Editor’s Note: This article is an excerpt from one of RetailWire’s recent online discussions. Each business morning on RetailWire.com, retail industry executives get plugged in to the latest news and issues with key insights from a “BrainTrust” of retail industry experts.
By: George Anderson
After focusing on cross-channel promotions and online info-sites for years, Procter & Gamble is working with a third-party operated website, theEssentials.com, to sell its brands directly to consumers, thereby bypassing traditional retail outlets.
TheEssentials.com, which only sells P&G products, is part of a larger movement by consumer packaged goods (CPG) brands to test direct sales to consumers. P&G rivals L'Oreal and Estee Lauder, for example, have operated websites that sell beauty brands to consumers.
While it supports the operation of theEssentials.com, P&G spokesperson Paul Fox told The Financial Times, "We treat them like any other retailer as they buy product directly from us."
P&G's direct sales test is still somewhat uncommon among CPG manufacturers but is something that companies in apparel, electronics and other categories have used with varying degrees of success. Some retail experts were underwhelmed by P&G’s move and skeptical of its success.
While an interesting experiment, one has to ask why consumers would feel the need to buy these products directly from Procter & Gamble, when most of the products are available at either Drugstore.com, Amazon.com, or other online retailers. While it is a great way for P&G to gain insight from their consumers, they will have a difficult time providing a compelling reason as to why people should shop on this site. Unless on the other hand, they start to offer products or variations of products that are not available from other online retailers,” said Joel Warady, principal of the Joel Warady Group. “Let's not forget that P&G has sold directly to consumers before through their Reflect.com site. And that ended up in a failure, although it was a completely different model. Let's see where P&G takes this, and how they can make this work.”
“It's highly unlikely that CPG vendors will make significant sales directly to consumers over an Internet channel. For the bulk of P&G's products, it is far more convenient for consumers to buy them from a retailer that offers a broad assortment of products that can be purchased on one shopping trip. theEssential.com appears to be focusing on P&G's more expensive and complex products, such as OralB toothbrushes, Braun coffee makers, and Crest Whitestrips, not toothpaste and detergents,” said University of Florida professor Barton Weitz. “For these more expensive products, consumers might purchase them from an Internet channel with theEssentials.com being one of many Internet retailers offering the products. theEssentials.com does provide parts for P&G consumers that might be hard to buy through traditional supermarket channels. By offering these parts, theEssentials.com can provide a service to P&G customers--a service not offered by its retailers.”
Thursday, October 30, 2008
Tuesday, October 28, 2008
Q&A With OfficeMax VP Bob Thacker On Cause Marketing, Holiday Promos
OfficeMax has proven itself to be one of the most innovative marketers in the retail space. It recently announced it will reprise its highly trafficked Elf Yourself campaign this holiday season, after driving 193 million website visitors last year to upload a photo so they could see what they looked like as an OfficeMax elf. Following up on the Elf Yourself campaign, now OfficeMax is adding a layer of cause marketing.
The “A Day Made Better” cause marketing initiative, in which OfficeMax and education advocate Adopt-a-Classroom surprised over 1,000 teachers with school supplies across the US and Mexico, is one of the activities that “gives a company a soul,” according to OfficeMax VP of Marketing Bob Thacker. Retail TouchPoints had the opportunity to talk with Thacker and learn the fundamentals of the recent “A Day Made Better” cause marketing initiative. The former VP of marketing for Target Corp. and head of creative for Sears, Thacker is one of the more experienced and respected voices in retail marketing. In addition to detailing the Day Made Better campaign, Thacker also touched on the company’s holiday plans, and how the elves are taking over.
Retail TouchPoints: Can you speak to how and why cause marketing is becoming a more important element of a retailers’ marketing mix?
Bob Thacker: I’ve been involved in cause marketing for over 20 years. I actually helped create cause marketing when I was at Target and I felt then, and I feel even stronger now, that it is what gives a company a soul. People today are looking for a deeper relationship with companies they do business with. Many people today feel that they don’t want to do business with what I call a “carpet bagger,” a company that just comes into the market and just takes money out and doesn’t put anything back, or make the experience richer or more rewarding. People really expect companies to have a soul, and cause marketing is one of the ways that companies can do that.
RTP: How, if at all, does the economy factor into cause marketing?
Thacker: For [OfficeMax], it really wasn’t a factor at all. Other people have asked, ‘well, gee, with what the economy’s doing your sales are probably not as great as you’d want them to be. Have you thought about canceling that?’ My response is: would I cancel Christmas? They are two different things. Cause marketing can and does lead to increased sales, but that really isn’t why it should be on your marketing initiative. It has to do with who you are as a company. Do you put your soul away because sales are down? I don’t think so.
RTP: You had mentioned how consumers are looking for a deeper relationship with the companies they shop. How does the customer psychology and perception of cause marketing factor into it, and how is “A Day Made Better” really nurturing those thoughts?
