Brand advocates are the most important salesmen a product has.

Brand advocates are the most important salesmen a product has.

Graphic courtesy of The Times & Bain

Personal recommendations ensure brand preference, even in the toughest of times.

A survey of 6000 shoppers by Bain reveals that consumers are more likely to “treat themselves” by spending more on premium and luxury brands during these tough economic times. Bain note that consumers recognise the there is an emotional pull by these brands, who are deriving reassurance of quality in their purchases.

In tough circumstances, consumers are cutting back on big ticket purchases (think Best Buy & Comet issues), are holidaying at home (BA reports another drop in passenger numbers) and in terms of homes, they are either holding on and not moving (stagnant housing market) or can’t get mortgages to get on the housing ladder and will continue (or even restart) to rent (today’s Grainger report indicates up to 50% of Brits will soon be renting).

While these are understandable indicators of such hard economic times, many consumers want to afford themselves to the occasional “treat”. When they do, in a surprisingly wide range of categories – including fragrances, restaurants and personal technology – they look to brand-influenced decisions. What is interesting in the Bain study, is the confirmation that

  • advertising continues to  diminish as an influence on 2st Century brand choice
  •  personal recommendations are the most important influence
  • online activity is important but not as important as the massive shifts in marketing expenditure to internet expenditure suggests.

As Bain says ‘Companies overestimate the importance of online and are underestimating the importance of advocacy.  A lot of companies have spent a lot of money on the internet but they should be spending more on getting people to be influenced by their friends and family”.

Brands can succeed next year despite the gloom and doom, by creating advocates, by listening to and creating dialogue with these consumers and by recognising that by doing so, consumers imbue these brands with quality associations, beyond the basic product attributes. Brands that do this understand the new customer journey has many touchpoints that require new thinking and smaller, consistent actions that reinforce the expectations of the brand promise.

Hailey’s Comet – innovate the brand rather than cut off the tail

Hailey’s Comet – innovate the brand rather than cut off the tail

When Best Buy shut down UK operations yesterday, a John Lewis spokesman got it right when saying :there was no gap in the market. Today, Kesa shed itself of Comet for £2 to a group of companies under the name “Hailey” advised by retailer turnaround specialists OpCapita.

Hailey’s Comet – geddit?

Kesa have invested £50M into Hailey and covered the staff’s final salary pension fund. Hailey’s Comet will burn for at least 18 months (they “promised”). The goal is to sell it on then or after for £70M+ assuming the chain has indeed turned around. Kesa had already been fighting the downturn by shutting down 17 stores and was “right-sizing” more. Hailey will no doubt be fast tracking this faster and deeper to drive profitability on declining revenues.

Which makes one wonder what the future of these bigger out of town operations? Especially for infrequent big ticket purchases? No doubt people will still buy what the big Electrical Outlets offer – once a year or less rather than what was twice a year or more.

But with everyone becoming savvier in online research and the importance of recommendations, what will drive people into the stores that they do not pass frequently? Smaller High Street stores work for smaller electrical and tech offerings (Carphone Warehouse’s skills not Best Buy’s) or offer an all encompassing experience (Apple Store) that will draw more regular visits without a desire for specific purchase. Argos has cracked its digital search app brilliantly to order & reserve before going to store to pay & pick up – and use GPS to make it yet more relevant.

How can Hailey turnaround what Kesa couldn’t? Cost optimisation will not be enough. The Comet Brand Experience will need to be reinvented – and that cannot start with price promotion advertising but with innovations on the whole customer journey. Innovations that should include a new digital dialogue or friendly & rewarding search and information applications and then through to expectation beating in store experiences. The aftercare option cannot be confined to selling expensive and unwanted product liability insurances.

There are enough Comet stores that Hailey can test out different experiences on different customer journeys – and then accumulate the total learning into the whole group. Such a programme could and should lead to turning around revenues as well as whatever Hailey decides to do with cutting off its tail.

If they fail, there may well be a gap in the market – the real Hailey’s Comet is due back in our solar system in 50 years…what will be happening in retail outlets then?

Best Buy – an avoidable failure.

Best Buy – an avoidable failure.

Best Buy UK’s closing down of their 11 Big Box outlets is being touted today in the broadsheet newspapers as a failure due to a combination of “naivety & arrogance” which was compounded by the sharp economic downturn. While the UK story has abruptly collapsed to these poor headlines, the partnership between Best Buy and Carphone Warehouse hasn’t been a disaster and both strong brands remain strong in their markets.

Best Buy’s US brand is a very resilient and they are out making a Superbowl commercial ( for only their second time using a weird father/son duo of Ozzy Osborne & Justin Beiber!). Their in-store experience consistent and rewarding not least through their Geek Squad sub brand. Their UK partner, Carphone Warehouse has a similarly strong brand and consistent experience.

The JV’s European management is strong with Messers Dunstone and Harrison well versed in branding and retail. Indeed, with Best Buy taking up the successful US partnership and buying out Carphone Warehouse, there is considerable financial upside for Carphone and the European JV partnership will continue – but in outlets that will represent Carphone Stores rather than Best Buy with a strong Telco focus.

What went wrong in the UK? The economic times were clearly a bad backdrop, but the failure seems to be down to 2 key reasons, which should have shown up in early planning and could have been avoided. The focus on big out of town outlets and the disappointing brand experience

Best Buy UK had just 11 big stores. Out of Town sites are expensive (particularly in UK compared to France & Germany and even more so than in the US). Planning permission is tortuous. Regular visitors to the parks are usually only to supermarkets. Visitors looking for Big Box electronics and Home improvements and the like are now less than once a year or so. Their established competitors had hundreds and hundreds of stores and were eager to compete against the US invader.

Their Best Buy brand was launched with big ambitions – National Advertising and big price discounts promised. The assumed poor service of their competitors improved and customers were able to browse Best Buy & walk across to Comet or Dixons and browse/compare based on product and pricing at which Best Buy weren’t clear winners. Customers would have done this online too and may have only gone into Best Buy as it was a new experience. To succeed, the Best Buy experience needed to beat expectations, expectations they themselves were setting.

Was it a good experience? The range of products inside were disappointing – often significantly less than their competitors. The discounts were either short lived or only premium products. The Geek Squad failed to live up to the hype (the US Squad rocks!). The advertising didn’t differentiate. Why was it so American? Where was the humour for the UK marketplace? Too many customers in research assumed that Best Buy was an American grocery outlet.

The economic times didn’t help. Indeed Best Buy should have entered the UK much earlier. Today, there isn’t room for 3 competitors for such an infrequent expensive purchase. But to go in with an all singing, all dancing BIG brand promise missed the mark. A smaller test, via a single store say, to hone the right offer, the right experience and the right brand for the UK market which can then be heralded more overtly and growth taken slowly, 21st century brands need to be tested and nurtured with their customers. Too many assumptions seemed to have been taken and then wrongly accounted for in planning.

A shame as the Best Buy US experience is a very good one. As is the Carphone Warehouse experience. But they are different and were always likely to be.