CMOs & Marketing Accountability - A Look at Home Depot

"Home Depot delivers on its brand promise," announced Liz Miller, Vice President at the CMO Council, yesterday upon releasing the results of a Council survey to gauge the consistency of 25 brands across six touchpoints. In today's Brandweek article Miller goes on to say: “The Home Depot may have struggled with its earnings this year, but don't blame its marketing.” Why the heck not?

These CMOs are clearly ignoring what customers are telling us with their feet and their wallets as Home Depot's comp store sales are down more than their competitors' so far this year. There are shortcomings in the Home Depot customer experience and there is a gap between Home Depot’s messaging and reality. Consistently delivering messaging across touchpoints should not be rewarded if it’s consistently the WRONG messaging. And how do we judge whether it’s right or wrong? By measuring how much that messaging contributes to getting the right people (customers and employees) in the store and to making the cash register ring.

In our research with home improvement customers earlier this year, we found that Home Depot’s positioning is not credible. Their slogan “You Can Do It, We Can Help” resonates conceptually, but Home Depot does not deliver. Customers go to Home Depot for two reasons only: Selection and Price. The size of its stores makes it hard to find employees, and that contradicts the notion of “help.” The sky-high racking of inventory out of reach flies in the face of self service and suggests that maybe customers really can’t do it themselves.

In fact, the company seems to recognize the disconnect, even if the CMO Council doesn’t. Earlier this week, HD announced a move that could eventually change its format from cavernous warehouses to shoppable stores. The Atlanta Home Journal reported Sunday that HD is investing over $300 million in regional distribution centers and systems to take inventory out of the stores and lower working capital requirements across the business.

While clearly being undertaken for cost savings (they anticipate freeing up $1.5 billion in working capital), the implications for store design and the customer experience are significant. Meanwhile, the CMO Council might want to reconsider what it means for a brand to deliver on its promise.

WaMu's Retail Bank - Toxic, Too?

Watch out JPMorganChase - Customers have been complaining loud and long about WaMu’s banking practices.

Google “WaMu Sucks” and you’ll find pages and pages of search results – all of them obviously angry, and perhaps less obvious, not confined to the subprime mortgage business that finally tanked the company this week.

Despite its ad campaign poking fun at bankers, WaMu has long been accused of pulling the same stunts they spoof in the commercials: misleading offers, disconnected systems making service spotty at best, nickel and diming on checking accounts, and more!

In an attempt to distance itself from toxic mortgages, WaMu turned to traditional retail banking for profitability in the second quarter. As The Seattle Times reported in July, WaMu “opened 250,000 new checking accounts in the second quarter. Fees paid by depositors — for overdrafts, ATM withdrawals and the like — totaled $767 million, up 8.9 percent from the first quarter and 6.5 percent over the past year.” All those “free” checking accounts historically generated a lot of fees for the bank. And customers noticed.

In principle (pun intended) there’s nothing wrong with fee for service banking. The problem in WaMu’s case is twofold: the poor service that historically went along with free checking and putting the bank’s systems to work generating even more fees.

As far back as 2006, there are plenty of examples of WaMu’s poor retail banking service and inadequate systems. In this post from OnTheBrightSide.net, a retail bank customer recounts her experience trying to pay for merchandise with her WaMu debit card. Right, her debit card which should work just like a checking account only better. But not at WaMu.

Beyond exasperating, WaMu systems and policies suggest a systematic approach to racking up late fees for the bank. ConsumerAffairs.com has a seemingly endless collection of complaints about WaMu's retail banking practices (there’s a separate URL for complaints about WaMu’s mortgage-related practices). One customer who had to evacuate due to Hurricane Ike accuses WaMu of “purposely manipulating system times, forcing systems to apply cut off times without proper notification, giving a false sense of security when it comes to transfers, and purposely trying to find ways to cause customers overdraft fees.” Others complain that “Washington Mutual does not give me access to the available credit for 5-10 business days! They've got my money but won't let me use it!”

The retail bank was supposedly the bright spot in WaMu’s portfolio - the only part worth saving. I wonder if anyone at JPMorganChase knows the true state of what they just bought: the bank’s retail customer relationships are at risk, its retail systems are clearly not working, and its retail employees don’t know what service means. WaMu does not look like a bargain at almost any price.

In Retail as in Politics, Everybody Loves a Winner

It’s an old saying usually applied to politics. The thinking is that it’s easier to take sides when it looks like the winner has already been determined.

