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What Marketers Could Learn From Microsoft’s’ Acquisition Of Nokia’s Mobile Division

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Microsoft’s acquisition of Nokia Why Nokia is a good buySo Microsoft is to buy Nokia’s phone division for $7.2 billion. Most commentators are pretty neutral on this and Microsoft’s stock is even down on the day. I’m guessing a lot of people are thinking that departing CEO Steve Ballmer’s swansong (he announced his retirement from the business last week) is little more than a pairing of two dogs and all this will create is a mongrel. On the face of it they may be right – Nokia has undoubtedly failed to bring its proposition into the smartphone era and Microsoft’s mobile platform has equally failed to gain widespread acceptance. Both struggle with some major issues in competing with Apple with iOS and Samsung with Android.

And yet there is a great possibility that the naysayer’s will be proven wrong and this coupling will become a marketing case that B-schools will adopt globally.

Microsoft’s acquisition: Why Nokia is a good buy

Let’s think about the situation: whilst Nokia has struggled to capture the imagination of the affluent west, it has done a pretty reasonable job of making cheap, Internet-enabled handsets available to consumers in the developing world. With 3G networks rapidly become ubiquitous (during a recent walking trip in India, I was able to download email atop a 2600 meter-high Himalaya), the major barrier to internet adoption for many is the availability of affordable devices. Nokia has ample expertise in building these devices and if it could unpick its tangled route-to-market strategy, it could easily take a solid position in the massive untapped market that the bottom of the global pyramid represents.

For its part Microsoft remains the world’s dominant provider of operating systems and programs for home computing. Indeed in conversation with a recently departed director of marketing at Microsoft, I was told that nearly 95% of personal computers in the developing world run on  Microsoft. However, the company has failed to realize profitable revenue streams from this not because consumers reject the brand, but because of the ubiquity of pirated product. The same former exec suggested that converting just a tiny percentage of the world’s pirated users to official licensees would add huge sums to the company’s topline.

As developing world consumers enter the Internet-enabled market, the most common point of entry today is not a desktop but a mobile device. With this in mind not only is Microsoft’s tie up a brilliant opportunity to gain ground back from Google and Samsung, but also it’s a fabulous way to ensure that revenue from licensed software and services (think Skype and Bing) is returned to the company.

Good acquisition – where’s the marketing?

So far this all reads like a great case to illustrate a smart acquisition strategy. But there’s little in this which relates to marketing right? But here’s the thing, delivering on the promise of this tie up is a major marketing challenge. At engage, we advocate the need for Total Marketing strategies – ones that meet the needs of the consumers who will use the product, shoppers who will buy the product and retailers who stock the product. Microsoft can only be successful if the approach they take fully embraces this relatively simple concept. If they do, then graduate students will be studying their marketing success for years to come.

5 Marketing Challenges Microsoft Faces Now

The managers faced with delivering on this challenge now have five key strategic questions to resolve:

  1. Which consumers should we prioritize? Most of the hype surrounding mobile devices focuses on the pace at which smartphones have been adopted by the global middle class. Accepting this may be a large potential oportunity for a Microsoft led mobile offer; I would argue that this should not be their priority. Not only have both brands struggled in this space, but also both brands have significantly more to gain from a much larger, less affluent consumer base which as yet no single manufacturer has a monopoly over.
  2. What shopping behavior will we have to create to put sets into consumer’s hands? Getting less affluent shoppers to part with a large proportion of their disposable income is a major ask and a significant decision for the individuals involved. Not only will the new business have to ensure the product is available to these shoppers but equally that they can communicate the benefits of the product to them and that they can create an offer in the form of pricing and promotion that will stimulate these shoppers to buy.
  3. Which retail environments do we have to be in? Accessing up to a billion new buyers globally is a challenge for anyone and it’s going to demand that Microsoft in particular have a major re-think about their retail strategy. The shoppers they may choose to target don’t all have access to shopping malls and large format stores, so the new unit will have to get the product into retail channels where they may have little or no expertise. They may well be challenged to develop competence in managing extended routes to market and many millions of independent retailers in a way they have not been in the past.
  4. What’s the best marketing mix? A traditional approach to media and communication, especially one that revolves around glossy ads and flagship stores will probably not be effective if the new business wants to secure sales to a new cohort of shoppers . Microsoft and Nokia may well have to create massively different messaging and utilize media that to date they may not have considered relevant.
  5. What investment is this all going to require? Way beyond the investment in new product engineering, the mobile team is going to have to consider the surgical investments needed to ensure that they secure retailer’s support ahead of brands like Huawei and Samsung.

