How grocery chains can beat Walmart

The bad news for grocery chains is that they have become a cauldron of consolidation. The past few years have seen major grocery chains buying smaller competitors to forestall the Walmart takeover of the industry.

Kroger’s buys Harris Teeter and Roundy’s. Albertson’s buys Safeway and Haggen. ACME Markets, a subsidiary of Albertson’s, buys a bankrupt A&P. On and on.

Grocery chainsThe consolidations hints at several trends for the grocery industry, even if the largest grocery chains (such as Kroger, Publix and Albertson’s) are seeing this as way to fight the retail behemoths of Walmart, Target, Costco and others. By increasing distribution, those chains are hoping to out-large those big boxes so they can overtake market leadership.

For the smaller and regional groceries, the consolidation spells doom. Soon, they will either be put out of business or forced to accept an offer from the large chains.

For all those groceries, this is not a good trend. Walmart isn’t going anywhere. It is already the market leader and some reports say more than half of its earnings come from grocery. It has even been able to win with its private label brand, Great Value, leading the way. If anything, Walmart will increase its emphasis on grocery.

So what are grocers to do?

Leveraging the trends

Before we answer that question, let’s take a step back. There are two trends flowing through the industry that are diametrically opposed to each other, if you think about it. On one hand, groceries have often captured market share through sales, low prices and couponing. The weekly newspaper circular still exists today even though newspapers themselves are not as relevant as they once were. (That’s why apps are becoming the couponing system of choice today.)

The problem is that, now that Walmart has entered the fray, that tactic is not as effective. Walmart’s brand, encapsulated in its theme of “Save Money. Live Better,” is so embedded in the minds of consumers that consumers who shop on price shop there.

Walmart beat grocers at the price game because low prices were never part of their brands. They were only marketing messages while Walmart means low prices.

In our corner of the world in North Carolina, a once-thriving Food Lion was doomed the instant the nearby Walmart added a grocery. It closed months later and has sat empty ever since.

Grocery chainsThen there are the shifting eating trends. Consumers want healthier options, which have led most groceries to increase their organic offerings. Whole Foods is the organic food leader, but it will never be the market leader because organic foods are expensive. It remains only part of the equation.

So how do you approach the changing food environment (with its higher prices) with a large segment of shoppers buying based on price?

Grocery chains scouting themselves

Grocery shoppers have preferences but a majority of them will buy groceries from more than one place. You can buy the basics at Walmart (where price supersedes quality), a prime choice of meat at Fresh Market and have the occasional trip to Harris Teeter or Kroger on the way home.

What grocers have struggled with is finding their positions in the market. Kroger has used a theme of “Fresh Food, Low Prices.” How is that different than Walmart? When consumers are faced with all things being equal, they will choose the market leader. (Therefore, Kroger’s theme only works if there’s not a Walmart nearby.)

Couple the Walmart copycatting with other unemotional messages, and preference ends up depending on location. Hence, the number of mergers and acquisitions.

The messages have become throwaways

Even more, those messages are just used as just that. Messages. They are not firmly affixed to the brand the way Walmart has affixed its theme to the brand. When that happens, even if the message is differentiating (and most are not), they are not believed because they just sound like marketing.

Albertson’s has used “You’re in for something fresh,” which sounds like it was written by an ad agency and does nothing to distinguish the chain from the competition.

Grocery chainsTo compete with Walmart, those chains and others must be truly different and better. Copying Walmart’s ownership of low prices is simply a loser’s game. Trying to build your brand (or advertising campaign) on fresh food just defines you as a grocery store.

Instead, grocery chains must define who their customers are when they use your brand. That’s how preference is created. If your brand is a true reflection of the target audience, then consumers will be incapable of choosing anyone else because it would be going against their own emotional natures.

Apple users Think Different. Nike users Just Do It. What do your customers do?

By Tom Dougherty

Stealing Share President and CEO

Originally published by Supermarket News.

Another retail casualty: the CEO of Stein Mart

The retail industry is under siege, if you haven’t already noticed. Stores are closing, CEOs are leaving (being either fired or retired) and few know what to do in the battle against Amazon.

I have written plenty about this issue, maybe even more than you know. I am a regular contributor to RetailWire, which you can read about here. The single biggest question asked is, “Where do retailers go from here?”

Stein Mart
The resignation of the Stein Mart CEO is another demonstration that retail is dying.

