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    Published on: October 17, 2017

    by Michael Sansolo

    A few years back, the CEO of a good-sized chain told me an ironic story about his shoppers. It seems that once a week, the chain would have a special discount on gasoline purchases and shoppers would line up to fill up.

    The irony was this: many of those same shoppers were drinking cups of Starbuck’s coffee. As the CEO observed, the same people who waited to save a few cents on a gallon of gas were perfectly willing to spend far more than those savings on their morning coffee. Apparently, some liquids are valued a lot differently than others.

    That’s hardly the only contradictory behavior you will find from shoppers or any of us. There are some products or experiences for which pay will gladly pay higher prices without a moment’s hesitation. For other items the same shopper - at times on the very same shopping trip - will value price above all else.

    That inconsistency and illogic of behavior is what makes customer satisfaction such a tough nut to crack. And, in essence, that’s the reason Richard Thaler (as Kevin reported Monday here) was awarded the Nobel Prize in economics.

    Let’s be serious: there’s little likelihood that most of you read up on Thaler and his prize winning theories in behavioral economics even though MNB offered a link to a terrific article yesterday. Here’s another one.

    These articles and Thaler’s theories are something you must think about because new insights into consumer behavior are essential for future success.

    But let’s face facts: reading an article about new economic theory is possibly the least attractive offer I’ve ever made in one of these columns. Hell, both my wife and I studied economics in college and we know the two essential truths of that work:

    • Economists are usually students without the personality to become accountants.

    • If you laid every economist end-to-end they still wouldn’t reach a conclusion. (Sure the courses are dry, but we are at least self-deprecating. Answer that, sociology majors!)

    Behavioral economists like Thaler are changing all of that by marrying the economics and psychology to understand the illogic that drives so much of decision-making. There’s no simple formula for deciphering any of this and certainly very few of us could possibly understand the insights people like Thaler have.

    Yet we still need consider this emerging area of thought to better unravel the forces that motivate behavior. There’s no surefire way (and likely never will be) to read a customer mind, but more than ever we need to try so that just maybe we can get a better sense of what they really think and what they truly value.

    We know we are in times of change thanks to demographics, technology, competition and more. It seems almost logical to conclude that new thinking is necessary to understand the shopper.

    That is, if anything is logical these days.

    Besides, as a wise Vulcan once said, “Logic is the beginning of wisdom, not the end.”

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
    KC's View:

    Published on: October 17, 2017

    by Kevin Coupe

    On Friday, MNB reported on the closing this weekend, barely a year after it opened, of the ‘365 by Whole Foods’ store in Bellevue, Washington.

    Now, I’ve been thinking about the closing, even though it was a store with which I never was particularly impressed. And I have an idea … even though, to be clear, I have no inside information nor any sort of confirmation about Whole Foods’ lease obligations.

    But … wouldn’t it be interesting if Amazon, rather than just abandoning the space, decided to do something innovative with it.

    For example, since it has its own dedicated parking lot, they could use part of the store as an Amazon Fresh Pickup location. And they could carve out part of the space for an Amazon Books.

    But the other thing they could do is take the remaining space an turn it into an Amazon Smart Home Store. I could imagine them mocking up various rooms of the house, and then allowing shoppers to explore ways in which they could use Amazon’s various technologies to make their lives easier, more convenient, more interesting, more, well…amazing.

    It’d be a limited test … but it would be in a location where it could be easily monitored and adjusted, depending on what works and does not. It’s be like an Apple Store, but on steroids.

    Again, I have no inside information. There may be a thousand reasons this couldn’t and shouldn’t work. But if they tried it, I’d bet they could turn what always struck me as a lousy location into something that a lot of people would like up to see, and that would only bolster the brand.

    Just an idea. I think it could be an Eye-Opener.
    KC's View:

    Published on: October 17, 2017

    The Wall Street Journal has a story about how grocers like Kroger are “racing to leverage” data in their efforts to maintain a competitive advantage against other bricks-and-mortar chains, as well as against Amazon.

    “Food industry executives know they have to be smarter and faster to compete,” the Journal writes, and “Kroger has invested billions over the past decade and a half to hire engineers out of leading universities and away from companies recruiting talent with the same kinds of specialized skills—including data analytics, logistics and app-development.”

    Kroger, the Journal writes, has developed “infrared sensors that monitor the number of customers in a store and automatically deploy checkout clerks as the number grows” as well as equipment that remotely monitors the freshness of certain produce and notifies managers the second a cooler blows out. “ There also are “shelves with sensors designed to recognize and communicate with apps on the mobile devices of certain customers,” and “a wireless scanning device it calls Scan, Bag, Go at 400 stores next year. Customers will use the device to ring up groceries as they shop, then pay for their purchases through an app.”