It seems the inverse holds true for where we shop – no one wants to shop at a loser. And there have been a lot of losers over the past year including Sharper Image, Bombay Company, Linens ‘N Things, Steve & Barry’s, and more. As reported by Reuters Friday, tuned-in shoppers are evaluating stores’ financial health based on staffing levels.

Funny that on the heels of this Reuters story comes a two-part special report from the National Retail Federation. The articles in Part 1 are all about self-service, at checkout, at the perfume counter, and more.

In our consumer research, we have seen a consistent desire for more and better service – in the store, on the phone, throughout the day. While self-service is a form of service, I don’t think it is consumers’ first choice. My hunch is that the rise of self-service has something to do with the disappearance of the professional salesperson – like the fabulous women who used to work at Bullock’s Wilshire or I.Magnin and knew how to wait on teenage girls shopping for just the right thing to wear to a special event.

To cut costs, those professional sales people had to go (from all but the most expensive and exclusive stores), and even that wasn't enough to save Bullock's or I.Magnin or Good Guys. With most stores staffed by minimum wage employees, real service became harder to find. Stores replaced some of those low-wage, low-service employees with technology. So, we have seen the store shopping experience go high tech, and in many cases less human.

We accept technology happily online, but it’s unclear how willing we are to Do-It-Ourselves when we’ve made the effort to go to a store in-person. Certainly, I’d rather do-it-myself from the outset than wait around for an incompetent sales associate to do it wrong and simply delay my having to do it myself. But this strategy relies more heavily on the product itself and the ease of my finding exactly what I want – no personal relationship to paper over in-store shopping frustrations or to make add-on sales.

In a July posting I asked “where have all the store employees gone?” Based on Britt Beemer’s research reported in Reuters, the smart money might be reading cuts in the number of sales associates as a leading indicator of a retailer’s decline.

What do you think? Do staffing levels help predict retail winners (and losers)? Does in-store technology aimed at customer service make your experience better? Who’s doing it right? All great topics for future postings.

Up Close & Personal at NFL Games

You can get basketball seats on the court. And baseball seats above or right next to the dugout. Football fans have been shut out of the same kind of up-close-and-personal experience. They have traditionally been separated from their grid-iron heroes. Maybe it was because of ridiculous number of people and amount of gear on the sidelines. Maybe it was because of the danger of being so close to the play.

Sky Boxes were supposed to pamper fans so they would forget about the distance between them and the game. Stadiums across the country have spent (and are still spending) hundreds of millions of dollars building them. But Sky Boxes are far from the field. The times we have sat in a sky box, we ended up watching the game on TV! Or just enjoying the cocktail party, and skipping the game entirely.

Are Sky Boxes becoming passé? Earlier this month, the Jets announced their plan to make football available up close and personal for big-spending fans at their new Meadowlands stadium, scheduled to open in 2010. They’re creating a railed-off section of the field called the Coaches Club - complete with its own security personnel - and a bar and lounge area directly behind it.

"It's really about getting their feet on the field," said Thad Sheely, the Jets' executive vice president of stadium development and finance. "To be on the field, it's the kind of access only coaches and players get." To further that “Insider Feeling,” members will receive free VIP parking next to the stadium and can buy tickets to other events. These fans will also be able to stand in the tunnel before games and listen in to the coach's postgame press conference from a few feet away.

Congratulations to the Jets for figuring out a way to enhance the experience for a lucky few fans, and monetize this previously underemployed real estate. If this experiment goes well, look for copycat plays across the country.

“Value” Has Become Table Stakes

I was in NY in April on business and was stunned by the economic pessimism that pervaded every meeting. From retailers to private equity folks to investment bankers, the talk was of a retail recession and the economy being in free-fall. I was so concerned I called our financial advisor to have a serious talk about how our IRAs were allocated to withstand the impending stock-market swings. And since peaking in early May, the Dow has lost nearly 20% of its value.

As the shocks to our economic system continue and consumers feel the pressure increasing, retailers have turned bearish. According to a new study released earlier this week by BDO Seidman and reported by Retailer Daily, nearly half of all retail CFOs believe we will not see a meaningful improvement in the economy until July 2009. Nearly two-thirds of the Top 100 largest U.S. retailers reported decreased comp store sales in the first half of 2008 vs. the first half of 2007, and over half of their CFOs expect revenues this year to be below last year's.

In today’s economic climate, delivering “Value” is no longer an option. It is a requirement. Some brands staked out “Value” as their promise and point of differentiation from the get-go. Wal-Mart’s Every Day Low Pricing guarantee was a dramatic break from the pricing strategy of most of its competitors who marked goods up only to mark them down. Food 4 Less, The 99 Cent Store, and Ross Dress For Less were all launched as “Value” brands.

