Sell Your Employees in Order to Sell Your Customers

Refresh, Reboot, Reinvent


There is a great article/column in Forbes this week "JCPenny's New Stragegy A Tough Sell on the Sales Floor". It is a first person account of a family's quest in search of the perfect and perfectly priced sofa. The experiences the author describes ring true, especially for the home furnishings industry because we are very entrenched in discount pricing models and almost used car salesman techniques with artificial mark ups, crazy sales discounts, and spiffs.


However, beyond the initial shopping trip for a sofa is a much bigger lesson that applies to all industries and businesses. When making a strategic change to the business model it is imperative to remember that your team, whether they are in direct consumer sales, b to b service, or just in house administrative--they are your most important customer. If you do not take the time to win over your employees about the strategic shift of the company, then the shift will falter.


When Howard Schultz returned to Starbucks as CEO in 2007 he recognized that first and foremost he needed to focus on the core brand, its values, and its ethos. In order to do that he needed to retrain, reinvigorate, and refresh the workforce. He took the unprecedented move of closing down all the stores, flying managers into a central location and focusing on the details that, when combined are the Starbuck's brand. 

Link to Book

"On February 23, 2008, “I closed every store to retrain 115,000 people – I said we were going back to the roots of the company.” Of course, the media frenzy that ensued from this decision brought many to believe that the end of Starbucks was near – that they were no longer relevant. Schultz admits it was a bold decision to retrain every single employee. His explanation? “It was honest, it was authentic, and it was necessary.” The company lost $6 million that day. And as he said, Starbucks still had a long, long way to go in solving their mounting problems – but this was a start.
Starting over, he said, involved metaphorically asking the question of employees,What does it mean not to be a bystander? “From this point, we had to create, attract and create new customers.” Gone, he says, was the time that Starbucks could do no wrong — that the company was on a “magic carpet ride” – and that profitability and like-ability would happen automatically with every move the company made. Gone was the time that Starbucks was leading the conversation — now, they had to find a way to take part in the larger conversations that were happening." (source)


In the case of JCPenny's where they are trying to basically start an entirely new brand but based on a foundation of an old brand, retail stores, and employees, it is not enough to roll out a new ad campaign, pricing structure, and updated merchandise. 


If the railroad cars are not connected to the engine, the engine will still arrive at its destination, but with what to show for it?
JCP needs to take the time to establish and secure the connections between each boxcar before the engine leaves the station. Its too late now of course, but they still have time to catch up. As Schultz proved, an existing brand can be put back together if you take the time to stop the engine. Regroup, reconnect, and redefine together the action plan and shared goals. Hopefully JCP does this. 


For all those with businesses that need a refresh, remember that (1) it's not too late and (2) take the time in the beginning and continue to maintain the brand because that is always easier than a mid-journey stop and restart.

Local Product Development Imperative in Emerging Markets

As Mattel and others trying to expand in China and India have learned, the right blend of localization and globalization is tricky, write Gupta and Wang

Why Barbie Flopped in Shanghai

April 21, 2011 By Anil Gupta and Haiyan Wang, Bloomberg Businessweek, INSIGHT 

Mattel (MAT) opened its first free-standing Barbie store in China in March 2009—a giant, 36,000-square-foot edifice in a six story building on Shanghai's Huaihai Road, one of the most expensive shopping streets in the country. It was the second such store on the planet, after the successful launch of a pioneering, 7,000-sq.-ft. outlet in Buenos Aires in 2008. Barbie's Shanghai adventure didn't work out so well, though. Mattel shut its doors on Mar. 7 this year.

It's easy to dismiss this failure as a stark illustration of ignoring the well-worn dictum: "When in Rome, do as the Romans do." In our view, such an explanation is far too simplistic. You can never outdo the Romans at the fine art of acting like a Roman. Creating the right blend of localization and globalization is a much harder task than achieving either complete localization or zero localization. To succeed in dynamic markets such as China and India, managers need to learn rapidly what and how to localize—while avoiding the risk of catastrophic failure from inevitable mistakes.

Consider the differences between Mattel's experience in Argentina and China. The Argentine market was already Barbie-crazy; a Broadway-style Barbie musical had even been highly successful on the Buenos Aires stage. In contrast, Barbie was a relatively new concept to China. Mattel faced many more unknowns in China than it did in Argentina. Yet the company chose to start out with a store more than five times as large.

