(This is the second in a two-part blog-exchange on brand decision-making I’m doing with Denise Lee Yohn. I kicked things off last week with a post called “Killing Retail Giants” and today Denise answers the questions I posed to her about retail small businesses. We’re both teaching sessions in the Marketing Profs University course, Marketing Your Small Business . Denise’s webinar, Why Small Businesses Need Brands and How to Build Them, airs next week. Register now and use coupon code DENNYVIP to receive $200 off!)
SD: Technology – from QR codes to crowd sourcing/sharing/tapping to social anything – is all the rage…and yet, at least from what I’m hearing from clients and a few far enough away from the blogosphere and close enough to a real P&L, it’s the actual human contact – the face to face – that converts. What do we make of this “original, old-school social networking” called floor-level selling versus the newest and greatest socially enabled thing of the moment? Where do you put your dollars today?
Denise: I agree with former Apple retail head and current JC Penney CEO Ron Johnson who stated in a recent interview, “Physical stores are still the primary way people acquire merchandise, and I think that will be true 50 years from now.” And as long as stores continue to exist, so will the importance of salesmanship.
People may use technology to do more research before they enter a store, but according to a study published in the McKinsey Quarterly last year, as many as 40% of customers remain open to persuasion.
It makes sense. If a customer is in store these days, she’s not there to waste her time. She wants information, engagement, discovery, entertainment, inspiration, service – something. A lot of elements in the store will address this desire, but a salesperson still holds the key to converting browsers into buyers and skepticism into sales.
The sales process is definitely more art than science and individual flair and style-flexing is paramount, but a good salesperson follows four basic steps: open, ask for needs, demonstrate, and close. Technology can help in each step.
Through social networking, salespeople can lure customers into their stores. And we’re just moments away from making it possible for customers to be greeted personally through mobile location sensors and tracking. Salespeople are already using tablets to show a range of solutions or to highlight usage occasions, thus facilitating a conversation about needs.
Virtual dressing rooms and smart-phone enabled product demos make for compelling sales demonstrations. And access to customers’ social networks, price/inventory transparency, personalized deals, and mobile checkout are technology-enabled tools to help salespeople close the deal.
So technology is facilitates the sales process but it’s the salesperson that drives it, so I’d invest in sales training and tools.
SD: There’s an eternal, titanic struggle for control between retailers and manufacturers. We’ve seen major big box retailers literally put weak manufacturers out of business with exorbitant “vision funds” and high co-op expenses to drive in-store foot traffic. We’ve also seen relatively new powerhouses over the past few years send products into retail with literally zero margin. Where’s the balance of power now? More importantly, how does the lowly manufacturer (or lowly retailer) gain at least an equal seat at the table, let alone the semblance of an upper hand?
Denise: The struggle is indeed eternal, and I suspect the balance of power between retailers and manufacturers will continue to fluctuate indefinitely. But there are two approaches that create a win-win for both parties: exclusive product and private label. Both require tight partnerships between the two sides.
With exclusive product, manufacturers develop a unique product tailored for a specific retailer. Right now, this is mostly happening through cosmetic differences on existing products – e.g., providing exclusive colors or sizes, or using different brand names on the same product. This is the easiest, lowest-cost approach.
There are bigger opportunities, though, for retailers and manufacturers to collaborate on new product development — integrating retailers’ detailed customer data into manufacturers’ product expertise to create truly tailored offerings. Years ago when I was at Sony Electronics, we developed an exclusive line of products for women at Target. It provided differentiation and value for both Sony and Target.
Private label is another approach to consider, especially for smaller manufacturers. By developing products to be sold under the retailer’s brand name, manufacturers exchange for brand equity for access and volume – a smart trade-off in some cases – while retailers benefit on margin. In the past, private label may have been looked upon as the ugly step child, but according to another McKinsey study, consumers are more receptive to store brands these days. It’s a viable solution to the eternal struggle.