BT: The Cone Cause Evolution study 2008, released this month, revealed that education was the leading issue among Americans. 79% of consumers said if the price and quality were similar they would switch to a brand associated with a good cause.
RTP: The “A Day Made Better” initiative was launched in 2007. Was there a difference in last year’s initiative to that of 2008?
BT: Yes.To go back and recap why we did it in the first place, the whole idea of teacher’s funding their own classrooms is a crime. And teachers spend $4 billion a year of their own money to pay their way, and on average, a teacher makes about $30,000 a year. Our whole attempt is to make this a national cause. We can’t fix it ourselves but we can certainly bring attention to it, do what we can and make the public aware of what a crime is being committed. In 2007, we did 1,000 classrooms all over the country. In 2008, we increased it by 1/3 to 1,300 classrooms and we involved Mexico. We also brought celebrity and key opinion leader attention to it. We had some very prominent people supporting this initiative, and in some cases, going out and surprising teachers. It grew in a really great way to become something bigger, more dynamic, than we had expected it to be.
RTP: Was there a criteria for the teachers selected who received supplies on “A Day Made Better?”
BT: Yes. They were all selected by our non-profit partner, Adopt-a-Classroom. We were not involved in the individual school selection. The teachers all needed to be in school that had a high level of need. A majority of the children in the schools are on free lunch programs, come from lower income families and in schools that have generally a greater need than, say, a well-endowed private school or a school that has some legacy or a huge foundation behind it. These are poor schools, underpaid teachers with kids who need it the most.
RTP: Does OfficeMax plan to continue the “A Day Made Better” effort in the future?
BT: Oh yeah, it’s deeply engrained in our culture and it’s’ really fun to walk around and hear people talk about ‘okay, next year on a day…’ It’s come down to a day and it’s referred to like it’s our day. I’ve been involved in 50 or so events like this in my career, and this has been the most emotionally effective and has done the most to raise the whole self esteem of the company… Our primary focus is on helping teachers and schools.
RTP: Does the company plan to bring back the “Elf Yourself” promotion for the holidays?
BT: He’s back! He’s going to be bigger than ever before. We’re just getting ready to launch him after Halloween. He’s going to be available in four different varieties of music and different dances. It has taken on a life of its own. It’s set a bar that nobody I know has been able to match, including us. The thing that’s different this year is that people will actually be able to make things out of the elf. You can make Christmas cards and different novelty items ad ornaments, so the elf can be preserved permanently, whereas before he used to be limited to the viral space. He will actually be available in product form so that’s going to be fun! It has become the viral equivalent of Frosty or Rudolph, the classic icons of the past. The elf is today’s version of that. Over 30% of the people who created elves said it made them feel better about OfficeMax.
The “A Day Made Better” cause marketing initiative, in which OfficeMax and education advocate Adopt-a-Classroom surprised over 1,000 teachers with school supplies across the US and Mexico, is one of the activities that “gives a company a soul,” according to OfficeMax VP of Marketing Bob Thacker. Retail TouchPoints had the opportunity to talk with Thacker and learn the fundamentals of the recent “A Day Made Better” cause marketing initiative. The former VP of marketing for Target Corp. and head of creative for Sears, Thacker is one of the more experienced and respected voices in retail marketing. In addition to detailing the Day Made Better campaign, Thacker also touched on the company’s holiday plans, and how the elves are taking over.Retail TouchPoints: Can you speak to how and why cause marketing is becoming a more important element of a retailers’ marketing mix?
Bob Thacker: I’ve been involved in cause marketing for over 20 years. I actually helped create cause marketing when I was at Target and I felt then, and I feel even stronger now, that it is what gives a company a soul. People today are looking for a deeper relationship with companies they do business with. Many people today feel that they don’t want to do business with what I call a “carpet bagger,” a company that just comes into the market and just takes money out and doesn’t put anything back, or make the experience richer or more rewarding. People really expect companies to have a soul, and cause marketing is one of the ways that companies can do that.
RTP: How, if at all, does the economy factor into cause marketing?
Thacker: For [OfficeMax], it really wasn’t a factor at all. Other people have asked, ‘well, gee, with what the economy’s doing your sales are probably not as great as you’d want them to be. Have you thought about canceling that?’ My response is: would I cancel Christmas? They are two different things. Cause marketing can and does lead to increased sales, but that really isn’t why it should be on your marketing initiative. It has to do with who you are as a company. Do you put your soul away because sales are down? I don’t think so.
RTP: You had mentioned how consumers are looking for a deeper relationship with the companies they shop. How does the customer psychology and perception of cause marketing factor into it, and how is “A Day Made Better” really nurturing those thoughts?
