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.

What bank leaders can learn from Wells Fargo

The Wells Fargo cross-selling scandal will affect more than just it and its customers. The scandal will affect the entire banking industry, which means banking leaders must be beware of simmering anger with banks and know what to do going forward.

There are already reports that other banks are being investigated by regulators. Stories have also emerged of employees at those banks saying the sales culture is just as intense there. That is, a culture that could produce the same over-reaching employees that worked at Wells Fargo.

Wells FargoConsumers have always had love-hate relationships with banks. To them, a bank is both important and irrelevant. Few enjoy going into a branch anymore, making branches into very expensive billboards. In fact, most people don’t even want to hear from their bank because any notice just means bad news. That’s what makes banking both low intensive and low involvement – except at that point of failure.

We’ve conducted proprietary research for banking clients and there is one constant throughout: At any given time, a customer has considered leaving that bank. It doesn’t matter the demographic involved. In fact, about 7% of the market is seriously thinking about changing their primary financial institution at any given time.

Therefore, will that percentage increase for Wells Fargo and will more people leave?

Probably not. The thought of switching feels too complex for many bank customers and, with the lack of differentiation among all banks, there is very little reason to switch.

How Wells Fargo affects all banks.

But here’s the thing. Rising distrust of the banking industry will rise and cross selling will be less accepted. This is akin to the financial crisis in 2008 because the general public blamed banks for that – and this can feel more personal.

If you think it’s difficult to reach those goals now, just hold tight through the rest of the year (and beyond).

So what are bank presidents to do? How do they keep high margins when faced with higher regulatory costs and low interest rates?

Consider this. Most customers do not switch because they don’t see any other bank as being much different. They see the banking industry as a whole, not a collection of its parts. It’s one big glob to them without any differentiating brands. The question asked is, “Will it be any different over there?”

Wells FargoDuring the recession, credit unions blew a perfect opportunity to steal market share from banks because anger was so high. Credit unions had the high ground but it only exploited it by using the same messaging about how they are not beholden to stakeholders.

That is not an emotional thought, just a logical one. It is hard for potential customers to see how no stockholders give them a personal advantage. Humans, by our very nature, generally only act when events directly affect us. The ones most likely to leave Wells Fargo, for instance, are the ones who were financially hurt by the scandal. Credit unions were just lumped into the banking industry as its little sibling. In the end, customers believed credit unions were also banks but with sign-up restrictions. So few of them joined up.

A similar situation is threatening to brew here, although not as severe but more pointed. The anger will result in weariness of banks doing any cross selling or accepting any new offer from a bank. (“They’re just going to screw me over!”) Want more customers to sign up for a credit card? Good luck.

Where the opportunity lies

But there is opportunity for the right bank (or credit union) to take advantage. Like in 2008, customers will see all banks in the Wells Fargo glow and will only prefer a new one that’s truly different and better.

The knee jerk reaction by most banks is to reassure customers (and, hopefully, new ones) that they have integrity and would never do that. Banks will say that there are safeguards in place to prevent any wrongdoing and that, we the banks, are always focused on you, the customer.

It won’t be believed or move the needle. No, instead a bank that takes ahold of the current opportunity must drop all the trite messaging that exists in the banking industry.

Wells FargoNow is the time to be truly different. A brand message that taps into the distrust and is truly emotional will win the day. Tone is key because banks never adopt an edgy tone that gets noticed.

In fact, tone can prompt the switch because the right one would align with the attitudes of the target audience. Telling them to switch because it’s time to take action would be a stronger message than what banks are promoting now.

To convince audiences to switch their primary financial institution is extremely hard. To get people to switch doing what they are doing now in any thing is nearly impossible.

But the door is ajar for the moment. The bank that steps in will become the leader.

Sales at Keurig are down, having overexposed itself

I have long expressed my addiction to coffee. It’s big time, friends. I can’t control it and I am not ashamed to admit it. My habit is so intense that every morning, even before I hit the shower, I’ve already downed two or three cups.

Sipping my first cup of coffee brings me to the light. It pulls me out of my morning grog and massages my mind into a semblance of alertness. The second cup drops me at the doorstep of normalcy. While the third and fourth give me pizzazz.

Keurig
Could Keurig be overexposed?

For years, I have been relying on a Keurig machine to provide caffeinated goods. My first machine came my way back in 2008 (crazy that I can remember that, isn’t it?). There was something so cool about plugging a K-cup into the mouth of the machine, hitting the brew size and getting a piping mug a minute later. Even if the coffee wasn’t as complex tasting as a traditional pot of coffee, the process was different enough from the norm to keep me coming back.

