketing to these groups, IRI suggests that less is more – less variety and category assortments, but also having stores that are open more hours to accommodate different work schedules, accept many forms of payment, and offer guarantees for store brand products (the last one comes up frequently in qualitative interviews: people buy brands only if they trust them. Being on a budget means that any risk with a new brand is a huge budgetary consideration. Guarantees take out some of that risk.). There is a strong interest in healthy foods and dollar store bargains all in the same mix. Today almost anyone can fall into the lower income shopper category (hence its lack of usefulness as a broad rubric), but it’s clear that there’s room for thoughtful promotions, product innovation, and strategic marketing within that framework.

Take this example from the food industry: according to Natural Specialty Foods Memo, Dean foods, the largest dairy food processor in the US, is predicting sales growth despite the economy because milk prices are down (good for them, not good for the dairy farmers, not good for everyone in the long run). Its line of organic products – including organic milk and soy milk – has successfully expanded into non-traditional venues like convenience stores and pharmacies. As NSFM points out, people have a strong brand association with Dean products like Silk and Horizon, so sales remain steady. However, even as the price of milk drops, the cost to consumers of organic milk will not be dropping at the same rate. At the same time, the research shows that middle to lower income consumers are equally interested in organic and natural foods, even as they are forced to cut back on some organic consumption. Fresh products rank consistently high even as consumers cut back in other areas, such as packaged organics.

So, the challenge would be to generate and market a line of lower cost organic milk. Right now, a gallon of organic milk is still 50% higher than its regular counterpart. According to NSFM,

“That's a stiff premium, which is why many consumers just can't afford to buy organic fluid milk in this economy (and often in a good economy) even though they want to. The core organic milk consumer still seems to be sticking …but there is significant overall sales erosion in the category as evidenced by recent data. A slightly lower organic milk retail price is a good goal."

Keeping the price in line and selling in venues that are accessible to everyone is one way that companies can corral that elusive but necessary low income dollar, segments or not.

Corporate Social Responsibility Revisited

Previously in this blog, I’ve talked about the continued importance of corporate social responsibility even in the midst of retail downturns. Indeed, a fair amount of research has shown that consumers like companies that combine charitable donations with purchases; green practices that demonstrate conservation and renewable resource use; and product development that highlights an awareness of the community of users.

In some respects, it doesn’t matter if CSR is done out of selfishness (brand image) or altruism (a clear guiding philosophy embodied in corporate practices), but in other ways companies that appear to engage in corporate social responsibility for purely selfish gain are less enticing. Still, as companies like Proctor and Gamble have shown, it should definitely be highlighted so that consumers know what they’re getting.

A recent study reported in the Washington Post goes one step further and examines whether CSR helps or hurts companies. The Post reports on a study from July 2007, by Goldman Sachs which found that sustainable companies outperformed the market, often by significant margins. The WP tested that argument by creating a ranked list of 498 companies that represented -- according to IW Financial -- a broad view of socially responsible behavior… What they found: “In the worst economic turmoil in decades, when investors had every reason to shed pretensions of political correctness, companies that put time and energy into behaving responsibly seem, thus far anyway, to have performed no worse than those that didn't.”

One interesting point that the Washington Post research reveals is that companies that appear at the bottom of the SR list were companies that are a bit more insulated from consumer demand – and yet they were also trying to engage in CSR, whether as part of their core business model or as a way of maintaining profitability (i.e. energy conservation) during tough times. The ambiguity of what “counts” as CSR makes it a bit hard to put an enormous amount of generalizability on any list, but the point is that more companies are engaged in CSR than not. As the Washington Post puts it,

“Since their products are in demand whatever the state of the economy, these companies are largely shielded from the vicissitudes of consumer taste; whatever these companies actually think about the norms entailed in CSR, they've decided they have no choice but to play along, recession or no recession.”

As Intel chairman Craig Barrett told Fortune. "We look at our CSR activities in pretty much the same way: you can't just do them in good times and then just forget about them in bad times and hope to get any results."

As one analyst put it, "leadership on corporate responsibility is not like a spigot that can be turned on when things are going well." CSR for long range planning is key.

CSR, whether or not it’s highly visible to the consumer up front, will be increasingly important as the less-savory business practices of the financial industry come to light and as companies are forced to make decisions about how to survive the recession.

