The Robin Report - Issue 4 - February 2011 by The Robin Report

ROBIN REPORT The

Issue Four February 2011

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Q&A With Neil Cole

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Dear Reader In a very famous scene in the 1967 movie The Graduate, Dustin Hoffman’s character, Benjamin, learns the importance of one word from his neighbor, Mr. McGuire: Mr. McGuire: I just want to say one word to you - just one word. Ben: Yes sir.

Mr. McGuire: Are you listening? Ben: Yes I am. Mr. McGuire: PLASTICS.

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WHAT’S NEW?

NOTHING AND EVERYTHING By Robin Lewis

Nothing is new and yet, everything is new. Is this more blah, blah nonsense? Absolutely not. Whatever is new now, in a nanosecond will be old. So, in that nanosecond what you think is new, is, but, a new new comes so fast that everything seems new and old at the same time. If you think this is gobbledygook, guess again. And, put your serious thinking cap on for what follows.

We talked with Neil Cole, CEO of Iconix Brand Group. The brand management company licenses its 27 (and growing) brands in exclusive deals with big retailers and wholesalers, allowing them national brand distribution with private label exclusivity and economics. Here’s what Neil had to say about consumer and economic trends, and the importance of true brands. Q. How was 2010 for you, and looking ahead, what do you see? Is the recession over? A. We had a great year and a strong fourth quarter with all of our brands. We have 27 individual, unique brands, but last year most were up by double digits. Christmas was better than we expected, so we’re very excited. I think the consumer is consuming, feeling good, feeling like they have a job. I think people are hiring again, but it’s a long slow recovery. It’s going to take a while to get back to where we were a couple of years ago. The industry is going through a dramatic change, with consolidation and all the things you’ve talked about, and will continue to change. Compared to 5 years ago, things are so different.

In our digitized, socially communitized, e-world, an overwhelming stream of “new” is instantaneously trumped by another overwhelming stream of “new.” We live in a world that is in a constant state of disruption.

Q. What about the teen sector, where you have a lot of brands? Isn’t it pretty saturated? A. Our teen businesses have been good across the board. Teenagers were maybe the last to realize there was a recession, when Dad stopped paying them, and now that Dad’s got some money again, they’re going to spend again.

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ROBIN REPORT I N S I D E t h is iss u e

Dear Reader…

• Dear Reader ……....................1

Ben: Exactly how do you mean?

• what’s new? ...........………… 1 Robin Lewis

Mr. McGuire: There’s a great future in plastics. Think about it. Will you think about it? Ben: Yes I will. Mr. McGuire: Shh! Enough said. That’s a deal.

• Q&A with neil cole ......…… 1

• “keep your friends close & your enemies closer”…... 7 Robin Lewis

• what are your customers doing?………… 10 MasterCard Advisors

•m anagement without borders................………….. 12 Herbert Mines Associates

•c ustomer experience in a multichannel world......14 Kurt Salmon

• Dumbed-down beauty, reality tv-style.........….…....16 Dana Wood

• dear laura…...............…….. 18 Warren Shoulberg

• late payment notice…….... 20 Paco Underhill

• tide and mr. clean: just soap?……....…………….22 Robin Lewis

• quotes to remember…….. 24

Likewise, I just want to say one word to you – just one word! It encapsulates the most important piece of strategic knowledge you absolutely must place on the top of your planning priorities, or die: DISTRIBUTION. However, unlike Mr. McGuire, I am not going to say: “Shh! Enough said.” I’m going to tell you in the strongest terms: there’s not just a great future in distribution, you won’t have a future without it. How many times and in how many ways do I have to remind you that in this over-stored, over-stuffed, and now, over-web-sited world, it doesn’t matter how perfect your product, your brand, your experience, or your service is; or how important or powerful what you have to communicate is, if you are not able to get it to your consumer (or any targeted recipient) first, faster and more often than the literally hundreds of equally compelling competitors all racing to beat you there. All three of my articles this month are about superior preemptive distribution, getting your product in front of your customer faster, better, and before anyone else does. Get it? Unless you can figure out how to preemptively distribute your perfect ‘whatever,’ you will lose, and ultimately die, because the world of overcapacity, including information and communications, is not going to go away. Several articles this month underscore the importance of preemptive distribution. In “…Tide and Mr. Clean: Just Soap?” we see that P&G totally gets it. And, if you think you can skim through “What’s New? Everything and Nothing” you will totally miss the globally profound preemptive distribution of ‘tweeted’ communications that might ultimately change the world forever. Talk about ‘shock and

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awe’ in Iraq, please note the revolution in Egypt. In “…The Godfather Strategy,” all of my speculation about the synergies to be had through department stores evolving into mini-malls, and leasing space to specialty retailers and other products, brands or services compatible with their brand and consumer bases, is really all about preemptive distribution. For the department store, it’s creating a more exciting experience which will preemptively compel customers to come to their brand first. And, for the leasing brands, they gain preemptive distribution through “investment-lite” new space. In the Q&A this month with Neil Cole, CEO of Iconix, Neil lends further support to the importance of preemptive distribution. He tells us that exclusivity of a brand – having something your competitor doesn’t – is the biggest traffic driver these days, and makes all the difference between growth and stagnation by preempting the competition. Finally, you will notice in my sidebar to the MasterCard article, “What are your Customers Doing?”, the absolute imperative for early and precise information about who it is you are attempting to preemptively distribute to. In fact, you can’t achieve it without such information. So, in closing, I just want to say two words to you – just two words: PREEMPTIVE DISTRIBUTION! Enjoy the read!

Robin Lewis has over forty years of strategic operating and consulting experience in the retail and related consumer products industries. He has held executive positions at DuPont, VF Corporation, Women’s Wear Daily (WWD), and Goldman Sachs, among others, and has consulted for Kohl’s Department Stores, and dozens of others. In addition to his role as Publisher and CEO of The Robin Report, he is a professor at the Graduate School of Professional Studies at The Fashion Institute of Technology.

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What’s new? NOTHING AND EVERYTHING

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Big question for our readers: how do you compete and grow your business in such a short-term environment that is constantly being disrupted by the next “new”… The severe downside of such disruption, which naturally triggers expectations of change, is that in the split second before we see or hear what such change is, there is another disruption. The result of this rather dark Pavlovian lesson is that one cannot plan for change, indeed, a changed “whatever it is” never happens. It’s simply a disruption-on-disruption world. Therefore, the 24/7 connectedness of human ears and eyes to all devices in “e-world” is an addiction that yields a steadily diminishing “high,” (another “new”), only to find more disruption.

no one would ever buy anything, because the next new thing is always around the corner, newer, and more appealing. Another possible outcome, and one carrying a similar potential to “lower all ships,” is not only likely, but actually happening. Because the disruption and changes are occurring at such a fast and furious pace, people are likely to snap up whatever is being said or shown to them, and to do so even more quickly if they’re tweeted an “okay, cool” or a Facebook “Like It” by one of their pals. So, what’s wrong with that?

