Tag: Sales

The manageability of innovation

Innovation is manageable

“Innovation” means different things to different people but, generally, it involves the application of novel ideas, products or processes for some purpose. But even if we can agree on “what” it is, do we understand “how” innovation happens?

Managing 'bright' ideas

There is a significant change taking place in the way that the process of innovation is understood. We can put this in the context of developments in the manageability of other areas of business activity in recent times. Read more of this Post

The ageing of the USA, Part Three

Back to the future – a new way of seeing forward

The concluding part of a three-part paper previously published by Professor Sherry Jarrell, Part One is here and Part Two is here.

What kinds of business establishments will thrive in the U.S. city of the future?  To answer this question, we examined the count of the number of establishments per business category listed on yellowpagecity.com, adjusted proportionately to represent a population of 500,000, and found the following results.

Death services. Although the strain on the healthcare system has received much attention in relation to ageing in the United States, the next logical step—death—is rarely mentioned, although it certainly represents many business and professional opportunities.  Our data suggest that the number of funeral facilities and cremations per 500,000 residents might double or even triple by 2025. The same applies to the number of cemeteries and companies listing monuments.

Healthcare. Along with roughly 30% more doctors, our data suggest that a range of medical services and products will be in greater demand by 2025. Nearly all of them relate to age. Consistent with the expectation that mental and self-care disabilities increase with age, listings also jump considerably for alcohol information and treatment, and counseling services. This trend doesn’t occur, however, for mental health services.

Real estate and living arrangements. Real estate listings significantly increase across the six MSAs, along with a substantial growth in listed land surveyors. The number of listings for nursing and convalescent homes moves from an average of 30 for the current MSAs to 50 for the 2020 and 2025 cities. There’s an even larger average rise in the number of retirement communities and homes.

Perhaps the most surprising pattern, at least initially, is the dramatic increase in the number of listings for mobile home dealers and mobile home parks and communities. Insurance studies have shown, however, that the percent of manufactured (mobile) home owners who are age 65 and older has risen from 26% in 1990 to 30% in 2002. Similar percentages are cited for owners who are retired. In addition, over the same period, the amount of owners age 80 and older has changed from 3% to 7%. Therefore, the future might be replete with mobile homes. The data might reflect the strategy of retirees selling larger homes to extract the equity, which is used to help fund retirement and buy a less-expensive manufactured home.

Activities. The data show a marked increase in the number of associations, clubs, churches, and fraternal organizations, which supports the description of mature adults as “joiners.” Bingo games are more popular in the 2020 and 2025 cities. Perhaps most noticeably, more golf is played in the 2020 and 2025 MSAs, requiring many more golf courses and golf-related products and services—not just in Florida, but also in Youngstown, Utica, and Scranton. Residents in the 2020 and 2025 cities also spend more time at the library, at recreation centers and parks, and reading newspapers.

Finance. Services that will be in higher demand as retirees seek assistance in managing their retirement assets include credit and debt counseling services, insurance, loans, mutual funds, and stock and bond brokers.

Products. The number of listings for new and used automobile dealers increases between the 2005 and 2025 cities, as do listings for new and used furniture dealers, health and diet foods, hardware, lawn and garden equipment and supplies, service stations, TV and radio equipment sales and service, and vitamins. But the data also reveal many other rising trends that are likely age-related, such as for antique dealers, arts and crafts, ceramic equipment and supplies, embroidery, gift shops, giftwares, jewelers, and security-related products. The substantial increase in florists is probably related to the number of hospitals, funeral facilities, and crematories in the cities.

Services. The Yellow Pages listings indicate many more business, employment, and investment opportunities in the future. Several categories relate to home improvement, such as contractors for remodeling, landscaping, and swimming pools. Home maintenance also is in greater demand in cities with older populations. Similarly, listings related to servicing and repairing automobiles, furniture, and jewelry rise across the three pairs of cities—along with beauty salons and massage. Pets apparently deserve no less, as pet washing and grooming services are in greater demand in cities with older populations.

Research Implications

This innovative methodology for studying various aspects of the future reveals that many of the detailed trends across the three pairs of cities have significant implications with respect to new product development and marketing. For example, marketers need to begin partnering with development and land use officials to anticipate future growth in demand for golfing facilities, churches, parks, libraries, cemeteries, and mobile home parks. And medical services providers must be prepared to meet the demands for home health services and many other healthcare preferences of older adults in an increasingly competitive environment.

Although it’s true that many factors other than age will shape future spending patterns, such as changing tastes among mature buyers, new technology, and various economic factors, many of these trends are almost entirely age-related. Therefore, it’s unlikely the future will look that different from Lakeland today, where the share of the population age 65 and older is identical to that projected for the nation in 2025.

The United States will not be a nation of Floridas in 2025; it will be a nation of Lakelands.