Sticky Situation Suggests Selling Safety Up Front

The recent peanut butter fiasco – in which salmonella was found at the point of production and hundreds of products were recalled – brings up some sticky issues in retail marketing and consumer behavior (yes, the pun was intended. Sorry). Even with contemporary concerns about peanut allergies, sales of peanut butter remain consistent and high in America. Like macaroni and cheese, pasta, tuna, and other pantry staples, peanut butter seemed recession-proof. But concerns about food safety are another matter altogether. Given that Americans consume an enormous amount of peanut butter and that this is one of the largest food recalls in recent history, the food industry has a bit of a problem on its hands. The New York Times reports that companies are taking some defensive measures.

“The drop-off is so striking that brands like Jif are taking the unusual step of buying ads to tell shoppers that their products are not affected, and giving them a coupon to make sure they do not learn to live without a staple that almost every child loves — and more than a few of their parents, too.

While food companies are working to stop the drop, it might be worth considering this as a good object lesson in marketing: consider what’s going to be most important to consumers in the near and not-so-distant future, when their dollars are stretched and confidence in corporate entities wavers with each step in the process. First, health is what we could call a “super value” in American society – it supercedes many others and intersects with our sense of rights and entitlements as citizens and consumers. Health concerns are partly why many people shift to organic and green products, maintaining those practices even when budgets are tight. When we’re dealing with food and safety concerns, people exhibit a combination of desires: individual control and energy spent on well-being combined with a sense that government and other institutions should protect them from the most egregious risks. According to policy and industry experts, we're going to see more of the latter in the future, especially with new concerns about "bioterror."

While there’s a whole host of complicated reasons why the salmonella outbreak happened – and we will, in all likelihood, see renewed vigilance from federal agencies who supervise the food industry as well as new mechanisms to trace the sources of problems more quickly - it behooves marketers to consider pro-active marketing that touts their compliance and engagement in national food safety standards. In some cases, it makes sense for industry to construct and enact its own protocol -- but in the case of food, it will be more and more important for companies to also align themselves with national directives.

Bringing People Back In: Advertising, Technology, and the Personal Story

Everyone loves a good personal story, especially if it has elements that ring true and speak to common interests, human pathos, and the usual triumph over adversity. Advertisers know this, but they often consider their own imaginations as the prime source for good stories. That’s like a novelist who locks herself in a room, endlessly mining her own biography well past the first few novels. Enough already, we think.

Rather than chase their own tails in search of a storyline fit for an ad campaign, advertisers are beginning to put two and two together: the first part is knowing how to find human drama in real life experience and the second is giving consumers and citizens a sense of control over how they present themselves, how they interact with products and technology. The best of these are integrated marketing campaigns that include posting to websites, print and media ads, and social media.

Here are some examples of what I mean: the old version is the “personal testimony” –you know these ads ("how I lost 145 pounds eating turkey subs…") But more significant are the ones where the ad – or the site where the ad is generating attention – is not as intensely focused on the product alone.

The now-classic version of this is Dove’s Campaign for Real Beauty, which began in 2004 as a straight media format, but showed ordinary women celebrating the diversity of body types. Women posted stories and sent in photos; Dove’s site included space for commentary and has morphed into an activist campaign to help women of different ages develop self esteem and respond to unrealistic portrayals of women’s bodies in the media.

A less successful version was Microsoft’s Life Without Walls campaign (“I’m a PC… and I’ve been turned into a stereotype” featuring a John Hodgeman-like spokesperson who then gives over to vignettes of many different people using their pc…) which had potential but felt scripted too closely to its competition and also gave in to rumors that many of the spots on the commercial were created on Macs… The site itself has great stories, but it functions too defensively in favor of the product and less positively in favor of the terrific stories.

For an upcoming example: athletic gear maker Adidas is giving women a chance to star in a new campaign with WNBA basketball player Candace Parker. According to recent news,

The company is hosting an enter-to-win promotion, starting today, in which women can share stories about training struggles and successes. Three entrants whose stories are chosen will star in the ads. Throughout February, consumers are invited to become the new face of the "Me, Myself" campaign by uploading their photos and stories to www.adidas.com/women. They can invite friends and family to vote for them via an online widget that can be attached to one's Facebook or other social networking sites.

