John Ross knows a thing or two about retail. Before he joined Interpublic Group’s Mediabrands in July 2009, he spent 12 years at home improvement giant The Home Depot, including a stint as CMO. He joined Mediabrands as president of its Emerging Media Lab in Los Angeles. During his tenure there, the lab was retooled to focus on retail activities. In June 2010, Ross was given a new assignment — build a new agency at the holding company (under Mediabrands) called Shopper Sciences, where he is CEO and which is designed to help retailers up their game.
In conversation with Adweek’s Steve McClellan, Ross talked about the challenges facing retailers and how they need to change in order to thrive in the digital age.
Adweek: You’ve been charged with developing a retail specialist agency for IPG. The company has had retail-focused clients for years, including your former stomping grounds The Home Depot, as well as Kmart, Sears and Walmart. Why now?
John Ross: Just having retail clients doesn’t necessarily mean that we’ve kept pace with the understanding of what’s going on with retail shoppers. In many cases the industry has not kept pace. As an ex-retailer I knew that word of mouth was influential in every decision that took place in our stores. But pre-Internet and pre-social media you had no way to reveal it or monetize it. And you had very few tools to actually influence it. Now in a world where Facebook is bigger than many countries and where shoppers are empowered with tools that allow them to communicate with and influence each other at scale in a global way, the dynamics of retail shopping have changed.
So agencies are playing catch up?
Yes, and as a marketing services company if we don’t keep pace with all that and understand how shoppers make decisions, we could easily find ourselves irrelevant to the clients we advise.
You’ve talked about how marketers lack knowledge of the end-to-end shopping decision process. Where are the biggest gaps?
Look at most of the research. It’s focused on the sales data. It’s not reflecting the shopper’s voice. If you go across all the analytics, the multivariable regression analysis, the brand health tracking studies . . . you go through all of this stuff and you have to ask who is looking at the shopping experience through the lens of the shopper? We’re still using amazingly lame, crude tools to understand what’s important to shoppers and how to serve them better.
That seems hard to believe in an age when consumers are armed with more information than ever as they make purchasing decisions.
Retailing marketing behavior is incredibly manipulative. If I run a sale, I tell you as a consumer when to start and stop. I tell you that you need a coupon and that you have to have four items in your basket that match. Heaven forbid I do a rebate where you have to fill out forms. It’s a controlling relationship with the shopper that says you must shop on my terms.
But consumers are putting up with it less so, aren’t they?
Yes. Instead of setting rigid terms under which shoppers will buy from you, the future is inviting those shoppers into the decision making to help you design what your promotions are and what your product looks like and the level of service you provide.
How big a factor is social media in changing shopping dynamics?
It’s huge. In a pre-social media world that controlling approach was probably appropriate behavior because retailers didn’t have the tools to scale shopper feedback. But now shoppers are in control and if you don’t believe it sit down with a manufacturer in the CD and DVD business or the travel industry. Consumers are creating entire industries on their own like virtual goods markets where $150 million worth of baseball caps and T-shirts that didn’t exist have been sold through Facebook. The consumer is powerful.
Who’s doing it right?
Apple is a spectacular example. You walk through that Apple Store and everything, from the way the sales associate captures the transaction near the display to the nature of their training bar in the back of the store. Even the way the point of purchase is organized reflects what’s important to the shopper and not what’s important to the brand. And look at their display labels: they’re not filled with technical specs. Instead they tell you what the product does for you. That’s great shopper marketing.
You spent 12 years at The Home Depot. What’s the single most important insight about consumer purchasing habits you took away from that experience?
I’d tell you this: shopping is ultimately lonely. It’s fundamentally decision making. And the price point of the product is rarely a reflection of how important the decision actually is. That decision may be a $2.50 purchase at the grocery store, but it’s an investment in something that will go into your family’s bodies. That 99-cent lightbulb may be a way to lower the energy consumption of your home, or you may be worried about what to do with the lightbulb when it burns out. Every decision brings a lot of incremental decisions along with them. And if you want to earn loyalty, you have to make the shopper feel like they’ve made a smart decision. If you do that, it moves the needle in sales in ways that make traditional advertising of the retail space — discounts and sales — pale by comparison.
You spent a year overseeing the IPG Emerging Media Lab in Los Angeles. Talk about its new focus.
The lab has always done primary research, trying to understand how emerging technology impacts consumer behavior. What we did was invest in a tool suite that allows us to understand not just consumer behavior but specifically shopping behavior.
How consumers decide to buy a specific product?
Yes, and lay bare the process from undecided to decided on any purchase path. And to understand the effect of traditional advertising, the physical shopping environment, online, social media and, increasingly, mobile. If you can understand the effect of all those different elements, it makes you very powerful.
