Whole Foods Acquisition is a Wakeup Call to Independent Grocers

Much has been written about Amazon acquisition of Whole Food Markets. Every day brings an avalanche of opinions: from the industry pundits’ speculations on a scope of inevitable disruption of the grocery industry to flash analysis of the Whole Foods price reductions. I decided to join the choir and offer my observations and opinions from a perspective of the industry ecosystem participant.

So far there were strong indications of higher traffic in Whole Foods stores after the acquisition and lower pricing on selected items. There are also reports on internal operational changes that have sent the vendors, brokers and distributors into a very unhappy frenzy. The most disturbing are the Whole Foods shoppers’ complaints about the quality of organic produce and availability of products on the store shelves.

At the time of this writing there is no evidence whatsoever of any positive change from the perspectives of shoppers or the grocery eco-system. In fact, there is every indication that Amazon adopted a very hands off approach to Whole Foods management who continues to implement operational initiatives conceived long before the acquisition took place.

In the wake of the acquisition, some major grocery retailers announced significant investments into technology to combat Amazon’s (technology giant) foray into their territory. Some, like Kroger, started to court smaller, regional product brands that are threatened by Whole Foods abandonment. That may be a very good development for artisanal food manufacturers, when and if it actually materializes.   

Most analysis you can find focuses on the impact of the Whole Foods changes on very large, publicly traded companies. Very little is written about how the independent grocers, small batch product manufacturers, food brokers, demo agencies and merchandisers are impacted by these changes. There is some evidence of lower foot traffic in the independent stores and an ebb in the promotional activities by the brands on the store floors. However, many grocers we spoke to are in denial that a small grocery eco-system will be materially affected.  And that is a mistake.

Thanks to Jeff Bezos’s relentless focus on the  quality of customer experience, i.e. long term sustainability of Amazon business, everyone assumes that the acquisition will produce some magical result and force a major change in how we buy our food. So far this “earthquake” is yet to produce a tsunami of change. Amazon does not always succeed, but it succeeds most of the time. Change now. Before you have to.

While the small, independent grocers cannot compete with the big boys’ scope of technological investments, they can and should mobilize their ecosystem partners to provide a better, more personal, experience to their shoppers. As Whole Foods pushes away their trade partners, who helped them to become successful, independent grocers could use this opportunity to forge closer alliances to provide more engaging shopping experience in their stores.

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The Survival of Brick and Mortar

Ever since the advent of on-line shopping the question of traditional retail model survival has been continuously in the forefront of media and consumer discussions.  Yet, only 8.5% of US Retail Sales were conducted via  ecommerce during Q1 2017, which represents a long term annualized growth rate of 16.04%.

While it sounds like a healthy growth rate, it is hardly reflective of  the well publicized turmoil of traditional retailers, with stores closing and job losses. Even if you take more aggressive estimates by Forrester, direct online purchases account for “roughly” 10.3 % of total retail, the peril of traditional retail stores hardly seems imminent. Moreover, the successful expansion of the ecommerce giants, like Apple and Amazon,  into physical stores clearly proves that it is not Where, but How you conduct business to be profitable.

Retailers like Sears, Kmart, Macy’s have never understood that consumers have a lot more choices now than they used to, and they choose the stores that offer them a better experience and not just nearby location. The primary focus is not on Product selection, Price, Place/location and Promotion any longer. Every meaningful market player has figured these things out or gone out of business by now. The competitive edge is found in the fifth pillar of marketing – People, or more specifically Customer Experience, which became the primary differentiator.

Retail leaders are disrupting  traditional retail methods, not the traditional market format (brick and mortar) that has been in existence for thousands of years. The change is not about digital and physical. It is about what has been learned by conducting ecommerce business – where customers have a myriad of choices, past experiences of “people like us” ( which is the next best thing to your own experience), and ability to return or replace the merchandise that did not meet their expectations without leaving their home or office.

The next frontier is the grocery aisles, where margins are fat and complacency is high. Get prepared and find the way to create an experience your customers will find engaging.

 

 

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5 Reasons Why You Should Invest in Improving Customer Experience

Jaakko Männistö, Founder and CEO of Feedbackly  shares his experience building customer experience strategies for clients of Feedbackly, a customer experience management company he started in 2013.

There are two things that every business wants: more customers and less red ink on the balance sheet. Unfortunately those 2 things are often hard to come by — you generally have to spend money to make money. Over the past few decades, there has been research at length about the value of optimizing your customer touch points and how important it is to get your customer – facing workers the tools and information they need to provide a better customer experience. That’s the ​how​ of customer service. But, what’s the ​why​? Why should you prioritize investing in building a better customer experience?

