UPDATE: Up-selling the consumer

Observation:  Yesterday, I offered a post explaining that more consumers are ordering tap water when out-of-home dining, thus reducing the average ticket for some restaurants (see “Tap water” from 10/31/11).

As an apparent counter-point to that mindset, an article in today’s Marketing Daily suggests that the recreation industry is successfully regaining their pre-recession revenue-per-customer by adding food sales to their entertainment customers.  Click here to see that story.

Implications:   In addition to serving as an additional revenue stream, having food service options on-site coaxes the consumer to staying at the theme park, casino or museum longer.  (And longer time spent creates more opportunity for money to be spent.) 

There is an interesting contrast between yesterday’s post and the research offered in this Marketing Daily story.  Yesterday, we were talking about consumers who were cutting-back by not ordering a soft drink or coffee with their restaurant meal.  Today, we’re talking about consumers who add a meal to their recreation venue experience.

Can your company, product or service pursue add-on sales that businesses in other categories are losing?  Do you focus on just individual products or services that you sell… or do you consider bundling to enhance the overall customers experience for the people you serve?  While some folks will skip the drink to save money on a meal, those same folks will often rebuke the idea of discipline… and add-on when it comes to an experiential indulgence.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Consumers increasingly tap water to save money on restaurant bill

Observation:  Over the past few years, more folks have been ordering water instead of their favorite soft drink when dining out of home, according to this story from today’s Marketing Daily.

Implications:   A good share of this decline probably has to do with the consumer’s desire to save money, but that’s not the only issue here.  Because the decline was underway prior to the recession, there are other issues contributing to the drop.  Does your favorite restaurant offer healthful alternatives to soda that are sugar- or caffeine-free? 

If you’re a restaurant owner or marketer, are their ways you can help refreshments find their way back on to the diner’s tab?  Have you asked them—conducting some simple research—to find out what they’d like to sip along with their entrée order, or what price they think would be reasonable?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

UPDATE: Gas pains won't prohibit vacation

This morning’s Research Brief suggests that while consumers are bothered by rising fuel prices, they plan to forge ahead with summer vacation plans.  Click here to read the brief for yourself.

Implications:  With falling crude oil prices lately, we’re all hoping that the price at the pump will fall soon, too.  But only 39% of survey participants said their vacation plans will be altered if gas prices stay high.

That begs the question… where will the money that people spend on gasoline come from?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

No matter what you call it, it's reality

A story in today’s New York Times digs into the difference between a recession and an economic recovery… when that recovery is moving so slow, it’s hard to note progress. Click here to read the story.

Implications: Before this is all over, we could call this a double-dip, a protracted recession, a very gradual recovery… or my least favorite, the now-cliché “New Normal.”

No matter what you call it, this is reality. The prevailing consumer sentiment varies from one part of the world to another, from one region of the country to another, and indeed, from one neighborhood to the next.

Right now, the smart money remains focused on your micro economy, as a business: Who are the people around you that are still in the market to buy the product or service you sell?
Focus on that target consumer, the deeper benefits she seeks when considering your offer, and whom else she might talk to (your competitors) in attempting to satisfy that need or want.

Yes, we may be living in a period of austerity. But there are exceptions to that rule (items or occasions which lead us to indulge), and companies that profit nicely by appealing to the pragmatic side of consumers. Wise companies will stop defining “value” as the price a consumer puts IN to a purchase, and go back to defining “value” by the benefit she gets OUT of that purchase.

Mike Anderson

Commodity prices could head higher

A story worth noting: Commodity prices (grains, in particular) could rise in response to supply & demand, an effect of the extreme weather many regions experienced this year. Click here to see the NY Times story.

Implications: Consumers, already more cautious than they were a few years ago, might be seeing higher prices on grocery store shelves and restaurant menus in the near future.

Mike Anderson

Good food they can have at home. When people go out, they want service.

A survey by Empathica is cited in a Marketing Daily story this morning, which suggests that consumers across the U.S. and Canada want great service, not just good food, when they decide on a restaurant. Click here to see the story.