This addiction has the long term potential of creating a world in which nothing is long term, including the attention span of the human mind. In fact, we’re already there. Sound bites and pictures lasting no more than ten seconds are all we tolerate when receiving communications. Reading? Writing? What is that? If disruption and change are constant, why would one bother to plan for the long term, and what would one plan for, anyway? One possible result of this syndrome is that if one anticipates they are about to receive the next new thing in a nanosecond, why choose, accept or buy the new thing one is currently connected to? This scenario is similar to the deflationary spiral that economists dread. If consumers believe prices will be lower tomorrow, they won’t buy today. And, when tomorrow comes with lower prices, they expect lower prices the next day, and so forth, as the economy deflates downward, as it has in Japan for twenty years. At the absurd extreme in our short-term world, then,

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Well, nothing, except that the scenario actually disrupts and changes the entire world, and not just for a nanosecond, but, forever. Get it? It leads to “short-termism.” It leads to communications, including information, that must be faster, louder and more provocative, to get immediate attention and buy-in. Think about the credibility of news vs. a blog that might be more exciting in the moment. It means products and brands and services of the “moment,” as long as they are hyped and tweeted and facebooked, and the newest, hottest, and “now” - in other words, promising to be gone in a nanosecond. Think about “fast fashion” getting faster, the Gilt Groupe and Rue La La flash sales getting shorter (and flashier), new beauty introductions more often, thirty nine sub-brands of Tide and other names spewing forth, and on and on. More new, more often, more now. The implications for product and brand

life cycles, loyalty – even the duration of things like relationships – are pretty sobering. And, one more nightmare to think about: with virtually no barriers to entry, (including financial), how many new e-commerce sites do you think are being built, even as I write, for some new product or other, on top of the fifty billion websites already out there? Big question for our readers: how do you compete and grow your business in such a short-term environment that is constantly being disrupted by the next “new,” to say nothing of the e-devices that give your customers five competitors’ places that have the exact same item, cheaper? Yes, that’s right - you keep pursuing private and exclusive brands, over which you have total control, but how do you keep those brands fresh and relevant in this over-branded, over-stuffed, short-term world? Lastly, and talk about disrupting and changing the world forever, need I even mention Egypt, and the first tweeted revolution in history? Is the constant disruption, change and short-termism in our daily lives a good thing? And, is the constant disruption and change and short-termism for our world, and forever, a good thing? Is it good for our families, our world? How do we deal with it? u b the jdge. And, good luck!

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ROBIN REPORT Q&A With Neil Cole > Continued from Page 1 Yes, it’s competitive, but we’re not in the specialty sector, we’re primarily in the big stores. In every industry there are going to be winners and losers. People who are good are winning. Those who don’t have anything new and exciting aren’t. Q. What is a brand, anyway, and how long is its life cycle? With celebrity and reality stars coming into the picture, it seems like anyone can be a designer today. Have we abandoned the concept of old, authentic? A. Real and authentic are still important. A brand is when you say it and images come into your head. It means something. A reality star doing vitamins is not a brand. It’s a label. There was always a sea of labels just slapped on to product, but the consumer is smart, and knows what’s real or not. A brand, in my opinion, doesn’t have a life cycle. We look at our brands as brand new every day. You have to keep it new, relevant and exciting or it doesn’t mean anything to anybody. Just because London Fog is 100 years old isn’t the most important thing. No one really cares that it’s 100 years old. They want to know if it’s right today, if it has the right fabrics, styling, etc. Brands are like your children…you have to talk to them, keep them out of rehab. Q. Speaking of rehab…how is it to work with all these celebrities? Aren’t there risks involved with that? A. We try not to work with too many celebrities, rather to use them as billboards. I’ve learned a lot from working with Jay [Z., of Rocawear], but it’s not a celebrity spokesman relationship, it’s a business relationship, and he’s a very good businessman, a fascinating person. I got to work with Madonna, too, who’s brilliant. Q. Why do retailers license Iconix brands? Why don’t they just buy or build their own? A. They have to differentiate. They’re all looking to drive traffic, they’re looking for something that their competition doesn’t have. And, an established brand talks to you, you know what you’re getting. Take Coca-Cola, for instance. It’s just like the slogan says – if you want the real thing. No consumer wants to start from square one when walking through the store. It’s only going to get more important globally. Plus, you have millions of websites out there, with consumers instantaneously knowing the lowest price of a flat screen TV. So how does a Macy’s deal with that? With exclusive brands. Retailers need to focus on retailing, and on building the mother brand that’s on the outside of the store. Our partners are great retailers, but they can’t do everything. They too must have great partners that do

the marketing of the brands themselves. With our model, they’re getting better economics, because they’re not having to pay a middleman. Q. In the apparel category, in mainstream department stores, do you have a sense for how much of the business is private or exclusive brands? A. It varies, but for some it’s huge – up to 80% of the business. For others, it’s probably 20% and growing. Where it’s been a pendulum swing in the past, I don’t think it’s going back. Q. Are major department stores looking to open branded specialty stores for their private brands? A. Some of them are definitely talking about it. In America, there’s no growth. When you have 1,000 stores, your roadmap is pretty set, there’s really no place to go. Q. And vice versa, specialty stores are opening shops – leasing space – in department stores? A. Definitely. Wal-mart’s had McDonald’s in it for years. It makes it so that the consumer doesn’t have to leave the store. The retailers have such vast real estate. I think we’ll see more of that. Q. Do you do all the marketing of your brands in-house? A. We do a lot of marketing in-house, and we have a lot of partners out around the world who help us – photographers, directors, etc. We have 100 people here working on marketing, PR, social media. I tell our investors sometimes that we’re really an ad agency that happens to own our intellectual property. We focus on the front end of the business and let our partners focus on the back side – products, design, procurement, selling. We’re focused, so we don’t have to worry about the supply chain. Q. How important is social media? A. It’s critical today. We work very hard on it, and are starting to fund it in a major way. It’s very difficult – maybe impossible - to reach the consumer on one TV show. When Britney tweets, product sells out. It’s pretty amazing. Madonna’s daughter is writing a blog for us. It’s also an amazing platform for marketing research. For our Candie’s Foundation, we had a viral video that got 3 million hits in a week. We didn’t even need to run it as an ad. We coordinate our online efforts with our retail partners. It’s become a real art, and we have 2 or 3 people in each shop – ours and theirs – working together. But whatever we’re doing will be gone in 5 years, maybe less. There will be something new.

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Q. You don’t acquire a brand until you have a home for it…What’s the process you go through before buying a brand? A. We work both sides, there’s not one set process. It’s a matchmaking activity. We know the markets and what people want. We do a lot of research – qualitative, quantitative. We make sure that 80% of America knows the brand before we buy it, and if that number is only 60%, we find out what it will take to grow it to 80%. We want something well-known. A lot of the brands we acquire have a great licensing business in place already. And the brands we pursue are not always on the selling block – sometimes we go in and convince the owners to sell when they’re not even thinking of selling. Q. What about wholesale? Do you buy brands with a wholesale business? A. The last couple of brands we bought were in the wholesale business. We just bought Peanuts, which has about 1,000 licensees. Each brand is unique and different. We’ve learned a lot from Peanuts. We’re selling life insurance, since Met Life is our largest licensee. We have the biggest licensed greeting card business in the world – Peanuts has been with Hallmark for 50 years. Warner Music – ABC Television – we’re coming out with a new DVD in the Spring. Fashion is a third of that business. America is only a third of the Peanuts business, which is bigger in Japan than it is here. It’s been a great learning experience for us, a way to learn about growth opportunities. Q. Other than Badgley Mischka, most of your brands are mainstream brands. With luxury doing so well, are you looking to get into the more upscale area? A. We have a lot of brands in Macy’s and Nordstrom. Most luxury and designer brands, though, are just

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not that big. In our model, we’re looking for volume. If we were to find a $30 - $40 million brand and saw a strategy to make it large, we might. For us, sometimes it’s the same amount of work to market a $50 million brand as a $1 billion one, so we need to go for the bigger potential. As the company has gotten bigger, we’re looking for the bigger properties. Q. What about sports? A. We have 2 huge sports brands – Starter and Danskin. We’re doing a big event at the Super Bowl – it’s called Starter Field. The idea of doing more sports is very interesting to us. Q. What about global expansion? A. Global is critical. We know we’ve peaked in the US, and that America is a zero sum game, and that we need to make our brands global. Our culture dominates music, movies, and will dominate fashion as well. Right now 18% of our business is outside America. Our goal is to grow it to one-third of the business in 5 years. We have an equity partnership with Silas Chou in China who, with his daughter Veronica, is opening single-brand stores for us there. Our brands opened 150 stores in China last year and are set to open 300 this year. We think China will be a huge part of our future. We’re equity owners in 5 companies in China, and our goal is to have equity positions in 27 companies. Not all of them will be successful, but if we have 3 or 4 that could become very big, then we’ll be successful. We also have joint ventures with retailers in South America, Mexico, and Europe. We have 30-40 licensees in South America. We know India will be an important growth market down the road. The partners have big organizations, and they’re making our brands local, but keeping them…iconic.