Another interesting version is Nationwide insurance, which has a version of that’s focused on Black History Month. The centerpiece of the campaign is a site, www.nationwide.com/mylegacy, where people can post their significant moments of personal achievement within their African-American heritage. The site allows people to share stories, family history, and photos. The company's presence on the site is subtle, which also adds to the imprint of sincerity.

photo credit: "Dad and Four of Five Sons, August 2008" by Jame C.E., Tignall Georgia on the Nationwide "My Legacy" site.

Back to Natural: Focusing on Functional and Generating Generational Sales

Yogurt’s a mainstay in our household – a regularly purchased product – and we’ve had a fair amount of brand loyalty over the years. Originally a local brand in New England, Stonyfield Organic went over well when there were small kids in my house, since it could be sweet, smooth, and without artificial ingredients. It wasn’t my kind of yogurt – not tart enough and a bit too gelatinous – but it’s better than a lot of what is available in your average grocery store. Recently, yogurt brands have been expanding out again (beyond the unfortunate direction of looking too much like a bad version of dessert, from the turn-your-tongue-green and sell me a cartoon character to the what-is-that-crunchy-chocolate-crap anyway) now there’s a renewed interest in yogurt as an actual health food --- priobiotics are one of the best selling functional foods out there. And greek yogurt –the “real” stuff with a richer texture --- has gone mainstream, too. I’m still buying the Stonyfield and a greek active culture yogurt for our regular use, but I’ve stood over the “probiotic” ones for a while, contemplating a taste. So far I’d resisted because they only come in the tiny packs and I'm suspicious that the benefits have been inflated. But the ad campaigns are definitely wearing me down, as I see Jaime Lee Curtis hawking the stuff with a big smile. The clincher was when I was offered some at a hotel breakfast bar this weekend, which I happily ate, especially when it had the words “ALL NATURAL” written across the top.

In the retail food and beverage market, natural and functional seem to be steady sales and growth areas. Although “natural” has a vague and watered down meaning, it’s clearly become more meaningful to consumers than “fortified,” “low-calorie,” and “low-fat.” According to the Mintel Global New Products Database, "Food and drink manufacturers today realize that natural and pure have become healthy eating ideals, as people look for holistic, genuine nutrition they can trust." Functional foods also have that edge – they have the tinge of science and nature all in one (Kraft has a LiveActive Chewy Granola Bar that smacks of healthy snacking while providing the consumer with all the fiber and probiotic culture you simply can’t find in potato chips). Ethical (eco) foods are also still a growing concern among consumers, so add that in to the mix.

I’m not Gen Y by a long shot – my kids and students are, though – and their food preferences match up with the trends described above. The Center for Culinary Development and Packaged Facts did some qualitative studies and found “their penchant for customizing foods through adds-ons or mix-ins (the reason they love fajitas and other "build-it-yourself" foods); their dedication to local, organic, fair trade and vegetarian/vegan foods (reflecting their belief that food choices can make a positive difference in the world at large); and their firm belief in the value of health/wellness and functional (including anti-aging) foods and beverages."

Sure enough, I looked around the classroom the other day and saw three women eating the same yogurt I’d had at the hotel – and the ones I bought for myself are mysteriously disappearing from the fridge awfully fast…. Honestly, the one I actually tasted was good, but until the science catches up with the marketing (or I magically become Gen Y), I think I'll probably go back to my regular brand.

image and an excellent analysis of the yogurt health claims from the great science magazine Inkling's Inky Circus Blog.

Do You Think “What You See” Influences “What You Get”?

If not, you might be wrong, as Evan at Storefront Backtalk points out in an excellent blog post.

We know the statistics: Wal-Mart's in-store TV network is now the 5th largest broadcast network in the US, after NBC, ABC, CBS and Fox. We know that YouTube and social video sites are at the top of the pack in terms of traffic, loyalty and "stickyness."  And we know that "kids these days", say anyone under 35, are tuning in to video sources on their cellphones and PDAs while on the bus or train, in class, and at work. While all of this distraction might have kept people busy, and thus not spending money, interestingly, “among the benefits of videos touted by web retailers are a lower
number of abandoned shopping carts, reduced return rates and higher
sales,” said Jeffrey Grau, eMarketer senior analyst.  Further:

[I]t’s clear retailers are just beginning to understand
the sales power of in-store videos, which is nice, because consumers
are just starting to understand the informational power—and, yes, the
convenience—that well-done videos can offer. Will these two trains
meet? And I do not mean in a Gomez Addams model train set kind of way.

