Creating Added Value

Post Crisis Trends

Clive Woodger, SCG London

• Customer Mindsets – staying relevant

• Shopping Modes – formats … multi channel

• Differentiation – brand development

• Social Media Challenge

Creating Added ValuePost Crisis Trends

Strategic Consulting Group

International Strategic branding and design consultancy.

13 years … 60+ Russian managements

We work in the retail, financial, real estate sectors by creating

Creating Added Value

Customer Mindsets

Staying relevant

Customer MindsetsStaying relevant – Lifestyle changes

• Marrying later …• Rise of single households• Time poor – cash richer• Value• ‘Values’• Freshness … Health … Choice

Changes in Society, needs and aspirations

• Increase• Decrease• No Change Consumer confidence – Russia = ‘average’

Return of Consumer confidence?International

Return of Consumer confidence?International

Return of Consumer confidence?Russia

Shared Norms for the New Reality “we live in a world that is becoming increasingly

complex and interconnected but also experiencing an erosion of common values and principles”. DAVOS 2011

Opinion poll 2010 … global values for cooperation40% chose honesty … integrity … transparency24% chose others’ rights, dignity and views20% chose the impact of actions on the wellbeing of others17% chose the preservation of the environment

Universal Values?

Food Trends – Customer Attitudes Value Health Connectivity Home Dining Fresh Sustainability Energy vs. Relaxation Internationalism

Food TrendsValue

“Constrained consumers”

More for Lesspragmatic .. careful… planned shopping

Price led but value drivenQuality …Choice …Experience … environment / service / process

The best quality at the best price

A good ‘deal’ … every time you shop

Food Trends

Health … nutritionfood / pharmacy realistic claims – growth of ‘proven’ products

Food TrendsConnectivity … social media marketing campaigns

Food TrendsHome Dining … indulgence at home /

new products for creative home cooking

‘eating out at home’

Premium ranges – gourmet and restaurant dishes

Budget – cooking from scratch

‘Ingredient foods’ – less pre-made / packaged

Tesco launches City Kitchen range

Food TrendsFresh

Demand for Freshness Minimal processing, chilled, minimal packaging Food safety Organic products Diet books Increased frequency of shopping trips Highlighting ‘sell by’ dates

Organic and Ethical label range opportunities

Food TrendsFreshBack to basics – Fruit & VegetablesLess packaged / processed foodSmoothies / packaged fruit snacks

Food TrendsSustainability … environmental / ethical / social … People … Planet … Profit

• Consumers want to feel ‘good’ about what they buy - how was it procured, grown, reared, caught, manufactured, transported, by who, how?

• Emergence of the ‘principled consumer’

• Did it harm the environment, people, communities?

• Was it ‘Fair Trade’

• CSR industry - differentiated by values

• ‘Look behind the label’ …. M&S

Food TrendsEnergy vs. Relaxation

InternationalisationRegional / Locally sourcedEthnic / Fusion cuisine

“Now all fresh meat at Morrisons is 100% British”

Creating Added Value

Shopping Modes - Formats

Multi Channel

Shopping Modes - Formats

• shopping centres• hypermarket• supermarket• convenience stores• discounters• online

“MULTI CHANNEL”

Shopping CentresTrends ….

Food Experiences & Services

Crisis exposed weak developer strategies

In UK 60% of centres in trouble, only super regional will survive?

What lessons for Russia?

Shopping Centres“the city centre at your doorstep”

Kaleidoscope Tushino, Moscow

Hypermarkets

More than functional warehouses – providing services and non food as lifestyle pit stops and community destinations

• Choice • Price• Services

Lifestyle pitstops /centres - ‘everything for your life’

big was better?

Retail theatre … events / workshops / parties

Supermarkets“making shopping a pleasure”

• Balancing convenience, quality and experience• Range – focused to local catchments … demographic … ethnic• More space for deli and fresh produce• Food to go / Cafes• Services – financial, mobile phones, …

Sales densities vs better environments

Supermarkets“making shopping a pleasure”

Convenience Stores“my place”

• Near to the customer … work or home• Baskets not trolleys • Coffee cafes - takeaways

“Marks & Spencer struggle to keep up with demand for wine by the cup concept”

Open … 7am to 11pm

Discounters“quality repositioning”

Online“total convenience … to your door”

According to sales data collected through the UK’s leading website MyVoucherCodes.co.uk, Tesco enjoys the majority share of online grocery shoppers, with 41% of supermarket sales through Tesco.com, compared to 27% via Asda.co.uk

Online“total convenience … to your door … to your store”

2000 2001 2004 2006 2007 2010

Founded, first distribution agreement with Waitrose

Deliveries began

First automated conveyor warehouse

50’000 orders delivered in a week

EBITDA positive for first time

100’000 orders delivered in a week

2011

IPO, valued at £1bn

Trades above IPO price for first time

2010 HIGHLIGHTS

Gross sales 2010: £551m Average order value: £112 EBITDA: £16m Still loss-making after 10 years Market cap: £1.13b