BT: The Cone Cause Evolution study 2008, released this month, revealed that education was the leading issue among Americans. 79% of consumers said if the price and quality were similar they would switch to a brand associated with a good cause.
RTP: The “A Day Made Better” initiative was launched in 2007. Was there a difference in last year’s initiative to that of 2008?
BT: Yes.To go back and recap why we did it in the first place, the whole idea of teacher’s funding their own classrooms is a crime. And teachers spend $4 billion a year of their own money to pay their way, and on average, a teacher makes about $30,000 a year. Our whole attempt is to make this a national cause. We can’t fix it ourselves but we can certainly bring attention to it, do what we can and make the public aware of what a crime is being committed. In 2007, we did 1,000 classrooms all over the country. In 2008, we increased it by 1/3 to 1,300 classrooms and we involved Mexico. We also brought celebrity and key opinion leader attention to it. We had some very prominent people supporting this initiative, and in some cases, going out and surprising teachers. It grew in a really great way to become something bigger, more dynamic, than we had expected it to be.
RTP: Was there a criteria for the teachers selected who received supplies on “A Day Made Better?”BT: Yes. They were all selected by our non-profit partner, Adopt-a-Classroom. We were not involved in the individual school selection. The teachers all needed to be in school that had a high level of need. A majority of the children in the schools are on free lunch programs, come from lower income families and in schools that have generally a greater need than, say, a well-endowed private school or a school that has some legacy or a huge foundation behind it. These are poor schools, underpaid teachers with kids who need it the most.
RTP: Does OfficeMax plan to continue the “A Day Made Better” effort in the future?
BT: Oh yeah, it’s deeply engrained in our culture and it’s’ really fun to walk around and hear people talk about ‘okay, next year on a day…’ It’s come down to a day and it’s referred to like it’s our day. I’ve been involved in 50 or so events like this in my career, and this has been the most emotionally effective and has done the most to raise the whole self esteem of the company… Our primary focus is on helping teachers and schools.
RTP: Does the company plan to bring back the “Elf Yourself” promotion for the holidays?
BT: He’s back! He’s going to be bigger than ever before. We’re just getting ready to launch him after Halloween. He’s going to be available in four different varieties of music and different dances. It has taken on a life of its own. It’s set a bar that nobody I know has been able to match, including us. The thing that’s different this year is that people will actually be able to make things out of the elf. You can make Christmas cards and different novelty items ad ornaments, so the elf can be preserved permanently, whereas before he used to be limited to the viral space. He will actually be available in product form so that’s going to be fun! It has become the viral equivalent of Frosty or Rudolph, the classic icons of the past. The elf is today’s version of that. Over 30% of the people who created elves said it made them feel better about OfficeMax.
Thursday, October 2, 2008
Retailers Need to Realign Wall Street Reporting Practices with Cross-Channel Reality
Written by John Gaffney
With Wall Street analyst firms and the investors they supposedly service back on their heels it is an excellent time for retailers to fix something that has been broken for some time. After years of toiling under the irrelevant judgment of comp store sales, retailers can change the game to the rules of cross-channel engagement.
Several retail and technology vendors have pointed this out during the past few weeks of economic turmoil. Retail stocks have largely outperformed the plunging market, and will most likely come out stronger from this crucible of repositioned credit and unreasonable growth expectations. But instead of looking at Wall Street wants, which is the simplicity of short-term measurements of comp store sales, it’s time for retailers to refocus investors on the reality of the cross-channel world. Circuit City provides the best and most recent example of how not to do this. Its comp store sales were way down last quarter, and its prospects for opening new ones were dim. So they bailed. They told Wall Street analysts “we’re not reporting anything anymore” and they filled financial press releases with platitudes about serving the customer and focusing on its core business.
Circuit City can do better and all retailers can do better. Wall Street judgments are reality. But so is the cross-channel retailing environment. Comp store sales were relevant when comp store sales were the only measurement available of retail performance. Retailers have a richer data palette to work with. We see five areas that should become an essential part of all financial reporting and as a consequence provide a more accurate financial picture of the current as well as future state of any retailer.
Channel growth: Comp store sales should be part of a three-pronged reporting approach. Retailers should call out their quarterly growth online, in-store, and direct channels. Obviously this will be different depending on the business model. Amazon and Overstock would not report in-store sales. But there is no better measure of retail performance than the ability to keep pace with the consumer’s desire to work different channels for purchase, information, and returns. Retailers should be judged on how they grow in all relevant areas. Retail executives don’t manage toward an obsessive focus on comp store sales, they manage across channels. So why are they still judged so simplistically?
Conversion Rates: Online conversion rates hover around three percent. In-store conversion rates are too inconsistent to measure, but could be measured if retailers focused doing so. Conversion rates are a true measure of how attractive pricing, promotion, and service are working. Example: The 80 percent increase in online conversion rates measured recently at Urban Outfitters should say more about the strategy and practices of that operation than comp store sales. And when compared on a quarterly basis, analysts will know more about “what works” instead of the short term and potentially misleading metric of “what sold.”