The economy may also play a role. I’m hesitant to say that, because columnists, marketers and politicians (how’s that
for a trustworthy group?) today seem to find in the weak economy the
magic answers that will explain everything. (”Traditionally, Brussels
sprouts are not big sellers in school lunch programs, but with the way
the economy is headed, that’s going to change.”)

The question I have is whether there's a causal relationship between video viewing habits and purchase intent (or brand perception, or any other goal/measurement of success).  Are video watchers naturally inclined to be more accepting, hence their attitude toward watching the video in the first place?  Or are we simply seeing the self-selecting dynamic play out (as Evan notes himself)?  Or maybe it's novelty.  I guess I'm wondering how much selling the video itself is doing, and how much is coincidence.

Any thoughts?

The Web as The Source: Consumers, Information, and Trust

As we’re poised to watch a whole slew of expensive Super Bowl ads, undoubtedly focused on entertaining and emotionally enticing viewers, it’s worth stepping back a moment and considering that as fun as these ads might be, lately most people are making purchasing decisions using their brains and not their feelings.

Whether you consider this a new insight or a basic tenet of human consumption in the market era, consumers are becoming more focused on gathering information about products and brands. To me, it’s no surprise, but the accessibility of knowledge via the internet and social networks makes this a whole new ballgame for marketers and retail sales. Certainly there’s a glut of information out there -- and people struggle to decide what counts as an authoritative voice to guide them through purchases. (You can even see the Madoff debacle as an extreme example of how easy it is for the unbelievable to appear ordinary). One result of the current economic situation is that discernment is rising to the top of desirable skills for consumers. No one wants to make mistakes when they’re on a tight budget.

In a recent survey of consumer micro-trends, Penn, Schoen, and Berland Associates find that consumers no longer trust television ads or news as a means of gauging a product – and they’re more likely to trust online sources than store clerks for information. Again, no surprise when most retail outlets don’t work to create the sense that their sales force is there for the consumer rather than the company line. As I’ve pointed out in prior posts, those that do (Apple, for instance) are more apt to generate consumer loyalty. Blogs that provide retail insights (like this one, we hope!) are also a growing influence. Not that we have a buyer’s revolution on our hands, but it’s about time advertisers jettisoned their outdated notion of what consumers are really like.

Just to keep things in perspective, keep in mind that the micro-trends survey finds that most people are spending less than half an hour in product research online. That’s not a huge amount, but it also probably depends on the item in question. It also appears that it actually works when companies don’t presume that consumers are ignorant of technical information. Penn et al explain:

“Information-seeking is not just an activity, it's a way of looking at the world. New info shoppers are proud of the progress they have made in putting facts over pablum. More companies should treat their customers as Dyson did and let them in on the secrets of their unique success. And they should invest more than ever in helping form their consumers into citizen corps, arming them with PCs, cameras and even asking them to use the phone's new video cameras to document their product usage and put them online.”

The biggest obstacle in advancing a new approach seems to be the antiquated notion that an informed consumer is an unwilling consumer. Trust, it seems, is a two-way street.

Image source: Smart Shoppers in the 1940s, The National Archives.

Marketing Up the Scale: Foodies as Economic Indicator

As a writer and a market analyst, I am working hard to avoid using the word “recession” or even the less ominous phrase “current economic climate” when describing what’s happening in the retail world. Perhaps until things change, we can just reach a mutual understanding that this is the context in which we’re all working?

Sounds good.

That said, there are some interesting marketing trends reaching for two segments of the market – those who are somewhat insulated from current conditions and those who are affected more directly by a “fear of falling.” In this case, I’ll focus on the upscale side.

Food purchases are some of the best indicators of people’s attitudes about spending. Certainly restaurant-going is way down and there’s a fair amount of concern in the hospitality industry about who – or what – will survive the...well, you know the phrase. The new President’s economic stimulus plan (here it is in full detail) has retail and hospitality high on the list of industries that ideally will receive some help. But general food expenditures, outside of restaurants, remain robust in some sections of the market.

Despite a very recent spike in Baby Boomer savings, Packaged Facts reports that spending is still high among “foodies” (a term that I hate almost as much as I bet the foodies do). Natural Specialty Foods Memo also points to good sales at UK premium grocer Waitrose and other natural upscale food stores over the holidays.