After all, providing these workers with the tools and information they need to make quality decisions isn’t going to be without cost. You’re looking at improving your technology infrastructure to seamlessly transfer responsibility of tasks and share information. You’re going to need to provide the necessary training to get your workers up-to-date on a new technology system. You’re also likely to need to make modifications to your management plan to ensure that this sort of large-scale implementation is successful.

Although, it doesn’t have to be this hard. With the right tools and guidance, you can improve your customer experience cheaply, quickly, and efficiently. I’ve collected 5 basic tips for you to kickstart this process below:

1. Supplement Your Quantitative Numbers With Qualitative Data

It is very easy for companies to overlook this area of their business because the benefits are often highly qualitative and notoriously difficult to convert into hard numbers. We all know that numbers are a critically important driver to aid you in making business decisions, but they must also be supplemented by gut instinct and common sense. Of course there are ways to quantify your customer experience. Once such method is called Net Promoter Score. That topic deserves a blog post of its own, but it is essentially a method of measuring customer loyalty that was created by customer experience researchers to find a metric that correlates with company growth.

2. Empower Your Employees

Your employees are the lifeblood of your company. Giving them the tools they need to be independent and efficient is a crucial productivity factor in your organization. A recent article by ​Forbes​ cited instant feedback one of the best ways to empower your employees. Building a relationship between management and employees allows your employees to then build meaningful relationships with customers. A good way to speed up this process is to pick the right tools for the job. When you choose simple tools that can be used by employees of all levels, you create an environment where employees can break down the technological barriers of communication, and that leads to a better customer experience.

These represent costs — investments in the business. And many companies are understandably loathing expenditure unless they know they’re going to get a tangible benefit out of it. So what’s the value of a good customer experience? What does it mean for a business’ bottom line? Is there a way to quantify, and put a dollar value on customer service?

3. Build A Better Brand Image

It’s clear that customer service and experience is an area of potential growth for many organizations. Between the cost-reduction potential and revenue opportunities that come from providing a better customer experience, this is a huge opportunity that may be right under your nose. Providing a better customer experience is a great way to put a positive public face on your organization. Improved customer service is often cited as a huge contributing factor to brand loyalty, but this is only one facet of the overall customer experience. This, combined with updated business processes and operational shortcomings show your customers that you care enough about them to continuously improve your own offerings to better serve them.

4. Data-Driven Action Trumps All

Anecdotal evidence is NOT a reliable source in which to based business decisions on. It is now 2017, and there are literally thousands of tools available for the sole purpose of
measuring, documenting, and organizing data. This data, both qualitative and quantitative should be the main driver of business decisions. Measurement produces visible data which increases accountability based on real and tangible information, not just subjective impressions. Investing in a proper system for measuring your customer experience will ensure the long-term success of your company.

5. Identifying Transferable Responsibilities

The beauty of implementing a truly company-wide customer experience management system is that it allows you to identify improvements that can be made across departments. You will be able to provide a higher level of organizational consistency in the quality of service company-wide. You will also gain insight into which responsibilities should be shared by 2 or more business units in a company. Promoting inter-departmental cooperation contributes to a more positive company culture which is focused on teamwork, constant improvement, and constant communication. Investing in improving your customer experience will promote this.

 

So there you have it. Of course, the benefits of investing in a customer experience strategy are nearly endless. It just depends on how you measure success in your organization. The items listed above are easily achievable in the short term and are proven indicators which will ensure the longevity of your company.

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Customer Experience – The Three Legged Stool

Over the years I witnessed the never ending debate between practitioners of Customer Service/Support and Marketing over which one of them is more critical to the delivery of outstanding Customer Experience. The debate itself is a testimony that these practitioners are more focused on their self importance than on their customers’ needs. As long as you debate which is more important – the food or the utensils – your guest goes away hungry. The most amazing product cannot thrive without at least  reasonable customer service. The most amazing customer support cannot keep customers from abandoning inadequate products, and without retaining the customers there is no path to sustainable profitability. I want to illustrate this point with the following story:

A few years ago we started to use a web site building software from GoDaddy.com (WebBuilder) to take control of our marketing needs from IT specialists. Our experience was very good  as GoDaddy provided very reliable hosting service and outstanding tech support. However, as we wanted to make our website better we started to realize severe limitations of the WebBuilder editor. GoDaddy acquired this technology and did not keep investing into it to keep it competitive with other products available. Eventually we realized that the reliability and support could not overcome the inadequacies of the tool.