    While Kroger has an advantage in this space - it is ahead of many supermarket chains when it comes to data mining - the Journal points out that the battle for data supremacy is becoming more pitched with virtually every passing day.
    KC's View:
    One of the more telling passages from the story is about how Amazon “spends 12% of its sales on technology each year, compared with less than 3% at most grocers.”

    There’s no question that Kroger - and virtually every other retailer - has to be better, and just as important, faster, in mining data and actually using it effectively.

    Published on: October 17, 2017

    Netflix yesterday announced that Q3 revenue that, at $2.99 billion, was up more than 30 percent from the same period a year ago; at the same time, the company said it added 5.3 million subscribers, bringing its total to more than 109 million.

    Netflix also said yesterday that it plans to spend $8 billion on original content in 2018, up from the $6 billion it is spending this year.

    However, as Fortune points out, success has a cost: “Netflix has now reported several straight quarters of exceptional subscriber growth, the number Wall Street most often seems to use as the metric for judging the company’s success. But, as Netflix also continues to operate with negative cash flow (-$465 million in the third quarter, compared to -$506 million in the same period last year), the company’s high-spending ways will remain under scrutiny.”
    KC's View:
    The lesson, it seems to me, is that differentiated content - otherwise known in other business segments as private label - is ket to business sustainability these days. I’m not smart enough to figure out how this all works out economically except to know that at some point it has to. But I do know that with increased competition comes the need to offer products that nobody else has.

    Success is found in the differences, not the similarities.

    Published on: October 17, 2017

    The Puget Sound Business Journal reports on how Macy’s in downtown Seattle has reduced its sales space from the entire building - six floors and the basement - to just the first floor and basement.

    Now, a Connecticut-based company has acquired the building and is leasing out the top four floors.

    To Amazon.
    KC's View:

    Published on: October 17, 2017

    ...with brief, occasional, italicized and sometimes gratuitous commentary…

    • The Columbus Dispatch reports that Giant Eagle plans to offer delivery service, powered by Deliv, to its central Ohio customers. According to the story, “Giant Eagle’s Curbside Express Home Delivery program offers the first delivery, via Deliv, free of charge. After that, users will pay a $12.95 fee per delivery.”

    The story notes that Giant Eagle has been offering Curbside Express pickup service to the market for some two years, and that this is the next phase in its service evolution; the retailer has been testing delivery in its home Pittsburgh market.

    The instinct to deliver is right, but I still think that if you’re going to do it, you have to own it … and outsourcing this critical part of the customer experience is dangerous.
    KC's View:

    Published on: October 17, 2017

    ...with brief, occasional, italicized and sometimes gratuitous commentary…

    • The Wall Street Journal reports that the Nordstrom family has confirmed its decision to suspend efforts to take the company private, after encountering difficulty raising enough financing for an IPO. It is, however, only a suspension - the family says it will continue exploring the possibilities after the end-of-year holiday shopping season.

    The financing issues appear to be related to a general malaise in the traditional retail business - retailers are closing, facing bankruptcy and high debt loads and/or closing stores and circling the wagons to fight off Amazon and the e-commerce threat.

    I was just thinking about that phrase, “circling the wagons.” It seems to be a perfect way to express what many businesses do when faced with existential threats … instead of continuing to move forward, which is the best way to compete.

    The San Francisco Chronicle reports that “California employers can no longer ask job applicants about their prior salary and — if applicants ask — must give them a pay range for the job they are seeking, under a new state law that takes effect Jan. 1.”

    The bill applies to “all public- and private-sector California employers of any size. The goal is to narrow the gender wage gap. If a woman is paid less than a man doing the same job and a new employer bases her pay on her prior salary, gender discrimination can be perpetuated, the bill’s backers say.”

    Delaware, Massachusetts and Oregon all have passed similar laws, the story says.

    The Atlanta Journal Constitution has done a story about the most popular shopping chains in the US, state by state, and concluded that Target comes out on top.

    Target was the most popular store in almost half the states, and Walmart was most popular in 16.

    The outliers - Macy’s was most popular in Washington, DC … Uniqlo in Florida and Illinois … Fred Meyer in Idaho, Oregon and Washington … Primark in Massachusetts … and Bloomingdale’s in New York and Virginia.

    Cold comfort, I’m sure.
    KC's View:

    Published on: October 17, 2017

    • Catalina announced the naming of Tom Corley, most recently the COO of Acosta, as well as a near-three-decade veteran of Kraft Foods, as its new Global Chief Retail Officer and President of U.S. Retail.
    KC's View:

    Published on: October 17, 2017

    The Boston Globe has a story about Dave Ratner, owner of Dave’s Soda and Pet City, described as “a small chain of shops selling the unlikely combination of pet supplies, birds, fish, and beverages for humans.”