Despite the many unknowns, Mattel designed the Shanghai store to target both young girls as well as adult women, thereby significantly increasing the risk that a misconnect with either segment could doom the whole venture. The giant store size also meant that Mattel needed to have a very large mix of product and service lines in the store—900 display cases, a restaurant, a spa, a cocktail bar, and an adult clothing section, to name just a few. The large variety of products and services rendered it impossible for the company to figure out in advance which ones to localize, how much to localize, which of them would catch on with customers, and how much customers would be willing to pay.

HOW WAL-MART EXPERIMENTED

The company wasn't totally blind. It did launch Ling, a Chinese Barbie. Dealing with hundreds of moving parts in a very different, unfamiliar, and dynamic market such as China, however, guaranteed that the speed with which the company would discover its multitude of mistakes would overwhelm its ability to learn and adapt.

Compare Barbie's entry strategy into the retail sector in China with that of Wal-Mart (WMT). When Wal-Mart entered China in 1996, it took a far more experimental approach. It experimented with different store formats to figure out which would have the greatest customer appeal. Similar experiments regarding target customer segments and merchandise mix played a useful role in helping Wal-Mart reduce the risk of failure as it rolled out store expansion and ramped up investment. It is also critical to note that a large format store is a fundamentally lower-risk strategy for a multibrand retailer such as Wal-Mart than for a single-brand retailer such as Barbie.

Mattel itself has adopted a much smarter learning strategy for Barbie in India. Since its India launch in 1991, Barbie has developed an unrivaled brand presence in the country. The brand has been targeted exclusively at children and promoted via extensive advertising on television networks popular with kids. Further, instead of opening a free-standing large format store, MQuite recently, like Ling in China, Mattel has also introduced an Indian Barbie modeled after Katrina Kaif, a popular Bollywood actress. Mattel opened a large number of stores-within-stores, including an exclusive space in a highly successful Hamleys toy store in Mumbai. Such an approach reduces needed investment and associated risks while creating greater brand exposure. More importantly, it enables Mattel to learn and adapt at a faster pace on the road to learning where and how much to localize.

FIVE TIPS TO SUCCESS

As with Mattel and Wal-Mart, the challenge of learning how much and where to localize is universal to every multinational company. We offer five guidelines regarding how companies can meet this challenge faster and better than their competitors.

First, remember that you can never win in China and India (or any other foreign market) by either complete localization or zero localization. The trick lies in figuring out the right blend between localization and incorporating global concepts and standards. This will never be easy. Companies can significantly increase the odds of success, however, by starting with simpler products and services, engaging in lots of rapid and low-cost localization experiments, and adding complexity to their business models as they learn from these experiments.

Second, the localization-globalization question needs to be addressed at the level of dozens of variables pertaining to both strategy and operations. Coca-Cola (KO) is a grandmaster at this game. While the iconic cola is pretty much a globally standardized product, most of the company's sales outside the U.S. comes from products and brands created locally for the unique needs and desires of local customers. Even for the Coca-Cola brand, the company pays careful attention to localization along a host of variables such as package type and size, amount of sweetener, distribution channels, advertising media, and pricing.

Third, traditional market research, while useful, will often be woefully inadequate in helping companies figure out what to localize and what not. Like Wal-Mart's approach in China, active experimentation and trial-and-error learning will generally be the fastest approach to getting the most accurate answers.

Fourth, avoid the trap of superficial generalization. Like Mattel, many companies make the mistake of assuming that, because urban Chinese customers appear quite Westernized in their outward appearance, they will easily accept Western concepts, products, and services. Even in the case of premium luxury goods, companies are realizing they must understand and adapt to potentially important market differences. BMW (BMW.GR) owners in Europe or the U.S. love to drive the car themselves; their Chinese counterparts, however, sit in the back and rely on chauffeurs to do the driving. In Europe, the majority of Louis Vuitton (LVMHF) customers are women; in contrast, in China, it is men buying gifts for business partners, wives, mistresses, or girlfriends.

Fifth, keep your ears close to the ground. Emerging markets such as China and India are changing at three to four times the pace of developed markets. Thus today's perfect blend of localization and globalization could easily become obsolete three years from now. The trend need not always be toward greater preference for global brands and concepts. As China and India become richer, there is a rapidly growing sense of national pride. Also, as local products improve in quality, it is inevitable that local styles and brands will start acquiring as much cachet as global ones.

I would add a 6th point - be aware of current, past, and future government policies. Local policies regarding everything from building restrictions and incentives to transportation restrictions as part of urban planning initiatives can make or break a business. Ducati ($DMH.SG) opened a Shanghai flagship store in 2010, and quickly discovered that the customers faced major hurdles if they wanted to actually ride the motorcycles they purchased. Because it is Illegal to drive two wheel motored vehicles in Shanghai (read more here and here)I was told by the store general manager that in fact a rider would have to truck their bike 200km outside the city limit, and even then the speed restrictions are tightly controlled by the police. Another hurdle is that trucks are limited to late night and early morning hours (read more here) of operation within the city of Shanghai, so the escape time is also restricted.