Implications: During Consumer DNA workshops over the past several weeks, I’ve had more than one conversation with marketing executives about how sit-down, family-casual restaurants lost share during the great recession, and what kinds of tactics might bring those customers back, now that a recovery is underway. My position: Low price is what drew customers from sit-down restaurants to fast food, but low price is probably not what will gain them back.

What about candle-light dining and date night? What about the feeling of being “waited on” by someone who sincerely enjoys serving customers? What about the quality of the food (and health), not just an entrée at a sale price?

Talk to your customers to be sure—a little good research is better than a lot of speculation—but what customers want from their sit-down dining experience or upscale restaurant is probably not limited to a cheap price on a meal. A coupon might get them back in, but the way they enjoyed their evening will bring them back in again and again.

Mike Anderson

Research informs the next marketing move

There was an interesting story in a recent issue of the Marketing Daily newsletter, announcing that Intercontinental Hotel Group had commissioned an extensive photography shoot for their hundreds of hotels. Click here to read the story.

Implications: The most important aspect of this story might be easy to overlook, when set beside the impressive number of hotels involved (approximately 3,500) and images to be captured (estimated at 100,000)… not to mention the 360-degree tours of hotel rooms and facilities.

The thing that caught my attention was the way consumers drove this decision: IHG did some research, and realized the importance of the web as a tool people use to decide on a hotel, and the importance of the visual representation those web sites provide.

Do you carry web-worthy digital camera with you frequently (or have one handy at your desk)? Have you done justice to your product or service in the way it is represented, visually, on your web site?

Or, have you listened to your consumers… to understand their consideration process, and how you can more effectively serve it?

Mike Anderson

A healthy future for restaurants?

A lot of restaurant companies are trying to figure out how to re-build their revenue after so many customers cut-back on out-of-home dining in response to the great recession. If you’re among them, this story from Marketing Daily might appeal to you (click here to link).

It suggests that tactics like “bundling” or a more health-conscious strategy could enhance and accelerate the industry’s comeback.

Implications: A lot of family casual and other sit-down restaurants are wondering how they can regain market share they lost to fast food joints during the recession. I was challenged to a debate on the topic last week while working with some marketing executives in west-central Florida. A couple of folks thought that price points might be the way to win customers back from the fast food competition. But I don’t think “cheap,” in and of itself, is a sustainable position for most full-service, sit-down restaurants. Certainly, “cheap” does not make a restaurant distinct… so it does not classify as a unique value proposition.

Service, flavor, ambience… these are things that a more sophisticated or specialized sit-down restaurant can deliver more consistently than a fast food restaurant (my opinion). Perhaps healthy dining (like that explained in the Marketing Daily story) is another way for more complex cafes to regain share that was lost to fast food places.

If you’re a full-service, sit-down restaurant, why should I come back to you? What is it that I (as a former customer) might miss about my visits to your café? Are you seasoning your invitation to me with that kind of flavor?

If you’re a fast food restaurant, how do you defend against the inevitable competition, as your sit-down counterparts decide to romance the customers you gained during the recession?

Mike Anderson

“Eewww! That person just left without washing their hands!”

A story in this morning’s New York Times confirms what you already knew: Lots of people are leaving the washroom without washing their hands. Click here to read the story.

Implications: The numbers are up, with regard to hand washing hygiene, since the recent H1N1 pandemic. But the world remains a less than perfectly hygienic place. And when reminded of this issue—many of us have observed people leaving a public restroom without washing their hands—it makes some people visibly uncomfortable. (Did you get the creeps just reading the NY Times story? Did your face involuntarily take-on a look of disgust?)
Could your company take advantage of this issue? Yes, I’m serious.

Perhaps the conventional restaurant could muster images of a buffet-style competitor, where customers are selecting their food choices from an open cafeteria-style serving table. The headline or voice-over says something like: “One in six people don’t wash their hands after visiting the restroom. I wonder which of these people has dirty hands.” The body copy of the ad would conclude: “[Conventional] restaurant. Where your food is only touched by professional, clean hands.”