Since then, K-cups have become the new standard. Which, ironically, isn’t all that good for Keurig.

Keurig has oversaturated its own market

Back when I wrote about my love of Nespresso, I failed to mention that it’s greatest power is the brand’s scarcity. Scarcity can be a value for any brand because we instinctively want it more if it’s not easily available to us. It may seem counter-intuitive, but sometimes brands actually lose market share when they are too available. Krispy Kreme used to be a destination because it had a niche feel. But when it expanded too fast and opened stores all across the nation, its sales actually dropped.

I do drink coffee from K-cups with reckless abandon, but my preference is waning. In fact, I recently unplugged the machine and dusted off a French press. I have found pleasure in selecting locally roasted  beans that I can brew just about as quickly as I can a K-cup.

I am not surprised that Keurig sales are falling. Moreover, the moment it instituted the Keurig 2.0 and Kold machines I sensed bad times were ahead. Keurig, a company that once held the market in the palm of its hands, has become less special.

As a coffee drinker, I move in fads. My fad now is the French press. The next one might be the slow pour. After that, who knows,? Perhaps a Bialetti? Throughout, I am sure I will have K-cups, but I won’t consider the experience all that unique anymore.

Selling insurance when people don’t want it

Selling insurance has one of the single most difficult hurdles to overcome. How to convince audiences that they should buy something they believe they don’t need.

Selling insurance isn’t like selling something people want. Consumers want iPhones and a nice-looking car. They will gladly pony up for them.

Selling insuranceHowever, they don’t want to think about what insurance is protecting them from: Death, illness, fire, liability, etc.

Selling insurance includes another dilemma. People believe that insurance companies are simply out to take their money and will automatically fight any claims. Whether that’s belief is true or not, it is believed. We have conducted research in this industry and that belief is the single biggest hurdle for insurance sales reps.

What are the other selling insurance hurdles?

Without giving away findings that are preparatory to our clients, our research has borne out a few themes:

  • People, including white-collar professionals, believe insurance companies are unfeeling entities, which means claims of caring rarely resonate.
  • Fear-based messaging (“What happens when you die?”) is ignored because it’s seen as the start of a scam.
  • Policies are confusing, feeding into the belief of insurance companies being deceitful.

Here’s the catch. Agents, those chosen to sell insurance products, often feel the same way. They also believe that messages about caring are not believable. They are also sick of telling the same story. And they find working with insurance companies to be cumbersome.

This should not be a surprise to anyone in the industry. What is surprising is that too few in the industry do anything about it. Yet overcoming those hurdles is exactly what would increase market share.

Let’s address each hurdle.

Insurance companies are unfeeling entities:

This is the most difficult hurdle because few believe any company cares more about its customers than its bottom line. This belief is especially acute with insurance companies because insurance is a low involvement category until they have to use it. Then it is high involvement and highly personal.

An effective brand message is the best step. Any message must be aligned with that belief (insurance companies are unfeeling) and positioned against the competition.

Selling insuranceAsk yourself these questions: What is it that audiences seek in their lives? What are they truly seeking when considering insurance? What are they rebelling against if they are forced by an employer to seek a particular structure of insurance, such as a health savings account?

More importantly, the message should be about the customer, not you. You lose the audience’s attention the moment you begin talking about you (either in person or in an TV advertisement).

Selling insurance becomes even harder when the rep knows that all products are the same and the only effective tool is the personal relationship with the individual customer. This is one of the main reasons an insurance salesman is such a cliché. Customers need insurance, not someone pretending to be their newest best friend. Be expert and understanding.

Fear-based messaging is ignored:

So stop doing it. Advertising for life insurance is especially guilty of this, often asking the question, “What will your family do when you’re gone?” This might have worked decades ago when life insurance was a relatively new idea. At its best, protecting your family is a category benefit.

Today, audiences have become immune to that message and consider their own investments as savings against such an outcome.

Think about this. Thousands of messages come into our view every day. Even the logo on a pen is a message. Humans, though, have a filter. They only hear messages that are about them.

What insurance companies and agents must do is understand the emotional reason why someone would want to protect something with insurance. Not a rational reason. An emotional one. Too much messaging today is superficial and paper thin. (A better example for life insurance: “It’s what a good father would do.” A definition of who they are when they buy insurance.)

Policies are too confusing:

This is an industry-wide problem. Policies have variations on variations, papers upon papers, language that is too confusing. Even agents have trouble deciphering everything.

To potential customers, it looks like an attempt to intentionally confuse them so the fine print can’t be understood.

So much of the world seems complex, so we thirst for simplicity.

Simple is best. Make everything you do, including how you explain policies, as simple as possible. What is the final result? The details are usually ignored.

