Mobile Retail November 2009

FUTURELAB

7 New Profit Opportunities In Mobile Retail An Conversation Starter by Futurelab’s Retail & Shopper Marketing Practice

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About This Conversation Starter Over the past decade, mobile communication has evolved ...

From a simple means of voice communication, mobile phones have become multifunctional devices. They have become cameras. GPS devices. Music players. Even reality augmenters. And when combining 4G networks with the coming increase in computing power, the best is yet to come. ... but mobile retailing has largely remained the same.

Store designs, staff, merchandising and business models still focus on phones and subscription plans. Service and process habits date from the days when mobile retail was a “landgrab”, rather than today’s lifestyle & application market.

These orthodoxies cost money.

By having customers who consume/shop in one way and stores that service them in another, many operators and phone retailers miss valuable opportunities for profit and customer delight.

Mobile communication habits have dramatically evolved, but mobile retailing is still largely the same as 10 years ago.

So we decided to investigate what could be done ...

We did photo surveys across the Benelux, Greece, Romania, Russia and Ukraine. We talked to consumers, and organised an internal think tank in which we asked non mobile people to look at mobile challenges. ... and we found it doesn’t need to be that way.

With this paper, we want to highlight 7 new profit opportunities which mobile retailers could explore. Some tactical. Some structural. All looking at mobile retail from the point of view of the customer and the bottom line.

This project is part of the overall Futurelab Change Marketing initiative. Here, we formulate alternative answers to challenges where marketing and business habits generate insufficient returns, where orthodoxy stands in the way of innovation and where the customer connection has been lost. As such, our hope is to change the nature of marketing itself, so it once again can become the focal point for customer-centricity, innovation and profit.

Written by: Alain Thys Contributions from: • Alex Eperjessy • Milton Papadakis • Mirela Rotaru • Olga Vaganova • Ramona Patrascanu • Scott McLaughlin • Stefan Kolle • Wouter Marck Subediting • Minke Hamstra Published by/ Edit. Responsable • Alain Thys

This report is published under Creative Commons Attribution 3.0 license. You are Free to Share or Adapt the work as long as the Futurelab name and URL (www.futurelab.net ) are clearly mentioned.

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Seven

Table of Contents: 7 Opportunities for Profit

1.

Treat servicing and selling as separate businesses

p. 4

2.

Segment stores by customer type

p. 6

3.

Streamline the product offer

p. 8

4.

Sell the platform, not the parts

p. 10

5.

Improve instore and window communication

p. 11

6.

Offer a true multi-channel shopping experience

p. 13

7.

Create a personal connection to your customers

p. 15

How Futurelab can help you become more profitable

p. 16

Contact Details

p.17

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1.A. Treat Selling and Servicing as a Separate Business A store needs to help customers orient themselves, be serviced and buy in a time efficient and pleasant manner. Many mobile stores fail at this task because they insufficiently differentiate between the “service” and “sales parts” of the business. Mixing customers that want to make new purchases with those looking to be serviced increases waiting time for both. This annoys those who have to wait to be serviced, and causes new shoppers to leave the store because they receive insufficient attention. “Coping” mechanisms to deal with this suboptimal situation, only increase customer sentiments of being delayed and processed. The results are: lost sales opportunities, insufficiently happy customers and stressed staff.

Being a Customer Takes Patience …

… and Self-Confidence.

Coping Mechanisms are Well Intended, but ...

Because of the complex and regulated merchandise offering, the average mobile retail transaction “takes time”. Many store designs are not set up for this reality. This leads to queues, customer irritation and stressed staff that rushes through service scripts.

Service points leave a customer “exposed” and are often uninviting. A Transactional mindset dominates to process customers quickly .

Faced with the constraints of their retail environment and industry, some mobile retailers develop coping mechanisms. These do assist store staff to process customers quicker, yet do not necessarily increase the customer experience, nor profitability.

Example: Take A Ticket Benefits • Waiting line management • Manage expectations

Take a ticket

Downsides • Effectively reduces a customer to “a number” • Focuses customer mind on transaction (= no upsell opportunities) • Puts most profitable customers at par with least profitable.

