Retailing Format, Marketing Personality and Customer Service: The Three Drivers for an Indian Retail Revolution

India has today several glitzy malls with shops dedicated for homegrown brands as well as multinational brands. The retail channels are a combination of single brand retail or multi-brand retail shops. Also coexisting in the normal shopping districts are standalone shops and the ubiquitous kirana shops (mom and pop stores). Quite obviously, the investments in the mall based retailing are significantly higher than those in the more traditional ones. Frequenting the variety of shopping options, one would certainly find a step function increase in product choices but an inexplicable lag in terms of salesmanship and customer service. Even the traditional retailers seem to be less concerned about attracting customers and retaining customer loyalty. As India would continue to witness an explosive retail growth, in terms of infrastructure mainly, long term viability would depend on full utilization of such infrastructure.

The new Indian retail revolution seems to be based on mall and shop infrastructure on one hand and product portfolio on the other. Communication is largely through media advertisements and text messaging. New product launches, discount periods and festival seasons are leveraged to inform customers of product availability. The expectation of the retailers, however, largely is for customers to reach out and choose for themselves the products they need. The importance of customer service to connect the customer with the products on one hand and the retailer on the other seems to be less recognized. There is, of course, a hypothesis that the customer of today is well informed and he need not be burdened with excessive verbiage on the products. Such hypothesis misses the point that customer service has a more holistic meaning to it.

Physical and virtual

Customers are aware that there are now several options to source anything through the Internet, often at lower prices, and based on considered evaluation of alternate product characteristics. Yet, the physical format, despite its price premium, offers one unique advantage of person to person contact and a conversation to help the customer. The physical malls and shops of today seem to miss on this element all together. Even where product displays are provided, the emphasis is more on the customer-product contact than on customer-salesman contact. In rare cases where customer-sales person contact is enabled, the emphasis is more on meeting the sales target rather than on understanding and fulfilling the customer need. The two key influencers are the ratio of sales persons to customers and the marketing personality of the sales person.

It is important to note that while virtual format cannot replicate any of the unique features of the physical format, the physical format can combine the best of both the formats. At an intense level, it could be providing a suite of computers and tablets for customers to first exercising their choice short list through virtual retailing and then taking them on to more focused physical marketing. At a subtle level, it could be in terms of electronic displays that stream live the high points of the shop and its products. While the virtual format can rise up to the physical challenge by promising the earliest possible delivery (for example, the promise by amazon.in of a 24 hour delivery), the physical format can extend itself by promising wider access beyond what is on the shelves through in-store Internet kiosks. The key to the success of the physical-virtual combination lies in making browsing while shopping feasible and pleasurable.

Retailing format

Apart from multi brand and mono brand retailing options, category retailing options also exist. For example, Reliance has chosen to develop specific retailing channels and store formats for product categories such as home needs (including FMCG), footwear, apparel and electronics. Future Group also follows a similar approach with Big Bazar and Pantaloons. Tata Group has Landmark, Westside and Croma for books, apparel & accessories and electronics respectively. The logic is that such segmented retailing enables focused customer groups which can be served with better product choices in each category. The results have, however, been mixed. Given the relatively high work pressures in India, it is a moot point if consumers would like to visit dedicated shops or would prefer one location for all their needs. The success of malls is perhaps attributable to the need to have one stop retailing solution. None of these groups, however, has experimented with a monolithic retailing format such as Walmart, where their own corporate brands act as mega malls.

Indian retail may experiment with one more concept of stores within stores. Large behemoths like Hindustan Unilever and P&G may create sub-stores within the stores where all of their products can be offered as integrated solutions. This is a trend that is apparent in electronics with displays organized as per product categories and brands with dedicated sales personnel. It is the value proposition of brand loyalty and product loyalty that could determine the drive for, and success of, such a store within a store concept. Extending it further, these giants could have their own exclusive sales plazas or malls. There is, therefore, likely high scope for further evolution of the physical retailing format in multiple models. Whichever retailing model is adopted, the development of a marketing personality would be foundational for the retail success.

Marketing personality

The success of the physical format depends on the marketing personality of the shop and its sales persons. Marketing personality, like all professional personalities, gets developed based on personal attributes, education and experience. While Indian institutions are focused on developing marketing managers, little infrastructural support is available to develop the needed marketing personality in frontline sales personnel. These persons do not need statistics for market research or strategy for market penetration. They need, however, a deep understanding of consumer psychology, a thorough knowledge of product attributes, an inquisitive mind for customer needs, an empathetic approach to striking a conversation, and above all a commitment to deliver value for the customer. They are relationship managers more than sellers or marketers.

