July/August 2007

A Retail Publication by an

Company

Ever since Wal-Mart made it impossible to compete on price, retailers have been heard to declare, “We will differentiate on service!” Unfortunately, the retail boneyard has claimed quite a few companies that tried to “win by out-servicing the competition.” In most cases, they overlooked the customer. In the shopper’s mind, there is no service in retail. The best a store can do is manage your disappointment. A greeter may welcome you to the store, but after that it’s all downhill. You can choose between a surly cashwrap clerk, self-checkout or the Internet. Even though people are quick to change brands because of it, most retailers remain ill-prepared to address service from a human resources or economic perspective. Turnover continues to come with the territory—churn rates of 79 percent are considered normal, except for fast-food where normal is 300 percent. For years, retail employment has suffered from a dumbed-down, dead-end image. So much so, it’s become a job of last resort for the least educated. And as customer service falls, sales fall. As one retail expert pointed out, the customer can’t have low prices and a store filled with smiling, knowledgeable, helpful associates. When the company and customer decide to pay for both, they get both, as in the celebrated Neiman-Marcus experience. Or from the educated staff at The Container Store. Luckily, a little ingenuity can make up for the typically small, nomadic staff. Strategic design thinking to the rescue. “The store has a serious role to play in customer service,” says Scott Jeffrey, chief creative officer at Design Forum. “Today we design stores to do two things. First, to act as the brand champion which means it has to embody the brand promise and make a bold visual statement. Second, it should make you feel really good to be there, so even though there’s less personal service, the overall environment makes up for it. A great design also gives the store credit for the specialty services it does offer.” In recent years, category leaders have made major strides in improving the customer’s perception of service with refined layouts and adjacencies. Big box office suppliers reoriented the store around shopper needs to make selection easy. Retail bank branches have done away with teller cages, added concierges and provided kiddie spots. Smart auto dealers have brought the Internet into their showrooms, along with relaxed no-sales zones where customers can retreat. The friendlier atmosphere promotes the perception of better service. No additional staff or training required. Convenience is stressed, as well as flexibility of use. “Experiences have to be more than convenient, they also have to be exciting,” says Jeffrey. “And service is an important sub-set of experience, which includes the sounds, smells and textures used throughout the store. Customers interact with those design elements, which impacts their perception.” Apparel stores compensate for small staffs by adding luxurious lounge areas, flattering light and sometimes fragrance. Shoppers feel pampered by the surroundings, if not by personal attention. In the

Differentiate on Service?
future, technology will connect to customers to a centralized personal shopper with style advice. But in the meantime, even small innovations are having a big impact on perception. Gap installed a fitting room call button, and J. Crew directs shoppers to the red phone in the case of outof-stocks—a major aspect of service in the customer’s view. Consumer electronics retailers have taken a different tack by focusing their labor budget on genius bars and geek squads where it will have the greatest impact. The store proper is set up for product interaction. Strategically placed digital technology helps, especially with product complexity. IMO Independent Mobile stores developed their own technology so shoppers can compare phones and plans from every carrier based on their own needs. Screens that educate, inform or inspire with creative ideas help take the load off store associates. Accountability—a big part of service—is embodied in a welcoming returns area. Accessibility also has a huge role to play in taking care of the customer. JCPenney’s fully integrated in-store and online operations allow shoppers to check their local store inventory from home to make sure an item is available in the right size. And the website is available at the stores’ cashwraps. Strategically applied design can be both tangible and intangible, involving communication, environment, service and behaviors. It’s also in a constant state of evolution, keeping track of behaviors and tweaking design to influence purchase. According to Jeffrey, a store’s virtual, physical and human interface choices all spring from one strategy. It requires a lot of insight into what the brand means and what it wants to be. Even a company’s decision to offer full, semi or self-service is determined by brand. “Great stores tell a brand story in such a way that the shopper can insert themselves into the story, and try on the lifestyle,” says Jeffrey. “And the more creative, the better, like Urban Outfitters and Anthropologie. Creativity is a major source of value in our culture, and fresh ideas will be seen as part of a store’s customer service. “Brand strategy is central to everything,” says Jeffrey. “At the end of the day, it’s ‘who do you wanna be?’ When the customer leaves the store with a bag, what else do they leave with? The experience. Now that design is no longer at the back-end of the brand strategy process, it has a lot to offer retail: greater customer satisfaction, greater control over your offerings and greater profits.”

Can You

The Riskiest Job in Retail
Even before the annual Spencer Stuart report came out to confirm it, and even before Fast Company called it “the most dangerous job in business,” it was impossible to miss the high CMO turnover at top companies. During the last few years, a ton of talent has churned through the likes of Wal-Mart, Best Buy, Gap, Kmart, McDonald’s, Coca-Cola, Circuit City… to name just a few. My initial take was that it was right to view marketing as a link in corporate growth. It merits a chair in the c-suite, but it seemed companies were filling it with the wrong people. The advertising guy or gal who can drive a great ad campaign and raise awareness scores rarely has the skill set required to manage beyond the tactical. Promoting them to CMO looked like a case of title inflation, with a huge budget thrown in to boot. To worsen matters, many companies naively expect a marketing campaign to “fix the company” in eighteen months. That’s almost always a complicated long-term project, and the CMO shouldn’t be the fall guy just because their work is the most visible. design, as we practice it, is a partner in strategic decision-making and accountable for its results. It’s also an incubator for innovation, brand ideas and a mitigator of risk. Marketers and retailers are expected to bring big ideas to the table, and we have learned to help them feel a little more comfortable sticking their necks out. It still often happens that really large corporations put together very odd and ineffective teams on major initiatives that don’t interact. That’s why we created a process that encourages executive collaboration across silos and helps leaders facilitate change. Sometimes the culture needs to be changed in order for the brand promise to be delivered in the store. And when it comes right down to it, culture can’t change if there’s no executive collaboration. The primary source of value for most retailers used to be their products or brands. Today, value is moving to the customer interface—in other words, the experience, the lion’s share of which is the store. Because the store experience helps drive customer loyalty and brand building, a bigger share of the marketing budget is coming into the store. But now you can know what store design is spending and achieving. People responsible for new concepts and formats—and the CMO is often a major influencer—would do well to find a retail design firm that, like them, understands business complexity, cost of doing business, shopper needs, the source of profit for each segment, and how to measure outcomes. An average CMO life-span of only 23 months has to hurt a company, as good work gets thrown out and money wasted. Maybe now that the word is out, companies will hire more carefully. The skills package they seek is rarely found in one person—it’s hard to find in design firms. Thoughtfully,