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KEEP YOUR FRIENDS CLOSE AND YOUR ENEMIES CLOSER” The Godfather Strategy By Robin Lewis

First quoted by Sun Tzu, the Chinese general and author of The Art of War, an ancient treatise on military strategy, the statement was given more contemporary relevance in the 1974 film The Godfather Part II when spoken by Al Pacino’s character Michael Corleone. The point? Know your enemies even better than your friends, because in battle, while wanting your friends alongside you, knowing your enemy’s strategies and next moves provides the ability to launch a preemptive strike or at least to plan counter strategies to their next move on the battlefield. Not to get carried away with the metaphor, but the advice is in fact smart strategy for the retail battlefield as well. But, what if we were to envision a different scenario, one in which the “Godfathers” of retailing develop a strategy that goes beyond simply understanding the enemy, or keeping them close, to literally bringing them into their “camps,” or stores?

retail specialty apparel chains have literally stolen the number one share spot from department stores. In other recent moves: Target has inked a leasing arrangement with Radio Shack to staff and operate Radio Shack phone kiosks within Target stores; Sunglass Hut, Lush toiletries and Destination Maternity in Macy’s; Sephora cosmetics and Aldo shoes in JC Penney; Apple boutiques within Best Buy; and, not to be outdone, Sears has opened Edwin Watts Golf Shops, Work ‘N Gear uniform apparel shops and Whole Foods stores within their walls (I must check if this is a Mr. Lampert retail or “cash” strategy.) Through all this, the “Godfather strategy” begins to make sense. And, the potential synergies to be achieved here suggest a strategy that is bigger and more powerful than originally thought, a true game-changer, deserving serious, long term strategic planning, as opposed to just tactically seizing opportunities as they arise.

Better yet, why not flip the battlefield on its head and turn the enemies into friends, the competitors into collaborators? Those of you have read last October’s issue of The Robin Report and the article sub-headed: “Department Stores as Mini-Malls,” already know where I’m going with this. Lately, every Tom, Dick and Harry journalist has been randomly and anecdotally referring to “stores within stores.” The great irony here is that many of them, like Forever 21 within Sears, Brooks Brothers in Nordstrom’s, MNG by Mango inside JCPenney, and others, with many more to come, were in fact, the “enemy” for many years. In the apparel sector, in the forty years since their inception, branded

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ROBIN REPORT Beyond Tzu and Pacino: If You Can’t Beat ‘Em, Join ‘Em FIT graduate students Suchi Singh and Mehreen Danish conducted extensive qualitative and quantitative research, some of which is shown in the charts on these pages, in support of the thesis of department stores as “enclosed mini-malls.” My co-author Michael Dart and I had earlier championed this notion in New Rules. Using department stores to exemplify the rationale for the strategy as well as the synergies created, it is easily translatable to all other sectors. First, who are the enemies the department stores might pursue for collaboration? Given the breadth of product categories, brands and distribution platforms these department stores include, the list of enemies is endless. However, I will focus on apparel, since it accounts for such a large percentage of sales at each of the key players in the department store sector (see Chart 1). Supported by the extensive research of Singh and Danish is the fact that the branded retail apparel sector is “enemy number one” for the department stores, and has been for many “share stealing” years. Between 1992 and 2009, department stores lost a staggering 15 percentage points of apparel share, while apparel specialty chains gained 19 points of share (see Chart 2). The reasons for this are numerous, ranging from the specialty stores’ superior shopping experience to better control over their value chains. Further proof of the encroachment on the department stores’ apparel turf is evidenced by the sales growth of the specialty sector during most of those years compared to department stores’ declining sales (see Chart 3). Finally, to add insult to injury, using the measure of sales per square feet across a representative group of department and specialty store retailers, the specialists are over twice as productive as department stores (see Chart 4).

Fight to the Finish, or Change the Game So, even though the department stores are fighting the good fight and probably slowing share loss with exclusive and private brands, why not flip the battlefield, change the game and turn competitors into collaborators?

Why not convert the heated “share wars” into synergy, so that, rather than expending energy fighting to steal share from each other, each could provide more value for consumers through sharing space. At the risk of overdoing the well-worn sayings here, the whole would be greater than the sum of its parts, since it would lead to fundamental vs. just incremental growth, allowing both players to gain new customers and get their existing customers to buy more. And, guess what? For both, this is “investment-lite,” a term I coined in October for low-risk low-cost growth strategies. And, in case you’re wondering why the “enemy,” who is winning the “share wars,” would want to collaborate, consider this: for little or no capital investment (depending on the deal), the specialty brands get a multitude of new, high traffic locations virtually overnight. And, again, as a part of the synergy, they will achieve new, fundamental growth.

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The Godfather Synergy Let’s look at the synergy potential between JCPenney and its arrangement with Mango. The young “go-to” Mango loyalist who finds a JCPenney location more convenient, becomes new traffic for JCPenney. Mango, on the other hand, gets “investment-lite” additional real estate in malls, with the added kick from JCPenney’s vibrant store traffic. The synergy occurs when this new young consumer seeking Mango also buys a pair of Arizona jeans as she walks through the store. Mango gets national coverage, quickly and less capital intensively, and will likely attract JCPenney customers they would not otherwise have gotten. Further, the combined brands enhance the shopping experience, thereby strengthening each brand’s consumer connections. The same synergy works for Sephora, and for the brands leasing space in Macy’s, Nordstrom or Sears. “Godfathers” Lundgren and Ullman, and now Blake Nordstrom, who is welcoming Brooks Brothers

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into his stores, and even Lampert (depending on what he’s really doing), have all been nibbling on the edges of this strategy, by leasing space, or some other hybrid arrangements to retail specialty brands. The question: who will be first to turn this model into a full-blown strategy? My speculation is that Molly Langenstein, EVP of Fashion and New Business Development at Macy’s, who now has responsibility for procuring lease business opportunities, specifically specialty brands in niche categories that can fill their “white space,” might very well morph what sounds like the pursuit of ad hoc opportunities into such a long term strategy for Macy’s. So, going beyond Michael Corleone’s understanding of Tzu’s Art of War, this new generation of department store Godfathers is starting from an even higher knowledge base. They are not only bringing their enemies into their camps, but are turning them into friends, indeed, collaborative partners, and an important source of business synergy.

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What Are Your Customers Doing? Breaking the Information Barrier New Data, New Perspectives While over the past several years there has been a huge upsurge of merchants collecting and using customer data to drive retail business performance, the power of those approaches has been constrained by what might be called the three “natural limits” of in-store gathered information: target, space, and time. That is, merchant retail data can only show them what their customers, while they are in their store, have already done.

No matter how good their analytic tools, retailers’ sales data is limited to what happens within their own walls. Access to a broader picture of actual consumer behavioral data is changing the landscape for retailers and other merchants, and our Merchant Solutions practice has taken a lead in providing merchants with this kind of data-driven insight. The billions of transactions MasterCard processes each year give us the ability to do robust reporting, modeling and consumer behavioral segmentation.

Insights From MasterCard Advisors Merchant Solutions

After cleansing the data, supplementing it, and applying proprietary analytics to it, it is possible to glean accurate, granular information on areas that until now were unknown territory or hard to gather from one source. We are able to supply insights on a wide range of topics, including customers’ overall spending behavior, competitive purchase patterns, ecommerce purchases, customer drive-distances and loyalty patterns over time.

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What are consumers doing generally?

How am I doing compared to my competitors?

One new capability the data enables is sense of how consumers — both a single retailer’s customers and the larger universe of non-customers — spend across industries and geographies. For instance, MasterCard SpendingPulse™ provides one of the market’s earliest reports on monthly retail spending by category and region. It has a better than .9 correlation with the Department of Commerce’s final revision, yet is available about a week before the government’s first estimate.

When one national retailer saw a troubling decline in its performance in a particular market and became concerned that they were losing market share, management was ready to execute an expensive customer win-back response, involving a multi-million dollar advertising campaign and significant markdowns.