Do you offer microbe-killing hand sanitizer at your bakery or produce counter? Are your products packaged in a more hygienic way?

How could you talk-up the concept of clean?

Mike Anderson

Air fares might seem less fair

In another case of supply and demand economics, the airline industry seems to have turned a corner, in terms of pricing and inventory. That’s according to this recent story in the New York Times. For the past few years, the airlines have collectively cut capacity… which is putting upward pressure on the price of air travel, and pushing profits upward for the industry. Click here to read the story.

Implications: Every product has a tipping point, at which the price takes consumers out of the market. It will be interesting to see if that point is acknowledged first by the airlines, or their passengers. We should know next spring and summer, as the tourism season resumes.

It is not so much the cost of a ticket that matters at this moment... but the cost of a ticket in contrast to their pricing in the depths of the recession, which was not all that long ago. I haven't heard too much about various baggage fees and pillow prices among business travelers... but I've heard a few "non-frequent vacation flyers" that were shocked by the hidden costs of hitting the skies. If that goes on too long (the surprise, I mean), I have to guess people will find alternatives that are closer to home. What do you think?

Mike Anderson

Milking for all it's worth

In my humble opinion, people-watching remains one of the most entertaining modes of consumer research.

My wife had some dress shopping to do, and I had some work to do. So yesterday, I drove her to Mall of America in Bloomington, about 45 minutes from our home. She could shop to her heart’s content, and I could hit the Caribou Coffee shop (a rustic version of Starbucks, for those not familiar), and work until she finished her mission.

Electrical outlets were at a premium this day, as the shop was particularly busy. (Locals, evading a summer heat wave, tourists touring this monument to consumerism, and parents shopping for back-to-school.) After waiting a few minutes, though, a table opened-up near a prized plug-in, and I was able to get down to business analyzing some qualitative research.

While my focus is usually pretty strong on projects like this, I consider the Mall of America to hold “Fourth Place” on my list of favorite places to people-watch. It is only behind Pier 29 in San Francisco at #3, any commercial airport at #2, and New York’s Times Square, which enjoys the first-place position as my favorite of people-watching venues.

Back at the coffee shop, I noted a gentleman fussing-about, looking for tables near a plug-in just as I had been a few minutes earlier. He was asking folks who were obviously wired whether there was an open outlet they would share, so that he could charge his cell phone. He was one of those louder-than-most folks—maybe even trying to be a bit flamboyant or “noticed”—and lacking in the art of respecting peoples’ personal space. He finally made one couple sufficiently uncomfortable that they abandoned their table, which he nearly jumped on, since it was close to a power socket. After settling in with his gear, he asked a young lady nearby if she would mind “watching his stuff” while he proceeded to the counter to buy his beverage. She shrugged in consent, and he left for the counter.

He returned with 1) the cup of tea he had purchased, 2) the pitcher of milk that is intended for customers to dilute their tea or coffee, 3) an empty cup, 4) the shaker of cocoa designed to let customers modify a beverage to their liking, and 5) several packets of sugar. Then, he proceeded to concoct an extra beverage that he had not paid for, pouring enough milk and cocoa and sugar into the cup to yield a large glass of chocolate milk. (Not what the baristas had in mind when making the milk, cocoa and sugar available, I presume.)

Humans are fascinating people.

Implications: I suppose it would be inappropriate for me to indict the gentleman who grabbed an “extra beverage” composed of free ingredients. After all, the coffee shop had given the man an extra cup (on request), and provide the milk, sugar and cocoa customers use in modifying their beverage to taste, at no extra charge.

At that same time, while waiting for my wife to finish her shopping, I bought a cappuccino and “plugged in” without a second thought, using the shop’s electricity “for free.” (And with considerable presumption; I didn’t even ask.) I have a few mini-shampoos in my drawer that are labeled with the name of this hotel or that, and more than one pen in my desk that likewise displays the logo of some convention center or other host facility. I’m not sure how they ended up in my possession, as I don’t recall being told, explicitly, to take them.