Similarly, last year (2010) the government was providing massive incentives to consumers to purchase everything from refrigerators to new cars. Then, come 2011, the Chinese government put in place strict laws restricting the number of cars allowed in all Tier 1 and 2 cities (read more here). The result is that would be auto consumers have a slim chance of winning the car allotment lottery, and auto sales plummet.

Bloomberg Article Authors

Anil K. Gupta (anil.gupta@insead.edu ) is the Insead Chaired Professor of Strategy at Insead. Haiyan Wang (hwang@chinaindiainstitute.com) is managing partner of the China India Institute and an Adjunct Professor of Strategy at Instead. They are the coauthors of Getting China and India Right (Wiley, 2009) and The Quest for Global Dominance (Wiley, 2008).

........

and a follow up read from this week's Access Asia

Fear Not...Barbie Lives

It seems reports that Barbie had felt rejected, and had thrown herself under a bus on Huaihai Road, were premature. Barbie Towers has shut down, and Barbie has decided that regular retail is not for her. Yes, Barbie is now out their selling it on the streets.

Judy's, infamous Shanghai slapper bar of long note, and renowned for its ladies who charge (you know what we mean, any other way of describing them will never get past the puritan filters at most American companies!!) is selling nights out with Barbie. So, if you want a date with Barbie, forget visiting the Barbie Store (it's shut anyway), just buy her a Rum and Coke and she's yours!

And just in case you're reading the small print, we'd like to point out that in our long and deep experience there's no such things as a 'give away' in Shanghai!!

Live performances of what, exactly?

The Importance of EXCEEDING Customer Expectations

Excerpt from,
Business Stripped Bare:
 "Adventures of a Global Entrepreneur"

Source: I discovered this article via twitter from @EntMagazine. You can also follow @RichardBranson for more great business insights.

This is a insightful, clearly written article about delivering expectations - actually - about EXCEEDING Expectations. And the simple ways a business can do that. And, the key role the founder and later 'leader' must stay involved in the process, in touch with customers and employees, and always, always true to the core values of the BRAND.

This is an edited excerpt from Richard Branson's book Business Stripped Bare: Adventures of a Global Entrepreneur (Virgin Books, 2010).

The celebrated entrepreneur's advice for delivering on your business promises.

By Richard Branson   |   April 20, 2011 from Entrepreneur Magazine

So you have an idea for a business -- one that you believe has the potential to alter the industry. You put together a straightforward proposition, raised the necessary capital, gathered a team and publicized your new venture by every means available. What happens next?
It's time to deliver on your promises. And the only difference between merely satisfactory delivery and great delivery is attention to detail.

Anyone who aspires to lead a company must develop a habit of taking notes. I carry a notebook everywhere I go. Most of my entries are like this one, from a Virgin Atlantic flight years ago: 

"Dirty carpets. Fluff. Areas around bow dirty. Equipment: stainless steel, grotty. Choice of menu disappointing -- back from Miami, prawns then lobster (as a main course) in Upper Class. Chicken curry very bland. Chicken should be cut in chunks. Rice pretty dry. No Stilton available on cheeseboard."

What's most revealing is this final note: 

"Staff desperate for someone to listen. Make sure flight staff reports are actioned IMMEDIATELY." 

.....I'm pleased to say they now are. 

This is the key to getting all the other items on the list done -- employees are better able to report problems and get them fixed before I come along with my notebook.

And as you decide how best to deliver your product or service, keep in mind the company's core business values, the medium-term strategic considerations and where the industry is headed in the long term. 

Make your decisions on the micro level in light of that bigger picture, and your business should be headed in the right direction.

This problem-solving process should not be limited to the launch. Owners and leaders of established companies should sample their business's products as often as possible. Many bosses regularly speak to staff at all levels, but often they do not follow up on problems they uncover. This means their employees never learn what importance the CEO places on getting the details right, or see just how necessary and possible it is to address the everyday problems that come up. If you foster a culture of waiting for someone else to solve problems, the company will suffer the consequences.

Great delivery also depends on great communication, which should start at the top. Be brave: hand out your e-mail address and phone number. Your employees will know not to misuse it or badger you, and by doing so, you will be giving them a psychological boost -- they will know they can contact you anytime a problem comes up that requires your attention. (twitter is also a great way to 'hand out' empower your customers or potential customers with the ability to communicate directly with you.)