High-end brands are playing catch up, and talking “Value.” The NY Times recently reported that Whole Foods is offering deeper discounts, adding lower-priced store brands and emphasizing value in its advertising. It's even inviting customers to budget-focused store tours.

Expect the shouting about “Value” to continue. Meanwhile, differentiation increasingly hinges on other brand dimensions. Product intimacy, design and assortment, site selection, store design and format, and customer service all offer short and longer-term ways of standing out with customers. In the background, smart retailers like Urban Outfitter and J. Crew will keep working as described in earlier blogposts to deliver on these differentiating aspects of the customer experience to be ready for better days ahead.

Google - Hiding Behind Technology

I’ve always admired Google. I still do. I wish I had been certain enough in my admiration to bid on their Dutch auction IPO. But I wasn’t, so I didn’t.

I love their company values and their “Do No Evil” mantra – in the battle against Microsoft and other tech giants, it was the rallying cry of a scrappy innovator with a mission and a purpose. But as the dominant player in numerous categories and businesses, including online advertising, I have a hard time seeing Google as David against all of those Goliaths anymore.

Today’s NY Times story about Sourcetool is the latest installment in the story of Google's growing arrogance. Like Sourcetool, everyone with a web presence tries to optimize it so that it comes up high in Google’s natural language search results. The lore about what Google’s algorithm is looking for is passed from one entrepreneur to another. There is no handbook and the algorithm itself is a closely guarded secret.

The latest accusations against Google’s algorithm remind me of the movie “Wanted”, which came out in June. In the movie, Morgan Freeman leads a team of assassins whose targets are “written” in fabric woven by a loom – the loom of fate - that has been endowed with mystical powers. Of course, in the end we learn that Morgan Freeman himself has been calling the shots (literally) by reinterpreting the “assignments” to protect himself as well as some of the assassins, whose names supposedly came up in the loom’s binary code.

Using “The Algorithm” as the guardian of the customer experience gives the people of Google plausible deniability when those of us outside the company don’t like what happens. It’s time for Google to grow up and take responsibility for its actions and their consequences.

The sequel to “Wanted” is already in the works. I can’t wait to see what new lessons it holds for Google, and the rest of us.

Scrambled Merchandising

You've seen it all around you - now there's a term for it. Scrambled Merchandising refers to a practice by wholesalers and retailers that carry an increasingly wider assortment of merchandise. It occurs when a retailer adds goods and services that are unrelated to each other and to the firm's original business.

It used to be that you went to a drug store for drugs, hardware store for hardware, a pet store for pet food and a grocery store for groceries. Now you can buy groceries at the drug store, find pet food at the hardware store and get anything you want at Wal-Mart or Target, not to mention Zappos or Amazon.

The Consumer Electronics Association presented at RetailVision results from a recent consumer survey about buying preferences: 25% would be willing to buy consumer electronics products from Starbucks, 30% from Ikea, 40% from Bed, Bath & Beyond and almost 60% from Home Depot. What does this mean for category leader Best Buy? For Radio Shack? For Circuit City? How can any retailer facing inroads from non- traditional competition protect its turf and retain its customers?

The answer lies in understanding how people make decisions about where to shop. Our research says there are generally two main considerations: the likelihood that the store will satisfy the requirements (i.e., Selection) and the availability of knowledgeable help (i.e., Expertise). Price, location, and loyalty are usually secondary. Last year in researching the home center market we learned that people go to Home Depot when they feel pretty confident about what they're doing because Home Depot has the best selection. Conversely, when help is needed, consumers will trade off a little selection to make sure they can talk to a real person who knows what they are talking about. In category after category, we have seen this same basic tradeoff.

So, should Best Buy be worried about Home Depot moving into electronics? Hardly. For Home Depot to make a go of it, they'll have to change a lot. Top priority would be to get more employees in the stores to answer people's questions. The folks at Home Depot are friendly enough and if you can find them, they are actually helpful. Problem is, for cost reasons, employees are few and far between at most Home Depots. Even though we're comfortable buying CE, we still have questions, or unique situations that require talking to someone. As long Best Buy keeps innovating the customer experience, they should be able to defend against scrambled merchandising.

In politics as in retail, the more channels of interaction, the better

Marketers and e-commerce managers have long known that shoppers who buy from stores, online and from catalogs are a retailer’s best customers. Opinion Research confirmed in a recent study that multi-channel consumers spend nearly twice as much as their single channel counterparts on average.

Taking this insight a step further, I suggested to friend in magazine publishing that the number of channels a consumer uses to interact with a brand could be a leading indicator of consumer brand engagement. Turns out, his data supported the idea that the more channels a subscriber uses to interact with the brand, the greater the brand engagement and more likely the subscriber loyalty, measured in renewals.

What does all this mean for the customer experience? It means retailers are going all out creating multifaceted brand touchpoints online and off, in their own stores (catalogs and PCs on the selling floor) and through partnerships (e.g., the Banana Republic-Details promotion announced recently). It helps explain why spam has increased, and why more people are on the Do Not Call list. It also helps explain why widgets and contests have emerged as arguably less offensive and more fun means of engagement.

This election season, we’re seeing the same pattern play out in the Presidential campaign. Potential voters who engage through multiple channels appear more likely to actually vote in November – whether it’s donating money, writing letters to the editor of the local paper, to the candidates, or to anyone else, blogging/commenting on blogposts – the more touches, the more committed.

Web-based tools are intended to convert online energy into in-person support. From January to April, for instance, the Obama campaign spent $3 million on online advertising to steer voters to their precincts through polling place locators - online look-up tools that tell people where to go to vote. According to Chris Hughes, a Facebook co-founder who has become an Obama campaign aid, the locators "are hard to build, but once you build them, they have a very high return on investment."

This summer, it was reported that Obama trumped McCain in social networking popularity and online fundraising efforts. The findings were seconded by Pew, which found Obama supporters evangelized heavily across social media.

And as the race grows more intense, it is becoming clear that social media outreach and paid search advertising are going to be key. "Online targeting and optimization will translate to more votes offline," predicts Jonathan Mendez of search engine marketing blog Optimize and Prophetize. If he’s right, we should have one heck of a turnout in November.

Going for "Good"

Good is in. And big brands want to be associated with goodness. In just the last week, ebay launched WorldofGood.com, Weight Watchers launched Lose for Good, and now Starbucks is launching Good Sheet.

What’s going on? Why the sudden focus on good. We’ve talked before about do-good consumerism. My colleague, Carol Phillips, who knows millennials calls them a generation that seeks to make a difference. These promotions are aimed at fulfilling that aspiration.

I’ve already written about World of Good. Lose for Good is aimed at turning Weight Watchers' customers weight loss into weight gains for those in need. For each pound lost at Weight Watchers during the 6-week promotion, the company is donating a pound of food to Share Our Strength, which works to make sure no child in America grows up hungry, and Action Against Hunger, which provides immediate and long-term solutions for hunger to people around the world.

Good Sheet is a brand new, free newspaper to be distributed at Starbucks that the company hopes will start conversations among its visitors – while they’re in the store or after they leave. The promotion launches just in time for the November election and features an article a week about a different election topic.

The NY Times reported today that Good Sheet will present the facts without taking sides in the discussion. Starbucks is seen as fairly liberal. So, rather than produce the newspaper itself, the company turned to Good Magazine, a 2 year old West Hollywood publisher. The separation may be important in ensuring customers that the voice of Good Sheet is truly independent.

Different topics may resonate more in different communities, or Starbucks locations. For example, customers in stores in retirement communities may have lively conversations about health care or shoring up Social Security while those in communities with young families may spark to issues like public education.

Good Sheet seems poised to build on Starbucks’ position as the third place, the one in addition to home and work. In this third place, just maybe we’ll have an opportunity to learn about the issues and have a good conversation over a cup of coffee. Seems like a good move.

Does Big have to be the Opposite of Special?

In pursuit of profitable growth, brands expand their distribution and extend their offering but risk losing what makes them special. Starbucks immediately comes to mind as the poster child for this dilemma. Macy’s, too. Do economies of scale necessarily mean diseconomies of soul?

Part of what makes a brand special is uniqueness – offering a distinctive product assortment or customer experience or both. Another ingredient is not being widely known – so that customers feel “in the know” – or widely available, so that customers make an effort to participate in the brand.

The Wall Street Journal interviewed Urban Outfitters’ CEO, Glen Senk last month. He talked about his vision for the company, and how he’s ensuring its relevance by avoiding cookie-cutter stores and keeping concepts small and close to their target audiences. The company is designing its brands to stay special by not saturating the market. For example, no brand will have more than 250 stores.

This made me wonder whether brands that have passed the saturation point - like Starbucks - can ever become special again, and if so how. I think it has to do with going micro/massively local and tailoring the "mass" brand to appeal to one neighborhood at a time. Then came an NY Times story about Origins – one of the skincare brands owned by Estee Lauder – trying to do just that.