Being able to identify spending patterns in particular areas, we have been able to provide the kinds of insights that can help build profitable strategies in a wide range of areas. We enabled a restaurant chain to analyze customer spend in their category to identify the best prospects for a new customer acquisition campaign. Based on our spending-by-category propensity scores, the campaign resulted in a newcustomer response rate of well over 10%, an outstanding result for a new-customer acquisition campaign. How granular can this information be? Because of the size and quality of our data warehouse, it can be reported down to the ZIP-code level. Fine-grained geographic analysis can inform decisions on everything from geo-marketing strategy to store location.

What are my customers doing when they’re not in my store? The implications for loyalty are massive. Insights about your own customers’ behavior at competitive merchants, or in other merchant categories, can immediately point the way to actions that will help you decrease attrition, re-capture spend, or win spending from the competition. One electronics and appliances retailer located local prospects who were spending heavily in their category, but not in their stores. Using this information to drive a direct mail campaign, they doubled their market share among the mailed segments and saw a 129% increase in penetration during the promotion.

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MasterCard Advisors, however, took a look at the data through a wide-angle lens and reached a different conclusion. Our ability to generate performance data for an anonymized competitive set locally, regionally, or nationally, allows for the most robust benchmarking available. When we showed the retailer that they were actually gaining, rather than losing, market share against their competition and that their losses were more symptomatic of an overall category slowdown, they were able to save themselves the expense of their planned campaign.

What is going to happen? Although no one can see the future, sophisticated models applied to uniquely broad and historically deep data sets can yield more reliable estimates than ever before. Through SpendingPulse Outlook, MasterCard Advisors offers spending calendars and regular outlook reports, allowing merchants opportunities to capitalize on estimated future spending, and to guide their marketing, inventory, and work-force planning. Answers to these kinds of questions demand data that is beyond what any one merchant, survey, co-op, or government agency provides. But the data is out there, for those who have the resources and know-how to gather it, process it, and perhaps most importantly, make sense of it. So when it comes to the kind of robust information needed to drive sales growth, it may be time for the merchants themselves to go shopping.

There’s no doubt that data is going to be one of the distinguishing features of retail success in the years ahead. When Michael Dart and I studied the strategies of winning retailers, we identified three drivers for retail success in the new landscape. One of these, preemptive distribution, involves using all possible distribution platforms to reach consumers ahead of the competition. Retailers who want to adopt this strategy are going to find themselves increasingly looking for the best, most granular and most timely information about consumer behavior. It’s like hunting: if you’re going to bag that big trophy before the competition, you’ve got to spend the time in the woods so you know exactly where to look. It’s only through a careful analysis of what consumers are doing now that a retailer can anticipate what they’re going to do in the future, and plan accordingly. Right now consumer behavior is far too volatile for merchants to rely on the old forms of measurement. To get in front of customers before your competition, you’re going to need the earliest possible indications of where they are.

Andrew Woodward is Global Practice Leader for the Merchant Vertical in the Information Services practice at MasterCard Advisors. He can be reached at andrew_woodward@mastercard.com

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ROBIN REPORT Management Without Borders Global Talent Needed at Top Levels By Brian Meany

As companies in the fashion and retail business globalize, they are realizing the importance of international experience. We talked with Brian Meany, a Managing Director of Herbert Mines Associates who leads global searches for the firm, and learned that U.S. companies are looking beyond their borders to widen the pool of talent they consider for high-level positions. Why are so many companies in the fashion and retail industry going global? A decade ago, it was still a rare thing for a U.S. wholesaler or retailer to make international expansion a core strategy. The U.S. market offered plenty of growth, and it was more

difficult to do business abroad. Today, things are very different. The U.S. is a mature market. With e-commerce and mobile commerce so critical, retail has become a borderless business that no longer uses just bricks and mortar to sell product. Many brands are finding they already have an international following because of their Internet sites, so physical expansion is the natural next step.

Reflections from The Corner Office from Herbert Mines Associates

international assignment as part of their development if they are given the opportunity, and it is equally shortsighted of companies to only recruit talent within U.S. borders.

How has the increasingly global nature of the business changed how U.S. companies search for talent?

Interestingly, the knock has been that when an American takes an international assignment, by the time he or she acclimates and begins to make inroads, the tour of duty is up. We helped Levi [Strauss & Co.] find European leadership who was living in Europe but had worked for an American retailer there, who could master the art of interpreting such an iconic American brand. That was a successful solution for them.

To be successful internationally, their senior leaders absolutely need to understand the global marketplace and acquire broad geographic experience. It is shortsighted of executives not to think about an

What is the most effective executive staffing strategy for American companies actively moving into the international

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arena? Should they move Americans abroad or hire someone in the local market?

U.S. market. In that case, the best solution was to repatriate to the U.S. an executive who had worked in Europe.

Whether a company hires local executives with experience and knowledge of their market, or sends a U.S.-based expatriate who may already work for or know the company, business or the particular brand depends on several factors, and there are pluses and minuses to both strategies. Cost is one consideration. When you consider the housing allowance, tax equalization, travel back and forth, education for children, and other expenses, it can be at least twice as expensive to send an executive abroad as to hire a local one. But the American knows the company culture, products and brands, which can help immensely, particularly with getting things done internally.

How would you advise U.S. companies conducting a search for a highlevel position?

On the other hand, the local professional knows the language, the culture and customs of the region and its customers, and what will work in terms of marketing and operations. Also, local employees help the company establish roots in the local markets, and help develop a sustainable talent strategy that trains and promotes local executives, which is very important to longterm viability. Most companies are finding it best to have a healthy blend of both U.S.-based executives and local talent as well. With Tesco’s plans to enter the U.S. market, they retained us to recruit several U.S. executives that they sent on European assignments for three to four years. Then the American executives returned to the U.S. to successfully build the brand here. Separately, the challenge with Hugo Boss, based in Germany, was to find a CEO for their American operation who could interpret their European sensibility for the

February 2011

Companies need to insist that candidate pools be diverse, or they put themselves and their business at a severe disadvantage. European companies have understood this for years. Our European clients expect at least half the candidate pool to be international when we do a search for them. Now the U.S. companies are starting to catch on, too. Last year we completed more than 100 executive searches in the U.S., and in at least a third of those, we were requested to supply an international slate of candidates that we sourced through our global search group — leveraging robust talent pools in The Eurozone, U.K. and Asia. We have a comprehensive international database we use to identify sources of talent, and then work through our partners to get more local knowledge on international candidates. What would be your advice be to senior level executives who are considering a global assignment? Historically, executives were worried that they would be at a disadvantage if they took a job overseas and concerned that they would not be considered when new opportunities came up in the U.S. because they would be “out of sight, out of mind.” Now, technology keeps us in touch with each other on a daily basis and reachable 24/7 no matter where in the world we are located. If you have experience living and working in another part of the

world, you are going to be much more attractive to a company and promotable than someone who doesn’t have that experience. Companies are finding that, all other things equal, senior executives who have that hands-on international experience are going to do a better job leading that company into the future. We’re in a global age, and there’s no turning back. U.S.-based executives without foreign assignment experience will find it increasingly difficult to compete for executive roles in the future. Europeans easily make the move to the States – they just pick up and go. They are used to moving from culture to culture, because they start doing it at a very young age. Americans aren’t quite that adaptable, but that’s changing rapidly, because it has to. As borders are coming down, leaders need to be prepared to think globally.

Brian Meany, a managing director of Herbert Mines Associates (www.herbertmines.com), oversees the firm’s strategic partnership with The Globe Search Group (www.globesearchgroup. com), an international network of search businesses, all of which hold a leading position in their local markets. As the point person for international projects, he has conducted senior level searches for clients including Esprit, Levi’s, Tesco, PPR, Ahold, Hugo Boss and Wal-Mart. A member of the management team at HMA since 1996 and an executive search consultant since 1984, Brian’s practice includes clients in retail, consumer products, food service, and hospitality. Brian is also actively involved with the venture capital and private equity communities, and regularly conducts executive searches for their portfolio companies.