The latest shoe to drop is the resignation of Stein Mart CEO Dawn Robertson, who left after same-stores sales declined 4% this past quarter. You sense a trend here. Office Depot and Staples, once thought to be merger partners, are looking for new CEOs. Macy’s is closing stores even though it promoted a national holiday hiring day.

It’s a mess out there for retailers.

The problems facing Stein Mart and others

The problems are two-fold for retailers, such as Stein Mart. First, they have never gotten the basic strategies of creating preference right. Secondly, they are behind the curve when it comes to online retailing.

Retailers were once powerful, thriving during the days when malls took over the marketplace. Malls were a community of stores, aping a downtown marketplace. Shopping at a mall was efficient and easy for buyers. Retailers reaped the rewards of shoppers buying more than they intended. (Think the Sam’s Club model. You go for a great deal, but stroll up to the checkout counter with loads of merchandise.)

In good times, brands often get lazy. They live off their success, thinking that there’s nothing they need to do to prepare for change. So few, if any, actually built brand preference. Instead, retailers fought over price, some adopting the Walmart model of always having a low price with others holding sales every week (that’s what has gotten Stein Mart in trouble). When you do that, you teach audiences to shop on price because you haven’t given them any other reason to choose.

So shoppers choose Amazon.

That second issue, failing to be a strong presence online, caught retailers with their pants down. They were slow to prepare and any preference they did have disappeared. In essence, retailers have reaped what they sowed.

What do retailers do now? They have to go back to the basics. Build a brand that actually stands for something, one that is different and better. That better part is difficult, but the different part is what has befuddled them. The retail choices all look, sound and, frankly, are the same. There’s not a squat of difference between Stein Mart and Kohl’s from the point of view of the customer.

No wonder we all shop on Amazon. At least we know what’s different there.

The appealing brand of Shark Tank

I am not the easiest audience to impress. Just ask my son, who this past weekend attempted to share a segment from the Comedy Central sketch series, Key & Peele. While he was laughed so hard that tears streamed down his face (the segment was one entitled “High on Potenuse”) mine barely moved a muscle. I could see his intrigue in the show, but regretfully, I won’t be binge watching that series any time soon.

I love just anything on PBS. It was easy for me to become ridiculously infatuated with the HBO series’ The Sopranos and The Wire. Lately, though, I have been snarked by Shark Tank.

Shark Tank
The appeal of Shark Tank lies in the belief in entrepreneurship.

Shark Tank has filled up the capacity of my DVR. Simply put, I cannot get enough. There is something I admire about each of the “sharks.” They have wits about them, they follow their gut and are willing to take a leap of faith more times than not. And they are entertaining.

Shark Tank taps into a universal belief.

In the past I’ve hinted at my viewership of the Tank and have even blogged on products presented on the show. But now’s the time to give the show a complete piece of my mind.

With the risk of sounding hokey, Shark Tank is good medicine for our county. It’s the “American Dream” at its finest. It’s a platform where entrepreneurs with a great idea (or a bad one, even) has a chance to fully realize their potential. Shark Tank also offers helpful feedback from a group of folks who understand brand remarkably well.

The show’s brand power comes from the belief that anyone can be successful, if they are just innovative enough and work hard. That’s a belief many of us share. So we put ourselves in the position of the those presenting new products and those judging them.

I cannot recommend it enough. As for me, I have another episode, or 30, to catch up on.

Arnold Palmer, a pioneer and a dealer in hope

It doesn’t take a brand strategist to figure out the appeal of Arnold Palmer. He was one of us.

Arnold Palmer
Arnold Palmer, the King of the people.

Before Palmer, golf was a sport for the elites, like polo. It was birthed in 15th-century Scotland by kings and stayed that way until after World War II.

That’s when Palmer showed up. His personality, born from less than elite status in Latrobe, Penn., was outgoing and inclusive. He adopted the game following his dad, who wasn’t a member of the local country club, but the greenskeeper.

Arnold Palmer’s personality was so welcoming that he attracted fans to the game who had previously ignored it. They became known as Arnie’s Army, a version of a rebellion in the sport of golf. If you were part of that army, you identified yourself as a new wave of golfers and fans. That is, the rest of us.

His passion sparked a game that was not polite, a go-for-broke style that worked against the demure, chip-away-at-things style his forbearers played. That led to 62 PGA Tour wins and seven major victories.

He was a true pioneer and he will be missed.

Arnold Palmer embodied a brand of the people.

He was also the perfect embodiment of a brand. Many mistakenly believe brand is about what the company/product offers. “We do this,” “We do that” become the mantras of brands that find themselves in perpetual stagnation.