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1.B. Treat Selling and Servicing as a Separate Business The structural solution to this challenge is to clearly separate sales and servicing in the mobile retail environment. This can be done within the store by creating adequately staffed service areas which offer customers the privacy, comfort and attention they deserve.

An alternative is to physically split retail locations. The automotive industry learned this decades ago. Showrooms are separate from service areas. Scripts to deal with both customer types differ as well.

This allows offering service customers the required privacy and attention, while ensuring that buying oriented customers can shop till they drop.

Points of inspiration For some thoughts and inspiration, we recommend you visit these remarkable mobile stores.

Zain, Bahrain

O2, London

Remarkable : Orange Bucharest

Tactical Fix: Empower Your Customers

In addition to being a welcoming environment, the Orange Bucharest store has created different lounges to surf the net for free. Qualified staff is on hand for any questions. Did you ever see a store look this pleasant?

If structural changes are impossible, empower customers to take care of themselves.

Create self-service environments for tasks that do not require a service associate. This reduces waiting lines and increases the customer’s feeling of control.

Bold thought Most car brands evolve to a limited number of high prestige showrooms for buying and a large number of smaller outlets for servicing.

Why not combine a limited number of high prestige megastores for mobile shopping with a large number of small customer relationship centres? This would be more efficient, profitable and pleasant for the customer.

DIY recharging, Q&A, initial orientation, ‌

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2.A. Segment Stores by Customer Type Because of their product and technology focus, mobile retail stores treat all customers the same. Young iPhone savvy clients are mixed with elderly people who just want to call their grandchildren. High ARPU small business owners, stand in the same queue as bonus hunting pre-paid clients.

While perhaps democratic, this approach is also costly. Staff attention is not allocated based on financial revenue potential. The customer experience becomes bland, average and unexciting.

It makes you wonder ...

What About the Customer?

Archetype

Focus

Across the various countries of our research, we have identified three archetypes of mobile retail stores.

Network operator store

• •

Services owned by the own network A “something for everyone” variety of mobile phones (multi-brand)

Phone brand store

• •

The full range of mobile phones of the brand, catering for “all audiences” All flavours of all mobile networks

• •

A wide variety of phones (all brands) All flavours of all mobile networks

Remarkably, all start from the brand, network or product perspective. No one starts from a pure customer point of view.

Independent phone retailer

Encouraging Signs

Mobile operators are some of the largest advertisers in any market. They also know the final decision for a phone or a plan often happens on the shopfloor.

Yet instead of truly connecting with the customer at this moment of truth, mobile retailers remain box shifters which generally deal with all customers in the same manner.

Wouldn’t it make sense to divert some of that media money to retail?

Many operators have started to separate their business customers from consumers, through specially designed business centres.

With its Vertu stores, Nokia is clearly taking a very tailored approach to affluent customers who want a luxury phone.

Vodafone starts to segment its offer by application, rather than technology (work, entertainment, go online, ...

Image: Vertu store, Prague

Image: Vodafone store, Frankfurt

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2.B. Segment Stores by Customer Type Instead of focusing stores on product type or network, mobile retailers should tailor their offer and experience by customer type. Expand the thinking launched by media supported MVNO’s and create retail formats that inform, inspire, engage and provide comfort to different types of consumers or business buyers.

A Model to Emulate: Women’s Fashion

What if ... A Quick Brainstorm We asked ourselves the question what would happen if mobile retailers segmented their store offers by customer need or type. The answer was remarkable. A totally different type of store or shop-in-shop emerged, even with different functions. Also the merchandise mix would evolve. Below a few of the first ideas we came up with.

At the moment, women’s fashion retail is probably the most advanced industry when it comes to segmenting an offer by customer type.

Not only are women segmented based on their desires and psychographics, yet store formats and even total brand offers are created around lifestyles, user moments and even moods.

This while, just like in mobile retail, every store essentially sells the same products: shorts, pants, t-shirts, skirts, blouses, jackets, sweaters and accessories.

What if mobile retailers became lifestyle storez Teenage Hangout A trendy store where teenagers who belong to the network operator’s tribe can hang out to discover and share the latest phones, applications, games, accessories and music as they come to the market.

