Published on: March 22, 2005One in a series of articles previewing FMI 2005
Statistics show that people go to supermarkets less than they used to – in part because there are so many more places to buy food. The closing session of this year’s Food Marketing Institute (FMI) show will be focused on helping retailers out-strategize their competitors…lessons that will be delivered by Art Turock, who is one of the most popular speakers and facilitators in the business.
To get a preview of the approach that he’ll be taking at FMI this year, in the Super Session called “Driving Profits By Making Your Competitors Irrelevant,” we engaged Turock in an exclusive e-interview.
MNB: You talk about “making the competition irrelevant” and “minimizing the competition.” Does that mean accepting the fact that customers have lots of options, and finding ways to compete in which you are not so much “better” than the other guy, but “different,” offering products and services that are unique?
Art Turock: To make it worthwhile for attendees who stay until my closing session, I’ve raised the bar. Rather than talking about incremental growth or surviving, my focus is about “make the competition irrelevant.” Competitor-proofing strategy demands three qualities - being customer relevant, being unique from competitors, and being hard or disadvantageous for rivals to copy.
The strategy of “making competition irrelevant” requires an accompanying phrase--“for your target customer.” Retailers who achieve sharp differentiation begin by deciding what customers they will win and which ones they are willing to lose. Conventional supermarkets attempting to adequately serve the needs of a mainstream shopper are actually attracting more competition.
My FMI presentation will reveal four minimally contested segments: unwanted customers, underserved niches, neglected mass markets, and specialized shopping trips.
MNB: Do you think that a key reason supermarkets have trouble differentiating is that executives think tactically rather than strategically, which these days is almost like rearranging the deck chairs on the Titanic? Can you give an example?
Art Turock: Supermarket executives aren’t rigorous in using these terms. Many FMI attendees will hear an array of marketing tactics and return to their office suffering from conference fever, as evidenced by a compulsion to copy the latest “tactic in vogue.” Notice the tactical reasoning: “Dollar stores are growing, so let’s put in a dollar aisle. Organics are hot, so let’s add 8 feet to our produce department.” All too often, these moves are made without considering the broader strategic issues about whether the tactic fits for the chain’s target customers and core value proposition.
Strategy is an integrated set of decision criteria for selecting tactics. Tactics are the actionable answers to the questions posed by thinking strategically.
Make no mistake about it—Wal-Mart and the other alternative formats are thinking strategically as evidenced by their retail format innovations. Conventional supermarkets are never at a loss for tactical moves, but are being out-strategized by the alternative formats.
My FMI program will offer tools I’ve tested in consulting work for insuring that a senior management team stays focused on discussing strategic issues rather than having the conversation easily drift into the customary tactical matters.
MNB: You seem to think that one of the best ways for a supermarket to gain is by being willing to lose – lose unprofitable customers, lose poorly performing products and categories, and maybe even lose the “super” in supermarket. True?
Art Turock: I would frame the issue differently. I don’t mean it in terms of weeding out unprofitable customers and products once the results become apparent. I mean proactively declaring the customers you are determined to win and willing to lose because it serves differentiation.
I remember interviewing John Campbell who developed HEB’s first Central Market that stocked few national brands was choosing to lose customers who wanted Tide and Coke, etc. Campbell explained that a store differentiates not only based on the products it selects but also by the products it refuses to stock. To preserve the Central Market brand promise of extraordinary fresh perishables and top quality grocery products, many national brands get replaced by superior quality specialty products or local supplier brands.
This principle is not reserved for upscale stores but price impact as well. Take Save-A-Lot. They violate the conventional wisdom, “We want to be the families’ primary destination for grocery products” by targeting cherry pickers who swoop in for bargains and complete their bakery, deli, and other shopping needs elsewhere. And don’t hold your breath waiting to see an express checkout line at Costco. They don’t want congestion from shoppers who only pick up a few items.
MNB: There really are three categories of supermarkets out there – national chains, regionals, and independents. In each category, can you name one that is playing the strategic differentiation game right? And, is there one of these categories that you think has a competitive advantage – or at least better odds of survival - in the long run?
Art Turock: Size and geographic scope aren’t going to ultimately determine competitive advantage. All three supermarket categories have their unique advantages whether it be economies of scale, ability to do regional customization, or being able to move faster due to lack of bureaucracy.
The real competitive advantage resides in the individual company’s strategic thinking capacity. Most supermarkets practice a style of thinking which fuels head-to-head competition. In contrast, the most profitable retailers focus on solving fundamentally different strategic questions that minimize competition.
At the national level, Whole Foods, Save-A-Lot and Wal-Mart have made competition irrelevant. All have a definite target customer who their value proposition is perfectly suited for. The Big 3 supermarket chains show signs of moving from the undifferentiated middle ground. Albertson’s is starting to target extremes with the development of a price impact banner, Supersaver, and the acquisition of an upscale chain, Bristol Farms. Safeway is showing a promising life-style store concept.
Among regional players, Food Lion is remodeling in important target markets, acquiring a price impact banner, Harvey’s, and conceiving a retail format innovation, Bloom, which offers hassle-free shopping. Publix is developing its first dedicated Hispanic stores.
Mackenthun's County Market, an independent near Minneapolis, stays ahead of competitor’s by addressing consumer trends. To indirectly communicate concern for food safety, they have a shopping cart sanitizer beside the entrance. Many shoppers assume, “If they sanitize the carts every night, they must be sticklers on freshness with perishables.” In capitalizing on the whole health theme, a physician has a satellite office with specific hours of operation, in addition to a large assortment of HBC products.
In my FMI presentation, attendees will see photos of these innovations and receive my 20-page program handout designed to aid them in taking my idea back to their stores. Bottom line--They will walk out more convinced that making their competition irrelevant is not a pipe dream but a real possibility.
The annual Food Marketing Institute show is scheduled for May 1-3 in Chicago, Illinois.
For more information about how to attend, go to:
- KC's View:
- There’s a great phrase here that bears repeating. Turock says that many retailers suffer from a “compulsion to copy the latest ‘tactic in vogue.’ Notice the tactical reasoning: “Dollar stores are growing, so let’s put in a dollar aisle. Organics are hot, so let’s add 8 feet to our produce department.” All too often, these moves are made without considering the broader strategic issues about whether the tactic fits for the chain’s target customers and core value proposition.”
If Turock can get people thinking differently about this approach to retailing, he’ll have performed a public service. It won’t just be good for retailers, it’ll be good for consumers.