I for one will be interested to see how rapidly Microsoft are able to embrace these challenges now and how effectively they are able to execute against them in the future. I believe that if they get it right, Microsoft’s acquisition of Nokia could well be a brilliant buy that leaves competitors asking what has happened.

To learn more about how Total Marketing could help your company realize the opportunities you see in the marketplace, contact me by clicking here.

Image courtesy of Flickr user Vernieman

What Shopper Marketers Need to Know (Part 2)

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De-bunking shopper marketing mythsIn the blog last week I wrote about the truths shopper marketers need to know behind two of the commonly believed myths in the field. This week I explore the next two: that shopper marketing is just about large super-organized chain stores, and that it’s an evolution from trade marketing and category management.

Myth three: Shopper marketing is only relevant in large stores like Walmart

False: Shopper marketing is marketing. Shopper marketing’s focus is on getting people to behave differently when they are buying and people buy in a massive array of retail environments. We’ve already learnt that shopper marketing can influence people before they head to store, so it’s fair to say that shopper marketing can influence someone’s behavior regardless of the store that they choose.

Let’s take an example: Some years ago we were working with a baby nutrition company. Most of their sales were made in massive hypermarkets and as a result most of their investment was focused on activities to get people to buy more in hypermarkets. The trouble was, when shoppers walked into a hypermarket, they already had a brand in mind. When we followed people through the stores, guess what happened? 98% of them bought the brand they’d planned to buy. All that investment in big stores was changing the behavior of exactly 2% of the population! But when we looked at the very few occasions when a mom decided to change brands, we found these shoppers were 70% more likely to go to a pharmacy. A small amount of careful investment in pharmacies, we concluded, might have a much greater impact in the long term that the massive volume of money spent with hypermarkets.

Implication: Ignoring the potential to influence people’s behavior in independent stores, online or even in less important retailers limits the potential of your brand. Have all your shopper marketing efforts only focused on big retail is therefore going to limit your returns. Make sure you understand the retail environments that are important to growing your brands and invest there, even if it isn’t your biggest customer.

Myth four:  Shopper marketing is part of an evolutionary change

False: Many have argued that shopper marketing is the logical extension of the movement from category management, into in-store marketing and finally to today’s shopper marketing. It isn’t. Shopper marketing is the process of creating and implementing a marketing mix which changes shopping behavior in order to drive consumption. Just because it employs tools that have been developed in category management or in in-store marketing as part of its marketing mix, it doesn’t follow that it is has evolved from these tools. Shopper marketing has become important because marketers recognize the truth behind the first myth: that consumers and shoppers behave differently, so different marketing approaches are needed to get the required response.

Let’s take an example: A couple of weeks ago I highlighted the work that had been done in revitalizing Old Spice as an example of great shopper marketing. This has nothing to do with in-store activation, and everything to do with the insight that in order to get men to stop using their wives’ or girlfriends’ body wash, one has to persuade these shoppers to buy body wash for men. The key element of the marketing mix to make this happen was effectively communicating to women that their partners smell like girls. So good old fashioned advertising, and a cool online campaign did the job that in-store activity would probably have failed to do. This isn’t category management – it’s marketing, with a different outcome.

Implication: Companies that assume that re-branding the trade marketing team “shopper marketing” is all that’s needed will continue to enjoy the same results they have had to date because nothing will have changed. Successful companies realize that shopper marketing demands a fundamental change in the business model, business processes and organization structure. In return for their investments, these successful companies are enjoying sustainable and profitable growth.

If you’d like to learn more about how shopper marketing is transforming the way companies market their brands, pick up a copy of The Shopper Marketing Revolution today!

What Shopper Marketers Need to Know: De-bunking shopper marketing myths

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What Shopper Marketers Need to Know

Shopper marketing is just over a decade old and for many retailers and manufacturers it’s becoming increasingly important. But shopper marketing remains poorly understood by many and as a result, many common myths abound. In this week’s blog and the next, I want to deal the four most common shopper marketing myths, and explore what’s really true, what shopper marketers need to know, and what de-bunking each of these myths means for the modern marketer.