People from other networks are only allowed entrance to the “hangout zone” if they convert.

s pre-paid clients small and medium Female Mobility Mature Adults entrepreneurs in the same queue A practical, stylish stand and feminine Some pensionners want to try as stand ,for Explain every storeevery treats environment mobilehow minded new gizmo, others get customers in exactly the same way. women.

Here they can find turned off by techno-blitz.

High rollers in balance line with pre-paid everything they stand need to Older get the same theirteenagers. work, family and people life.

In this relaxed store, mature services as young ones (how about and knowledgeable staff andinbigger But comfortable they can alsochairs indulge the lettering?) helps both audiences in a Customers need topurchase be treated as retail environment that also occasional accessory individuals (explain to or cute app while sippinglogic fromfrom phone welcomes them if they forgot ). theirapplication macchiatoto or...chatting with their glasses or need to sit a friend. down for a moment.

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3.A. Streamline the Product Offer Many mobile retailers want to offer everything for everyone.

As a result they create confusion on the shop-floor, security issues and a cramped store environment.

The Trauma of Choice

Don’t Touch That Phone

Accessories Are an Afterthought

Too many stores offer too many phones. This leaves clients confused and turns products into low margin commodities

Too much product creates security issues. Some stores cope with this by making their highly tactile product inaccessible for the customer.

While accessories can be a great margin builder in the shopping basket, they are presented in bulk and often not adjacent to the product they belong to. This leads to lost sales and margins.

In addition, they make it almost impossible for staff to be knowledgeable about all the products and offers that are on the floor.

This leaves them and their customers frustrated and translates into lost revenue.

Food for thought The majority of customers aren’t looking for information to compare every offer on the planet. They just want the phone and plan that suits them. Nothing more. Mobile retailers need to guide them to this efficiently and remove all clutter on this journey.

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3.B. Streamline the Product Offer As long as mobile retailers try to service all customers with all solutions, only big box category killers will successfully find a balance between the width of their offer and a manageable merchandise mix. For those who decide to focus on a specific type of customer (see opp. 2), a new approach to merchandising can be implemented.

Tactical Fix: Better Displays If product overdose is inevitable, introduce more transparent display methods that provide oversight and allow customers to “touch” the product.

Structural Fix: Persona Based Merchandising

Your Aspirational Imagery

Your perfect plan

• Tailored benefit 1 • Tailored benefit 2 • Tailored benefit 3

The TOP 8 phones YOU like

Accessories to TEMPT you

Rather than merchandise products by type or application, mobile retailers can bring great clarity to their stores + reduce the width of their offer through persona based merchandising.

Various customer persona are defined and product offers are assembled to suit their liking.

These contain all phones, plans and accessories of relevance to this persona and brings them together in one part of the store.

This has a number of benefits: • •

The accessories you NEED

•

For customers it becomes much easier to navigate the store towards “their” offer.

For staff it is much easier to connect various parts of the offer and engage in upselling.

Smart use of visual merchandising and double presentation techniques can reduce the number of items actually carried in the store.

Really customer-focused retailers push the envelop by introducing products & services which are typically not seen in a mobile retail store (see opportunity 4).

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4. Sell the Platform, Not the Parts How It Is ...

How It Could Be ...

For many consumers, being mobile has become a way of life. As a result, they purchase dozens of products and services in addition to their phone, subscription and core accessories.

If mobile retailers would provide their customers with everything they needed to express their mobile lifestyle, merchandise offers would go well beyond the traditional phones, plans and accessories.

Yet many of these products cannot be found at the retailers which are at the heart of this mobile lifestyle experience.

Instead, applications, songs, ringtones and games would be offered for bluetooth download. Accessories to match the accessories or add-on lenses to enhance photography would be promoted.

This inconveniences the customer, who has to compile his ideal world across various environments, while for mobile retailers revenue opportunities are lost.

The result would be a store where consumers not just come to do a quick transaction, yet return to browse & buy.

Mobile stores need to sell the total mobile ecosystem from the customer perspective, rather than their internal processes.

This will transform store staff into mobile lifestyle advisors rather than subscription & feature sellers.

As a result, the people in the store will be more motivated, customers will have a better experience, and they will be encouraged to spend more, more often.

