Build House Brand Equity with Distinction

A recent Wall Street Journal article discusses a trend among retailers to use the same private label brand name across product categories. The reason is that these house brands have succeeded in establishing not only a price advantage over national supplier brands, but also a reputation for superior quality. For instance, Kroger Co. is renaming their “Naturally Preferred” and “Private Selection” organic lines “Simple Truth.”
     Currently, private label items cost, on average, about one-third less than the price of the national label brand. But in some categories, the private label item costs more than the average national label brand, and overall, the comparative prices of the private label alternatives are climbing.
     When items carry the same brand name across product categories—such as a bath soap and a shampoo—you’d like to strengthen the brand image by having the same package design. Having almost identical package designs is common with house brands, where a consumer could be looking at tables and tacos during one shopping trip.
     Overall, using a similar package design to build brand image is a good idea from a shopper psychology perspective. Mere familiarity brings credibility.
     There’s a potential downside, though. Research findings from Wake Forest University and University of North Carolina–Greensboro suggest that when packaging is similar across items, the shopper senses a loss of control. The consequence might be that shoppers seek variety beyond the similarly branded items. The shopper becomes a bit less likely to buy the house brand across product categories unless you take steps to restore the sense of control.

• Introduce distinctions by placing products with the same package design in different relative shelf positions for different product categories. With the mouthwash, the house brand is to the top left of the other brands, while with the toothpaste, the house brand is to the bottom right of the other brands. Research at University of Pennsylvania and University of Illinois confirm that random arrangement of a product set can lead to more buying.
• If your merchandising allows this, use variations of the same name. At Trader Joe’s, you might see Trader Ming, Trader Jacques, and Trader Giotto.
• Curb the routine with distinctive designs and color schemes on signage for different product categories. Researchers at Columbia University and University of British Columbia find that such techniques give the shopper a sense of control, and this sense of control curbs further variety seeking.

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Counteract Problems from Similar Brand Labels
Less Store Clutter, More Store Branding

Treasure Your Talented Employees

Researchers at Massachusetts Institute of Technology are bemoaning the profitability opportunities retailers miss when they shortchange staff on income, employee benefits, availability of full-time hours, predictable work schedules, in-service training, and opportunities for promotion. They build their case with examples from large retailers.

• At Costco, about 98% of store managers are promoted from within. Sales per employee are about $986 at Costco, while at Sam’s Club, where there is significantly less promotion from within, the figure is $588.
• At Trader Joe’s, full-time employees start at $40,000 or more per year. Sales per labor hour are more than 40% above that at an average grocery store, where starting salaries are about half as much.
• At Mercadona, which is Spain’s largest supermarket chain, workers are trained to perform a variety of tasks so that as customer traffic patterns change, the workers can be shifted to different tasks rather than being deprived of work hours. Mercadona’s sales per employee are 18% higher than those at other Spanish supermarkets.

     These productivity advantages of Costco, Trader Joe’s, and Mercadona are surely attributable to more than just their labor practices. In addition, you won’t keep getting more productivity as you keep on increasing expenditures on employees. Still, overall, the research indicates that for every $1 bump up in payroll, monthly sales climb between $4 and $28.
     Many small to midsize retailers fail to set a budget and track expenditures. Those that do budget often overlook benchmarking—comparing their division of expenditures with how best-practices retailers in similar businesses do the division. Without budgeting and benchmarking, your store might be slowly going out of business each day without you realizing it.
     However, there’s also a potential danger when you budget and benchmark: It’s tough to find the treasure chest of maximum profitability if you’re looking in the rearview mirror at the expense of looking through the front windshield. The MIT researchers saw this danger with retailers who set expenditures for employees as a percentage of sales. When sales drop, staff are paid less and there are fewer work hours for the next time period. The rear-view-mirror problem here is that the retailer is assuming sales won’t increase in the months ahead with staff dedicated to the store’s profitability.
     Treasure your talented employees so they’ll be around when those customers come in expecting to see a familiar face and hear a recollection of the customers’ shopping preferences.

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Hire Overqualified Candidates
Check Your Dashboard Indicators
Stay Current on Your Budget