Even though they end up promoting a rather frivolous-sounding label, Packaged Facts actually does a good job unpacking the segment to find that there are subgroups: Foreign/Spicy Foodies, Restaurant Foodies, Foodie Cooks, Foodie Gourmets, and Organic/Natural Foodies. Interesting though these segmentations are, they don’t translate outside the American marketplace to countries where regional cultures have a stronger influence on cuisine.

Among the many intriguing insights in their study, one point seems worth highlighting when thinking about retail marketing: even though foodies are willing to pay more for higher quality foods, they are also bargain hunters. (This goes along with our earlier blog about upscale shoppers being more effective coupon-users.) For example, Bon Apetit just featured 20 excellent wines for $10 or less. NPR reports that while some folks are still shopping based on taste regardless of price, wine sales are up especially among the less expensive vintages. (Remember the slumping restaurant industry? People perceive dining well at home as a less expensive option.)

Chocolate, on the other hand, seems to be benefiting from its association with good things in many of those foodie categories. Again, Packaged Facts finds that sales of premium chocolates remain high: from spicy (high end chocolates infused with chilis) to gourmet (premium microbatch bars) to natural (fair trade organic) to healthy (dark chocolate’s purported antioxidant properties).

The point for retail marketers to take home: Well, we can’t all survive on wine and chocolate, but many people, despite a desire to save and scrimp a bit, would prefer not to do without it. Marketing consumables as both a savings and a luxury is where it’s at.

Department Store Dreams: Fantasizing the Future from the Past

Le Bon Marche and the interior of the old Samaritaine in Paris


In their heyday, department stores were “palaces of consumption,” originally modeled on the great World Exposition of 1900 in Paris. Huge, turn-of-the-century fairs and expos helped usher in the consumer revolution, beginning an era of merchandising centered on fulfilling people’s fantasies through purchases made in a dream-like atmosphere. The rise of the department store from the mid 1850s to the end of 19th century was nothing short of a major revolution, not only for business but also for all of society. In Au Bonheur des Dames, writer Emile Zola skillfully describes these exotic and new places, bursting with fabrics, furs, and frills, with Oriental carpets and curtains recreating a harem-like setting where people were drawn in by awe and amazement. To many, the department store was the home of the democratization of luxury and the fantasy of wealth.

But more than a hundred years later, things have changed and some are wondering about the possibility that department stores are at the end of their lifespan. Both the experience of shopping as a form of entertainment and the availability of affordable beauty have diffused to different sites. Even prior to the current economic downturn, hints that the department store was not fulfilling people’s fantasies abounded. Specialty stores in cities and suburbs have increased their size and scope, whether it’s books, electronics, or high-end fashion. Malls, on the other hand, which are the traditional mooring station for the department store, are working hard to stay afloat. The malls that survive are often smaller, more focused on being entertainment and recreation centers, and provide more leisure rather than shopping activities (restaurants, cinemas, fitness centers, play areas, and day spas all do well, whereas specialty fashion stores and the big anchor box stores do not).

While many critics will point to Wal-Mart as a key factor in department store decline, it seems more likely that the experience of shopping as a leisure and pleasure activity has changed. When the original department stores opened, there was nothing else on the landscape that offered the same kind of variety, exoticism, and glitz in one potentially affordable site. People went to see the window displays and merchandise much in the same way one might go to a museum or show. La Samaritaine in Paris, one of the original department stores full of the latest fashions, was unable to stay out of the red and now awaits transformation into luxury condos. Today malls must add musical fountains, interactive game centers, and IMAX theaters to draw in traffic, none of which is enough to encourage wary shoppers to come out and spend money. What remains of the dream world of consumer fantasy?: Retail shopping in urban centers; Online inspiration provides almost instant gratification (and the collective experience via social media; Speciality stores really do specialize (not a bad thing). Frankly, the world is more densely populated with opportunities for consumption.

The department store, like the mall, may be at a particularly difficult point in its life cycle, occurring at an unfortunate moment in economic and social history. It will take some innovative thinking – and some real awareness of the long-term needs of people and their communities – to resuscitate these retail icons. Whether the new palaces of consumption are real, virtual, or some exciting combination, the story is far from over.

Are you a cart puller?

No, not in the pack mule sense of the phrase, but rather in the "move down the checkout aisle pulling your shopping cart behind you" sense.  If so, you may be missing a big chunk of marketing messages trying to get you to make a few last impulse purchases before you pay.