Points of Inspiration

Sony and Universal test vending machines that allow consumers to download music, movies & games to a mobile device.

Why not do this in store?

Many consumers use skins and services to personalise the way their laptops look.

Handbag manufacturers co-ordinate phone cases with handbags and other accessories.

Why not do the same for mobile phones?

Why not sell both at a mobile retailer?

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5.A. Improve Instore and Window Communication While many structural improvements can be made in the area of mobile retailing, the quickest wins lie in the area of instore and window communication. This is often confusing, overwhelming and even geared to “keeping customers out”.

Too Much Information = No Information With all the plans, innovations and promotions there is a lot to be communicated in mobile retail. Occasionally the temptation takes over to say it all. This can lead to nothing being said at all.

Store Fronts Can Often be Improved A good store front can be one of the strongest tools to invite customers into a retail environment. Yet to many are closed, cluttered and unclear in their meaning.

This board offers consumers the “best actions and advice”. Yet with so much advice, who knows what’s good any more?

“Closed & cluttered displays = uninviting

“Flipchart Promo” sloppy & blocks store entrance

Information overload in action. With so much to say, what are you saying?

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5.B. Improve Instore and Window Communication In the game of instore communication, there is no room for error. Every mistake translates directly in a reduction of store traffic, conversion and margin. That is why no excuse should be allowed to make displays anything less than excellent.

Structural Measure # 1: Coordinate Your Departments Strong store communication is a game of co-ordination and customer understanding.

Weekly sales, marketing, product and operational plans need to be aligned around clear customer-driven retail objectives.

When all work as one, everything in the store looks smooth and inviting. Staff has all the information it needs to sell.

If they don’t, too many products try to communicate simultaneously, marketing messages speak product instead of customer language and windows get plastered.

Structural Measure # 2: Ensure Your Agencies Understand Retail In many organisations retail communication is outsourced to advertising or POP agencies. This is the most efficient way of working. Yet we often encounter agencies where the people working on instore communication have never been retailers themselves. While they can be creative, this makes them ignorant of what is needed.

Before appointing your next agency, test how they will provide the necessary retail floor experience. And if this costs more, pay the bill. After all, every week of suboptimal communication, is a week of sales lost.

Tactical Fix:

Tactical Fix:

Focus windows on simple messages that invite people to “come closer”

Use visual language and interactivity to assist staff & customers in understanding store offerings “on sight”.

The structural fix is therefore to create a cross-departmental instore communication plan which starts from your customer’s behaviours, needs and choice drivers.

Then focus only on doing what brings most money in the till.

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6. Offer a True Multi-Channel Experience Most retailers by now have strong websites which feature an ever growing number of e-service modules.

Yet a truly multi-channel experience takes more than a call-centre, a website and a store.

It needs to extend well beyond the own media and tools, into every customer touchpoint.

The Very Basics Speak with one voice across all channels The minimum level of multi-channel integration is making sure that your business simultaneously speaks with one voice across all the channels it manages.

A nice best practice example in this context is the Dutch general merchandise retailer HEMA which is known for its innovative, stylish and highly integrated communication .

Self Test: Are You Managing Your Customer Buying Process Across All Channels?

When it comes to information gathering on products and providers, consumers put faith in what their friends say and what they find online. This makes what happens online an extension of the information your provide in your store. Yet are you truly managing it?

Go online and do the following test for your mobile retail organisation:

Google Reputation What are the chances that a consumer finds someone speaking well about you or speaking badly? To get a feel, go onto Google and type in the name of your brand + a series of negative and positive expressions.

See how many results speak about you with “love”, and who “hates” your brand. Also use graphical language and four-letter words. The love/hate ratio that comes up, gives you the shape you are in.

Price Fairness Take some of the key phones and accessories you sell and type them into the best known price comparison engines in your market. Mark the difference with your actual retail price. To make it really exciting, go onto eBay and do the same.

Social Chatter For a more sophisticated view, type your brand name into Twitter and into a few blog search engines (Technorati, Icerocket, ...)

Then ask yourself the question. If you know that these channels are part of your customers’ decision making process: WHO in your organisation is doing WHAT to manage this multi-channel information flow and WHEN was the last time YOU spoke to them?