By Sherry Jarrell

The ageing of the USA, Part Two

Back to the future – a new way of seeing forward

Part Two of a three-part paper previously published by Professor Sherry Jarrell, Part One is here.

In this post, we examine the current income and spending patterns from metropolitan statistical areas (MSAs) with age demographics similar to those projected for the U.S. economy in 2020 and 2025.  Two MSAs are selected for each year to verify that differences in buying patterns across cities are because of differing age distributions, not peculiarities in the cities.

We began with U.S. Bureau of Census data on the percent of total U.S. population expected within five age groups through 2025. The share of U.S. population attributed to people age 65 and older is expected to increase from 12.4% today to 16.3% in 2020 and 18.2% in 2025. By 2025, nearly one out of every four drivers will be age 65 or older, compared with 15.6% today.

Income and Spending Patterns

We find that, although many mature adults are highly mobile, most stay put; this results in the Northeast and Midwest remaining key mature markets.  Three of our four 2020 and 2025 MSAs are in Ohio, New York, and Pennsylvania. We also find that older consumers:

  • spend more of their income: The spending per income ratio rises from .67 today, to .76 for the 2020 MSAs and .77 for the 2025 MSAs.
  • continue to depend on their cars and prefer them to public transportation.
  • spend increasingly larger shares of their income on healthcare.
  • make TV a key element of their lifestyles.
  • remain in their homes and avoid nursing homes.
  • are politically conservative.
  • are civically active and wield growing influence.
  • are joiners.
  • spend heavily on housekeeping supplies, household furnishings and equipment, new vehicles, entertainment, computers, healthcare products, vitamins, healthier foods, and reading materials.
  • spend less on apparel, cosmetics, and fast food.

Retail spending data

We find that the percent of retail spending on necessities such as products at food and beverage stores and the subcategory of grocery stores is generally higher in all six of our MSAs, compared with the nation. The same is true for the general merchandise store category, which includes discount stores.  We also observe generally lower spending shares relative to the nation in the more discretionary categories of clothing and accessories stores, furniture and home furnishings stores, electronics and appliance stores, building materials stores, and garden equipment stores.

The more important observations relate to spending patterns across the three pairs of MSAs. Looking at food and beverage stores, spending as a share of total retail sales declines across the three pairs of MSAs with increasingly older populations. Beginning with an average of 17.2% in the 2005 MSAs, spending at food and beverage stores drops to 14.1% in the 2025 MSAs.

Similarly, the subcategory of grocery stores falls from 15.1% today to 12.2% in the 2025 MSAs. Note that the approximately 3 percentage point declines in these categories are in spending relative to total retail sales, and that within the categories, the decreases in spending are nearly 20%. For example, for every $1,000 in retail spending in the 2005 cities, approximately $151 is spent at grocery stores. That compares with $122 in the 2025 cities. Thus, although spending shares at food and beverage stores are higher than the national average in all six MSAs, the spending shares fall across the three pairs of MSAs as their populations become increasingly older.

The trend also is downward over time for food service and drinking places, from an average of 9.7% in the 2005 MSAs to 7.5% in the 2025 MSAs—with the trend again representing a roughly 20% absolute dollar spending decline per capita within the category. These results support the expectation that older consumers eat healthier and in less quantities (especially in the case of fast food), and also spend fewer dollars at drinking places.

Per capita spending at clothing and accessories stores decreases from an average of 4% of retail sales in the two 2005 cities to 3.2% in the 2025 cities. As before, although the 1% drop appears small, it represents an approximately 20% reduction in per capita spending.

What types of stores benefit from older populations?

Our results indicate increased spending on furniture, automobiles, and homes. Looking at the per capita shares of total retail spending for furniture, home furnishings, and electronics and appliances, spending shares rise from an average of 2% in the 2005 MSAs to 3.9% in the 2020 MSAs and 4.2% in the 2025 MSAs. This suggests a doubling of per capita spending at furniture and related stores. There are similar patterns for the subcategories of furniture and home furnishings stores, and electronics and appliance stores. Spending also generally rises at building materials and garden equipment stores. Upward trends across the six cities additionally are shown for motor vehicles and parts, and healthcare and personal care.

In the third and final installment of this research, we will discuss the specific types of business establishments that will thrive in the U.S. city of the future.

By Sherry Jarrell

The ageing of the USA, Part One

Back to the future – a new way of seeing forward

Part One of a three-part paper previously published by Professor Sherry Jarrell

Market research on the ageing of the U.S. baby boomer generation has focused on the spending habits of these older consumers. A new approach enables marketing researchers to observe the future now: Examine income and spending patterns from metropolitan statistical areas (MSAs) with age demographics similar to those projected for the U.S. economy in 2020 and 2025. With knowledge of these trends, they can begin preparing to meet the demands for particular products and services.