2010 HIGHLIGHTS

Gross sales 2010: £551m Average order value: £112 EBITDA: £16m Still loss-making after 10 years Market cap: £1.13b

1997 1999 2000 2001

Founded, $50m of seed capital raised

Deliveries began

$40m in annual sales, average order value $81

Bankruptcy

$800m in accumulated losses

IPO valued at $600m

2010 HIGHLIGHTS Owned by amazon.com Only ships non-persihable, household goods and office supplies Sales $10m2010 HIGHLIGHTS Owned by amazon.com Only ships non-persihable, household goods and office supplies Sales $10m

OCADO = New webvan.com … Amazon … What is the difference?

Customers will shop through various platforms and formats – supermarkets, convenience stores, farmer’s markets or online. Tomorrow’s sector winners can’t ignore - customers will demand the best possible experience.

Web grocery sales will increase to 9.5 billion pounds ($15 billion) by 2015, from 4.8 billion pounds this year. More 18-to-34 year-old shoppers are moving online and wider delivery coverage means sales have the potential to grow “significantly.” The Internet will account for 5.2 percent of total grocery spending in five years, up from 3.2 percent now. (IGD).

Web grocery sales will increase to 9.5 billion pounds ($15 billion) by 2015, from 4.8 billion pounds this year. More 18-to-34 year-old shoppers are moving online and wider delivery coverage means sales have the potential to grow “significantly.” The Internet will account for 5.2 percent of total grocery spending in five years, up from 3.2 percent now. (IGD).

In 2010 total retail spending was up 1%, online retail spending up 15%.

CONVENIENCE + VALUE will fuel the online food sales.

In 2010 total retail spending was up 1%, online retail spending up 15%.

CONVENIENCE + VALUE will fuel the online food sales.

OCADO = New webvan.com ? What is the difference?The difference is structural shifts in the society and higher acceptance of online shopping

Multi Channel

“How to grow your business in a low / no growth industry”

City … Supermarket … Convenience … Hypermarket … Online

… now towns!

Multi ChannelUK grocer challenge

Intense competition … near market saturation Slow growth … rising taxes … higher inflation Grow by stealing market share from rivals … enhancing proposition … adding space (better to cannibalise sales than lose to rivals!) Race for space – but diminished site availability Need for hypermarkets lessening – growth of convenience stores and online UK petrol price increase – more local shopping Leverage of multi-channels – click & collect kiosks … direct catalogues Non food needs more space – extensions & mezzanines More services and facilities … health, finance, travel

Brand ExperienceCUSTOMER EXPERIENCE BRAND REPUTATION

word of mouth, sms…

advertising, direct marketing

web site, social media, twitter, facebook

promotional publicity

posters, street signs …

collateral …

bags, cards, leaflets

assurance, memories

reminders, triggers,

after service …

customer journey…

anticipation … moments of truth

first vistas, approach, process,

layout, environment, products,

staff, facilities, exit experience …

Managing the Process – Physical … Human … Technical

coordination … consistency … control …

Brand Touchpoints

AwarenessPromise

Customer JourneyVisit

AfterglowSatisfaction

Touchpoint SynergyFood Retail

Identifying opportunities … solutions

‘Customer Journey’

Touchpoint SynergyPeople

‘Our people make the difference’

Creating Added Value

Differentiation

Brand Development

Differentiation

• Convenience• Products• Service• Experience• Culture

Why are you first choice?Brand Development - Image & Reputation

“Added Value”

Marketing and Communicating ‘added value’Using media, activities and events to reinforce tangible and emotional attributes … head and heart triggers.

Outdoor advertising Press Radio T.v. Web banners Web search engines

Talking ‘at’

ATL

Talking ‘to’

BTL ‘relationship ‘ marketing Direct mail Email Printed media through database … Personal contact Events / road shows

‘Brand Awareness’

Mass Audience

Difficult to measure benefit

Defines / triggers purchase

Targeted Audience

Easier to measure benefit / outcomes

Differentiation - Marketing Methods & Media

Differentiation - Marketing Social Media Challenge

Customer

‘Awareness’

Price comparison

sites

Social mediaOpinions

Shared experiences

ATL

Individual needs ‘triggers’ action

BTL

‘Database Knowledge’

Target customer groups information / aspirations

Differentiation - Marketing - ChallengesSavvy Customers - Product Reviews

‘To buy or not to buy?’

Differentiation - Marketing - ChallengesComparison websites

Differentiation - Marketing Email marketing – customer dialogue‘immediacy – relevance’

Differentiation - Marketing Brand Reputation … Equity - P.R. Challenge

International Benchmark – credibility crisis …

Inept corporate governance?

TESCO FISH FIGHT

When ‘sorry’ is not enough …

‘Damage limitation’

Differentiation - Marketing - Sponsorship Corporate Imaging’

Who gets the benefit?

