Starbucks goes “sophisticated and upscale”……?

In the you’ve-got-to-be-putting-me-on file, MSNBC and Starbucks just announced the launch of a special marketing initiative between the two companies whereby the Seattle chain will become a name sponsor of the cable news programmer’s “Morning Joe” show, with Joe Scarborough.

The deal allows for on-air Starbucks brand plugs, announcements, and visual references within the body of the weekday news-and-talk program. Future remote broadcasts may take place within Starbucks locations around the country.

Starbucks CEO Howard Schultz, in commenting on the deal, said the “Morning Joe” show makes great sense for his company, calling the audience “sophisticated and upscale.”

Let’s get this straight. With its business suffering in profound ways, with hundreds of stores closing, with its reputation as the place where the urban elite go for lattes, with millions of consumers forced to cut back on even small indulgences and others avoiding even the hint of conspicuous consumption as bad manners in a reeling economy, with the company doing everything it can to say its $4-per-cup image isn’t deserved, with all that……they’re now ballyhooing a deal to reach the posh and polished?

I'm only slightly kidding to wonder if they'd be better off doing a deal with NASCAR.

Would you like pantyhose with that ceiling tile? (and other retail oxymorons)

Perhaps you were taught this instructive “stick-to-your-knitting” story of some years ago. It starred an over-eager Home Depot executive who came up with the idea that millions would drop to the bottom line if only the company could see its way to introducing L’Eggs hosiery displays at checkouts in all its stores. After making his case to the top ranks of the company with a convincing argument about potential financial gain and a not-very-convincing plea for the company to use this as a response to the increasing presence of female customers, he was quickly asked to abandon the idea—of course, right after being told to abandon his seat from the meeting. The teachable moment—seized on by the chairman—was that just because you could sell it doesn’t mean you should sell it.

Apparently not everyone has heard this entrenched business lesson—including some more recent Home Depot executives, who two years ago brought about losses with a similarly ill-fated decision to sell flat-screen televisions during the holidays.

This week, Best Buy announced plans to sell patio ware—furniture, fire pits, grills and heaters. It’s their attempt to make up for lost sales in bread-and-butter categories like movies and music.

This has all the makings to be the pantyhose story of 2009. We’ll be watching this one especially closely, as this is a retailer which has done many things right.

Supermarkets used to fall prey all the time to the allure of selling higher-margin items—that turned out not to sell, like television sets.

A recent sighting of candy bars at the checkout of a garden center store struck me as a stretch, and a rather sad attempt to presumably get something back from a decline in boxwood sales.

Unexpected products in the assortment can delight customers. Urban Outfitters does serendipity masterfully. Probably until it was deemed illegal or immoral, Sears stores used to create endless Easter excitement with displays of live baby chicks…..for sale. But these examples are schtick—not fundamental assortment strategies.

Seduced and abandoned

In days gone by (any time before the current recession), the shopping cart was a customer’s rolling possession holder, containing all the selections that were as good as bought and paid for. With its vertical bars, the cart gave off a warning to other shoppers to keep out, contents contained within this high-security traveling metal fencing are “my stuff.” At the same time, each product placed within the cart represented the shopper’s (almost) solemn commitment to purchase—nothing would leave the cart until checkout. Sure, once in a great while you might see a vaguely embarrassed customer beg off an item at checkout—to the tsk-tsks, tut-tuts and clucking sounds of others in the queue, a chorus of muses who sensed some important cosmic code of shopping conduct had been violated. But mostly, the mighty mobile fortress simply served as the shopper’s purchase conveyance until their items could be taken out to the parking lot and put in the car.

No more. In a recent study we did for a large retail chain, upwards of 500 items were abandoned every day in each of the stores we were in, relegated to a corral of carts in the corner whose sole purpose was to house these rejected products (looking rather forlorn, anthropomorphically speaking, like abandoned puppies at a shelter). A cottage industry sprang up in the stores to sort and re-stock these “re-shops”—a thankless, never-ending task for the associates. Clearly, customers had exploded the idea that moving an item from the shelf into their cart represented any kind of implied purchase agreement.

Yesterday’s New York Times featured an article on abandonments in the online shopping world, highlighting a new web service which remarkets to those who might put an item in their electronic “cart,” but not finish the transaction. It’s an interesting approach to nudging people to re-consider, but certainly loaded with complications, not the least of which is the highly intrusive annoyance factor.

