About these ads

Carving Up the Retail Industry by Customer Jobs to Be Done

Online retailers had a heck of 2011 holiday season, up 15%. Whew, in a tough economy no less. But the news wasn’t as good for some physical retail stores. Sears Holdings announced disappointing sales and will be closing over 100 stores. Best Buy same store sales dropped, and some have expressed their sentiment that the retailer is on a long downward slide.

Digital disruption. Coming to a store near you.

That online and mobile commerce is increasing its share of business really isn’t a surprise. The  Internet, as promised in the 1990s, is turning over many industries.

Retail being another such industry, although it’s a much slower process of disruption. Which means the physical retailers have time.

Time to take their natural advantages and build on them.

Determining Physical Retailers’ Competitive Advantage

Given the retail industry’s importance to the global economy and its periodic restructuring, it should come as no surprise that there’s plenty of advice for the industry. Three of the larger, well-known consultancies weigh in.

Booz and Co.’s Karla Martin sees a need for retailers to reduce selections and assortments. Bain’s Darrell Rigby sees omnichannel engagement with customers as the path for physical retailers to re-assert themselves.

In both Booz’s and Bain’s advice, there are elements of incorporating the jobs for which a customer hires a retailer. In the Booz piece, it’s a curation job: “Help me navigate an increasingly overloaded product landscape!” In the Bain piece, it’s a…well, not entirely sure what job is being satisfied. It appears to combine several customer jobs to be done. It is also a good thought piece about future industry infrastructure requirements.

These advice pieces raise the question of how to drill deeper into customer needs. Go beyond the meta trends and get specific around customers. Consulting firm McKinsey offers this thought:

“One way that manufacturers and retailers can investigate these trends is through consumer surveys designed to identify ‘purchase drivers’ – meaning those factors that are decisive in the decision to buy a product or shop at a certain retailer. This survey should not only cover conventional topics like price, quality, and service but also such factors as corporate responsibility and traceability of product origin.”

Survey fatigue notwithstanding, McKinsey starts down the right path. Get the customers’ input. McKinsey talks in terms of purchase drivers. An example of such an influence is convenience, deemed to include shopping ease and practicality.

But does that go deep enough? The risk here is that only surface-level influences are elicited, while the real drivers are buried deeper. A case of “what they say” vs. “what they do”.

A good alternative to get deeper into customers’ minds? The jobs-to-be-done approach.

Components of a Job-to-Be-Done

To create a jobs-to-be-done structure, I’ve followed the work of Strategyn’s Tony Ulwick and Lance Bettencourt, and Re-Wired Group’s Bob Moesta. They’re practitioners who have been working with organizations for years.

Ulwick and Betterncourt have defined the structure of a desired outcome statement (pdf link):

  • Direction of improvement
  • Unit of measure
  • Object of control
  • Contextual clarifier

As example, he gives:

Minimize…the time it takes…to verify the accuracy of a desired outcome…with a customer…e.g. its meaning, completeness, exactness, etc.

Bob Moesta has identified four influences on how a customer decides what product will satisfy a job to be done.

Push (F1): The situation which is driving a person to seek a solution. What is it we’re dealing with? What’s the impetus?

Pull (F2): The promise of a new solution that can satisfy the need. As customer’s consider a new solution, how well does it map to their needs?

Allegiance (F3): The familiarity of an existing solution is a risk mitigator, leverages already learned usage and known benefits.

Anxiety (F4): The unknown characteristics of the new solution, and the potential missteps that await. Would if the new solution isn’t all it’s advertised to be?

I like both forms of analysis, they are quite complementary. So I combined Ulwick, Bettencourt and Moesta’s work to use as an analytical tool.

Retail’s Jobs to Be Done

There are many jobs that retail must fulfill for customers. Below, I’ve picked four of them for analysis. Four that are ones you’d probably see as well. Each job has a defined outcome statement, and a listing of drivers which influence the retailer selected for the job. These aren’t actual customer insights I’ve surveyed, they’re from me. But they address the right type of analysis needed.

The analysis is done from the perspective of switching from a physical retailer to an online one. This is the disruption which is occurring. This perspective was chosen to illuminate possible innovations for physical retailers, or to point out the long term trend they will need to accept.
Retail Jobs - Desired Outcomes

Retail Job: Low Price

Getting the lowest price. Isn’t that what everyone wants? It’s been a human goal since we were bartering woolly mammoth skins for stone weapons.

Frankly, this job is one that will be challenging for physical retailers to fulfill. As has been noted, Amazon – and other online retailers – don’t have the overhead of physical stores. They can and do price lower. And you can see the differences, right there, on your screen.