Myth one: Consumers and shoppers are the same

beer-aisle

False: I’m yet to work in a category where all the people who buy a product also use it. The proportion of a category sold to shoppers who are not consumers varies enormously from a very large percentage to a very low one. But even when the shopper and the consumer are the same physical being, the behaviors of consumption (drinking a product) and shopping (buying a product) are massively different.

Let’s take an example: I like to drink a cold beer after a game of rugby with my friends, personally. I prefer to drink a more ‘premium’ brand like Heineken over any old beer. These preferences, and the consumption they create, are born out of years of positive “post-rugby-cold-Heineken” experiences – I’m a “premium beer consumer”. Now let’s think about me as a shopper: every few weeks, it’s my turn to buy the beer for the team. Logic suggests I’ll buy Heineken, but when I stop to buy the beer on the way to training, I find another beer is on promotion and in the chiller in a large format pack. Since I’m buying for a bunch of guys, as long as the beer is not a brand I’d actively reject – I’ll buy the promotion to save money (I know – I’m a “cheapskate, deal-buying shopper”!).

Implication: Marketers who assume that activities that build brand equity in the mind of a consumer will automatically drive sales are often disappointed. Different consumption and shopping behaviors are driven by different stimuli – so they require different activities to deliver the required results. For campaigns to be really successful separate, and yet linked, consumer and shopper components are needed.

Myth two: Shopper marketing only happens in-store

empty-fridge

False: We are always shopping – especially today when we interface with brands in so many different ways. In actual fact the process of shopping begins long before we go to a store – it starts with a consumption gap (you can read more on this in one of Mike Anthony’s recent blogs):  he second I realize a product is absent from a regular cycle of consumption, I consider buying it, or I ask someone else to. At that moment the shopping process has begun and long before a shopper walks into the store, they first have to think about how urgent the trip is and which stores are most likely to ensure the trip is successful.

Let’s take an example: On the odd occasion I’m home to bath by one-year-old I notice we are down to our last “night-time” diaper. I mention this to my wife;now she has a choice: to wait until she does our regular shop or to send me around the corner to the local c-store. If it’s the latter two things will happen; firstly we will spend more per diaper (the C-store only has small packs and they are priced at a premium) and secondly we won’t use our preferred brand because the local C-store doesn’t stock it.

Implication: Marketers who believe that all that’s needed to deliver shopper behavior is a few well-sited displays or promotions in a key retail chain often get lower returns on their investment. Those who are able to prioritize shoppers and shopper missions are able to close sales faster, more easily and at less cost because they know how to lever their total marketing budget both outside and inside the store.

Next week I’ll deal with the next two myths that are most commonly associated with shopper marketing: that shopper marketing is just about large super-organized chain stores, and that it’s an evolution from trade marketing and category management. Find out the truth behind these myths, that all shopper marketers need to know by subscribing to my blog.

Price as a retail strategy – Could this be the beginning of the end?

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Price As A Retail StrategyStrange things are happening in the world of retail. Little by little retailers appear to be waking up to the fact that price is not a great differentiator. The last two decades have seen an explosion in price promotions, couponing and money off deals. So much that now it seems that the only thing most retailers have to offer is a cheaper price. But as shoppers wise up to the fact that the real differences in price between one big box and another are not significant, some retailers are beginning to respond by coming up with better ways to differentiate – and are less dependent on using  price as a retail strategy.

Why is price as a retail strategy weak?

It’s long been assumed that shoppers gravitate to the best price in the market. But this presumes shoppers know the price of an item. Most research suggests that they don’t or at least not within the boundaries of a plus or minus 10 percent margin. The truth behind the assumption is probably more likely to be that shoppers gravitate towards the best perceived price in the market. But even then price is rarely the main reason for choosing a store. Time and again, studies I read show that location and choice are the two many reasons why a store is chosen. And yet many retailers have continued to drive price as the main feature of their offer.

This has huge negative implications on consumer goods. Not least that lower pricing sucks value from the market place which benefits no-one. But further that it creates a vicious cycle of “lose, lose” between manufacturer and retailer. The ultimate conclusion of this will be dissatisfied customers. The more we train shoppers to seek out discounts, the more they will expect them and eventually the price point hits its floor. Left with no choice, manufacturers have to reduce product cost to continually meet price expectations and this ultimately leads to declines in product quality. All in, low price as a strategy is a zero-sum game.