Perhaps the customer contract in bricks-and-mortar retailers will be re-initiated, and shoppers will once again follow the age-old Cafeteria Rule—take all you want and eat (buy) all you take. Or we may be witnessing something that has already changed forever—good or bad economy notwithstanding—the cart as nothing more than a carriage of considerations.

Will McDonald’s drink Starbucks’ latte?

Is it any surprise McDonald’s has brewed itself boldly into the coffee business? The McDonald’s menu has evolved dramatically since its founding days in the 1950s, back when it was a simple spot to get a burger, fries and a drink. The company has adapted to shifting consumer tastes, wants, and demands, and has become a major player at breakfast, in chicken, in snacks, salads, and more. There have been a few flops along the way, but in the last six years, McDonald’s menu innovations, better service, and improved atmospherics, have pulled in new customers and boosted profits. Now, thanks largely to Starbucks, Americans now crave fancy coffee drinks, and want them for breakfast, in the afternoon, and even after dinner. It’s no surprise McDonald’s is seeking to capture all these newly evolved coffee cravers.

McDonald’s mochas, lattes, and cappuccinos have gotten positive buzz; even people who prefer Starbucks have given the McDonald’s drinks pretty high marks. And coffee drinkers who get their caffeine fix at McD’s can pocket the savings over the same drink at Starbucks. In recessionary times, that’s a powerful advantage. One survey found that 60% of consumers will trade to McDonald’s if the coffee drinks are cheaper and made faster. There’s also the convenience factor – you can grab a latte while picking up a happy meal for your kids, in a part of town Starbucks hasn’t yet hit, or on a road trip. Starbucks is fighting back against the McCafe invasion with an ad campaign focusing on quality adherence; they’re also experimenting with a breakfast value menu and one dollar coffee. However, we’re betting plenty of consumers will choose McDonald’s premium coffee along with its iconic food offerings over coffee at Starbucks accompanied by its made-off-premise bakery items and microwaved sandwiches.

On the day premium coffee at McDonald's debuted, my wife’s comment after taking her first sip: "Starbucks is in trouble."

The camera never lies...

...but lots of people do, especially when they’re talking to researchers or otherwise responding to surveys. A part of it might be attributable to the Lake Wobegon effect, from the mythical town of Garrison Keillor, where it is said all the children are above average. More technically, another driver is social desirability bias. This is where the respondent wants to provide an answer that will be looked at by others as favorable.

• A recent poll asked Americans who they voted for in the last election. This poll showed Obama thrashing McCain by more than 20 percentage points -- far greater than the actual Obama margin of victory on Election Day.

• When people are asked if they voted in a presidential election, the percentage of self-reported turnout is inevitably 10-20 percent higher than actual turnout.

• About 40 percent of Americans say that they attend church regularly. Counting and tracking methodologies used to determine true church attendance found that about half that number can actually be found in the pews.

• A number of years ago, a survey found that upwards of five million people claimed to be New Yorker magazine readers—an unlikely number given that circulation was barely above half a million.

People want to be on the winning team, and want to look virtuous and smart. So when we ask them to self-report, we often get responses that are wildly inaccurate. Researchers are exploring tools such as anonymous online polling and expressionless computer avatars in order to obtain more accurate survey results. But no matter how sophisticated surveys become, there is no substitute for the careful capture of actual human behavior, as we do with video-enabled behavioral analytics to see into the realities of shoppers in the shopping aisles.

As Yogi Berra once said, “You can see a lot by observing.”

Can we do an MRI in Aisle 11?

Ron writes: The search for the perfect predictor of advertising effectiveness continues. According to a recent story in the New York Times, a Yale undergraduate is using magnetic resource imaging to “study brain waves and determine why people respond to some advertisements but not others.”

Emily Yudofsky became curious about the potential of neuromarketing in high school, when she worked in a laboratory that did research on the consumer response to Coke vs. Pepsi. Yudofsky’s neuromarketing company will specialize in research on public service advertising, hoping to develop anti-smoking or don’t-drink-and-drive campaigns.

The article suggests neuromarketing is “tremendously controversial,” both because it is seen as “creepy” and, as scientists point out, “just because a neuron fires does not mean a consumer likes Coke better than Pepsi.” If neuromarketing is indeed effective, we will see it used for more commercial applications. It is tempting to believe that brain scans can provide a complete understanding of how consumers make decisions. However, no matter how refined this technology gets, it won’t be a substitute for the observation of behavior and the resulting insights that bring true understanding of the consumer. At least not yet.