Larger hotel and hospitality chains have been quick to realize the need for frontline customer interface and have established dedicated in-house training institutions and on the job training and apprenticeship programs. Shops and malls as well as a host of other customer-facing organizations have perforce to depend on the general pool of talent from educational institutions. There are, however, only a very few institutes in India that impart the right kind of education and training for developing a well-rounded marketing personality. National Institute of Sales, founded by NIIT has been one but the country needs a lot more. On the lines of Industrial Training Institutes offering technical apprenticeship training, the country needs Marketing Training Institutes to turn out sales and marketing personnel who can support the retail revolution.  A retail outlet that has persons of appropriate marketing personality tends to acquire a customer-friendly personality of its own. If retailing format would owe its success to marketing personality, the latter in turn would need customer service as the key driver.

Customer service

Customer service has several components. The first is a warm greeting; whether a sales person welcoming a customer to the store or a field sales person greeting the homemaker or doctor, the warmth, smile and connectivity of the welcome greeting sets the tone for a customer friendly ambience. The second is a polite enquiry on what the customer is looking for. The ability to distinguish between focused and unfocused customers as well as impatient and languid customers is the key to guide them appropriately to the required store location. The third is to provide transparent and authentic product information; informed decision making by the customer leads to customer satisfaction. The fourth is to understand customer indecisiveness as an opportunity for need discovery rather than to force a buy through canvassing. The fifth is an ability to commit to getting the right product after the need discovery. As products range from high generic to high technology, the need to understand consumer psychology and align the store philosophy becomes progressively more important.

As products move higher in specificity and technology, two factors become important. The first is the ability and willingness to offer pre- and post- sales support; this is essential to ensure complete lifecycle support to the customers. The second is the ability and willingness to transform each sales transaction into relationship development; this is essential to ensure a value proposition for Indian retailing beyond products and brands. To succeed in this, the ratio of customer service executives to the customer base becomes important. Investment in people and technology would be an important component of the new retail format. People investments must focus on adequate numbers of trained marketing people. Investments in technology should focus on understanding the consumer needs better and forming a long lasting relationship with them. When Google and Facebook can collect huge amount of information on the preferences of the site visitors simply through their browsing habits, the physical stores should be in a position to supplement customer data bases with physical connectivity and emotional rapport.   

In the emerging Indian retailing milieu, as discussed in this blog post, while the choice of an appropriate and differentiated retailing format would be a key strategy consistent with each retailer’s vision, development of marketing personality and integration of customer service would be universally required to drive sustainable growth.

Posted by Dr CB Rao on May 4, 2014            

     

Digital Technology and Human Mindset

The other day when I was traveling from a leading city to another leading city, separated by four hours of flight time on a leading airliner of an advanced country, I had the occasion to go through the in-flight magazine. The magazine opened to a statement by the Chairman as to how the airlines has been harnessing digital technology in a variety ways to make travel options easier, more productive and more comfortable for the traveler. As the full plane braced for a takeoff after an intriguing hour of delay, the captain informed the passengers that due to bad weather the plane has been provided a different route which happened to be a longer route, and the plane did not have sufficient fuel to cover the longer distance. Hence, the plane had to re-taxi to refuel itself, and could finally take off after a total of over two hours of delay. Ironically, however, the flight covered the s called longer route in the normal flight time. This delay of more than two hours for the stated cause of fuel insufficiency was a surprising experience given the strides reportedly made by the airliner through digital technology which should have made prediction and coordination seamless and easy.

The same flight had an in-flight advertisement of a leading car maker as to how its state-of-the-art cars are designed. The video showed extensive use of computer aided designs, graphics, computations and simulations on computers. However, it also showed how craftsmen make and carve sophisticated models of its cars by their hands, feeling and chiseling intricate shapes. It showed how experts touched and felt the exteriors and interiors, for both form and texture, and compared materials personally on looks and feel. It was as if the traditional craftsmanship and the innate human sensory perceptions were essential compliments to modern computerized design. This combination of human touch and elegance with computer power and perfection as shown in the video was truly remarkable in an industry where design and manufacture are widely assumed to have been digitized. In a flight which seemed to have been no better for all its technology, the automobile video was a good reminder that technology and human faculties are complementary.