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ROBIN REPORT Customer Experience in a Multichannel World By Amy Klaris and Greg Ellis

The Customer Experience Imperative

Customer Experience Defined

In Kurt Salmon’s recent conversations with leading retailers, two topics come up repeatedly: customer experience and multichannel. Over the past decade, the two concepts have broadened in definition and become inextricably linked. More importantly, retailers increasingly understand that they must address both in order to win in today’s new retail environment.

Retail strategy has always encompassed two key elements: value proposition and target customers, i.e., what a retailer offers and to whom.

Over the last century, the retail industry has experienced dramatic changes. In the beginning, consumer demand far outpaced producer supply. After World War II, the tide began to shift as manufacturing and distribution significantly expanded. Now the consumer has the power. Today a shopper can find essentially the same product in many different retail outlets. She can quickly find out where she can buy the product and where she can get the best price. She can have that product brought to her and taken away if it doesn’t work. Then she can easily tell all her friends about the great deal she found and the great experience she had. To compete effectively in an age where information ubiquity has increased transparency and new selling channels have increased accessibility, retailers must seek new ways to differentiate themselves from competitors. The winning retailers will create connections with consumers that go beyond just transactions. This connection is part of the imperative outlined in The New Rules of Retail. Coauthors Robin Lewis and Kurt Salmon’s Michael Dart assert that, going forward, retailers must create emotional ties to consumers, in addition to establishing preemptive distribution and controlling (but not necessarily owning) the supply chain.

Best Practices from Kurt Salmon

environments (e.g., customer engagement, design, customer-facing technology), outof-store interactions (website, community forums, chat, email, mobile, call center), marketing (advertising, PR, social media, events) and product assortment. The Multichannel World

But the new retail paradigm requires a third element: a customer experience strategy. This component addresses what brand message a retailer will deliver to target customers and how and where retailers will interact with their customers. Further, these three elements — value proposition, target customer and customer experience — should reinforce each other. The right products must be sold to the right customers in the right environment. In today’s world of ubiquitous product, this customer experience component will become a retailer’s key point of differentiation. For example, recent Kurt Salmon research shows that consumers consider stores that they love to have similar personalities to them; and consumers are more likely to get excited when they think about shopping at the stores that they love. Given that net advocacy for loved retailers (64%) is nearly twice that of liked retailers (34%), the benefits of creating this connection are clear. To be clear, customer experience is not just another way to say customer service. While customer service is an integral part of the execution of a customer experience strategy, the broader definition now includes all touchpoints with a consumer. Beyond the obvious — product assortment — consider the breadth of touchpoints retailers have with consumers today: in-store

Within the context of the customer experience imperative, retailers are also grappling with a multichannel reality. It’s clear that consumers are interacting with retailers in many different ways across many different channels, and they expect integration across those channels. Consider these findings from a recent Kurt Salmon study of interactions between consumers and their favorite retailers:

• 22% belong to the loyalty program of their favorite retailer • 26% get the catalog • 34% report having ordered something online and picked it up in the store • 22% have been to the Facebook page of their favorite retailer Multichannel is often thought of as the different places a consumer can make a purchase: store, web and catalog.

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But in the context of customer experience, we believe retailers need to think about a broader definition of channels, such as: • Places for transactions: store, website, mobile commerce, call center, retail partners • Channels for marketing messages: traditional media, Internet, social media, direct mail, email • Indirect channels: word of mouth, public relations, product placement Consumers use each of these channels differently, and each presents different opportunities for retailers. For example, only in the store can a consumer touch and feel apparel; only through mobile media can retailers send a consumer customized options exactly when they are entering the store; and only through the website can a retailer effectively present the widest variety of products. Retailers must determine which channels they will use to reach which consumers in which ways. Although each channel plays a different role for consumers and offers unique capabilities, it is very important

February 2011

In today’s world of ubiquitous product, this customer experience component will become a retailer’s key point of differentiation. that retailers present their brands and messages in a consistent manner across all of the points of interaction. Conclusions A combination of long-term retail trends, technology innovations, and the shock of a severe recession have redefined retailing. Armed with unprecedented levels of information and choice, the modern consumer expects more from retailers than product and price. She wants a broader experience, and she expects to engage across many different channels. As retailers battle for an expanding share of this new consumer’s pocketbook, the winners will: •C reate closer and more compelling connections with their target customers throughout the entire interaction lifecycle

• Establish clear and integrated customer experience strategies, and develop the processes, organization and systems necessary to execute in a crosschannel environment • Anoint chief customer officers to be the champion for customers and ensure the organization is delivering on its brand promise The challenges inherent these actions are not insignificant, but they are surmountable. With the world changing every day and competitors running the same race, the most important thing is that these changes start now. Amy Klaris and Greg Ellis lead Kurt Salmon’s Customer Experience Practice and co-authored this article. Together they have more than 20 years of experience advising industry leaders. They can be reached at amy.klaris@kurtsalmon.com and greg.ellis@kurtsalmon.com. To learn more, visit www.kurtsalmon.com. 15

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ROBIN REPORT

Dumbed-Down Beauty, Reality TV-Style What’s Next, John Boehner Spray-On Tan? By Dana Wood

hether plopping down at her makeup table to do a surprisingly expert smoky eye, or running her fingers through her waist-length chestnut mane, 40-something Kyle Richards of “The Real Housewives of Beverly Hills” has captured the collective attention of millions of beauty-besotted (and credit card-wielding) women across America. Madly Googling at their computers after each episode airs, they want to know exactly what products she uses, and any other style tricks she has up her floaty caftan sleeves. Depending on one’s perspective, this level of consumer interest in a reality television “star” – be it newcomer Richards or her massively famous predecessor, Kim Kardashian – is either the wave of the beauty future or no less than the decline of Western civilization. Andrea Robinson, who has helmed some of the biggest and buzziest brands out there (ranging from Ralph Lauren Fragrances on the giant end to Tom Ford Beauty on the tiny-but-highly-influential front), falls squarely into the latter camp. “What we are witness to here is the dumbing down of America,” she says. “Everyone – the reality stars and their audiences – is digging down to the most base instincts and least-complex thought process.” Ouch. But isn’t Kardashian, along with her coattailclinging sisters Khloe and Kourtney, at least lovely to look at? “Those women are so plastic,” huffs Robinson, who during her decades on the corporate side (and earlier years at Vogue) cast numerous models and celebrities for ad campaigns. “The Kardashi-i are now symbols of beauty and young womanhood? Their bodies are nourished by Gummy Bears, their minds are developed by Internet porn, their voices sound like they’ve inhaled helium, their taste influenced by the Playboy mansion. “Give me Meg, Jo, Beth and Amy any day,” adds Robinson, tossing in a reference to Little Women. “The Kardashians wouldn’t even know who they are.” Nor, probably, would the hordes of star-gazers who clamor after whatever cosmetic property Kim Kardashian attaches her name to, whether it’s her signature fragrance with

Lighthouse Beauty; the Fusion Brand products LipFusion and IllumiFill Line Filling Luminizer that she fronts; or PerfectSkin, a new treatment line created in conjunction with her sisters and PerfectScience Labs. As founder of BeautyStat.com, a fast-growing online interactive community and Facebook superstar, Ron Robinson says his 30,000+ members can’t get enough of Kardashian. “We recently featured a Q&A with her and the response was overwhelming,” he says, adding that members use terms like “aura-like glow” and “divine” in their online comments about her. “I don’t know if anyone is quite on Kim’s level right now. But believe it or not, I think has Snooki has great potential to parlay her realityTV star fame into a lucrative beauty licensing business.” Yes, you read that right: Snooki. Of “Jersey Shore” fame. According to the New York Times, the third season of the MTV juggernaut has recently snagged close to 9 million viewers per episode, besting shows on ABC and NBC in the same Thursday night time slot. “The best beauty spokespersons are not only beautiful but they should have a very warm and approachable personality,” says BeautyStat’s Robinson, who is thoroughly – and unabashedly – dialed-in to reality TV culture. “If they plan to become a spokesperson for a makeup line, they should really be glammed-up and rocking the hottest shades. If they promote a hair care line, having great hair would be important. And if promoting a skincare line, having natural, healthy looking skin would be a plus. For example, Heidi Montag would probably not be a credible spokesperson for a skincare line given the amount of cosmetic surgery she’s had. “An exception here would be Snooki,” Robinson adds, “as she has such a unique look and personality and has a fearless attitude that seems to resonate with consumers.” Though she spent a good chunk of her career on the CoverGirl account, former ad exec Gloria Appel is surprisingly egalitarian on the topic of reality TV personalities landing beauty contracts, and their encroachment on turf that once went to the Christie Brinkleys of the world.