Funnel Choices to Cultivate Creativity

A classic exercise to develop individual creativity is to give someone a few objects—like a paper clip, a facial tissue, and a scrub brush—and ask the person to list all the different ways the objects could be used together. The assumption is that this task—using all the objects together—would be more difficult with, let’s say, six objects than with, let’s say, three. But does this mean that the six-object task develops more creativity than the three-objects task?
     Research at New York University-Stern and University of British Columbia suggests that it does not when it comes to consumers behaving creatively. Their conclusion is that if shoppers have fewer options available—a smaller number of paint options for a decorating project or a smaller number of alternatives for preparing a dinner—creativity increases.
     When shoppers are making purchase decisions that they believe express their personal values, they’re happier if they believe they’re exercising creativity. It appears that you can help your customers do this by progressively limiting their choices as they move toward a purchase decision.
     This finding fits with other evidence that a well-organized store encourages customer creativity, as long as it’s not overdone. Consumers do require sufficient complexity to stay engaged.
     All this is more true for consumers who are highly experienced in combining the merchandise to meet objectives—the confident amateur interior decorators and chefs, for instance. The NYU/British Columbia researchers explain it by saying that the experts feel a greater need to evaluate all the available alternatives than do the novices, who want to keep things easy. With an abundance of choices, the experts become anxious, which can immobilize creativity.
     As a retailer, you want shoppers both to make purchases and to be satisfied with their shopping experiences. Observing shoppers might lead you think that having more options results in more satisfaction. Researchers at Cornell University explored that issue. They found that as the number of alternatives got large, additional shoppers are attracted to the store, but unless the retailer funnels the choices for each shopper, satisfaction fades.
     When it comes to cultivating creativity, one further step is important: Point out to the customer evidence of creativity. Restricted choice increased shopping enjoyment and objective creativity for experienced consumers. But the restricted choice often decreased the subjective feelings of creativity expressed by those consumers. Except if their creative output was pointed out to them.

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Offer Neatness to Creative Shoppers
Clear Up Clutter Ambiguities
Protect Shoppers From Too Many Choices

Anthropomorphize Partners & Servants

What personality types does your store serve? The answer to that question determines—or at least heavily influences—brands you carry. However, even within a single brand line, there are different personalities.
     Some years ago, Adidas aimed to grab market share from Nike by defining eight different personalities to sell to. Among the personalities named by Adidas were “Gearhead,” the adult dedicated to running who says, “I’ll pay for shoes that bring me the joy of moving fast,” and “Aficionado,” the teen or preteen who says, “I won’t look at an athletic shoe unless it’s named after a famous player and costs a lot of money.” Adidas made fine distinctions between “Core Letterman,” the high school athlete who loves to help the team win, and “Contemporary Letterman,” who’s in it for the individual glory.
     In a parallel endeavor, electronics retailer Best Buy developed a typology of customers. One of them, termed “Devil,” was the sort of customer who purchases large quantities of loss leader items at Best Buy, waits until the items go back to the regular price, and then sells the items on eBay. Best Buy trained salespeople to deal with the different personality types.
     A way to generate sketches like these, and one you might want to try, is to ask focus group participants to imagine your store name has come to life. To generate their personality sketches, Adidas asked focus group participants to imagine that the brand went to a party. What would Adidas be doing there? Teens answered that Adidas would be hanging around the beer keg with its pals, talking about girls. They said that Nike would, instead, be with the girls.
     Recently, researchers recommended that, when anthropomorphizing your store name this way, you distinguish between partners and servants.
     A partner brand guides the shopper’s behavior. If the store name has a reputation for indulgence—the Krispy Kreme name was used in the study—consumers who consider the anthropomorphized brand as a partner aim to take the elevator rather than the stairs. If the store name has a healthy reputation, you’re likely to identify a group of shoppers who take the stairs.
     But if the store name is seen as a servant when coming to life, it’s as if a store’s reputation for promoting health gives the consumers an excuse to be unhealthy. They depend on the store to do all the heavy lifting.

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Mythologize Your Store

Join the Real Modern Family

The Emmy-winning TV series “Modern Family” features non-traditional household compositions: A gay couple adopting a daughter. An older man married to a much younger woman raised in a different culture.
     But a study released last month by advertising agency Leo Burnett Chicago indicates that the TV show is behind the curve compared to actual modern family dynamics. Since maximum retailer profitability depends on staying ahead of the curve, take note of what that report, titled “Humankind 2012: The Transformation of Aspiration,” has to say about now compared to before:

• More single parents. About 40% of children are born to an unmarried mother. This does not necessarily mean there’s no father in the home, though. About 60% of married couples had lived together before the wedding.
• More househusbands. Some of this is because men account for almost 70% of job losses in this Great Recession. Almost 80% of men have no objection to giving up the traditional gender roles. About 77% are comfortable with their wives earning more than them, and about 72% accept staying at home to raise the children.

     Husbands are doing more of the household shopping than in the past, and when a wife does do the shopping, she’s more likely than in the past to bring along family or friends. Women would prefer to be home more with their families, but in many cases, this isn’t feasible.
     The variations in preferences within the population of women and within the population of men are, in many realms, more significant than the average differences overall between men and women.
     Still, research finds that, overall, men tend to think about shopping and conduct themselves as shoppers differently than do women. Researchers at Stanford University asked samples of men and women to contemplate the task of shopping for a new wardrobe. Later, each participant was assigned to plot the route for a cross-country road trip.
     The women in the study were much more likely than the men to plot out a scenic route rather than a direct route. Male shoppers are more purpose-driven. Women are more possibilities-driven. Men tend to like sharp contrast. Women tend to like harmonious flow. Along with this, women are more likely to find emotional comfort from shopping than are men.
     Recalibrate your merchandising and patterns of salesperson-shopper interactions to turn these shopper gender trends to your advantage and to that of your modern family shoppers.

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Recalibrate for Shopper Gender Trends
Overcome Gender Stereotypes