Cynical endorsement marketing or mutual reputation enhancement

Differentiation - Marketing Discounter repositioning creating quality credibility

There is no such thing as loyalty … you are as good as your last transaction / customer experience

Challenge - loyalty programmes not just cards

Transparent mutual deal - we really reward you - we learn about you - we can serve you better.

It has to be relevant, clearly worthwhile, proactive.

Role Model - Tesco ... Increased investment ... Key factor in success …

Retailer or Partner card?

Differentiation - Marketing Customer loyalty – wishful thinking?

Hard to ensure loyalty of a fickle, frugal customer!

Tesco Tesco now has 16 million active Clubcard holders in the

UK, compared to 11.7 million people who have a Barclaycard.

Tesco has earmarked further investment on top of the £150m it pledged when it re-launched the Clubcard.

iPhone, BlackBerry, Android, Ovi applications +

Asda Invests in new TV marketing campaign Improved likelihood to shop Created better ‘my kind of supermarket’ perception … and launched own T.V. channel on YouTube ‘saving

you money TV’

Differentiation - Marketing – StrategyDifferent investments

Differentiation - Marketing - Private Label - ‘More for Less’ … Something Different- A key retailer differentiation strategy …

Obvious growth potential with Russian mindset changes

Less status conscious - more acceptable ... for anyone … democratic

Less brand loyalty - consumers more likely to switch

Demand for a bargain - need value for money with economy pressures

Trading Up - psychological requirement to treat yourself - premium own brands e.g. Tesco Finest

Variety and Choice - new products / ingredients / flavours …

Organic and Ethical - retailer label ranges & opportunities

Traditional

Differentiation - Marketing & PRCreating awareness … desire .. reputation

Today

Image development

Marketing – promises … promotions ... events‘what you say about yourselves and offers’… billboards, T.V., radio, themed promotions / activities …

Reputation development

Public Relations – corporate relationships, events, messages / crisis management ...

…

Image and reputation ‘is what people say about you’

Marketing and P.R. activities and audiences are now symbiotic – social media merges B2B and B2C communication

Creating Added Value

Social Media Challenge

Staying relevant

Social Media ChallengeCreating a ‘joined up’ social media strategy

Social Media ChallengeCustomer Connectivity

not what retailers say … customers listen to each other ... iPhones, wifi, … food forums etc

“… there are 59.7m internet users in Russia, 42.8% population” (June 2010)

61.9m people will use the internet in Russia by 2013” eMarketer

“Russians are the heaviest social networkers worldwide in terms of time spent per user” eMarketer

Internet Transparency

Software Technology who is targeting who?Software Technology who is targeting who?

Software technology can track and interface with customers through loyalty cards, touch screens and phone apps …

But, …. consumers can use technology to create instant damage or enhancement to your brand – cut and paste communities – Facebook, fanclubs, Tweeters, YouTube

http://www.adturds.co.uk/tag/sainsburys

Brand demolition!

Social Media Challenge

Customer dialogue – ‘the good’

Sainsbury Twitter … ‘almost’ real time response to ideas and complaints.

Waitrose Forum3500 people viewed single chat about a food recipe. 24x7 customer service.

Not just advertising!

Social Media Challenge

Managing reputations - ‘the bad’

556,308 fans … “4000 chavs a year die from tesco cheap booze. Every little helps”

Tesco had to pull the plug on an unofficial Facebook group of 2000+ called 'Tesco employees could rule the world’ where staff abused their customers.

Social Media Challenge

Aldi

USA Aldi “hate” sites …

Live Aldi Twitter1,614 followers in Germany4,615 Australia

Social Media Challenge

Russia

Social Media Challenge

Twitter – 3,514 followers

'enjoy the taste of our new cereal'  Facebook - Russian winter campaign, 3,295 people like this

Perekrestok now have active Twitter and Facebook pages.

Black PR - Instant ‘cut and paste’

Social Media Challenge

CUSTOMER EXPERIENCE BRAND REPUTATION

word of mouth, sms…

advertising, direct marketing

web site, social media, twitter, facebook

promotional publicity

posters, street signs …

collateral …

bags, cards, leaflets

assurance, memories

reminders, triggers,

after service …

customer journey…

anticipation … moments of truth

first vistas, approach, process,

layout, environment, products,

staff, facilities, exit experience …

Managing the Process – Physical … Human … Technical

coordination … consistency … control …

Brand Touchpoints

AwarenessPromise

Customer JourneyVisit

AfterglowSatisfaction

Creating Added Value …Instant achieving a first choice Brand Experience

Creating Added Value …Achieving an effective management organisation

Marketing

Department collaboration?Teamwork = Synergy

operations

Store WorkplacesService Internet

real estatebuyers

IT

communicationshuman resources

managementprocurement

sales

Brand experience – for customers and employees

Departmental activities / functions

marketing

logistics

finance

Thank You

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