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“

What we are witness to here is the dumbing down of America… Everyone – the reality stars and their audiences – is digging down to the most base instincts and least-complex thought process.” - Beauty Executive Andrea Robinson

“While these women hold no appeal to me, what they represent is seemingly attainable, accessible beauty that provides a refreshing foil to the ‘Real Housewives of Everywhere,’” says Appel. “By identifying a ‘real’ woman on the show, viewers and fans can feel like they can easily capture a look. That’s why women are so obsessed with So-And-So’s eyeshadow. Because – in theory – these stars are everyday women, their look can be more easily cloned.” In other words, a Kyle Richards type - who, along with her co-stars lives in a whopper of a home in Beverly Hills and appears to have a much higher standard of living than the average American woman – possesses exactly the right dose of beauty: Enough to be intriguing and aspirational, but not so much as to make viewers feel intimidated. Beautiful, but not professionally beautiful. And not surrounded by full-time fleets of makeup artists and hairstylists, like, say, new Lancôme faces Julia Roberts, Kate Winslet and Penelope Cruz. “When I worked on CoverGirl, we would often get comments about the models such as ‘I could never look like her’, ‘She’s not real’, and ‘Why can’t they show someone who looks more like me?’ There was real distance between [the campaigns and the] reader/viewer,” Appel

February 2011

recalls. “Here the distance is, in many cases, minimal or at least significantly narrowed. And women love the vicarious thrill of watching them.” Of course, the jury is still out – way out - on whether any of these reality hotties will have anything resembling a career like the legendary contract beauties of yore. Only time will tell whether Kardashian or one of her peers magically morphs into the next Paulina Porizkova. “There just seems to be a lack of permanence,” says Appel, “and the hungry consumer will soon be onto the next show or star.” Bingo. Once you run the numbers, betting the brandequity farm on a “here today, gone tomorrow,” Snooki sort of manufactured celebrity is a risk that most beauty companies can’t afford to take. Especially if they intend to stay in business long after the season finale. A beauty journalist for over 20 years, Dana Wood has served as Beauty Director for both W and Cookie magazines and has written for numerous national publications including Glamour, InStyle, Harper’sBazaar and Self. She also spent several years in the Luxury Products division of L’Oreal as Assistant Vice President, Strategic Development. Her first book, Momover: The New Mom’s Guide to Getting It Back Together, was published in 2010 by Adams Media.

The

ROBIN REPORT Laura Al

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CEO, W il San Fran liams-Sonoma In c. cisco, CA

, a r u a L r Dea

cently sults you re re r u o y n o y congrats ear and sa Y w e N y ted Happ ssive. you a bela h is w to ery impre d V . te n n g guru of a so w a st se I ju the guidin oliday r, h e e st e th tch when L m rd o d fr Howa rough stre f a o n g e e in announce b ss s a a with the p of what h of money. year, what ing on top whole lot a a m e o g it c u in k q O a E d C nm ainly ha ecessor as to mentio You’ve cert your pred fun…not d f n o a t a lo m le o ho on ea of $200 having a w e whole id Williams-S ’t th sn n a e d w d st su a. It was fa any ju a good ide thers, all o h ro your comp c B su n a e k m li h g idn’t seem ere tradin y. After Le stomers w e econom ora used d u N th c r e d u n rs o a u y o k s c ic a s of ent as fast ones like N There wa tro teleph ise assortm d re n d a n h a rc s e n m frying pa own your ding to trade d rd a h were spen f o le p o e kind p n e Pottery lives. K-ed it wh tted above Howard O down their o . sl ss n e o m ti e ra ope wrong Hom is was the higher end s-Sonoma th a m r, a d e li n p il a p W -u rs was the me not-so n decorato Then there class beca ke drunke li le d s e id m m o r h e p their hen the up money on logical. W ry design e v d e in a sea of st lo Barn seem n . e e e b m e wrong ti and it had stores was store at th single unit the dollar st to e g n ig w b o r d u e arn. It’s yo ut everyon t Pottery B sn’t bad, b e a w rg k fo o t o lo n And let’s time. PB’s long, long a r fo ding retail price. ss e n same tter at buil ird of the e b th s a a t w a y d od was. You …an away. Nob t Howard d copying it a e h ss w a e p rs y u ll a o correctly. ich is of c and eventu ally use it achine, wh k, retired tu c m c si a a t d s o n g n a g si rd e a lgorithm… engineer d Then How the word a just as an se ls e u d g they don’t o in m il ming, but y in reta business ti d o is b y fe n li a r heard erything in hardly eve hey say ev T s. g in th of ke charge time to ta e in the m so s a g strength in . u It sure w g n in ti n m o ti c d g it’s goo r projectin always say son and fo a se y a d li o ry strong h aving a ve h n o ts ra plutonium So, cong u kept the o y . , re ss but you e tu n fu si sta blush, hen bu c ri a it k b immediate s e k c th u In me much amazing. ake a Starb , adding so t would m was pretty g a d in th e d s n e sh e li in p sp h rt ac accom spresso m pper to sta What you sets and e et the sho g re a to w t k c o u o d c encrusted er price pro ct ) some low y rr o ortment. p the dire (s in salted ion to kee ) to the ass is in c a e g d a r y u re o e rr ice (so e stores. Y segment h needed sp l a market e WS Hom il th st n is w o re d e t k – that th ed to shu be not. ectly, I thin t and decid e rr ll o u c b – e s ores. May th w st o e sh th s e k c You bit ss a e b sin even bring catalog bu ventually e l online and ’l u o y e d. Mayb to be serve

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You seem to have finally got PB’s design story straightened out. I’d still like to see it a little more differentiated than it is now, but there’s freshness there we haven’t seen in a long time. Now comes the harder part. If the economy truly is righting itself and your core customer is back spending again, that’s a big part of the equation. The boys on Wall Street should be as happy as your customers on Main -- well Upper Main – Street. But there is still much to do. All Sonoma nameplates got as promotional during the past 18 months as they’ve ever been. Not Kohl’s-70-off-before-7am-promotional, but there were more sales, online specials and pop-up events than you were used to. How you keep that balance right is going to be key. You said your margins were solid during Christmas so you must have found the right formula. Howard would be proud. You do have to ultimately figure out how to succeed in the better soft home business. WS Home was your second shot at this segment (anybody remember Hold Everything?) and you can’t quite make it work. Don’t be too hard on yourself: Nobody else has made the upstairs bed and bath segment work on any scale – OK, maybe Bloomingdale’s – but there’s a customer out there, you’ve just got to build a better bed to get them in. I haven’t mentioned West Elm yet and that may be your biggest challenge. It’s certainly your biggest opportunity as it represents an underserved market segment that’s beyond IKEA but not quite ready for your Pottery Barn or Crate and Barrel, much less Raymour and Flanigan. The trick is learning where to draw the line. It’s a dicey proposition that continually trips up Gap and its Old Navy unit, among others. And don’t forget Zara Home is waiting in the wings in Europe and wouldn’t they be a formidable WE competitor if they chose to enter the American? So, you need to continue to fine-tune West Elm but you can’t be too cautious either. This is your biggest growth vehicle and you better own that retail space before somebody else moves in. So there’s lots to do and lots to work out, but here’s the thing, Laura. I ask you the same question I once posed to the CEO of a big retailing operation who was bemoaning the problems – all very legitimate, by the way—he was dealing with: Is there any other retailer in your merchandising classification that you’d rather be running? He thought about it for a minute and eventually said no. I don’t think you even need a minute. You run a great company and you are poised to continue to reap the benefits of all the hard work you’ve put into making it better. And, besides, who else sells a toaster made of glass so you can watch your bagel brown?