    Ratner, the story says, “attended President Trump’s signing of an executive order authorizing changes to the Affordable Care Act designed to create cheaper — and less comprehensive — health insurance plans. An Associated Press photograph of the event, with Ratner smiling broadly behind Trump, has come back to haunt him, big time … Ratner has been excoriated on social media, and many customers are calling for store boycotts.”

    Ratner says that not only was he unprepared for the reaction, but he didn’t even really know what Trump was signing. “I absolutely abhor what he did, and I would not have been there had I known what was happening,” Ratner says.

    The Globe described the backstory this way:

    “Ratner is an active member of the National Retail Federation, a trade association supportive of small, local businesses. For years through this federation, his company and others negotiated for cheaper group insurance rates, giving them some of the advantages large companies have. With the 2010 passage of the Affordable Care Act, this negotiating power vanished. Since then, he has trekked to Washington, D.C., annually, talking to anyone who will listen about how unfair that is.

    “Fast-forward to two weeks ago. Ratner received a call from the federation, inviting him to a ceremony in which Trump would sign an order restoring that power to small businesses.” What he didn’t know was “the scope of the rollback of the ACA included in the executive order,” nor that Trump would shortly sign another order eliminating “a subsidy that makes health coverage affordable for many low-income citizens.”

    Not only does Ratner say he did not completely understand what he was going to the White House to witness, but even his wife “now tells him that was naive.”
    KC's View:
    One of the things that’s interesting about this story is that over the years Ratner has built his business by personalizing everything about it - he does the TV commercials, his voice is on every store’s voice mail, and he has tried to establish a connection to his shoppers at every opportunity. In short, he’s done everything you’re supposed to do to give yourself an advantage, which then came back to haunt him when those same customers felt betrayed.

    Some argue that this is political correctness run amok, but I’m not sure that’s true. Like it or not, agree with him or not, Trump and his presidency are fairly described as highly polarizing … and the health care debate remains a hugely divisive issue.

    I don’t think the answer here is for businesses to stay away from politics, because, in fact, I think that it may be more important than ever for businesses to be involved in the shaping of public policy. But not knowing what they’re talking about, or what they’re associating themselves with, simply is not an option.

    Published on: October 17, 2017

    Yet another email about the move by the Boy Scouts to accept girls:

    I was in Girl Scouts from 1st through 12th grade.  And I achieved my Gold Award designation as a scout, which is the Girl Scout equivalent of Eagle Scout.
    Except…. The world knows what an Eagle Scout is and has no idea what the Gold Award is, which has always bothered me to no end.

    Honestly, the projects that my fellow scouts and I coordinated for our Gold Award were often much more complex that anything I saw our local Eagle Scouts attain.

    Perhaps the Girl Scouts need to do a better job marketing the achievements of their Gold Award recipients!

    On a side note, my boys are Cub Scouts now.  It’s interesting to me to see how structured the program is compared to what I experienced as a Girl Scout. 

    In my experience, Girl Scouts was always geared toward what the girls themselves wanted to do, not what the program dictates.  We often voted for what badges and activities we wanted to do!

    If parents want Girl Scouts to teach things more in line with Boy Scouts, then they should be a leader and provide those opportunities for their troop.  I’m looking forward to doing that for my little girl who can’t wait to be a Girl Scout next year when she’s in Kindergarten!  And like any good scout, I’ll take what I’ve learned from my boys’ Cub Scout Pack and make my daughter’s troop better for it.

    I enjoyed this email from an MNB reader who referenced our story yesterday about how technology is invading the kitchen:

    Too much information for most people regarding AI in the kitchen. My wife has Cracker Barrel Smarts Intelligence and I would bet that she is a much smarter cook than what these techies are attempting to put together by linking all the electronic cooking devices. My wife has all the natural cooking intelligence to make healthy and tasty meals for us.

    But not everybody is married to your wife.
    KC's View:

    Published on: October 17, 2017

    In Major League Baseball’s American League Championship Series, the New York Yankees beat up on the Houston Astros, winning the third game of the best-of-seven series 8-1. The Astros now hold a 2-1 series lead.

    And, in Monday Night Football, the Tennessee Titans defeated the Indianapolis Colts 36-22.
    KC's View:

    Published on: October 17, 2017

    Jackson Jeyanayagam, CMO of Boxed, joins Tom Furphy and Kevin Coupe to talk about his company’s competitive posture, unique value proposition, and focus on family-friendly values, as well as his experience as head of digital marketing at Chipotle during its food safety crisis. Plus, Tom and Kevin discuss Amazon’s integration of Whole Foods, and much more, in this inaugural edition of The Innovation Conversation Podcast.

    This podcast can be played below, or can be accessed and subscribed to on both iTunes and GooglePlay.

    This Innovation Conversation Podcast is sponsored by ReposiTrak, and brought to you by GMDC.

    This Innovation Conversation Podcast is sponsored by ReposiTrak, and brought to you by GMDC.

    KC's View: