Welcome to the CMA - Canadian Marketing Association - Blog. This Blog is an initiative of the CMA Digital Marketing Council. All marketing-related topics are fair game: branding, strategy, online, offline, marketing trends, technology, direct marketing, market research...and more.
Merril Mascarenhas
Merril Mascarenhas is a Managing Partner at Arcus, a leading research and strategy consulting firm.
For over twenty years, Merril has helped clients embrace dynamic business opportunities with effective strategies. He has brought fresh perspectives to senior management in diverse industries, including retail, consumer products, financial services, telecom and healthcare.
Merril advises several non-profit organizations on governance, management and marketing best practices. Merril serves as a director on the boards of Toronto East General Hospital, High Park Initiatives and Boardmatch.org. He is also active with the Canadian Marketing Association, where he judges the CMA Awards and is a Council member of the CMA Branding and Strategic Planning Council. Merril is an advanced scuba diver and avid squash player.
The mission of innovative marketers today is to open up a continuous dialogue with customers. For them, focus groups and quantitative research are outdated methodologies. They have begun to add "idea partners” who act as catalysts for discussions about new ideas. These are the people at a dinner party who make sure everyone is having a good time.
Is the time ripe to create your panel of experts and idea partners? I look forward to your feedback on the value of deeper customer engagement.
Research by Arcus shows that on average, only 27% of customers are advocates for a company's products and services. The link between higher customer satisfaction and higher revenue growth is clear. To that end, companies need to develop customer engagement processes to measure the revenue at risk for a company based on the levels of satisfaction across customer clusters and whether its products and services excite customers.
Engaging customers to share ideas on how to improve the business is critical to today’s leaders in innovation. An example is Starbucks. According to Starbucks chief Howard Schultz, the company’s customer engagement processes have resulted in surprising ideas. One customer wants Starbucks to make ice cubes out of coffee so when they melt they won't dilute cold drinks; 7,660 fellow customers agree. Another wants the chain to install shelves in restrooms—where else can you put your drink when you've drunk too much? Although some customers are repelled by that suggestion, Starbucks thinks it's a "sleeper idea" worth considering. More than 10,000 Starbucks fans wish for something to plug the hole in lids to prevent sloshing. Starbucks listened and just introduced reusable "splash sticks" to do that.
Why a Customer Advisory Board makes sense
A customer advisory board is like a think tank and sounding board for initiatives that could impact your customer base. Marketers need to pioneer the concept of a customer advisory board to senior management at their companies. Increasingly, it has become important for managers to have an in-depth understanding of issues related to products, services, sustainability practices and customer support. A customer advisory board acts like a board of directors. In this case they provide feedback on broader issues at a high level. This is corporate democracy in action. At the month-old MyStarbucksIdea.com, customers can make suggestions, other customers can vote on and discuss them, and Starbucks can see which ideas gain popular support.
The process has been implemented by several Fortune 500 companies. Several others have set up "panels of experts" or "Think Tanks" for specific initiatives such as sustainability practices, engaging boomers, and retirement plans etc. For example, Bank of Montreal has set up an advisory board to advice managers on retirement related business initiatives.
The idea partners also act as advocates for customers' suggestions back at their departments, so that customers would have a seat at the table when product and brand strategy decisions are being made. To close that loop in an authentic way, a company must make a commitment to building those ideas together with customers. They need to adopt the ideas into their business process, into product development, experience development, and store design.
It's key to plans of innovative companies to invigorate their marketing. Another example is an initiative pioneered by Michael Dell, who returned to Dell Inc., a year earlier and launched IdeaStorm.com to gather and act on customers' ideas. Dell has implemented a score of suggestions, including the introduction of computers running Linux instead of Windows.
How would you achieve deeper customer engagement? Let me know.
The wireless business has been driven by technological advances in phones so far. In 2001, no wireless phones incorporated digital cameras or camcorder, could receive email, play music or video, or surf the Internet. Some telecom companies offered Push-To-Talk with its Direct Connect service and there were a few rudimentary games on some higher end phones. Otherwise, wireless phones were very basic by current standards. Today most wireless phones sold worldwide incorporate at least one advanced feature. Competition among phone manufacturers is primarily based upon a race to add additional features within accepted price ranges. But that is about to change. Packing more features into a smaller phone as its limits. The transition to content as a differential for telecom companies is likely to accelerate over the next five years. The addition of content as a significant revenue stream for telecom companies, in addition to subscriber fees and sales of phones is likely to drive innovation in cell phone features.
The big trends over the next five years include the following:
1. Advanced features are standard in phones
In a recent Arcus survey of over 1,200 individuals to get a sense of where consumer sentiment is today, over 95% of wireless phone users said they use at least three of the technological innovations introduced in the past five years.
Increasingly, cell phone users consider these features to be integral to the phone and not an extra feature. These innovations have become part of a “basic phone.” This trend will increase the emphasis on other differentiators to engage cell phone customers. Cell phones of the future will incorporate features in a combination of what the value chain needs to support its business, what end-users want, and what the different players need as the environment changes. The value chain, which consists of the manufacturer, a distributor, the wireless carrier, and, in about 25% of the respondents, the employer of the end-user, need an ongoing stream of innovation and consumers open to new features. This appears to be the case in spite of some warnings that the wireless phone market will soon be “saturated.”