Customer Satisfaction: Customer experience, especially in a cross-channel world, can be an excellent predictor for retailers. Circuit City, for example, is investing a lot of money in sales associate technology as well as new store formats. If they reported the results of these efforts in terms of customer experience by settling on a consistent metric such as NetPromoter, it would say more about its future value than its sales of expensive electronics in an economy as tight as this one.
Traffic: Not just foot traffic. In the cross-channel world an increase in web site traffic can predict increased product research and an increased intent to purchase. A decline in web site traffic means the online component of a retailer operation has lost momentum. Once again, all these indicators can and should be judged holistically.
Customer Engagement: Analysts should know open and click through rates of marketing campaigns. They should know metrics about call center activity. They should know loyalty program registrations and points redeemed. They should know email response rates. All these metrics show the willingness customers have to take a relationship beyond simple purchases. Customer engagement is tricky to measure as an aggregate behavior. But it is a potentially powerful indicator of long-term retail financial fitness.
The Wall Street focus on comp store sales will not change in a day. And analysts will continue to weight those results heavily. But at the very least retailers can begin to prepare more relevant reporting information, and begin to work on a metric and an attitude that needs to be dragged into the cross-channel world.
With Wall Street analyst firms and the investors they supposedly service back on their heels it is an excellent time for retailers to fix something that has been broken for some time. After years of toiling under the irrelevant judgment of comp store sales, retailers can change the game to the rules of cross-channel engagement.
Several retail and technology vendors have pointed this out during the past few weeks of economic turmoil. Retail stocks have largely outperformed the plunging market, and will most likely come out stronger from this crucible of repositioned credit and unreasonable growth expectations. But instead of looking at Wall Street wants, which is the simplicity of short-term measurements of comp store sales, it’s time for retailers to refocus investors on the reality of the cross-channel world. Circuit City provides the best and most recent example of how not to do this. Its comp store sales were way down last quarter, and its prospects for opening new ones were dim. So they bailed. They told Wall Street analysts “we’re not reporting anything anymore” and they filled financial press releases with platitudes about serving the customer and focusing on its core business.
Circuit City can do better and all retailers can do better. Wall Street judgments are reality. But so is the cross-channel retailing environment. Comp store sales were relevant when comp store sales were the only measurement available of retail performance. Retailers have a richer data palette to work with. We see five areas that should become an essential part of all financial reporting and as a consequence provide a more accurate financial picture of the current as well as future state of any retailer.
Channel growth: Comp store sales should be part of a three-pronged reporting approach. Retailers should call out their quarterly growth online, in-store, and direct channels. Obviously this will be different depending on the business model. Amazon and Overstock would not report in-store sales. But there is no better measure of retail performance than the ability to keep pace with the consumer’s desire to work different channels for purchase, information, and returns. Retailers should be judged on how they grow in all relevant areas. Retail executives don’t manage toward an obsessive focus on comp store sales, they manage across channels. So why are they still judged so simplistically?
Conversion Rates: Online conversion rates hover around three percent. In-store conversion rates are too inconsistent to measure, but could be measured if retailers focused doing so. Conversion rates are a true measure of how attractive pricing, promotion, and service are working. Example: The 80 percent increase in online conversion rates measured recently at Urban Outfitters should say more about the strategy and practices of that operation than comp store sales. And when compared on a quarterly basis, analysts will know more about “what works” instead of the short term and potentially misleading metric of “what sold.”
Customer Satisfaction: Customer experience, especially in a cross-channel world, can be an excellent predictor for retailers. Circuit City, for example, is investing a lot of money in sales associate technology as well as new store formats. If they reported the results of these efforts in terms of customer experience by settling on a consistent metric such as NetPromoter, it would say more about its future value than its sales of expensive electronics in an economy as tight as this one.
Traffic: Not just foot traffic. In the cross-channel world an increase in web site traffic can predict increased product research and an increased intent to purchase. A decline in web site traffic means the online component of a retailer operation has lost momentum. Once again, all these indicators can and should be judged holistically.
Customer Engagement: Analysts should know open and click through rates of marketing campaigns. They should know metrics about call center activity. They should know loyalty program registrations and points redeemed. They should know email response rates. All these metrics show the willingness customers have to take a relationship beyond simple purchases. Customer engagement is tricky to measure as an aggregate behavior. But it is a potentially powerful indicator of long-term retail financial fitness.
The Wall Street focus on comp store sales will not change in a day. And analysts will continue to weight those results heavily. But at the very least retailers can begin to prepare more relevant reporting information, and begin to work on a metric and an attitude that needs to be dragged into the cross-channel world.
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