Sincerely, Warren

Warren Shoulberg is editorial director of several home furnishings business magazines for Sandow Media and has been reporting on the home business for a long time.

February 2011

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ROBIN REPORT Late Payment Notice

where is the retail in retail banking? By Paco Underhill

Retail banking remains the poor stepchild of North American financial organizations. Few banking CEOs have ever had line responsibility for their banks’ retail divisions. It’s as if they are in retail because they have to be, rather than want to be. As one catty white-shoe banker told me after having had one too many, “Retail is where we park women, and guys with funny last names.” We have been asking the rhetorical question for more than thirty years: where is the retail in retail banking? Last October, I ran a short consulting project for a major U.S. bank. The assignment was to lead a group of global brand managers through a prototype branch and talk about what worked and what didn’t. We call it a store, or branch, clinic. I’ve conducted clinics in a dozen countries across the world. It is an unambiguous way of assessing the effectiveness of the physical design, merchandising and operating culture, on location. The client bank is one for which I’ve done work for more than 30 years, starting with their first installation of ATMs to their modern domestic prototypes, and most recently their new models for Moscow and Singapore. The irony is that the connection internally between those that manage the brand, and those that design the branch, is often distant.

it’s a place where the tellers greet me by name, and the bank manager always returns my calls. I am what they call a gold customer. After selling me on the premise that there were advantages to having all my accounts under the same roof, the reality is that various banking silos—credit cards, investment services, mortgages and other financial products—have very little to do with one other. As well as the branch staff treats me, the flaws in the system have contributed to more than half my business having been lost to other institutions over the past ten years. The bank does not have a credit card that doesn’t have a foreign transaction fee, in spite of billing itself as an international institution. And having a seven figure total balance doesn’t translate into any real advantages in applying for a mortgage, much less a lock in a competitive rate. Neiman Marcus and Macy’s know who their best customers are. But let’s get back to ground level. Any clinic I conduct starts on the outside, either on the street or in the parking lot. That is where the customer experience starts. We asked the very simple question: what can a passerby read from the outside? In this case—a branch bank on lower Fifth Avenue—the answer is not much. There is often a homeless person

Despite a culturally diverse staff, Hispanic branch manager, and the presence of a distinguished educational institution…there is nothing in the windows or vestibule that showcases my branch as a major global bank. At first, the work was to happen in Tokyo, then it got moved to London and finally ended up taking place here in New York City at the very branch I do both my personal and business banking. At risk of calling to mind the Cheers theme song,

who controls the door or solicits donations from exiting or entering customers. The signage and window displays, like the posters and much of the signage on the inside, are recycled print, media and online advertising images. They have

nothing to do with that branch, the unique customer base it serves or characteristics – opportunities – in the surrounding community. Despite a culturally diverse staff, Hispanic branch manager, and the presence of a distinguished educational institution less than 100 yards away, there is nothing in the windows or vestibule that showcases my branch as a major global bank. In the ATM vestibule, there is the ubiquitous flat screen monitor, playing a variation of the media ads the bank runs. Not one person in ten entering or exiting the branch looks at the TV. For the one in twenty that does, the typical exposure time is less than three seconds, a duration that has absolutely nothing to do with the structure of the programming playing on the screen. The screen placement is not situated where it might get the best exposure, so was probably installed to look symmetrical in the architectural renderings of the branch. As people stream in and out of the branch, it isn’t hard to point out where the screen should be. What’s known in the industry as the check-writing ledge is less than eight inches wide. There is a direct relationship between the support of the wrist and forearm while writing, and the writing’s legibility. An eight-inch wide writing surface is an architectural decoration rather than a functional surface. The error rate in processing handwritten deposit slips is directly linked to the writing surface where they were filled out. In this case, what was also missing on the ledge was the key piece of information that goes onto every slip – today’s date. The greeter desk has two seating positions behind it and is open only on one end, which is the farthest end. To go from sitting at the desk to being out on the floor is a minimum of twenty steps. Our experience has been that with greeter desks open at both ends, the ability and frequency of the person assigned to that desk stepping out from behind it goes up by a factor of

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are where you should be turning to get information and education to guide you through those events. The modern branch isn’t about interest rates, or the sale of financial products; it is about facilitating life’s changes. In any branch bank there are distinct and focused opportunities to offer those services. Progressive merchants look on the three dimensional spaces as a piece of branding, and the messaging that goes inside them as information architecture. It was a fun clinic; I enjoyed doing it and the small group of bankers responded very positively. We have been informed that a large amount of the material discussed has been put to work, and other themes and messages are still percolating. My contract called for a fifty percent down payment on the job and the balance in thirty days. I have yet to be paid a dime. Multiple e-mails, re-issuing of invoices and several phone calls later, and finally, I was told last week, “please be patient, we are changing our payment systems.” The bill is coming on 120 days overdue. What would happen if I treated my mortgage payments, much less my credit cards, in the same fashion? two. One of the operational issues with modern bank design is the challenge of getting people out from behind their desks and out on the floor interacting with customers. Historically, in any branch bank in America, the person sitting at the desk farthest from the front was generally the person in charge. This branch is no exception. To be fair, the branch manager often leaves his office and during many peak hours can be found staffing that front greeting desk. In banking and in battle, good leaders lead from the front. One of the most difficult issues in branch design is to get past the legacy of bank robbery. As you should remember from any classic western or gangster movie, massive bars, sometimes of plexiglass, have historically protected the tellers. The concept of “we are on this side of the fence, and you are on the other” has been part of retail banking for centuries. Go back to the moneychangers on the Temple grounds of biblical times and you’ll find the same real or conceptual

February 2011

fence. However, in 2011, as bankers try to shift as much of the transactional business as possible from a teller station to online, the telephone, or the ATM, branch banking should be trying to break free of the historical ties that prolong this divide with the customer. For the vast majority of citizens, the exercise of going to the bank is a chore. We don’t go to shop; we go with the expectation of getting in and out as rapidly as we can. What drives us in the door is a specific mission. What progressive retail bankers seek is the opening to have a conversation. Money is a topic that is endlessly fascinating in the world of Suze Orman, or the business section of the local bookstore, yet is curiously missing in your local branch. Almost every major event in our lives, from graduating from high school, to marriage, to buying our first home, to birth of a child, to a divorce, to the incapacitation of a parent, to retirement, has huge financial implications. Your branch bank and your branch staff

There is a new branch prototype of this bank that opened in January in Union Square. Many of the same mistakes we have been reporting on for the past thirty years have been repeated. If any of the bank’s board members are reading this piece, I’d be happy to give you a tour of that branch for free. I and the rest of your retail customer base deserve better.

Paco Underhill is the CEO of Envirosell (www.envirosell.com ) a behavioral research and consultancy firm focused on commercial environments. His first book, Why We Buy, was an internationally bestseller. Call of the Mall was released in 2004 is a humorous walking tour of an American shopping mall. His columns and editorials have appeared in The New York Times, Money Magazine, The Washington Post and The Wall Street Journal, among others. Underhill is the only foreigner to hold a position on the Board of Advisors at Hakuhodo—Japan’s second largest advertising agency. His latest book published in July of 2010 is entitled What Women Want. It is not a sex manual.

The

ROBIN REPORT Tide and Mr. Clean: Just Soap?

Check Your Limited “Bandwidth” By Robin Lewis

It’s over. You want to continue selling your brand simply as a product? Go ahead, and you’re dead. You didn’t learn from the game-changer of all times, Starbuck’s, taking coffee out of a can and turning it into an experience? And, you’re dead twice if you still believe the only way to distribute it is through your forever loyal and supportive retail “partners.” So, before your brand dies twice and slips into commodity land, competing on price in an oversaturated “share wars” marketplace, and assuming you didn’t learn anything from Starbuck’s, then I urge you to pay attention to recent activity at the greatest consumer brand company in the world, period: Proctor & Gamble. P&G is chock-full of brilliant visionaries who totally get it, in fact they practically invented it: the necessity to preemptively get to consumers through new distribution channels and, once there, to wrap them in an unforgettable branded experience.