The anxieties that consumers feel about online retailers providing this job – retailer performance, shipping delays – are there, but don’t rise to the level of overturning the pull of the online retailers. Too many online retailers have proven themselves over the years. They’ve overcome these anxieties.

Physical retailers competing to fulfill this job need scale to overcome their higher infrastructure costs: physical plant, distribution systems, inventory, in-store personnel. Kmart, for instance, is losing the scale war to Walmart, and the online retailers are generally able to outprice it.

Verdict: Long term, this job will be fulfilled by mega-stores and online retailers. But only in categories where it makes sense. Groceries, for instance, are tougher for online fulfillment of the Low Price job, due to the delivery costs of home delivery.

Retail Job: Immediacy

There’s times when you just have to have something today. Even now. Something needed for a home project. Last minute gift. Car maintenance. The list goes on and on. The Immediacy job occurs when the unforeseen happens, or the unplanned realize they need something.

So what’s the pull of online here? Well, you can see the item from your comfortable home. See, it’s right there on my screen! And even better, I can buy it right now! Hmm…not quite the same as actually having it in hand, is it?

Actually, the online retailers are working to provide the “holy grail” of e-commerce, same day delivery. There are different strategies here, although working with physical retailers is a core part of several initiatives. But the costs appear prohibitive: one start-up, Postmates, charges $10 to make short deliveries inside cities.

Verdict: The physical retailers have a distinct advantage here. That expensive distribution system that hurts them with the Low Price job? It’s a distinct advantage here. Physical retailers should play the immediacy game full tilt. Develop an app that tells customers whether something is available, and make it easy to pay for the item. Create a drive-through pick-up experience.

Retail Job: Selection

What did Henry Ford say? You can choose any color you want, as long it’s black. That may have been the case earlier in the industrial age, but not so anymore.

As a general observation, people desire with the ability to select from distinct offerings when making a purchase. For instance, when buying a shirt, isn’t good to see a variety of colors, patterns, cuts, etc.? You’re looking for something that fits your style. If you’ve got a home repair, don’t you want the right tool for the job? Purchasing for your kids, and it’s great to see smaller sizes of an item.

Online retailers can fulfill the Selection job nicely with their ability to provide a long tail inventory. If one retailer doesn’t have what you want, the next retailer is a click away, thanks to Google search and dedicated shopping engines. Online sites can also “own” a category with a larger selection by accessing buyers globally, not just in the local market.

Physical retailers have competed to fulfill this job by offering a wide selection of categories (mass merchandisers) or by going deep in a single category (electronics, books, pet supplies, etc.). One advantage the physical retailers have is the ability to hold and touch items, useful when considering a large number of options.

Verdict: Physical retailers will eventually cede most of the Selection job to online, due to online’s distinct advantages.

Retail Job: Help

With so many options available to us, a distinct #firstworldproblem, it can be daunting to navigate the product landscape. You’ve got a personal style, but could use some help in finding items to match it. There are multiple philosophies for raisi9ng baby, what items fit the one you’re following?

Shoppers want information to help them in their purchases. Beyond information, they want advice. Because a low price on something that misses the mark is just throwing money away. The Help job relates to what a products are being purchased for, not for how complex the product is.

Online commerce offers shoppers great amounts of information. With a click, detailed product information – the kind not available in-store – can be found. Ratings by other shoppers are aggregated, helping distinguish between good and bad products. Online retailers who can specialize in a more narrow category can offer expert advice.

But…and it’s a big but…it’s hard to replicate the give-n-take, the weighing of trade-offs with a live person in front of you. That’s the advantage physical retailers have. There are just times when you really want to talk to someone.

Verdict: This is the physical retailers’ job to lose. With local presence and real live people, they’re positioned to do well here.  The best opportunities lie in cases where the outcome of the product has a fairly high degree of emotional or monetary value for the customer.

Which Customer Job to Fulfill?

For physical retailers, the customer job to fulfill should be a natural extension of their strengths. A company’s assets lead naturally to addressing a particular job the customer wants fulfilled. You really can look at industry structure based on the jobs to be done. And see that some long term trends suggest where retail is heading.

Keep in mind that a larger set of real customers could well describe the jobs they’re seeking fulfilled. My four above are drawn from own experience. But it’s getting input from multiple customers where this methodology comes alive. I’m sure there are some additional jobs that aren’t being fulfilled very well right now, which are opportunities for the future.

I’m @bhc3 on Twitter.

About these ads

In Praise of Grunt Work

broken-glass

Photo credit: Vieux Bandit

An experience I had that comes back to me from time to time is work I used to do way back in the early 1990s. I was an Assistant Buyer for Hecht’s Department Store in Washington D.C. My department? Stationery and Frames.