Digital limits and opportunities

The two examples reviewed above demonstrate certain subtle aspects of digital power (and powerlessness) and human ingenuity (and confusion). The airliner operates in a country which can accurately predict weather days in advance and which can calculate flight paths of spacecrafts to planets millions of miles away. The airliner thus has access to all the predictive, computing and coordinating power of digital technology. Yet, all of these were of no avail in predicting and managing a mild dislocation caused by not-so-bad weather. The basic and genuine need of the pilot to ensure flight safety could not be met by matching digital flexibility and application of human mind, even of a very simple and normal variety that is available in such an advanced country. Not only that, as the plane landed with all its long delay, the crew completely disclaimed any responsibility towards connecting passengers and said that ground staff would take care of them; but alas no such staff was present on the ground! The disconnect between service and technology was palpable.

On the other hand, the craftsmanship in making the wooden models of cars and the manipulative skills of the designer's hand in shaping computer images tells how human dexterity would continue to be one of the most enduring and most wanted human capability notwithstanding the boundless progress in digital progress. The design approach for elegant cars also illustrates that as long as a product is designed for use by a human being, human touch in design would be an essential concomitant. Societies which think that expert craftsmanship is a relic of the past would find themselves dealing with products that miss out the human-friendly approach. Enlightened societies that continue to respect tradition alongside modernity would see service and technology as inseparable. Firms that appreciate the nuances of craftsmanship bring out best-in-class products like Apple. Technology is not an end in itself but is an enabler for customer delight. Although in the same industry of transportation both the sectors seem to view technology-service paradigm differently.

Sublime in sophisticated

As technology develops sophistication is bound to increase. The objective of technological sophistication is better need fulfillment. That said, there tend to be complexities and subtleties of sophistication. Complex technologies require expertise to design and handle. The designers must understand the needs of lay persons who use complex technologies while users must understand the full potential of such technologies. An insulin pump, for example, must be designed with all the advanced heuristics that are required to manage the complexities of multi-factorial diabetes disease but must also have the child in mind for simple and error-proof operation. A teenager or an adult who invests in a sophisticated smart phone must, on the other hand, take the embedded technology as given but expand his or her knowledge of its hardware and operating system to push the utilization of the phone to its design limits. There is, therefore,an important step of converting technological functionality into user experience.

The way the educational ecosystem must evolve to cater to the technological challenge is clear; it must provide fundamental knowledge as always because it equips a person to serve a variety of functions and industries. However, it must also track the evolution of day to day transformations that technology provides as only then will the human mind have the ability to harness the full potential of its own developments. In other words, the new generations of humans, regardless of the domain, cannot be technology naïve. The taxi driver of tomorrow, even in the emerging economies, cannot be ignorant of technologies. He or she must be capable of being a part of radio calling and distributed dispatch network, and have the ability to adapt to a wide range of electronic payment systems. The customers too must be able to move on from conventional debit or credit cards to mobile wallets, for example. Digital devices are the answer to the call of the future but require more than just technology to deliver the full promise.

Poka-yoking technology

Measurement is the insurance against misapplication of technology. As devices become more powerful and versatile, a whole new set of connectivity options and measurement systems become important to keep the devices and systems efficiently and appropriately functional. Typically, the new generation of devices and systems must have two processors and operating systems; one to deliver functionality and the other to ensure quality. The performance of the first needs to be assured by the quality measurement unit. This becomes extremely important as medical technology leapfrogs to offer newer bionic devices for human rehabilitation. Measurement can be by ordinal or cardinal measures. What is important is the application of measurement for assuring integrity of design in actual delivery. Japanese have perfected the art of poka-yoking technology. There is another dimension of technology, however; that relates to unintended misapplication or deliberate misuse,and is much harder to tackle.

As technology progresses and network integrates, the risks of unexpected randomness, loss of privacy and the insecurity of hacking also increase. The random and dangerous pitfalls of algorithmic trading constitute an example. Similarly, as social networking, e-commerce and online payments increase, the risks of unintended data usage and loss also increase. While more technology filters and more fixes can be deployed, ultimately it is the discretion and caution of the human mind that can prevent inappropriate use of technology. The human mind must continue to be trained to function independent of technology so that the ability of an individual to evaluate both intuitively and experientially varied technological outcomes is not hampered.

Mindset, not technology set

When I set out to write the blog post, I did not envisage a return to the case of the advanced airline of the advanced nation with which I started this post. This time, I was returning to my base city on a flight, and had the opportunity of listening to all of its representative employees and the Chairman emphasizing in their pre-takeoff video how committed they are to ensuring absolute customer delight. Upon landing, after a long wait of one hour at the baggage claim, upon enquiry, I was informed that my missing suitcase would be arriving by another later flight. The  airlines, in spite of knowing this through its self-acclaimed digital baggage tracking system, never bothered to inform hapless passengers like me, on a proactive basis, of the delayed baggage arrival. Nor did the airline tender even the simplest of apology, or any other comforting assurance of whether the baggage for sure would arrive at an appointed time. While the airliner would deliver the baggage to home eventually, the disconnect between digital tracking and physical expression has been disappointing to say the least.