Chairman’s Commentary

Like designers, CMOs need cross-functional expertise around strategy, customer insight and metrics.

As it turns out, the problem goes deeper than that. The central issue is misalignment of expectations. The chief executive in many cases fails to define and align the chief marketing role. For example, the CMO may see their job as the creation of imaginative marketing initiatives and the maintenance of brand guidelines. The CEO however, expects strategic guidance, operational knowhow, accountability, customer insight, change leadership, and executive collaboration. That is a tall order. And one, for me, that seems all too familiar. It reminds me of an old design dilemma. Like marketers, designers used to be thought of as imaginative dreamers working in a bubble. That’s changed drastically. Design is now rightly considered a value driver. Same as every aspect of business these days, the design of environments has become very complex. As a result,

D. Lee Carpenter Chairman & CEO

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A Retail Publication by:

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GuestFeature
As the world becomes ever more flattened and connected, the challenges to success grow. There is one area where tremendous opportunity still exists, however. One place that we have not yet analyzed and commoditized, and which, in fact, cannot be commoditized: the realm of human behavior. HOW we do WHAT we do becomes our unique competitive advantage and ultimate differentiator, whether we are in media, manufacturing, service, retail, or even notfor-profit. The old rules of doing business (top-down command, control, hoarding information, and generating spin) must give way to values-based thinking and behavior. Think about it. Behavior you can control. If you reach out and inspire more people throughout your global network, you win. If you collaborate more intensely with your coworkers, you win. If you keep promises 99 percent of the time and your competitor keeps promises only 8 out of 10 times, you deliver a better customer experience, and you win. than we have developed frameworks to understand each other. Our ability to thrive lies in how we reach out and build strong connections; • The Opportunity to Outbehave – When you make stronger connections, you gain critical advantage in the marketplace; when you deliver a more meaningful customer experience, you engender a loyalty that brings them back again and again; • Active Transparency – Legions of bloggers across the country can sift through thousands of pages of corporate documents overnight; there is more to look at and judge. To thrive, individuals must turn transparency to their advantage; • Your Culture Can’t be Copied – Culture is the unique character of any organization, its lifeblood, the sum total of all its HOWS. Though your WHATS (your products) can be reverse-engineered in no time at all, no one can copy your HOWS. Strong cultures of connection can be a key source of differentiation and a unique competitive advantage; • Dancing with Rules –There is little in rules that inspire; by definition, we comply with them. Rules-based thinking holds us back. Values free us to do more than necessary while simultaneously preventing us from doing less than we should. • The Currency Value of Trust – Trust is the powerful dynamic that releases trapped potential, fills the interpersonal synapses between us, and allows us to function in times of uncertainty. Trust gives us confidence. • The Leadership Framework – Selfgoverning individuals approach everything they do from a leadership perspective; you can write an e-mail as a leader, attend a meeting as a leader, or build a report as a leader. A leadership mentality creates the strong interpersonal synapses so crucial to thriving in a hyperconnected world. • The Journey to Significance – Success can’t be pursued directly; it is a result. Longterm, sustained success flows from a journey of significance.

Outbehaving
by Dov Seidman

the Competition
When it comes to human conduct there is tremendous variation, and where a broad spectrum of variation exists, opportunity exists. The tapestry of human behavior is so varied, so rich, and so global that it presents a rare opportunity, the opportunity to outbehave the competition. Of course, you still need great products and great business models. You still cannot succeed, thrive, or become number one without having good WHATs. But those WHATs used to be enough to excel; now you need them just to stay in the game. To thrive, you need something more. • Improving Connections in a Hyperconnected World – Communications technology has joined us together across time, distance, culture, and country faster

“The opportunity to differentiate by outbehaving the competition is the central raison d’etre for both this book and my life’s work,” says Dov Seidman, author and speaker. “This concept, applied broadly to company/ customer/supplier relationships and worker/boss/team relationships, is what I mean what I talk about innovating and winning through HOW.” Dov is the founder, chairman and CEO of LRN, an ethics and compliance solutions company helping businesses like Disney, Dow Chemical, eBay, Proctor & Gamble, Raytheon, Johnson & Johnson, and 3M. Contact him at www.HowsMatter.com and www.LRN.com/HOW.
The old “can do” model is outmoded, out-ofdate and ineffective. Values-driven “should do” behavior energizes individuals, builds a powerful culture, and supports innovations, improved operations and sustainable success. It is no longer WHAT you do that makes a difference; it is HOW you do it. The emerging trend among leading-edge businesses today involves delivering not so much a better product, but a better experience to their customers.

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