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6. Offer a True Multi-Channel Experience To truly act in a multi-channel way, mobile retailers need to start looking at life from their customer’s perspective.

Building a True Multi-Channel Mobile Retail Plan (by Audience !!)

To help yourself and your people to do this in a structured manner, we recommend you go through the four steps on this page.

Look at buying or receiving service from the customer’s perspective. Identify the steps they take, the media they look at. Whether evaluations happen instore, or online. Whether clients actually talk to sales people before they make up their mind. Whether they compare prices. Talk to friends. Then see if your existing retail activities (online, instore, call-centre, ...) leave any gaps.

STEP 1: Review the Real Customer Journey

Interesting Practice [my] place by Telstra

At Telstra’s [my] place, customers can get qualified staff to provide advice, tutorials and troubleshooting for their devices and products.

For this, they book an appointment on the Telstra website (http://bit.ly/2Z22TG) & meet their advisor at a convenient time.

STEP 2: Research the Choice Drivers

STEP 3: Loyalty & Advocacy Drivers

At every step of the customer journey, people either choose for your business, or that of someone else (who may not even be in mobile).

Moving along the customer journey does not mean customers become loyal to your device brand or operator. It merely means they are being satisfied in their needs.

As a second step you identify the drivers of this choice, and the factors or people that influence them. Knowing which elements matter in the decision process allows you to identify the right actions to take for your customer.

To go beyond satisfaction, you need to identify those points in your (service) behaviour where you can truly create loyalty, repurchase, ARPU growth, ... Special attention in this process should go to creating advocates for your business.

STEP 4: Create a Multi-Channel Plan Once you know the ways you can make a difference to your customer, put in place a cross-business action plan to ensure this is delivered at a profit, at every single interaction.

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7. Create a (Personal) Connection to Your Customers All mobile retailers want their customers to love their business. Become loyal.

Come back to the stores again and again. Leave more of their hard earned cash.

Yet relational concepts like loyalty and trust are a two-way street. And reality bids us to admit that when entering mobile stores, the relationship is managed in a largely transactional way.

In operator owned stores, this feeling is often enhanced by call-centre and eservice mechanisms which aim to increase the distance to customers, in stead of pulling them closer.

But also in independent or brand owned stores, customers do not really feel embraced for longer periods than the one purchase they are there to make.

It’s Time to Get Personal

As it’s Not Happening Today

The transaction driven mobile retail days are coming to an end. Across the world mobility is moving from a technology to a lifestyle, while features become more invisible.

According to JDPower, customer satisfaction scores with major US operator branded stores are 51% driven by the sales staff in these stores.

This means that loyalty and revenue need to be earned on the relationship level. Mobile retailers need to invest in these by enabling their staff to truly care about customers. To create experiences which are pleasurable. To connect to their customers.

In a competitive retail world these investments are paid for through a wider – lifestyle based – product offer and additional opportunities for capturing revenu along the customer journey.

Still when looking at the TOP 13 staff behaviours that drive this satisfaction, 10 are being performed less in 2008 than they were in 2006.

Source: JD Power, October 2008

Connecting to Customers Does Not Need to Reduce Yield: The Business Case for Love

Imagine the profit of a mobile store where customers:

• • • • • •

are so delighted they actively recommend it to their friends & family; are continuously inspired in their mobile lifestyle by new products, services and experiences; get great advice because CRM systems recognise them and support store staff in their job; regularly come back to browse, because they want to, instead of once a year because they have to; recognise their own personality in that of the staff; actually go to hang out or kill some time.

NPS™ research has proven that customers who like your brand to the point that they would actively recommend it are the most profitable you can have.

After all, they return more often, buy more, negotiate less and are easier and more fun to service.

The Net Promoter Score™ is a registered trademark of Fred Reichheld, Satmetrix and Bain & Company 15

FUTURELAB

How Futurelab can Help You Become More Profitable We believe that true shareholder value comes from growing revenues, rather than cutting costs.

That is why, at Futurelab, we want to be a source of new profit opportunity.

If you are a mobile retailer, handset maker or operator, it may be worthwhile for us to have a coffee. Our retail and shopper marketing team can offer a variety of services to help your business capture the profit opportunities described in this inspiration paper.