But brand that’s practiced to be persuasive is about the aspirational self-reflection we (fans, consumers) see in the brand. When we buy an Apple product, we “think different.” When we buy a Nike shoe, we “just do it.”

For fans of Arnold Palmer, the self-reflection was, in its own way, fighting the power: The common man taking over a sport that was previously hidden. Palmer’s down to earth personality played into that, but also the fierce way he played. As Napoleon said, “A leader is a dealer in hope.” That was Arnold Palmer.

Even the drink he invented, the Arnold Palmer, was a common man kind of drink. Who would have thought that iced tea and lemonade, the drinks you sip while sitting on the porch, would work so well together?

Yes, Arnold Palmer was great. He was a true pioneer. And he was one of us.

Population health is an opportunity

Population health is a top concern, but it represents an opportunity

The Affordable Care Act has affected everything for hospitals, including the struggle to be financially successful.

Notably, however, it prompted the switch from a fee-for-service reimbursement model to a pay-for-performance one that emphasizes the value of the healthcare service.

This in turn has prompted hospitals to take population health more seriously because their reimbursements are now dependent on the success of outcomes. For that reason, hospital CEOs have listed population health as one of their greatest concerns.

Population healthHospital CEOs now need their hospital systems to be further integrated into their communities, working with local organizations and instituting programs that help population health. By doing so, hospitals earn more money based on the pay-for-performance reimbursement. Better population health means a better bottom line.

While many administrators see this as a hindrance, it can actually be an advantage for hospitals looking to steal market share from its competitors. It represents an opportunity to create preference.

Hospitals struggle to create preference

Traditionally, hospitals have grown organically. A new facility creates a new audience, whether if it’s at a new location or represents a new specialty. A system starts with a name usually associated with a location, a founder or a prominent contributor from the community.

Hospitals rarely see themselves as marketers who are creating for preference as much as they are seeking awareness. They also often consider the internal audience (physicians, staff, contributors) more than they do prospective patients. They take the care of their patients seriously, as they should, so they focus on acquiring talent, technology and new training.

But the changing landscape of healthcare, especially when it comes to reimbursement, has made investing in the hospital brand more important. There is now more competition, with greater regulatory oversight and technologies creating savvier patients.

Hospitals now have to think of themselves as a true brand, analyzing the competition, conducting market research and putting more dollars into their marketing. The competition has simply gotten too fierce. The world has also gotten more complex.

Population health is an opportunity

The regulations surrounding the Affordable Care Act can be confusing for the hospital, the patient and even insurance companies. Those are the ones forcing the pay for performance model because they don’t want to pay out as much money. Insurance companies also want to see better population health because it results in fewer claims.

The knee-jerk reaction is to promote the hospital’s various partnerships and programs to raise the community profile of the hospital. That’s all fine, well and good. But those alone don’t raise preference. They are simply the proof points to your brand promise.

Population healthThe danger is that hospitals will sport brands that are all about better health and caring medical professionals. But those aren’t the reasons to prefer one hospital to another. They are just definitions of a hospital.

Instead, the process of increasing preference is to find the emotional triggers that make those things – including the overall healthiness of a community – important to the prospective patient. Why are those important? What are the drivers for those patients so that they choose your hospital?

Creating preference

The key to gaining preference is to be early in a prospect’s decision tree. The earlier you are positioned, the greater your preference. The struggle for hospitals is that no one wants to think about a hospital. It spells danger, risk and potential death. Instead, you must be important enough to prospective patients that, when they need a hospital, they have already chosen you. Even if it’s subconsciously.

To accomplish that, hospitals must avoid the clichés and trite messaging that comes with most hospital branding. A few tips:

Understand your competition. To be a true choice, you have to be truly different and better in your messaging. If your main competition has messaging focused on caring and expertise, you have an opportunity. Audiences filter out those messages because all hospitals claim to care and have expertise. Those messages mean little.

Go deeper. Most marketing stops at the wants and needs, but those can be fulfilled by any number of healthcare providers. True preference is created when you understand the reasons why those wants and needs are important. That means uncovering the precepts that drive behavior and the self-identification those audiences treasure. Aligning your brand with that belief creates audiences who are incapable of choosing anyone else because they would, in effect, be choosing against themselves.

The opportunity with population health exists because hospitals can be more important to communities. They can position themselves differently. Improving population health offers a gateway to a meaningful brand that goes beyond traditional hospital marketing. It means the promises of your hospital have changed and now you have the proof points to show for it.

Your hospital is now in the results business. Think about that as a hospital brand.