The picture frames could get handled roughly, both by customers and in transit. Which meant broken glass. A lot of it.

The store department managers would box up these frames of broken glass, and ship ‘em back to the Hecht’s warehouse in Maryland. Boxes of these frames would show up each week, stored in the specially designated Frames area. I’m guessing the warehouse crew thought that was sort of amusing.

So you’ve got a bunch of frames, but no glass. What do you do? Ship ‘em back to the different manufacturers?

No, you send the Assistant Buyer to the warehouse to replace the glass.

We’d order a bunch of different pieces of glass, and I’d rebuild these poor little specimens on the Island of Misfit Frames. It sucked. I mean, I wore gloves but would inevitably get cuts on my hands. It was hot in that warehouse. Sitting there for hours doing this work was b o r i n g. I was a college grad, dammit!

But something happened over the hours, days and weeks I did this work. I learned those picture frames. I knew all the Burnes styles cold. It happened in spite of my dislike of the glass replacement work in the warehouse.

How did it help?

  • Sales numbers on a report were matched to a style I knew, making the data much more informative
  • Ad layouts – I knew the colors and styles to put into each ad
  • Store merchandising – I could go into any store and quickly size up the shelves for presentation and inventory
  • Product selection – I could compare new styles to what we already carried

All from the hours of grunt work in the warehouse. This is a lesson I like to remember from time to time.

*****

See this post on FriendFeed: http://friendfeed.com/search?required=q&q=%22In+Praise+of+Grunt+Work%22

The Migration of Web Techniques to In-Store Retail Practices

Via ralphbijker on Flickr

Via ralphbijker on Flickr

Think about the companies doing the most technologically advanced stuff. Amazon. Google.

Grocery stores.

Say what…? The place where oranges sit in piles in the produce section. Boxes of cereal lines the aisles. The frigid ice cream aisle.

Well, they’re not in the league of Google and Amazon. But grocers are more than those aisles of food and ceilings of fluorescent lights you see. Two trends in the industry borrow heavily from the advancements on the Web:

  1. Website optimization
  2. Recommendations

I’m not talking about monitors with web pages inside stores. I mean the shopping experience has been affected by these developments. Here’s how.

Website Optimization => Store Layout and Merchandising

E-commerce sites live and die by their conversion rates. A key piece of the conversion rate puzzle is effective navigation and presentation of items to site visitors. One company that helps with that is  Tealeaf, which records and analyzes visitor behavior to help site owners optimize conversions and return visits.

In a physical space, you can’t record people’s clicks and actions. Or can you?

As reported in a recent Economist article, retailers are starting to video record shoppers’ behavior in the aisles. For instance, here’s how one supermarket used technology provided VideoMining to understand visitor behavior in its juice section:

Another study in a supermarket some 12% of people spent 90 seconds looking at juices, studying the labels but not selecting any. In supermarket decision-making time, that is forever. This implies that shoppers are very interested in juices as a healthy alternative to carbonated drinks, but are not sure which to buy. So there is a lot of scope for persuasion.

These are exactly the kind of metrics that e-commerce sites track to improve their conversion rates. Use of cameras in-store to do the same thing is analogous to tracking visitors to your website.

Personalized Recommendations

Amazon.com really led the movement to provide effective recommendations to existing customers. One report I’ve seen says that Amazon derives 35% of its sales from these recommendations. Amazon’s recommendations are generated from your shopping history, compared to others via collaborative filtering. The success of these recommendations has inspired others to build recommendation engine services, including Aggregate Knowledge, Baynote, MyBuys, RichRelevance and others.

The same thing is happening in-store as well. You know that loyalty card you present to your grocer to get discounts? It’s used to record your shopping history. Historically, grocers have done little with that information. It was more of a device to keep you coming back to the store.

But in the past few years, grocers have been getting hip to the idea that their customers’ shopping history can be used to personalize the shopping experience.

Once, I was product manager for just such a system, called SmartShop. Pay By Touch’s SmartShop used a Bayesian model to compare your purchases against those of other shoppers, and determine whether you exhibited stronger or weaker preferences for a category or product than the overall average. A set of 10 personalized item discounts were then selected for you based on your specific purchase preferences.

On a website, returning customers are presented with a set of recommendations as they shop. In-store, what’s the analog? Kiosks. Kiosks are the in-store interaction basis with customers. SmartShop notified you of discounts via a print-out from a kiosk at the front of the store. This was key – get you the discounts right at the point of decision, when you’re shopping. Not unlike e-commerce recommendations.