That's what boutique market research firm Relevation Research concluded (and AdAge reports) after studying shoppers moving down the checkout aisle.  While "pullers" as they're called (and you can count me among them) account for about 74% of shoppers, remarkably most marketing materials and POP around the checkout aisle are designed for pushers -- those folks who push their cart down the checkout aisle (why they do that I'll never know.  But then, I'm a puller). The critical takeaway ias that, "The front of the store is a department, accounting for 1% of sales or more." That's according to Nan Martin, a co-founder of Relevation, who continued, "It's designed for consumers to make impulse purchases as they push through. If you're pulling, your back is to the merchandise most of that time."

I can see this kind of information putting retailers in a bind.  It's definitely not intuitive or "pretty" to have POP and other promotional materials face backward.  And while many displays are designed to be shopped from 360 degrees, few visual aides are designed to be seen from 360 degrees.  And if you decide to simply double up the number of ads in hopes of attracting the attention of both pushers and pullers, it's going to start looking very noisy, very quickly.

On the other hand, one must imagine that retailers are happier knowing what's going on than not, right?

Right?

Tags: shopping, retail marketing

If the shoe fits: spending less, selling more, and doing good

Surprisingly, as I look back over what I’ve written about for In-Store and Retail Media News, I’ve missed one topic very near and dear to my heart: shoes. That’s one that perhaps stereotypes me as a woman shopper (although not of the Carrie “Sex in the City” Jimmy Choo type – I’m more of a Columbia sportswear/Dansko kind of gal). But shoes are a great gauge of retail market sales, so I’m happy to find something to say about them as the year winds to a close.

Brandweek just profiled Zappos.com as an online shoe company that’s done exceedingly well with little to no advertising budget. Indeed, the biggest print ad I’ve ever seen for Zappos was no more than a three-inch sidebar in the New Yorker. Word-of-mouth and excellent customer service are the key factors that make Zappos successful. Indeed, my own retail happiness comes from knowing that I will be treated honestly and decently by whomever I talk to if I call to ask about an order or email a question. I’ve not had the pleasure of a bar sitdown with CEO Tony Hsieh, like some other customers have, but it’s not outside the realm of possibility, whereas the ten things I’d really like to convey to the executives at the Gap, Target, Starbucks, and Apple will probably only ever make it as far as this blog. There’s a lot of hype about social networks and retail sales, but Zappos is one of the few companies where it seems to actually work. Partly it’s the item in question: shoes are deeply personal but highly coveted fashion items that are necessary and ultimately functional (okay, well, for those who have learned the secret to walking in those Manolos, that’s not true). Partly it's good sales strategy that's accessible to even the small scale retail business. If you want to know more about how Zappos manages to do what it does, for a mere $39.99 a month you can subscribe to their new video question and answer service that’s a lot cheaper than a marketing consultant firm.

For another shoe company of more modest means and goals, take a look at Tom’s Shoes. I have been a fan of Tom’s for a long time. They make a single product in a million varieties and have a single important mission: to help shoe the world. Tom’s makes a stylish sustainable shoe (not Jimmy Choo or Dansko stylish – more “I’m a yoga goddess” or “I’m Brad Pitt and I can wear whatever I want” stylish”). Even if you personally don’t love these (and I do), you probably know someone who does and you’ll love the reason why Tom’s wants to shoe the world. For each pair of shoes sold by Tom’s Shoes, the company donates another pair to a child in a less developed country where podocondoitis is common. This disease, transmitted through high levels of silicate in the soil, which travels through the bloodstream to create lymphatic problems, is completely avoidable if people wear shoes. Tom’s has brought thousands of shoes to South Africa and Latin America. If you still haven’t finished your holiday gift giving or if charitable acts are part of your New Year’s resolutions, you can help Tom’s reach its goal of 33,000 shoes sold before the holidays end. Like its big corporate counterpart, Zappos, Tom’s Shoes makes great use of Facebook and MySpace, where fandom helps spread the word and provides excellent social network buzz about these cool shoes. There's a lot of marketing noise about the power of cause-based sales, but Tom's Shoes really walks the walk, as they say, in that the company's existence is centered on the cause as much as on the sales. Starbucks will still go on selling coffee long after their Red marketing foray into ending AIDS in Africa. But Tom's will always have a purpose AND good shoes!

All in all, here’s hoping you stay well heeled and inexpensively marketed for the new year.