In other words, exploiting a value-added freebie is not a matter of guilt or innocence… it is more likely a matter of degree. Almost everyone will exploit a value-added item that is provided as a courtesy of the vendor and as a convenience to the customer. It’s just a matter of how often or how much.

In this economic environment, are your customers more likely to “milk it?” Are there loopholes in your gift-with-purchase or courtesy program that need to be tightened?

Mike Anderson

Far more than an eyesore: Potential outcomes of the BP spill

The Deepwater Horizon tragedy cost eleven lives on the day it began (April 20, 2010). To state the obvious, the impact of this incident on the wildlife, the waterway and adjacent communities will be far-reaching. (The catastrophe is now recognized as the biggest environmental disaster in U.S. history.) But considered from the context of consumer trends, what are some of the plausible outcomes of the BP oil spill?

There is a fine line between being a trend watcher and being a futurist. And while I usually avoid crossing that line, I decided to give this question a little thought over the weekend. So, as we look out over the next months or years, what kinds of things might we see that could impact consumer behavior? (I encourage you to think about this, too, in terms of the way these issues could impact consumers in your category. If you come up with anything you’d like to share, just send me a note by email.) What I offer here are not predictions, but a range of possibilities.

Regional frustration. In a post-Katrina world, everyone seems more sensitive to the lapse that occurs between a catastrophe and an effective response. One form of regional friction will likely come from the delay, again, that the Gulf region has endured in terms of response time. But that is not the only form of regional friction to watch for.

In Florida, the temptation to generate revenue through off-shore drilling has long been resisted; one reason is the threat a possible spill might pose to the immense tourism industry. Now, Florida residents and public officials are increasingly upset that they stand to suffer environmental consequences regardless of their disciplined approach to offshore oil. For more on this angle, see this story from the New York Times.

Accelerating the pursuit of alternatives. There’s a good chance that the BP oil spill could speed-up the move toward more environmentally responsible energy choices. As the intense barrage of media coverage continues, consumers are more likely to realize that the cost of energy is greater than the price we pay at the pump. Also, consumers are more likely to make the connection between their personal energy consumption habits and consideration of how that energy is created and where it comes from. Another story in the New York Times offers thoughts on this topic, as does this op-ed piece from Thomas Friedman.

Increased scrutiny and regulation of the petroleum industry. It will be politically popular to write legislation that provides for greater protections and more strict performance expectations within the petroleum industry. On a flight to Denver last week, I sat next to a gentleman from the nuclear energy industry. During out chat, he said, “This is the oil industry’s Three Mile Island” (get background on that disaster by clicking here). The implication, of course, was that the accident at Three Mile Island served as a wake-up call for the nuclear industry, which saw a plethora of new rules and protocols after that 1979 incident. (The gentleman also offered that the entire nuclear industry became safer as a result of that accident.)

After a delay, increased prices. The oil industry (and I mean beyond BP) certainly doesn’t need any more ill-will these days. For a time, I would anticipate most producers will make every effort to avoid price increases. But when clean-up costs are tallied by BP, when new preventive measures can be expressed in terms of their expense to the petroleum industry (see previous paragraph), and if the moratorium on deep-water drilling should affect supplies, those price increases are inevitable. Of course, those prices will hit drivers at the gas pump… but they could also be felt in the cost of goods that are shipped from anywhere to anywhere.

Supply & demand implications. From tourism to seafood, prices are likely to mirror demand, whether that demand is high or low. And even in cases where spilled crude has not tainted the tourism or seafood industry, much of the press coverage has. Watch for more marketing campaigns to support industries which are not as bad off as the consumer might assume.

Implications: I apologize if the thoughts I have expressed here seem, in any way, impersonal or removed. The BP oil spill has been a terrible tragedy that has touched—and will touch—many people deeply. But my goal for this conversation was to place the effects of this environmental disaster into the context of consumer trends.