Prior to Pay By Touch’s demise, SmartShop was getting good traction among grocers, who were looking for ways to increase basket size, increase loyalty and differentiate themselves. And it wasn’t just SmartShop. Price Chopper and Ukrops use a recommendation system from Entry Point Communications. UK-based Tesco is the granddaddy of personalized recommendations, provided through Dunnhumby.

Teaching Old Dogs New Tricks

While e-commerce benefits from being all-digital and various identification mechanisms, grocery historically lacked these. But that’s changing. Retailer have picked up the best practices of their online brethren. Things are now much more measurable and personalization is no longer the province of the online players.

Looking forward to grocers introducing Twitter into the shopping experience…

*****

For reference, here’s a white paper I wrote about SmartShop when I was at Pay By Touch:

*****

See this post on FriendFeed: http://friendfeed.com/search?q=%22The+Migration+of+Web+Techniques+to+In-Store+Retail+Practices%22&who=everyone

How Would Social Media Help You in Your Job?

I’m having a ball with social media out in the consumer web. Blogging, FriendFeed, Twitter, Facebook. I’m learning so much about technology, new companies and people’s attitudes regarding Web 2.0. Along the way, some collaboration and a new job actually happened out of all this fun.

Now why can’t we see some of these same effects in the place where most of us spend a third of our day? We’re seeing live implementations of social media inside organizations (aka Enterprise 2.0). It’s a good sign.

I’m now in a job where I’m thinking about this a lot. And I figured I’d start with myself. Where would social media have made a difference in my two previous Big Corporate jobs:

Both companies were examples of today’s modern company, with a heavy information orientation. It’s been years since I worked at either, but here is how social media could have helped me in my jobs.

May Department Stores

The buying office of a retailer is responsible for picking the merchandise you see on the floor. Buyers also plan and execute promotions, set prices and ensure optimum amount of inventory on the floor and in the warehouse. We also had to communicate with the department managers of dozens of stores.

Here are the social media that would have helped me (if we had the Web back in 1990-1994):

  • Twitter: Yup, I would have loved Twitter. An easy way to fire off updates out to the field of department managers. And they would have sent back news of things they were seeing. Would have been a huge help during the crazy Christmas season.
  • Blog: I would have blogged about the weekly promotions. There’s a fair amount of work that went into them (promo prices, signage, focus of the ads), and documenting all that would have been useful. New products that we bought would have been good to discuss as well.
  • Bookmarking and notetaking: Assuming we had the world wide web back then, I would have bookmarked and noted a number of things for the job: competitor ads and pricing, product promotions I liked, new products I’d seen elsewhere.

Bank of America

At BofA, my group raised debt for corporations. Deals could run anywhere from $25 million to $6 billion. It was an information-intensive job.

The work consisted of three primary activities: (1) win the deal; (2) sell the deal; (3) close the deal via documentation. You had to stay on top of comparable deals, industry trends, capital market trends and general market chatter. Our group was divided into Structurers (me), who worked with clients to win and structure deals; and Distribution, who sold the deal to the market. Distribution always had the best information.

Social media I would have wanted:

  • Twitter: Again! I really would have wanted to see the ongoing chatter of the Distribution guys. They picked up all sorts of incredibly valuable market intelligence during the day. They used to IM. Now I’d want them to tweet.
  • Wiki: Every deal should have had a wiki space, with its “win the mandate” phase, its “sell it to the market” phase and the documentation phase. Wikis would have been good for handling the whole deal cycle.
  • Feed Reader: There were market data publications to which BofA subscribed. Getting a feed of deal information would have been a huge help. We were chasing information down in paper publications.
  • Bookmarking and notetaking: When deal, market or industry news came through, I needed a place to save it. I was always going back to find stuff I’d seen earlier. Bookmarking would have helped a lot. Note taking too – capture some information or thoughts, tag it and come back to it later.
  • Blog: My group wouldn’t have had much use for a blog amongst ourselves. But a blog that updated the rest of the bank as to what was happening in our particular capital market (syndicated loans) would have been perfect. We had other groups asking us often about market conditions.

I’d Love to Hear About You

Maybe you’re already using social media inside your company. Or perhaps you’ve been thinking, “my company really needs…”

If you’ve got any ideas to share, I’d love to hear them.

*****

If you want an easy way to stay on top of Enterprise 2.0, I invite you to join the Enterprise 2.0 Room on FriendFeed. The room takes feeds for Enterprise 2.0-related items on Twitter, Del.icio.us and SlideShare. To see this room, click here: http://friendfeed.com/rooms/enterprise-2-0

*****

See this post on FriendFeed: http://friendfeed.com/search?q=%22How+Would+Social+Media+Help+You+in+Your+Job%3F%22&public=1

Follow

Get every new post delivered to your Inbox.

Join 662 other followers