Clearly, even the best of technology can only be as good as the level of human commitment to deploy and leverage it. It is the human mindset that will determine not only the limits of digital technology but also the multiple ways in which it can be harnessed for customer delight. While deploying technologies in all possible ways firms must focus on shaping of employee mindsets in three different ways. Firstly, there must be an abiding focus on deriving the full benefits of technology. Secondly, there must be the needed flexibility and ingenuity to deal with situations when adverse environment disrupts planned outcomes of technology. Thirdly, the entire organizational ecosystem and employee performance must be driven by a passion for customer delight. It is worth repeating that the best of technology can only be as good as the human mindset that deploys or receives it.

Posted by Dr CB Rao on June 30, 2013

Customized Product Design (CPD): The Next Wave of Competitive Advantage?

Exponential technological development has contributed, in recent years, to a massive increase in product lines and products. Companies typically run hundreds, if not thousands, of store keeping units (SKUs). The more global a company is the greater the proliferation of SKUs. SKUs typically define product variations to meet country and customer specific homologation needs. It is, therefore, tempting to hypothesize that there is a huge wave of customization that is sweeping the industrial scenario. Unfortunately, SKU proliferation ends up adding to complexity with variations rather than meeting multiple customer needs with real customization.  Product variations do not necessarily mean customer customization.  The nature of variations, oftentimes, tends to be as per design templates rather than customer needs.  Product variations, as are commonly found irrespective of product or country, tend to fall broadly under three main categories: category driven, performance driven, and price driven. There are, however, two influencers that are esteem driven and policy driven.  

Category-driven is exemplified by broad and dominant product configuration; for example, smart phone versus non-smart (or, dumb?) phone and sedan versus utility vehicle. Performance-driven is exemplified by hardware and software differences which together set performance differential between products. Price-driven appears rather easy to understand in terms of different price points at which a product can be positioned but is actually more complex; specifications-driven costs and brand-driven premiums impact price. Esteem-driven is reflective of product-market niches that are created by companies. Policy-driven is the outcome of the influence of regulatory policy on product design. The preference for 660 cc mini cars in Japan or sub-four meter cars in India which qualify for lower excise duty reflect that category. Despite five such categories and multiple SKUs, rarely do products get designed around customers.

Customer choice; a mirage? 

The interests of the customer and corporation are conceptually aligned but practically tend to be misaligned. When one sees the hundreds of apparel in retail stores, it is easy to appreciate that the apparel are designed with certain standard sizes and ruling fashions in mind. In fact, factory production, ipso facto, tends to promote standardization and reduce customization in any field. Reverting to the example of apparel, decades ago when there used to be no readymade apparel, tailoring represented the only and complete form of dress development, which was truly customized to the individual.  In the earlier paradigm, the consumer had the choice of selecting a cloth and getting it tailored to his or her measurements and stylistic requirements. In the current paradigm, mass production of multiple designs does not necessarily translate itself into real customer choice. Probably, the right phraseology for the current scenario is product choice rather than customer choice.

Mass production in factories, of course, vests several other advantages of quality in design, manufacture and delivery, use of superior material and methods, reliability and adoption of global trends. Henry Ford’s assembly line manufacture of a standardized car in a single color in the 1910s represented that extreme of industrialization while General Motors’ competing strategy of differentiation was an alternative approach. In contemporary times, Apple represents the early Ford of smart phones with not more than a couple of products in each product line while Samsung with its scores of smart phones represents an amplified version of General Motors in smart phones. Customer choice, however, is not a matter of numbers either; there need not necessarily be proportionality between SKUs and customer choice. A simple question clarifies: Is Galaxy S4 equally ergonomically optimal to hold and operate for all ages and for all types of palms? The answer, unfortunately, is a ‘no’, which implies that a person of a small palm has to either bear the burden of an oversized state-of-the-art phone or a right-sized smaller screen phone of lower specifications.