2. The future is flexible and wearable
This year's Flexible Displays and Electronics Conference confirms that the future is with flexible, folding, and rolleable displays. Almost everything at the show is still a few years off, but there are actually two products with flexible displays for sale right now, Gyricon's electronic ink display and a wristwatch from Nike with a curved LCD screen (which has actually been out for years). A brilliant example is the Nokia 888 communicator concept phone. You're not going to see this in stores any time soon. But if you'd like to get an idea of what Nokia thinks the future of communications will look like, take a look at the Nokia 888 communicator, a concept design that recently won Nokia's Benelux design contest.
The bracelet-like 888 is envisioned to use a liquid battery, feature speech recognition, a flexible touch screen, and a touch sensitive body cover. A video showing off the device's potential features shows off close to a dozen functions, including an alarm clock, PDA, GPS, phone, push email receiver, digital wallet and, of course, jewelry. And, other than the "liquid battery," we can actually see this in the not-too-distant future.
The end-users wants are more ambiguous. The figure below shows that there is little interest in multimedia capabilities while there is significant interest in location services.
3. Software is the phone
High functionality SmartPhone will grow rapidly as consumers expect phones to integrate deeper into their lives. In addition, manufacturers will shift to platforms with user interfaces that deliver unique experiences from software upgrades rather than hardware changes. These will be stealthily incorporate a phone Operating System to easily morph new combinations of capabilities into the market quickly and economically.
4. Business applications will penetrate deeper into Corporate wireless
Wireless service continues to be treated as a corporate benefit. As data access becomes more integrated into mobile applications, there is likely to be a cultural shift of wireless phones from being “yuppie toys” to its recognition as productivity tools. As value-added data service will overtake the revenues from voice services, the industry will recognize that believing that one phone per person equates to market saturation. When society looks back on 2006 when it is 2011, it will be parallel to looking back to society looking at the days of Microsoft DOS. An example is the growing use of mobile phones to monitor customer purchasing patterns. Mobile phones look and feel like mini-PCs, improving the mobile internet experience and increasing the use of data services.
5. My Mobile Wallet
Cell phones are likely to become the new Interac. As consumers concerns about wireless security abate and the technology in North America catches up with Japan and South Korea where mobile commerce practicality of using a wireless phone in monetary transactions will overcome whatever consumer resistance exists to this application. While mass market purchase is focussed on services like tickets and entertainment, longer and more frequent online surfing is likely to broaden the goods and services purchased online. QR codes will drive the integration of product information with mobile commerce. South Korea has seen a dramatic increase in ARPU (average revenue per user) in the mobile sector as operators promote value-added services and customers respond enthusiastically driving mobile market blended ARPU by 13% to US$49.3 per month in the Asian market in the past year. Compared to Canada where the percentage of ARPU spent on data services increased by 4.5 % points to 12.1% last year, fuelled primarily by strong growth in the messaging sector. Canada has one of the highest postpay/prepay ratios in the world at 4:1. ARPU for postpay services is typically over 4 times that of prepay services in Canada and growth in postpay subscribers plays an important part in raising blended ARPU. Interestingly, Canada has a higher ARPU than South Korea even with an under developed mobile services market. ARPUs of Bell Mobility and Telus are $51 and $63 respectively. The recent CRTC wireless spectrum auction will hopefully open up the market for mobile content and services.
6. Local search now in your neighbourhood
Widespread adoption of Internet surfing from wireless phones will come with the use of more intelligent entry options. Android will dramatically change wireless search. The Open Handset Alliance, a group of more than 30 technology and mobile companies, is developing Android: the first complete, open, and free mobile platform. Take an early look at the Android Software Development Kit. It will combine information from the web with data on the phone -- such as contacts or geographic location -- to create new user experiences. Android does not differentiate between the phone's basic and third-party applications -- even the dialer or home screen can be replaced. Check out introduction from Sergey Brin on Android.
7. Biometric Security is here
Security will be a concern of the past just as online banking has become acceptable, mobile commerce will change dramatically after biometric security becomes standard on phones. The interaction between a cell phone and user is highly personal and interactive. So seamless, convenient and intuitive integration of security will speed up acceptance of mobile commerce adoption.
Spending money is now, strangely, its own form of entertainment. We have always bought things we don’t need. But the consequences are having a substantial emotional impact on consumer behaviour and their shopping habits. Consumers are psychologically affected by their clutter, becoming anxious, while others suffer guilt and embarrassment.
A recent Australian survey found that 84 per cent of consumers bought things in order to deal with the excessive amount of things they have bought. 20 per cent said they feel anxious, guilty or depressed about the clutter in their homes. The findings confirm insights identified in a home improvement survey by Arcus. 88 per cent of homes have at least one cluttered room, and the average home has three or more cluttered rooms. The spare room is the most cluttered area in the home, followed by cupboards, the garage and bedrooms. Not surprisingly, people living in detached houses had more clutter than people living in townhouses or apartments, and people with kids in the home tend to have more clutter than those without.