The most powerful way to clear the hurdles

The most effective way to address all of these issues, however, is through brand. So many  insurance companies get brand wrong. GEICO spends millions on a message – “15 minutes could save you 15%” – that isn’t believed. The result if market share stagnation. As an even worse example, Genworth Financial once said: “We’re big, safe and friendly.” Ugh.

Selling insuranceBrand is about the customer. Who they are when they use your brand. We are winners when we wear a Nike shoe because we “just do it.” Apple positioned itself against everyone else, saying that its customers “Think Different.”

Developing a brand like that is hard work. It takes in-depth research, leadership willing to slay sacred cows and an understanding that emotion works better than the rational.

Insurance companies and agents should take note. Because audiences right now believe you are out to get them. And get them good.

The wasted dollars of product naming

Brands should hold every business to a high standard of eliminating wasteful spending. For example, few industries are worse at spending money on foolish efforts than medical devices. Pick up any corporate brochure from a medical device manufacturer and here’s what you’ll see: Mountains and mountains of individual product brand names.

For some reason, companies are in love with giving every single product they manufacture its own unique brand name. That’s not product naming for any meaningful purpose. That’s reducing preference.

The medical device industry is a $150 billion industry in the US alone. Few industries would tolerate the sheer amount of money wasted in product naming. In fact, the value of a company lies not in its individual products, but in the company brand and its equities. When consumers buy products, they are purchasing the brand.

Product NamingBut medical device manufacturers have gone insane over spending countless dollars that actually hurt the value of the company. No matter if it is a stent, wire or an ICD, it will have some clever brand name that means little to anyone but the company’s own marketers. Doing so does nothing to help define the parent brand or the brands of other products.

Instead, the medical device parent brands are crowded into the same space. They all claim to be forward thinking, innovative and reliable. Yet millions of dollars and countless resources are spent marketing the individual products like they are their own entities. Even when they are using the same language.

That reduces the corporate brand into an afterthought.

Cleverness is the enemy

The overabundance of cleverness is certainly not unique to the medical device industry. Marketing executives, in general, are convinced that a name or theme will be remembered if it’s clever enough.

The opposite is exactly true, which means the money to market them is ill spent. If the name or theme is clever, then it is not believable because it feels like an advertising firm wrote it. It will sound like marketing.

Let’s use an example from the medical device industry. St. Jude Medical, through its acquisition of Thoratec, has a left ventricular assist device called HeartMate. Its meaning is clear. It assists the heart.

But it still sounds like marketing and made up. It has no emotional meaning. Considering the sheer litany of products with made-up names like HeartMate, it won’t be remembered because no one says “Nurse, give me the HeartMate.”

Think about this. These names do nothing to create preference or add to any financial or emotional investment in the company. Just because a device has a clever name does not mean that hospital administrators and doctors will prefer that product. So why do it?

Product naming as an inhibitor to switching

Stealing market share means you must convince your target audience that what you offer is something you do not already have. That’s the definition of a switching trigger.

Product NamingSwitching is often seen as difficult because it means adjusting to something new. It’s a change even if it is a minor one. That means you must reduce the hurdles to switching if you want to attract the customers of your competition.

With so many branded products that have no relation to each other, but operate individually from other products, doctors and hospital administrators are reluctant to switch to them.

The same holds true for any manufacturer. A litany of unique product names creates a hurdle to adoption because audiences are asked to learn something new. That is especially difficult when you consider the entire scope of products.

It is easier for audiences to switch is if they know they are buying the company brand name instead of the product. It is just simpler.

What to do?

The answer to that question should be obvious. Don’t overdo product naming when it comes to individual products. We live in a world in which simplicity and control rule, meaning it’s the customer who is in charge.

Product NamingMedtronic, the giant in this industry that actually does better than most, makes thousands of medical devices. Nobody can remember the sheer litany of branded product names.

A list of its endoscopic suturing accessories lists these products:

  • Endo Stitch Single-Stitch
  • Endo Stitch Tripe-Stitch
  • V-Loc Wound Closure
  • Surgitie Ligating Loop
  • Surgiwip Suture Ligature
  • Endo Slide Single Use Knot Pusher

It would be better if the names were:

  • Medtronic Single-Stitch
  • Medtronic Tripe-Stitch
  • Medtronic Wound Closure
  • Medtronic Ligating Loop
  • Medtronic Suture Ligature
  • Medtronic Single Use Knot Pusher

Now the company is actually investing in the parent brand and not just talking about it. And the sheer amount of wasteful spending has been reduced while market share increases. You’ve asked customers to choose the parent brand. That’s all any brand manager could want.