Customer choice defined

True customer choice occurs when a customer is able to secure a product that meets his or her expectations on all specification and at all price points. This is an awakening that is occurring slowly, but surely, even in some of the most strident category manufacturers. Luxury vehicle manufacturers such as Mercedes Benz and Audi are now moving down the categories to B class and A class cars as well as towards compact SUVs to provide their customary luxury specifications across all categories and price points. Becoming a full length manufacturer is commonly seen as the solution to providing customer choice. Probably, this is a beginning and still not a full resolution of the trend. The concept of full line manufacture as it exists today is one of positioning products at different price points, which almost invariably translates having a range of products from low-spec to high-spec.  True customer choice, however, enables the design of a product around the customer needs, with a very open and flexible mix and match approach.

Dell, the computer maker was long seen to be a leader in customers designing their computers by selecting the configuration of choice. Even the Dell model is not representative of true customer choice. Changing the processor, adding RAM capacity or battery power, or providing operating system (OS) options and accessory choices are more in the nature of upgrades rather than product redefinition.  True product definition would occur if a customer can, in the case of Dell for example, mix and match the specifications of Inspiron, Latitude and XPS models as well as those of laptop, ultra-book and tablet. Similar is the case with automobile manufacturers who try to customize marginally based on power train options or interior trim. The day when a hatchback can be grown proportionally into a compact utility vehicle at customer’s choice is probably still decades away even globally. Service industries, which are not manufacturing oriented and therefore should be better placed for flexibility, find it difficult to offer multiple services in flexible formats.

Customized product design

The challenge in achieving true customer choice lies in combining the benefits of mass factory production with the rigor of fulfilling individual customer choice. Reverting to the example of readymade apparel, there could be two ways by which the manufacturer can achieve customized service. All this would require is a measurement system in each retail shop. By taking the measurements and communicating them to the central factory along with the requisite cloth and style codes through the company information technology system, the retail shop can provide the custom-stitched, yet factory made, apparel to the customer rather than try to force-fit or re-tailor the available options at the retail store. This first way leads to the second way of building up a database of thousands of people measurements and developing a more customized size and style classification that could combine the advantages of factory design and production with the benefits of custom tailoring for the customer. Needless to say, over a few months the database would exponentially expand and provide a competitive advantage to the apparel manufacturer relative to the others.

The concept can be extended virtually to any sector with appropriate modifications. Given the openness and the lead time of 6 months in designing and manufacturing a smart phone, the smart phone makers can encourage customers to pre-book their phone requirements by taking a picture of the buyer’s hand (palm lines and finger prints can be covered to avoid risk to personal details) and an inventory of his choices in terms of screen size, screen type, pixel resolution, on-board memory, micro-card memory, processor speed, operating system, camera pixels, flash type, battery power and build type to quote, just a few parameters. This customer data base can facilitate the design of a truly ergonomic and operationally customized smart phone. Like with apparel, as the company builds up a database of millions of customer profiles, smart phones can be smartly, rather than presumptively, designed for the widest possible focused fulfillment. This approach can be leveraged for any product or service with appropriate data capture and analysis systems to move towards mass customization.

Mindsets and competencies

What is proposed in this blog post is a radically different way of conducting product design. The proposed paradigm makes the customers the product designers by enabling them convert their individual experiences, thoughts and desires into millions of specifications which can be sifted through using high speed processing technologies to develop histograms customer choices. The paradigm requires a major shift in the mindsets of corporations. They must resolve to understand and fulfill customer requirements first hand by asking intelligent questions, providing meaningful options and redeeming the customer hopes with products that are better customized.  Customers also must change for the paradigm to be successful. They must be discerning, responsive and responsible. They must be demanding but also patient. To enable the initiative achieve widespread awareness and expand to achieve self-sustaining capability, corporations could do well to form customer clubs which can become the nuclei of customer creativity and design enablement.

Corporations need also competencies to be able to successfully pilot the customized product design initiative and institutionalize the customer integration. Companies need to identify and establish the essential infrastructure that is required to connect the customer to the corporation. As with the apparel company, it could be the ubiquitous tailor for taking measurements of customers in the apparel retail store, supplemented by style manuals or style portals. As with the smart phone company, it could be palm scanning and product design kiosks in the phone retail stores. At the central level would be a very strong information technology backbone that connects all the primary data collection hubs with a powerful central server system, a high speed algorithmic processing system and a multi-faceted analytical capability. Organizational design must provide for structures and processes that enable continuous interactions between the market and product design divisions of the company. Talent that is technology savvy and customer friendly as well as analytical would be essential.

Customized product design (CPD) as proposed in this blog post could be the next wave of competitive advantage for corporations if backed by appropriate mindsets and infrastructures.

Posted by Dr CB Rao on May 26, 2013