Instilling attention to detail throughout your new company will prove especially important when the business begins to gain ground. Employees across the business should be focusing on getting it right all day, every day.

• A few years ago, I saw warning signs that we were starting to stumble when I received a letter from a couple who had planned to travel on Virgin Trains in Britain. We had seen a rapid 50 percent increase in passenger numbers, and suddenly people were finding it difficult to get a seat on the busier routes. The letter writers had not realized that they now had to book seats in advance. When they arrived at the station, they found the staff unhelpful. Given that the husband was disabled and needed assistance, this was pretty terrible of us.

I personally helped them, and in the process became concerned about the bigger picture for this company. I asked Ashley Stockwell, the brand and customer service guardian (note that he strongly correlates customer service 'guardian' (not representative) with the term brand - the customer service agents are the first contact experience for many companies with their customers. they are your brand - for good or bad or, indifferent.) for Virgin Group, to take a look. Thanks to our renewed focus on delivering great service and attention to detail, we got better and soon received plaudits. 

• Related: Richard Branson on Winning Customers' Trust

Finally, if you do start to see success in the form of new and repeat business, remember to keep a cool head. You're delivering change, and if you are succeeding, other businesses are probably getting hurt. They will try to shut you down.

Be sportsmanlike, play to win, and then befriend your enemies. If you do fall out with a partner, colleague or competitor, call that person a year later and take him out to dinner. It is likely you have a great deal in common. After all, why did you both get into the business in the first place? To deliver change, serve customers, and reform an industry. Now, what can you create together?

This is an edited excerpt from Richard Branson's book Business Stripped Bare: Adventures of a Global Entrepreneur (Virgin Books, 2010).

Recent Entrepreneur Magazine Articles from Richard Branson

•  Richard Branson on Customer Service

• • Richard Branson on Branding

• • Richard Branson on Letting Go
  • Richard Branson on Winning Customers' Trust

Business: Luxury Spreading Far and Wide

April 6, 2011 from China Bystander

Chinese already spend one of every eight dollars spent on luxury goods worldwide–as the proliferation of international luxury brand retailers from Armani to Louis Vuitton operating in the country and their growing dependence on its business already bear tony testimony. By 2015, Chinese consumers will be spending at least one dollar in every five, according to newly published researchby McKinsey (see original research article below), the international management consultancy. That adds up to sales of luxury watches, jewelry, handbags, shoes, and clothing of the order of 180 billion yuan ($27.5 billion), up from 80 billion last year.

Good news for the international luxury brands that Chinese consumers prefer? Up to a point. This broadening of their customers will move them out of their traditional niche of selling to the very rich. Mckinsey reckons that there are 13 million Chinese households with incomes of 100,000-200,000 yuan ($15,000-30,000)–upper middle class in China and on the first rung of the ladder of luxury consumption–and that this number will increase nearly sixfold to 76 million by 2015. Their share of the Chinese luxury goods market is forecast to grow from 12% last year to 22% by 2015, making it the fast growing sector of the market.

Addressing their needs requires a different marketing approach to the high-touch, for which read expensive, way luxury-goods makers are used to dealing with their best-heeled customers. That implies better in-store services and digital experiences for their customers, and the development of products and services designed for the local market (as Hermes is doing with its Shang Xia brand), three factors that have not always been the strong suit of luxury companies, especially their online strategies; the broad spread of social media is a particular challenge to the exclusiveness of a luxury brand. The luxury companies’ market will also spread from the the first tier cities to the second and third, compounding the reach and brand dilution issues, though it will also remain concentrated in the main cities.

Luxury-goods manufactures will also find that growing familiarity with luxury goods will make Chinese consumers more value conscious. Brand retailers won’t be able to get away so easily with just slapping a high price on their goods. Luxury goods prices in China are about 20% higher than even in Hong Kong. On the flip side, the research shows that as consumers get more brand conscious, they value craftsmanship and quality more, and are becoming more aware, and rejecting of, counterfeits.

McKinsey also predicts that spending on luxury services, such as spas and other wellness activities, will grow faster than that on luxury goods, another shifting sand for luxury retailers. The elephant in the room, though, is whether China will generate its own luxury brands as the once similarly foreign-brand besotted Japan has done. Original Article 

Tapping China’s luxury-goods market

By 2015, Chinese consumers will account for more than 20 percent of the global luxury market. How is their behavior evolving?