Tide and Mr. Clean as Consumer Experiences? Who would have “thunk” Tide Dry Cleaning shops and Mr. Clean Car Washes? FutureWorks, that’s who - an entrepreneurial division of P&G that looks for new growth opportunities in saturated markets (read: the U.S.) Its Vice President, Nathan Estruth, told The New York Times: “The power of our brands represents disruptive innovation in these industries.” Disruptive, indeed! If you have a brand as powerful as Tide or Mr. Clean, read on for “how to” instructions, because P&G might be disrupting the way everyone will be looking at brands from now on.

Has anybody seen a Nike Health and Fitness Club?

First out of FutureWorks was the Mr. Clean Car Wash concept. With sixteen franchises and growing, these crisp, immaculate, modern looking facilities are accented with the

colors of the Mr. Clean logo. The iconic, arms-folded icon himself looms larger than life, high up on the front entrance wall. And, if you key into their websites you’ll read how precisely positioned they are on brand “promise,” with copy as follows: “What began as America’s favorite name in household cleaning has grown into the gold standard in car care. Mr. Clean Car Wash gives you the brightest shine and the best experience possible. Our 5 Founding Proofs guarantee your satisfaction, while our friendly and experienced people do their best to give your car a showroom shine. It’s all about the clean. It’s all about the shine. It’s all about delighting you. Mr. Clean Car Wash. Let your love shine.™” The five “Proofs” refer to heritage, proven results (the total clean description and it includes oil changes and lube jobs as well), dedicated people, comfort lounge (outfitted with WiFi, TV, coffee and toy water guns for kids to squirt cars going through the wash), and finally, responsibility (they recycle and filter the water). Sound like an experience? I think so. Check out the adjacent photos. Both the car wash and the Tide Dry Cleaners almost look like destinations for a family outing. Tide Dry Cleaners is the newest of FutureWorks’ endeavors. Ironically, the entire dry cleaning industry, at about $8 billion in total sales, is just one-tenth the size of P&G, suggesting P&G could simply acquire the industry in total. Now, that would be a new one. Perhaps Goldman Sachs could figure out how to pull that off. Also of interest is the fact that attempts at capturing a dominant position in dry cleaning have been made before, including twice by P&G itself. Global consumer products giant Unilever took a shot about a decade ago, but found it could neither add value to the model, nor offer a lower price to consumers. My opinion: right strategy, poor execution. Another shot was taken by Autoweb.com, a car buyers’ site, who launched PurpleTie dry cleaners. However, not being able to offer more for less also killed these guys. Then, P&G introduced Dryel

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in the late 1990’s. It was to be an at home dry cleaning solution, but did not succeed. Then, they opened stores named Juvian in Atlanta that provided home pickup and delivery of laundry and dry cleaning but met with little success. Did the mighty P&G miss the fact that it was making the classic Marketing 101 gaffe? Dryel and Juvian were totally unknown brands. They were trying the costly and difficult route of starting from scratch, while sitting on the most powerful “clean” brand in the world? Well, I guess they have now figured that out. So, Tide Dry Cleaners has four franchise locations, but plans a rapid expansion, since their pilot store outside of Kansas City generated over $1 million in annual sales in its first year, about four times the industry average. And, while they are price competitive, they do provide more benefits and a more pleasant experience than the average dry cleaning establishment. The Tide-logoed prototype facility is roomier than a typical dry cleaning store, with about 3000 square feet. It has an air purifying system that pulls out the odors and heat usually associated with dry cleaners, so it’s cool and smells like Tide. And, if you don’t know that fresh, home-spun aroma then you’ve been living on another planet. It’s also “Green,” since they use environment-friendly silicone-based solvents in the dry cleaning process, enhanced with the Tide fragrance. Of course, laundry is also done on the premises.

How about your brand? Has anybody seen a Nike Health and Fitness Club? I haven’t. Should Ralph Lauren extend his brand into the hotel business? It’s been speculated he may acquire © Copyright P&G the American Hotel in the Hamptons’ town of Sag Harbor. Why not hotels? His brand is not just about apparel or other products. It’s about his vision of a Gatsby-like world of sophisticated elegance that, frankly, can embrace any product or service that fits that brand persona. Expand your thinking and your vision. Open them to worlds of new opportunity and growth that may be right smack in the middle of your brand’s DNA. Unlock its greater value. Give it a life. Create a branded experience.

There are about 15 employees per store all crisply outfitted in Tide golf shirts. And there is a 24-hour drive-through and pick up service, with personal lockers for use during off-hours. And, if one joins Tide’s Inner Circle Rewards program, the exclusive promotions, coupons, cash back rewards and all kinds of other benefits are endless.

It’s All About a Brand’s Positioning, What about Yours? Both the Tide and Mr. Clean brands are all about, well, clean. That’s clearly a no-brainer. So, how hard is it to imagine those brands of packaged “soaps” moving from supermarket shelves and becoming a 360-degree wrap-around experience as car washes and dry cleaners? With other skill bases that can be acquired, this is about as natural a brand extension and growth strategy as I can imagine. So was Starbuck’s extension into the “third place” experience.

February 2011

The

ROBIN REPORT Quotes to remember ONE GOVERNOR EXPLAINS HOW WE ‘KICK THE CAN DOWN THE ROAD’ AND HOPE “ The way we responded to recessions in the past was to do less of the same, with the hope of having more money later so we could do more of the same.” – Governor John Kitzhaber of Oregon OR AS CASEY’S DAILY DISPATCH SAYS OF LOSSES STILL ON COMMERCIAL LENDERS’ BOOKS “Rather than accept losses, delay and pray.” FOLLOWED BY THIS RATHER STARK OPINION… “ In order to have a double-dip recession, you first have to have exited the recession – which we haven’t. What the government and its shills have been calling a recovery is nothing more than the predictable, but short-lived, effect of pumping the proceeds from issuing a lot of government debt into the chosen sectors of the economy.” - Casey’s Daily Dispatch OF COURSE, WE KNOW WHAT ALBERT EINSTEIN HAD TO SAY ABOUT THIS… “Insanity is doing the same thing over and over again and expecting different results.” AND THE RUSSIANS TELL US WE WOULD BE BETTER OFF ‘BITING THE BULLET’… “The man who’s been beaten is worth two who haven’t.” An old Russian Proverb ON A LIGHTER NOTE… J.CREW CEO MICKEY DREXLER ON…WELL, MICKEY DREXLER “Shoppers love to shop – it’s an Olympic sport.” AND INSTRUCTION FOR ALL FROM LEONARD LAUDER, A GREAT VISIONARY --“If you can’t see the future, you can’t get there. It’s as simple as that.” AND MUCH LIGHTER FARE…ALTERNATE MEANINGS FOR COMMON WORDS Flabbergasted, adj. Appalled over how much weight one has gained. Abdicate, v. To give up all hope of ever having a flat stomach. Beelzebug, n. Satan in the form of a mosquito that gets into your bedroom at three in the morning and cannot be cast out.

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Copyright © 2011 Robin Lewis, Inc. All rights reserved. Copying or reproducing, by any means whatsoever, of The Robin Report, or any distribution hereof, in whole or in part, without the express written consent of Robin Lewis, Inc. is strictly prohibited. The Robin Report is published monthly for senior executives in the retail, fashion, beauty, consumer products and related industries. The mission of The Robin Report is to provide new strategic insight into major industry and business events. It is intended to be concise for quick reading, provocative to stimulate thought, and humorous for fun and enjoyment. The opinions expressed herein are not, and should not be construed as investment or other advice. All expressions of opinion are subject to change without notice. To order a print or electronic subscription to The Robin Report, please visit our website at www.TheRobinReport.com.