In time for its official opening on Sept. 16, the store is rolling out an exclusive Made for Denver line, which was designed with the high altitude and dry climate in mind. The current pilot store is testing several ways of expressing its soul – from uniquely tailoring its own products like High Elevation Hydration Cream to offering merchandise by with local providers like English Retreads, a company in nearby Boulder, CO that makes and sells handbags made from recycled tires.

“If we could bring to the new store the principles and core of what Origins is about, what would that look like?” asked Ken Stone, the vice president for retail stores. The idea behind this Denver outpost is to re-envision the retail experience.

"Can big brands afford to do this?" you ask. My question is: "Can they afford not to?"

Doing a World of Good

According to the Fair Trade Labelling Organizations International, consumers spent over 2.3 billion euros on Fairtrade certified products in 2007. This represents a 47% increase on the previous year and means that over 1.5 million producers and workers in 58 developing countries now benefit from Fairtrade sales.

Into this growing opportunity space, welcome World of Good Marketplace, a new-to-the-world partnership between ebay and fairtrade wholesaler World of Good, Inc. The business, called WorldofGood.com, enables users to fulfill their desire to own authentic, responsibly made and sold products and know the stories behind them. In millennial perfect pitch, WorldofGood.com uses e-commerce to promote social responsibility globally.

Launched September 2, 2008, WorldofGood.com brings to users’ fingertips products from all over the world that are verified as People- and Eco-Positive by independent trust certifiers. Well-known organizations like 10,000 Villages, Novica and World of Good, Inc. can participate, and so can individual artisans and small importers of fair trade goods. To build confidence in the marketplace, all of the products on WorldofGood.com have a trust certification and each product’s and producer’s impact is documented. “Trustology” is the hierarchy of trust certifications at the product, producer, and seller levels. “Goodprint” reports the impact on people, the environment, animals and the causes the producer supports so that buyers can select the kind of impact their consumption has on the world.

The concept is compelling, trend-right, and well-intentioned. The functionality is undoubtedly great, given the talent at ebay. Huge kudos to World of Good, Inc. and ebay.

However, this site is a cold e-commerce site. It lacks charm, ethnicity and visual expression equal to the aspirations underlying the concept. Producer profiles and product backstories are missing, too. A few are available in a PDF buried in the "media kit" which is really missing the point. These can, and hopefully will, be added to the commerce site soon. Emotional connections are key to drawing users in and keeping them engaged. The intellectual appeal is powerful, but will only last so long.

So, here’s my advice: take the weekend off to celebrate. Then, get back to work defining and building a branded look and feel and content worthy of the vision of this exciting new concept.

BR is Turning 30

I loved Banana Republic when I was in my 30s. That was in the '80s when the brand was new, and I thought the store and catalog were different and fun, and that the clothes were, too. We wore the clothes on a photo safari in Africa. We wore them trekking in Bhutan. And we wore them after work and on weekends around town. In the '80s, there were no casual work days – even Fridays were formal affairs, and BR was not office attire.

I’m still a BR fan (my husband decided long ago that BR was not for him). So, when I read Stuart Elliott’s article in Tuesday’s NY Times about BR celebrating its 30th birthday, I had a moment of nostalgia and wondered what would get me to love the brand like I used to.

Here are a few ideas:

#1: Ask me about me and then use what you know about me to tailor your messages and offers to me. For example, the Jackson cut of trousers fits me best. I have 4 pairs of them – each of a very different fabric. I want to know when you have new merchandise in the Jackson cut or that looks good on women who like the Jackson cut. If you would just notify me, I’d go to the store to try them on, and you would have a chance for add-on sales.

#2: Make me feel like an insider. For example, I’m not sure if the cut I like is named for Jeanne Jackson, the long-standing BR chief merchant, president and CEO between '95-'00. Thinking so makes me feel like an insider. Give me the back story on the product, invite me to store openings or events – you don’t need to use expensive props (the way the BR store decor of old did) to conjure the romance. Knowledge is still power - just share some of it with me so I can be in the know.

#3: Make the brand special. Is BR too big to be special? Not necessarily, but the product, the web experience, the stores are nice but they’re mass upscale. Like Starbucks, the consistency is great but mass produced. Maybe you could use the breadth of the assortment and the variety of markets you serve to create distinctive BR experiences aimed at different target audiences.

What would you suggest BR do?

I look forward to seeing what the BR team comes up with for the next 30 years!