APRIL 2011 • Yuval Atsmon, Vinay Dixit, and Cathy Wu Source: Marketing & Sales Practice

China will account for about 20 percent, or 180 billion renminbi ($27 billion¹), of global luxury sales in 2015, according to new McKinsey research. Even during the global recession in 2009, sales of luxury goods in the mainland rose by 16 percent, to about 64 billion renminbi—down from the 20 percent growth of previous years but far better than the performance of many other major luxury markets. To get a better idea of the dynamics, McKinsey surveyed more than 1,500 luxury consumers in 17 Chinese cities in spring 2010.²Three findings stood out.

Shifting attitudes

At a time of rapidly rising incomes, widely available luxury products (and information about them), and shifting attitudes toward the display of wealth, more Chinese consumers than ever feel comfortable buying luxury goods. As a result, China’s love for them is moving down the economic ladder, creating opportunities and challenges for marketers accustomed to serving only the very rich. While wealthy consumers (with incomes above 300,000 renminbi, or about $46,000) will continue to account for a majority of luxury consumption, our research shows that the 13 million households in China’s upper middle class (incomes between 100,000 and 200,000 renminbi) offer the biggest new growth opportunity. They already account for about 12 percent of the market, and their numbers are growing rapidly: we expect to see 76 million households in this income range by 2015, accounting for 22 percent of luxury-goods purchases (Exhibit 1).

Interest in them is moving beyond handbags, jewelry, fashion, and the like. A growing number of Chinese luxury consumers are also splurging on spas and other wellness activities. Consumption is growing faster for such luxury services than for luxury goods: 20 percent of these consumers said they were spending more on experiences, only 13 percent on products.

click for larger view

Greater sophistication

The Chinese are increasingly exposed to luxury goods through the Internet, overseas travel, and first-hand experience. As a result, they have become more discerning.

With the surge in the number of luxury stores, fashion magazines, and Web sites and the use of social media, Chinese consumers are now familiar with nearly twice as many brands as they were in 2008. Half of the consumers we surveyed in 2010, for instance, could name more than three ready-to-wear brands, compared with only 23 percent two years before. As Chinese consumers become more familiar with luxury goods, they are becoming savvier about the relationship between quality and price. In 2010, only about half of consumers equated the most expensive products with the best ones, down from 66 percent in 2008.

Price transparency contributes to this dynamic. More than half of luxury consumers check product details and prices online, compared with 13 percent of all urban dwellers. Since two out of three luxury consumers have made at least one trip overseas, they have access to external benchmarks for comparing prices back home. In 2008, only two of five people in China realized that in the mainland, prices were at least 20 percent higher than they were in places such as Hong Kong. By 2010, 66 percent did.

Luxury-goods companies have long waged a battle against counterfeit goods in China. But there’s good news for marketers: our research shows that consumers increasingly want the real thing. The percentage of those who said they would buy fake jewelry, for example, dropped to 12 percent, from 31 percent, in 2008. Some luxury buyers told us they felt sure that their friends would spot a counterfeit. A woman who used her first salary check to reward herself with a luxury handbag said, “it would be meaningless if it was fake.” What’s more, an internationally well-known brand has become one of the most important factors in making a purchase (Exhibit 2).

click for larger image

New geographic markets

Rapid urbanization and growing wealth beyond China’s largest cities are creating a number of geographic markets with sizable pools of luxury-goods consumers. More small cities will become large enough to justify the presence of stores catering to them; we expect luxury sales in urban areas such as Qingdao and Wuxi, for instance, to triple over the next five years. By 2015, consumption in such cities will approach today’s levels in Hangzhou and Nanjing—now two of China’s most developed luxury-goods markets—and luxury consumption could pass 500 million renminbi in more than 60 cities, compared with 30 today. But the luxury-goods market will remain concentrated in the top 36, which will account for 74 percent of the market’s growth and 76 percent of total luxury sales by 2015.

Most of the world’s luxury-goods companies are already in China or contemplating increased investment there. They must tackle several big issues before making their next moves. First, delivering exceptional service in stores is critical; two out of three consumers are disappointed with the indifferent attitudes of salespeople. While the in-store experience is by far the most important factor driving purchasing decisions, the Internet has rapidly become the second-most-important consumer touch point for luxury categories such as fashion. Marketers will need increasingly sophisticated Web strategies; for example, they can work with social-media agencies to monitor and shape online conversations among consumers or to identify influential bloggers and help educate them about brands.

for the full pdf report, click here 

Finally, much of luxury’s allure comes from the opportunity to share in the rich cultural heritage associated with a brand. This concept is rapidly catching on with Chinese luxury consumers, and many leading brands are promoting their history and craftsmanship. But the picture isn’t totally straightforward: one-third of luxury consumers in China said they would prefer to buy products that were designed specifically for the country and incorporated Chinese imagery.