If price isn’t it – what do shoppers really want?

Value – simple as that; shoppers want to feel that they have bought the right product for them and that they have paid a fair price for it. Value can’t be delivered by price alone – it’sa combination of quality experiences that ultimately leave you feeling that, when you hand your card to the cashier, you have made the right choices. This is what a growing number of retailers are learning.

Here are a number of examples of how retailers large and small are bringing these experiences to shoppers around the world.

Make good stuff, better

MorrisonsThis is a herb display in UK retailer Morrison’s – my poor photography probably doesn’t clearly show that the fresh plants on display are being gently bathed in a steady fine mist of fresh water. Its keeps the stock looking good and super fresh but it also says, “You can’t get this product any fresher unless you grow it yourself”. Little tricks like this help shoppers feel that the trip to this store is worth making. Morrison’s have introduced a number of ideas like this throughout their stores, which makes shopping there so much more rewarding than a trip to Tesco and Asda – oh and by the way, the prices are good too!

Set the bar high

IpersIf you want to see quality experiences done really well, visit a supermarket in Italy and have a look at fresh foods. This is Iper’s fresh foods section – each area is carefully segmented into a shop-in-shop environment which focusses not on the price of the product but on the breadth of range and its quality. Sure there are plenty of deals too, but this an extra reason to shop, not the primary reason to be there. I mentioned in my recent blog about Carrefour that strategies like this drive loyal shoppers back into the store time and again.

Make it easy to buy what you wanted

M&SThere’s a lot of hype about omni-channel retail but it really does add major value. Over the past few years, UK retailer Marks & Spencer’s has expanded its network of smaller stores. These focus primarily on food – much of it very good. But this means that apparel, another stalwart of the “Marks and Sparks” range is often limited in its range and availability in these stores.

I popped into this store to re-stock on socks and underwear only to find none were on sale. But have no fear – the order online booth shown here allowed me to buy what I wanted without the cost of a long trip the nearest large format stores. Not only does this help close sales that could otherwise be lost but it also opened me up to a number of trade-up options in the products I bought.

Make the offer match the need

CookSpecialist food retailing is going through resurgence in many markets and I particularly liked this store, again in the UK. Cook is a franchise operation with nearly 70 stores and the big idea is that ready-to-cook meals are rarely flexible enough to cater for either very large parties or very small ones. Cook offers a seasonally changing menu of frozen, heat in the oven meals that come in servings for one to six people.

They even sell swanky heating dishes so you can brag to your friends that you cooked it yourself. This little retailer, with its neatly focused proposition, is well-positioned to compete with larger players who can’t match Cook’s range; in this case, price becomes far less relevant

Make it a lot more fun

Malaya KitchenI blogged about BIG (Ben’s Independent Grocer) in Malaysia recently but I want to refer to them again, because the shopping environment theyve created is just so nice.

It’s the sort of place I want to go to buy groceries, because buying there is fun. If shoppers really do have to spend an hour of their lives shopping – I believe that they are entitled to do in a pleasant environment. Many shoppers agree which is why so much is written about customer experience.

This is, after all the ultimate non-price strategy.

The examples I have given clearly show why I believe this may indeed the beginning of the end of price as a retail strategy. I speak and blog often about the future of retail, online and offline so please contact me if you would like to learn more about changes in retail that might affect your brands and their shoppers.

Carrefour Gets it Right: Excellent in-store execution in Italy

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In-Store ExecutionAlmost a year ago I posted a blog explaining why I thought Carrefour might fail in China. This was based on a series of store visits to Carrefour Shanghai. Earlier this year a visit to another Carrefour store in Barcelona  did relatively little to change my views. Readers of both posts will probably conclude I’m not much of a Carrefour fan, so imagine my surprise when I visited stores in Northern Italy that demonstrated that Carrefour can get it right – their in-store execution was spot-on!

Back to basics

The stores I visited were both in Udine, a major regional center in the Northern province of  Friuli-Venezia Giulia and they showed that when Carrefour gets back to the basics of effective retailing, they can really nail it in there outlets.