In the trenches

Bill writes: Best Buy’s incoming CEO Brian Dunn started with the company 24 years ago as a salesman, and in some ways never left his roots. He still spends a great deal of his time on the sales floor, “where the rubber meets the road,” he says (see Wall Street Journal article “Best Buy Confronts Newer Nemesis,” March 16). In his quest to now differentiate Best Buy from competitors Wal-Mart and Amazon.com (now that Circuit City is history), Dunn has used a series of store visits to provide inspiration.

In the olden days of shopkeeping, owners minded their stores at all hours and lived upstairs when the lights were out. Nothing got past them since they were always there. In a world of multi-unit retailing, bosses are far removed from the action of the floor, often held hostage in meetings to consider new companywide dental plans and how to defer equity awards. Still, they take it as an article of faith there’s no substitute for being in the trenches, and “make time” to do store visits as often as they can.

While Brian Dunn’s efforts should be applauded, there may well be a limit to how much inspiration can occur when a CEO makes a guest appearance. Certainly there is value in talking with the troops, where good ideas might arise and unaddressed problems can surface. At the same time, these are all too often staged as goodwill/PR events to rally the troops, and the real value back to the CEO is diminished. One legitimate substitute for management’s inability to be in stores all the time is the use of video-enabled behavioral analytics, which provides a volumetric assessment of how shoppers use the stores and what are the effects of the experience the employees provide. It’s an interesting way to fuel inspiration and find out what’s really happening with thousands of customer actions, interactions, and transactions, when you can’t be everywhere—or anywhere—at once.

Getting out of line

Bill writes: It’s becoming less necessary, but going into a bank to conduct business is sometimes still unavoidable. You’ve certainly noticed how increasingly rare it is to enter the queue without the guys-in-ties from branch management trying to short-circuit the wait time by asking if they can be of service. “Do you have a straight deposit?” they will ask. “I can help you over here.” When I first began observing this, I thought I was seeing an especially perspicacious new generation of bank officers—ones seemingly well-schooled in queue dynamics and the importance of efficient transaction flow.

That was then, but today it’s all about skimming cream from the queue. Once they have you one-on-one, sitting at a desk to get your deposit processed, it’s open season—an opportunity to cross-sell, up-sell, and otherwise create awareness for a wider, profitable range of financial products. Customers are part of this dance, willing to give up the drudgery of line-waiting in return for listening to a brief spiel. It’s actually not a bad trade-off. There may well be a new product or service worth hearing about, and the customer at least gets the transaction accomplished and a comfortable place to sit.

It’s not altogether different from the trade-off people make when they agree to attend a time-share pitch—a 90-minute commitment in return for a gift or free trip or other incentive (not that I want to conflate bankers with those who hawk condos in hotel ballrooms).

But it brings up an interesting idea, especially in today’s economy. In return for you doing this, I’ll do something for you. Horse-trading, barter, swapping—call it what you will—it may be how things get done with increasing frequency. And then you won’t need any money. Or to go into a bank line.

One in a row

Bill writes: A woman walks into a store and takes a cart and a shopping basket. This moment is a retail ethnographer’s wet dream. It’s a weird and interesting shopper behavior and may be something big. HUGE. Like………? Maybe it’s that the shopper doesn’t trust the cart to keep the breakables unbroken, so she’s taken the basket as a “side carrier” which will provide a more gentle ride. Hey, there’s an idea here—let’s suggest they put in padded carts. Wait. Better yet—padded compartments within the carts to hold the eggs. But that could lead to walk-offs, with customers conveniently “forgetting” their eggs until after they’ve checked out. That would be bad. Hmm. Maybe it’s that she’s a germaphobe, and thinks the basket is less apt than the cart to have dried snot or microbes of baby poop on it. That’s it! We need entry door shower mists which spray liquefied Purell all over everything that passes by.

And so on.

What’s unknown from this little tableau is whether a shopper who takes a cart and a basket is a party of one or really one representative of unseen millions. Maybe it’s that she’s the only one today, but the trend setter who millions will be copying any day now. Or just maybe, since this is something I happened to witness, she arrived at the store and was meeting her husband back at the meat department.

It’s one of the reasons we like to use in-store video along with ethnographers when we do store studies. It’s good to be able to see things thousands of times in addition to once.