Influencers
Women are much more concerned about clutter than men: almost half of the women surveyed said they were anxious, depressed or worried about the clutter in their home, while a third said they were embarrassed by it. Indeed, fully 59 per cent of women said there was a room in the house that they don’t like visitors to see because of the clutter. So what’s driving the business of clutter? It isn’t surprising that emotions have a big influence on decisions taken to deal with clutter. Consumers struggle between the need to satisfy an emotional need to acquire things and the aftermath of having to deal with clutter in homes.
Impulse buys
Impulse buys have a significant impact on clutter. Products such as clothes, books, electronics etc. make it to the top of list. The average Canadian household wastes $1,300 a year on items that are purchased but never used. This equates to $19.5 billion across the nation – or more than the federal government spents on universities and roads over the same period. “Bargain” shopping has also contributed to the trend. For example, high income groups are the fastest growing consumer segment for Dollar Stores. As retailers such as Costco make bargain hunting trendy, dollar stores have increasingly become frequented by upper-income households along with their main consumer segment of low to middle-income families. In fact, store growth within the dollar store channel is unparalleled by any other retailer. Top dollar store chains, including Dollar General, Family Dollar, Dollarama and 99 Cents Only, have added more than 5,900 new North American outlets since 2001. The phenomenon of value-based shopping and commoditization of categories has accelerated this trend. Consumers want to know they are buying value when they shop. So they end up buying more products at lower prices than is needed. It validates an emotional need for “self actualization”. Maslow explicitly defines self-actualization to be “the desire for self-fulfillment, namely the tendency for the individual to become actualized in what he is potentially”.
Implications
These insights have significant implications for the business of clutter. In 2007, Canada’s home improvement retailers moved almost $37 billion in hardware, building materials, paint and decor, and other home products. Most of these transactions occurred at 8,923 major retail outlets.
Arcus estimates at least 10% ($3.7 billion) of the Canadian home improvement segment is linked to organization and storage. Companies like Rubbermaid (sales: $6.2 billion), have their entire business dedicated to storage. There are over fifteen business sectors that benefit from the trend of increased clutter. Some examples include home improvement, construction, organization services, storage companies, junk collectors. Junk collectors have grown rapidly over the past decade. One of them made it to the top of the Profit 100 list of fastest growing companies in Canada. Companies that focus on the storage and organization business are likely to grow rapidly as boomers downsize and more consumers start to address problems with clutter.
One of my favourite topics is innovation. Everyone talks about it. Few actually practice it.
That’s one of the reasons some brands fade faster while others weather the transition to immense popularity. The obvious ones that continuously reinvent themselves are Apple and Blackberry. Others such as Crocs, Lululemon have faltered in early stages of innovation.
Consumers get bored with brands. Or look for reasons to find new and improved products. But in increasingly commoditized and price driven categories like clothing, cars and personal care, it’s not clear that one model is necessarily better than another. And such products fall in and out of style with such swiftness that boredom hardly seems to be the issue. So what’s going on here?
In a recent paper, Stanford researchers found that consumers may abandon products as soon as chic goes mainstream. When similar people buy the same brand, it translates into social meaning. But when the wrong kind of people start buying it that object loses its meaning, these early adopters start seeking new identity markers. In their research, Berger and Chip Heath, Stanford Business School professor of organizational behavior, found that product categories that are more utilitarian are less likely to be used to communicate identity and hence less likely to try to separate themselves from specific social groups.
Alignment of options is a key factor. In a study of different sets of shoppers (Harvard Business School working paper, May 17, 2007), John T. Gourville and Dilip Soman tested whether avoiding extremes depends on the menu of choices. They say, “In a sense, you are buying none, a little, more, or a lot of a feature.”
So when options are nonaligned, consumers tend to like extremes. Ironically, consumers prefer compromises when the options are aligned. Consumers can’t decide, so they simplify their choice. They tend to say “give me the basic version or give me everything”. The last thing they want to do is pick some of the options but not all of them, and find out after the fact the ones they picked weren’t the right options. Consumers reflexively eliminate the middling options so they won’t kick themselves later.
According to Gourville and Soman, sometimes choices are not so neatly aligned, and consumers face tradeoffs when they make their decision. If you have a complex, nonaligned assortment, you really have two alternatives: to simplify that assortment — reduce the number of options to decrease the difficulty of making any one choice — or to help people along on the [decision-making] process. So hand in hand with adding more non-aligned choices, marketers could offer tools or advice to help consumers make their choice. For example, a car dealer might offer a sporty SUV with four-wheel drive, or a luxury SUV with leather seats and a sunroof (but no four-wheel drive). When those nonaligned choices multiply and the tradeoffs become complicated, consumers tend toward a stripped-down or a fully loaded model instead.
What does this mean for marketers? A deeper interpretation of the context of product features and benefits can have a substantial impact on a brand’s credibility. Go back to basics. Keep a close tab on where Product and Brand positioning intersect. An emotive brand promise is important. But it’s no substitute for a persuasive product story. I can think of over 20 marketing campaigns launched in the past 6 months that have a disconnect between product and brand promises, one of the reasons consumers prefer the extremes.