In specific, we can support you to:

We help businesses with:

• • •

practices to grow customer equity marketing that makes money innovations that are competitive

We focus on the end result, not the report.

• • • •

Create & implement innovative retail concepts; Understand your customers and focus your people and products on their true needs; Develop marketing & communication strategies that drive your cash register & margin; Develop a relevant, commercial multi-channel strategy.

All in the context of your market and business challenges.

Like an architect, we add to the vision of our clients and manage their agencies and vendors towards the desired result.

Along the way, we challenge any convention, corporate habit or industry dogma that prevents you from doing what is right.

For further information about our services, please go to www.futurelab.net.

Special Opportunity for Fast Movers No, we haven’t put all of our thinking into this report. For 2010, we are developing the concept for a new type of mobile retail store which is in tune with the customer’s mobile lifestyle reality.

If you are a mobile retailer that is prepared to lead the industry into change, we are happy to discuss concept fees and royalty arrangements to develop it together. Regional exclusivity can be negotiated for parties with clearly defined geographic footprints.

Getting Started with Futurelab

Taking on a strategy advisor for your retail activities is a big move. It takes time and trust. That is why we put together two pragmatic offers which allow you to experience the way we work and understand what we can and cannot do for you.

Mobile Retail Inspiration Days Tailored to your specific situation, we provide a key team in your business with a one-day inspiration session on the topic of mobile retailing. Using customised trend analysis relevant to your market, we work with your people to apply key developments to your business. In the process, we identify both bold and pragmatic opportunities for profit development.

Mobile Retail ProfitScan A more extensive review of your business can also be considered. In the Profitscan, a team of our specialists deep-dives into your retail business. For a number of high intensity days they review your store formats, customer management, communication practices, merchandising and operations. Based on this, they come with suggestions and recommendations to grow your top and bottom line.

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Contact Us For further information about Futurelab and our retail services, feel free to get in touch with:

Athens Mr. Milton Papadakis mpa@futurelab.net

Hamburg Mrs. Anne Marx ama@futurelab.net

Miami Dr. Paul Marsden pma@futurelab.net

Treviso Ms Beatrice Bortolozzo bbo@futurelab.net

Alain Thys ath@futurelab.net

10 Epidavrou street 15125, Marousi, Greece

Dorotheenstrasse 65 22301, Hamburg, Germany

Icon on Brickell, Unit 5003 465 Brickell Av., Miami, FL 33131, USA

Via della Chiesa, Campocroce 4/D1 31021 Mogliano Veneto (Treviso) Italy

Brussels Mr. Alain Thys ath@futurelab.net

Helsinki Mr. Kari Kariakoski kka@futurelab.net

Moscow Ms. Marina Natanova mna@futurelab.net

Shanghai Jan Van den Bergh shanghai@futurelab.net

Hoornzeelstraat 24 3080, Tervuren, Belgium

Frantic Oy, Iso Roobertinkatu 28 00120 Helsinki, Finland

Novy Arbat, h1 b 2, office 10 (4th fl.)

121019 Moscow, Russian Federation

Fenyang Lu 138, Room 506 200031 Shanghai China

Bucharest Ms. Ramona Patrascanu rpa@futurelab.net

Kiev Ms. Olga Vaganova ova@futurelab.net

Prague Mr. Laszlo Kovari lko@futurelab.net

4 Elena Street, 722721, Bucharest 2 Romania

74a Gonchara street, appt 10, 01054, Kiev Ukraine

Pod Sokolovnou 705/3, 140 00 Praha 4 Czech Republic

Chicago Mr. Jonathan Salem Baskin jsb@futurelab.net

Melbourne Scott McLaughlin smc@futurelab.net

The Hague Mr. Wouter Marck wma@futurelab.net

414 North Orleans Street, Suite 210 Chicago, IL 60654,USA

Level 15, 461 Bourke St Melbourne, Victoria, Australia 3000

Jan van Houtstraat 134 2581 TA Den Haag, Netherlands

Stefan Kolle sko@futurelab.net

Futurelab International Hoornzeelstraat 24 3080 Tervuren T: +32 2 733 8332 F: +32 2 706 5772

Or your Futurelab office of choice

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