Don’t think of the list above as a set of answers. Think of it as a set of questions… or a simple range of possibilities.

In what ways might higher oil prices, if they happen, impact your company or your consumers? Are there things your organization could do, in particular, to serve people in the affected regions? If jobs are seriously impacted in the region, what new industries might sprout, tapping an eager workforce whose lifestyle and livelihood has been altered, perhaps long-term? If your company strives to practice sustainable energy and operating policies, will consumers give you more credit in the future than they have in the past?

Mike Anderson

Gaining a consumer perspective... even before the consumer gets a peek

While traveling last week, I came across a story that illustrates just how aggressive companies are getting about looking through the eyes of the consumer. You’ve heard of flight simulators. Well, this article explained how some companies go so far as to build mock stores with entire aisles and sample displays… to make sure that a layout and/or product mix is ready for prime time.

Click here to read the story from the St. Paul Pioneer Press. It's about the ultimate dress-rehearsal.

Implications: From test kitchens to soft-opening trials, all kinds of companies are innovating the way they prepare for a consumer engagement. And why shouldn’t they? In a world where disappointment is Tweeted or announced on Facebook in near real-time, the restaurant, grocer or retailer seldom gets the chance to explain why something went wrong.

I was recently invited to the private soft-opening of a restaurant. This wasn’t the typical soft-open, where the store was opened to the public but not yet advertised. It was an invitation-only affair… which allowed the staff to get some “real-world experience,” among customers who were friendly to the organization. “Customers” enjoyed a free or greatly discounted meal, in exchange for comments about what went right or what could be improved.

The rehearsal virtually assured the store--the first of its kind for this chain--would be stage-ready for its real grand opening the following week.

Just as FedEx and McDonald’s re-defined “fast” for virtually every company out there (even those involved with something other than shipping or fast food), some companies are re-defining preparation… and consumer expectation. Are you one of them?

Mike Anderson

Helping consumers connect the dots

Most people whose work involves travel have plenty of stories about their flying experiences, some funny and some not-so-funny. But last week, a story in the New York Times took a deeper look at the delicate relationship between commercial airlines and their passengers. As you review the article, put yourself in the place of the airline, and assume your customers will take the role of the traveling public. That way, you might discover why this industry presents us with such a great learning opportunity. Click here to read the story.

Implications: Not long ago, my wife presented me with a stunning observation which demonstrates how astute the consumer can be. She had arrived home from a trip to the supermarket, and was irritated by the amount of money she had spent.

“You know, when the price of gas was up around five dollars a gallon a couple of years ago, everyone blamed their price increases on the cost of oil. But when gas prices fell back down to reality… you sure didn’t hear about companies who were going to lower their prices because their costs had gone down.”

It wasn’t really the higher prices that frustrated her. It was that the justification for higher prices had elapsed, and nothing was presented to take its place. She wanted rationale.
I was struck by the number of passengers/customers in the NY Times story who said, in one way or another, “I think the airlines should make a fair profit.” I certainly agree with that group. But most of those customers also have expectations with regard to safe travels, good customer service, and a pleasant traveling experience… either in comparison to past experience or when compared to other travel alternatives.

Consumers harbor few illusions about whether a company should earn a profit. They will only ever question whether that profit was earned in a manner they perceive as fair. To form that opinion, they will consider the value and satisfaction they have received, in contrast to the money they have spent and in comparison to other alternatives (your competitors, or not buying at all).

Should your consumer know more about your business model? Would they be more inclined to accept a future price increase, or a potential reduction in service?

Mike Anderson

Restaurants: Maybe the recession is not our only reservation

Today’s Marketing Daily offered some insight with regard to challenges facing the restaurant business. It cites NPD research suggesting that while the recession has hit the restaurant business hard, there are other factors impacting out-of-home dining. In addition to customers who are brown-bagging and dining at home with greater frequency, cultural and generational changes were underway that began long before the economic downturn. Click here to read the summary.