As a marketer, what else do you need to know?
You need to know where influence comes from. Was it me talking to other parents at the soccer field? Was it the big stack-out that the modeler did at the grocery store? Or health blogs where I read about the right sports drink for adolescents? If I can reveal those influences and map them back to advertising, that’s powerful. But I also need to know the nature of the content.
Because it’s complicated and constantly shifting. They may be looking for health and nutritional information early on in the process and value later on. And they may be looking for endorsement and validation from other buyers within 24 hours of making a final decision. It’s our job as marketers to figure out what they’re looking for and when and where.
The IPG Emerging Media Lab has done research showing that the in-store retail experience is increasingly unsatisfactory for consumers. What’s going on?
The Internet is teaching consumers to expect more robust information, access to deeper information, whether its care and use, nutritional information, recipes, warrantee or repair. And they have every right to expect the retailer to provide that as well.
What about product reviews?
Why not? Why can’t I review it in the store and see that [a given product] was reviewed by Consumer Reports and got a best buy rating in the last week. And why can’t I know that 100 customers who bought it gave it a five-star rating?
The media lab has new technologies on display such as interactive mirrors that can help a clothing shopper select an outfit and kiosks that offer virtual sales assistance. How quickly will such techniques gain critical mass at brick-and-mortar stores?
I believe we will look back at 2010-11 as being seminal years where a fundamental change took place at retail with the beginnings of rapid technology advancement to the shelf. The shopping experience itself still feels like 1975. The tags might be printed out by a laser printer, but they’re still stuck on the shelf manually with adhesive. Some retailers still use hand-written signs. In many cases the only advanced technology in the store is a self-checkout or a computer monitor behind a display blasting some rock music into the teens’ department.
But now retailers are ready to embrace the future?
Yes, for a number of reasons. The price of technology is dropping. And it’s more adaptable to the retail environment — super low-voltage screen designs that don’t require me to run electricity to every physical display, and WiFi connections that don’t require an expensive hardwire backbone. But the most exciting thing happening right now is 3G-4G mobile network deployment. The ability to use them to connect any screen anywhere whether that screen is big or the size of an iPhone and to move data and images both upstream and downstream at high speeds and in high definition means that I can communicate with consumers without a big elaborate proprietary network — all I need is a chip that would be sold in any phone. So wherever I put a display, I can talk to the consumer. Wherever I put a display and a camera, I can learn from that consumer.
What about privacy?
I’m not going to videotape them, just observe their behavior — the number of people who walk by a display; the percentage of them that turn and face it; the percentage of them that turn and face it and are engaged versus being frustrated and angry. The ability to make software to make judgments about their emotional reaction to the pricing. All in real time. That generates media-like diagnostics and that data flowing back to the retailer will be of infinitely more value than any [other data] that is currently available.
What about key mobile applications?
The vast majority of people experimenting with mobile phones at retail are trying to do old-fashion retail tactics on it like running coupons. It makes me want to cry sometimes. Yes, we can do that. But is that all we want to do with it? Our ability to engage with the shopper, give them more information and have them give us more information back using this device is so much more powerful than that. For example, if you’re in the considered restaurant business (over $15 per plate) and you’re not actively looking at previous diners talking about their last experience in your restaurant, you are missing out on feedback about last night’s special, not to mention feedback about your competitors.
And that can be applied to all retail?
Sure. Any phone with a camera is also a scanner. Every time [the shopper] scans [for better prices or reviews] in a store, that tells me that the way I’m communicating value isn’t good enough. It tells me that the credibility of my signage or the information on the package isn’t enough for the consumer to feel like they are making a smart choice. And that tells me I need to go back into old tech — let’s improve the box or make the shelf label more powerful or more useful.
Your planning a new lab in Atlanta that will be an extension of the retail agency you’re creating. How will it differ from the media lab in Los Angeles?
The L.A. lab looks at technology from a lot of different angles including retail. The Atlanta lab will focus much more specifically on retail and retail shopping. It will have some the same consumer facing technology like interactive mirrors, but we’ll also go a little deeper on the logistics side, like connectivity between show-room technology and Web sites or replenishment and resupply impact based on live diagnostics.
When will it be completed?
Sometime early next year.
What else do retailers need to do to effectively address the needs of the empowered shopper?
When you sit down with clients as varied as Walmart and Target or Golfsmith or Boston Market, our ability to understand what’s important to the shopper can inform everything from the most high-tech digital network we deploy to a better way to organize the data on your shelf label. Sometimes the answer isn’t the latest touch-screen digital gadget. It may be something simple like getting the bullets on the sign right.