Exercises in Innovation #5: Spend time with the customer, but don’t be creepy

Empathy is the cornerstone of business anthropology. Can you put yourself entirely in the customer’s mindset?

Tesco is Britain’s top retailer and the third biggest in the world by gross revenues. They sell just about everything from groceries to car insurance. Navigating their superstores can be confusing, especially for customers that are tired or under stress. To solve one of retail’s biggest problems, in-store conversions, they conducted a great deal of research. In the end, they simply spent time with their customers, shopping alongside them to watch how they make purchase decisions.

One demographic that stood out is how many shoppers brought small children with them and made a day of it. Like many other big box retailers before them, they tried adding beauty salons and pizza parlors to make the stay more pleasant for this valuable demographic.  Still, young mothers rated trips to the store as “tortuous,” and “daunting,” according to Andrew Sims in the book “Tescopoly.”

To put new mothers and expecting women at ease, the introduced midwives and clinics. They could not only do health checkups, they could simplify the shopping by recommending the ideal combination of items that young mothers would need, customized to their lives.

In fact, digital often takes the blame for the drop in revenues at brick-and-mortar stores and retail malls, but lack of customer-orientation did more damage to bottom lines than e-commerce ever did.

The retail toy company Toys R Us is another great example of a solid enterprise that became irrelevant due to arrogance. They believed that they were still the epicenter of children’s toy market because they didn’t have any real competitors. But in fact their competitor was the internet, with many tiny online shopping sites that added up to an infinite inventory and excellent customer service. Toys R Us shelves became more and more crammed and unmanageable as their in-store customer service remained practically non-existent.

It wasn’t fun to shop there anymore, and the world moved on without them.

In contrast, Tesco paid attention to the data about what customers actually needed, rather than what they said. The Tesco midwives offered intelligent, practical advice that was both helpful and drove business to the store.

The very opposite is what happened with one fatally flawed initiative by retail giant Target in the US.

Based on the same sort of data analysis as Tesco, Target decided to make shopping easier for young mothers in order to lock in lifetime customers, maybe multi-generationally. Instead of providing in-store services, though, Target decided to mail discounts on maternity-related items directly to the home addresses of customers where the data indicated a baby was on the way.

Perhaps you can guess where this is going. Even a single anthropologist on the Target team could have clued them in and prevented what came next. In Minneapolis, Minnesota, a father became angry when Target sent baby coupons to his teen daughter. He thought they were trying to encourage teen pregnancy. In fact, they were accidentally revealing some explosive family secrets.

By analyzing customer purchase data, Target found that certain outlier purchases, like unscented lotions and multivitamins, were strong indicators of pregnancy. That triggered coupons sent to the customer address, but in this case it was the teenager in the house who hadn’t yet told her father about her pregnancy.

The result was a great deal of negative media coverage on the loss of privacy in America and a large segment of consumers who rated Target’s data use as “creepy.”

At the other end of the scale, retail grocer Trader Joe’s lists their data policy as: “We don’t have access to your data at Trader Joe’s because we don’t have any data on you.”

The Retailer Preference Index rated Trader Joe’s at number one in both customer-centricity and sales per square foot. They only attract around 10.5 percent of US consumers but their customer knowledge and engagement has led to a customer base growth rate of 5.9 percent, in 2018 data from Food Navigator.

Bucking the trend of lowering employee wages, Trader Joe’s pays at the top of the wage scale, consistently placing them in the Best Places to Work lists. Despite the costs, they post some of the best profitability numbers among US grocery retailers. I can tell you from living in New York that shoppers really feel strongly loyal to the brand, and I’ve even heard people on the streets saying, “Trader Joe’s for President.” This is not an endorsement and I have no interest in them financially. I’m just observing, like an anthropologist.

Look out for exercise #6.

Ps. Download the complete paper here Ds.