Update: Here's a link directly to the Harris briefing.

Implications: In some categories and companies, the economic downturn was not so much a message, but a messenger. Rather than creating a new set of problems, the great recession served to reveal, aggravate or amplify challenges that already existed.

This is another story crediting social and generational shifts for fundamental changes to a category. Among other factors, the formerly reliable restaurant customer is now growing older and dining away from home less frequently, and their younger counterparts not as likely to make restaurant dining a natural part of their week.

It might be time for the restaurant owner/manager to re-examine the motives that lead to an out-of-home dining occasion. Family bonding time? Special occasions? Social networking face-to-face? Convenience? Flavor? An experience that is difficult or impossible to cook-up at home? Certainly, each successful organization will have found and served those benefits which their customers most enthusiastically want.

Mike Anderson

How does the consumer define you?

One might assume this posting is about the restaurant industry. But I think its implications stretch into many other categories.

Not long ago, Applebee’s was a casual family restaurant. But apparently, they have become a fast food restaurant. What did Applebee’s change? Nothing. Now, they’ll run food out to your car if you call ahead with an order… but they’ve been doing that for years. What has changed is the consumer’s definition of what “fast food” means, according to Technomic research cited by a story in today’s Media Post Marketing Daily.

The article suggests that this shift is self-induced; many fast casual restaurants have long been hitting the consumer with messages about low prices and high velocity service. Those are the keystones of a fast food restaurant, so…

Makes sense, doesn’t it?

Implications: As consumers were down-grading their out-of-home dining costs/consumption during the Great Recession, lots of companies were striving to retain their share of the restaurant dollar, even if that meant competing with the price-oriented burger joint down the street. And in their effort to say, “We can do that, too,” when it comes to speed and value, it looks like many casual sit-down restaurants have succeeded in being compared to standard quick service restaurants (QSRs).

As the recovery unfolds, I wonder if sit-down restaurants will remain happy about that comparison. Low margin product sold in high volume is a model that serves the fast food industry well. But is “fast and cheap” a sustainable model, over the long term, for places like Panera Bread, Applebee’s, or TGIFriday’s? Or will casual, sit-down restaurants need to re-build an identity that is associated more with quality than cost?

Many companies and categories have used extraordinary tactics to protect or gain share during the recession, with price cutting chief among them. But the questions become:

Will the tactics that served you well during recession serve you, also, in the recovery?
Did you adjust so successfully during the recession that your temporary plan became (or confused) your primary identity?
If you’ve spent three years teaching consumers that you’re a discounter, in what ways might you gradually return to sustainable margins? How will you help the consumer reconcile/justify a less discounted price?
Have the efficiency measures and other adjustments to your business helped you discover a new way of doing business that is sustainable over the long haul?

These questions can be tough to answer, but they can be even more painful to ignore. Start by considering this question first: How does the consumer define you? After all, you are who the customer thinks you are.

Mike Anderson

Hotel chain gives a plug for electric cars

Element Hotels, owned by the Starwood group of hotels and resorts, will provide parking spaces that are charging stations for electric cars according to a report in today’s Marketing Daily.

Implications: This move is as much symbolic as it is substantive, since there are only six properties in the Elements chain, with five more locations planned. (Hardly a broad enough impact to alter the course of global warming.) But I commend the move… because the company is putting actions, not just words, toward the idea of environmental responsibility.

More importantly, the move reminds us to stop and think about the consequence of fundamental change in the automotive industry. What will a gas station look like, when vehicles no longer use gas? Will there be plug-ins at the workplace so cars can re-charge after their morning commute? How will “the Grid” need to be modified? Who will pay for it? What price will petroleum have to hit… before paying for the shift to electricity becomes economically attractive? And, will there be a backlash against electric cars, if/when people realize just how much of our electricity is created through the burning of fossil fuels? (I’m just sayin.’)

Long term, few trends will be more fascinating to watch than “The Fuel Economy.”

Mike Anderson