Enter Weebly with a much snazzier platform. Last year we moved one of our web properties to Weebly. It looks much better, engages visitors for longer periods of time, and helps us improve the rate/cost of customer acquisition. Unfortunately, our reliability experience took a hit as Weebly’s hosting makes our site unavailable 5-6 times per month for a period of 2-8 minutes each. When we brought this problem to the attention of their tech support, they outright denied it and no amount of documented evidence could make a dent in their conviction. The overall customer support quality is much lower than the one from GoDaddy, and even though the “product” is much better, the reliability issue made our customer experience unsustainable. We did not want to move any other of our properties to the Weebly platform and started to look for yet another alternative provider.

WIX.com’s tools blew us away. They are so much more creative and powerful than Weebly’s, and the WebBuilder looks like it belongs to the era of horse and buggy. In no time did we re-design another one of our properties to look and feel amazing and were ready to publish it. It took us twice as long, so far, to find the way to upgrade our site into production and start paying to WIX.com for their amazing “product”. It is so painfully difficult to give them our credit card info that we started to look for help from customer support just to learn that there is no way for us to contact them. We started to think that the company doesn’t really want new customers and their money, until we noticed their promotions offering 50% discount from the monthly fees. However, every time I clicked on the Upgrade button I got

The links on the bottom do not lead anywhere and the Support Team phone number answered with generic voice mail. WIX customer forum is littered with messages from the frustrated customers who threaten cancellation, and the only response they get from the support is how to cancel their account, not how to remedy their problems.

Customer experience is a tree legged stool: Product + Customer Support + Leadership = Growing Profitability. How long can you seat on a stool with a missing leg?

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What’s the heck is Experiential Marketing?

what-the-heck-is-experiential-marketingI have written extensively about Customer Experience management and Product Marketing rooted in Customer Experience Intelligence for years. In fact, I started practicing those methods well before the barrage of “tools” and technologies started to flood the enterprise software market. After awhile  Customer Experience became a keyword for tools to map points of customer interactions, tired market research software, re-packaged CRM tools and pretty much everything else that stopped selling.

In a way, this served to confirm that everything in business somehow exists to create and manage an outstanding customer experience. Therefore, another convoluted term “Experiential Marketing” started to be thrown around in the last few years. Wikipedia offers this definition of the term:

” Engagement marketing, sometimes called “experiential marketing,” “event marketing,” “on-ground marketing,” “live marketing,” or “participation marketing,” is a marketing strategy that directly engages consumers and invites and encourages them to participate in the evolution of a brand.”

I would like to propose that Experiential Marketing should be defined as any marketing strategy that leverages the direct or secondary experience of actual customers, with a specific product/service, to measurably impact a company’s revenue.

There are examples of Experiential Marketing activities directly associated with products or services, that produce well documented, substantial and measurable impact on revenue.

  • Any effort to encourage customers to share their experience with the product or service is a part of Experiential Marketing strategy. While you cannot often get a customer to experience your product or service prior to the purchase, hearing about the experience of others may be the second best thing. Stars and scores may not transmit actual emotions and influence the purchasing selection, but detailed accounts of how the product/service made another real person happy, may and do. The evidence is easily found with simple Google searches, but I will list a few at the bottom of this post. They also contain specific examples of measurable impact of the reviews on the revenue.
  • Food and Beverage demonstration/sampling/tasting events are great examples of Experiential Marketing, and the impact on revenue can be very immediate and dramatic. Since new brands cannot compete with the advertising budgets of Kraft and General Foods, they successfully flank major brand products with superior engagement, taste and delivery via demos/tastings  on grocery store floors. Surely, the in store product demonstration does not have the reach of  TV ad coverage, but the experience of “in your mouth” taste over an advertising image,  and  dramatically lower cost of customer acquisition, counterbalance the disparity in marketing budget. These factors led to an explosion in a number of new and emerging brands, particularly in the specialty foods category.

However, larger brands have taken notice and go on the offence. It was interesting to see Haagen Dazs setting sampling tables along Pokeman Go routes in San Francisco during the height of the game’s popularity.

The “Try-Before-You-Buy” method has been commonly practiced in B2B marketing for decades by software and other vendors. Many car buyers’ decisions were influenced by their previous experience of renting cars while traveling.

Here are the links to some references that provide data supporting the premise of this post:

The Psychology behind Costco’s Free Samples

McKinsey&Company: Developing a customer experience vision

Customer Reviews Can Improve Your Sales by 5 Times

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