What I saw in the outlets was that Carrefour can:

  • Deliver excellence in fresh foods
  • Create great in-store environments
  • Make their offering regionally compelling
  • Deliver a coherent pricing strategy

Excellence in Fresh

I love shopping in Italy’s supermarkets, not such much because they are fabulous retailers but more because they really do have the best fresh food offers in the world. Italians demand the best in fresh produce so in any store you will find a great deli offer, fantastic fresh meat and fish and a fabulous choice of seasonal fresh veg. The Carrefour stores I saw were best in class in this whilst working to a globally recognizable footprint.

Carrefour’s MacelleriaAnother example of excellent in-store execution is in Carrefour’s “Macelleria” (Butchery), where shoppers queue to get their hand cut hams from a team of well-trained, efficient staff, in a well-laid out and fully-equipped deli station. And whilst the station itself does little to re-create the glamour of shopping in a family-owned specialist, it does a great job of delivering on Italians’ needs in terms of choice, freshness and appropriate pricing.

With many Italians are still eating as a family, especially at lunchtime, the right offer in fresh foods brings shoppers back to the store frequently whilst encouraging greater expenditure on affordable luxuries every trip.

Great in-store environments

Carrefour YoghurtYogurt is a pretty tough category to make interesting as often chilled units do little to convey a sense of theatre or to communicate shopper needs effectively. So this execution of the yogurt category got me excited. Not only is it clearly differentiated but also it does a great job of communicating the needs reflected in each segment cleanly and clearly.

This clever execution no doubt has hugely positive impact not only on total sales, but also in driving traffic into higher value segments.

Regionally relevant offers

The Flavors Of Your Land
“The Flavors Of Your Land”

Shoppers all over the world seem to respond positively to the availably of not just generically available global brands but also to products that fit local tastes and preferences. This makes the supermarket experience just a little more personal, and offering a curated choice of regional product can differentiate a global retailer from its competitors, building local loyalty.

The people of Friuli are rightly proud of their excellent wines, which are produced in the western hills of the province. Carrefour’s wine fixture gives prominence to this – offering as much space to regional wines as is given to all other wines combined.

I particularly like the communication here. The sign says “The flavors of your land”.

Coherent pricing strategy – delivered

Carrefour Pasta AssortiaToo much of Carrefour’s focus in other countries is on promotions and whilst in these stores there were plenty of offers, one didn’t feel that the core message was ‘cheap’. What was interesting however was the clever use of pricing to encourage active comparison and to facilitate choice. These stores did this in two ways – the first very clearly, the second much more covertly.

Carrefour makes no bones about offering a strong house brand but the way these stores communicated the value point of this brand was very clever. In key stable categories (Pasta, Biscuits, Oil), the different tiers of pricing were clearly on show.

In an approach that apes Tesco’s “good, better, best” strategy, known brands were compared on fixture with own label products. This is a far less cynical approach to own branding than that traditionally used by retailers – it offers shopper a clear choice without undermining the value of a known brand. The effect is a great profit-driving outcome as Carrefour can both capitalize on the higher cash profit of the known brand whilst also leveraging the higher percentage margin or its own brand – another example of excellent in-store execution.

Carrefour WhiskeyThe second, more covert strategy is shown on the whiskey fixture.

Here higher value product is given prominence in the hotspot – lower cost brands being sited either at the bottom or the top of the fixture. Placing high value items between shoulder and hip-height draws attention to the higher cost alternatives, driving trade up – another great outcome for brand and retailer alike.

Does excellent in-store execution mean a brighter future for Carrefour?

There’s a lot here that isn’t on show in many Carrefour outlets and it should be. Over dependence on promotions, a lack-luster fresh offer and poor merchandising have done a lot to undermine the retailer in recent years and performance has reflected this. If what the Italian business unit is doing is an indicator of the future, then better result should follow. All of the strategies shown here demonstrate a much clear focus on securing shopper loyalty and improving the profitability of the overall offer, which is to be applauded. The test for Carrefour is whether these in-store strategies can be efficiently applied in markets globally.

The manufacturer’s challenge:

What I’ve seen in Italy is a far cry from executions in perhaps more key markets like China, Spain and Taiwan and many manufacturers have struggled to gain traction in collaborating with Carrefour to enhance in-store execution and drive an agenda that extends beyond price and margin. Cases like these can be used to address this and effectively demonstrate what can be achieved within the group.

If you are struggling to get better traction with Carrefour and want specialist advice on how to do this in your market, feel free to contact me or my colleagues at engage.