“Find a comfortable couch, lie back, and close your eyes. … Let your mind wander toward the future. Move, slowly, to the year 2030. Now open your eyes. What do you see? You see a country whose collective population is older than that in Florida today. You see a country where walkers outnumber strollers.” Laurence J. Kotlikoff and Scott Burns in The Coming Generational Storm (The MIT Press, 2004).

Projected Age Distribution, U.S. Bureau of Census data

There has been much speculation regarding the effects of the aging population on the U.S. economy. By the year 2025, more than 18% of the U.S. population is projected to be age 65 or older, greater than the percentage in Florida today. This has led some to describe the future of the United States as “a nation of Floridas.” Furthermore, the aging of the United States is not expected to pass with the demographic bulge produced by baby boomers (those born between 1946 and 1964). The U.S. population also is aging because of increased life expectancy and decreased numbers of offspring. As a result, current research projects that the U.S. age profile soon will transform from the current pyramid shape, with older groups at the top, to more of a barrel shape, with roughly 40% of the population divided fairly evenly between the youngest (under age 15) and oldest (over age 65) groups. This new profile will persist for decades.

Although much has been said about aging baby boomers leading to potential crises in Social Security and Medicare, we are more interested in the economic prospects of their retirement as they relate to consumer spending: in particular, whether they have saved enough to maintain their standards of living in retirement. In this regard, the Congressional Budget Office (CBO) reviewed studies from the past decade on the retirement prospects of aging Americans, and found evidence that varied with the standard used to define “enough.” Some studies defined it as the level that maintained the retiree’s working-age standard of living, whereas others defined it as levels that made the retiree as well off as his or her parents at the same age.

The picture that emerges from the CBO study is that baby boomers, relative to their parents at the same age, have higher real incomes, are preparing for retirement at the same pace, and have accumulated more private wealth. Furthermore, the savings behavior of baby boomers and other future retirees is dependent on their views of the health and stability of government benefit programs. If they believe that they will receive all of the government benefits they have earned, then they will tend to work and save less. If they believe that these programs are in trouble, then they might increase savings and postpone retirement.

What impact will changing age demographics have on future spending patterns? We obtain a more complete picture of future spending by observing aggregate spending patterns in local economies that resemble the future now: those cities where “walkers outnumber strollers” today. This novel research approach is based on actual observed data, rather than on speculation and long-term statistical forecasts, both of which are notorious for inaccuracy.

In the next post, we discuss our sometimes surprising findings on the spending patterns in the U.S. city of the future.

By Sherry Jarrell

Understanding your Market, Part Three

Market research for sales people

Yesterday, in part two of this three-part Post, we looked at two real-life examples of how listening to your market works.  In this concluding part we examine some practical methods for sales people.  (By sales people I also include those who run their own business because there is no better sales person than the person who runs their own enterprise!)

  1. Empty your mind of all your pre-conceived ideas as to why your customers buy your product or service.
  2. Start off by listening to the reasons why a recent customer bought from you.  Ideally in person but if not, then by telephone.  Never by email!  I’ll leave it to you to think how you might do that – easy in practice.  Comment if you want to explore this aspect.
  3. Listen to sufficient number of customers so that you feel you have a representative view.  I guess what you are looking for is the Pareto relationship – what are the 20% of reasons/motives that generate 80% of your sales.  You should be able to end up knowing what are the differences that make the difference (between you and your competitors.)
  4. Just like Guy Watson of Riverford, knowing why a customer buys MUST also include knowing what use that customer is making of your product/service.
  5. Negotiate with as many customers as possible the opportunity to stay in touch – at whatever frequency makes sense to both sides. Again, think about how you stay in touch – personal visits may be unwieldy but phone usually is acceptable.  Not via email!
  6. Once you know why people become customers then you need to know what their experience is when they are accustomed to using your product or service.  This is key!  Think what you felt like when you bought your last car.  Full of the thrill of a new experience and the anticipation of enjoying your ‘smart’ decision.  Now think how you regard your car today after the reality of the cost of ownership, a few unplanned service issues and when it now feels much more like the utility vehicle that it really is.  If the original sales person doesn’t know how you feel today then there is no way that the sales person’s next sales proposition can be modified to keep you as a client.
  7. Staying in touch allows you to anticipate future needs of your customers – the key to all business success.
  8. Understanding your customers means that you can build loyalty – and loyal customers is the key to business LoyaltyEffectRevCoverprofitability.  If at all possible get hold of a copy of Prof. Fred Reichheld’s The Loyalty Effect.
  9. Use the relationships you build with your customers to seek their ideas as to what their future needs may be, how they would like to see your products and services evolve and who, and why,  they regard as your potential competitors.
  10. Finally, as in the first point, keep an open mind and never assume.  Remember the old ditty – if you assume you make an ‘ass’ out of ‘u’ and ‘me’.

By Paul Handover

Understanding your Market, Part Two

Market research for sales people.

Yesterday, I started a Post on undertaking market research, from a practical point of view. It continues.

To me, there are very significant advantages in being a small business and one of the most important benefits is that it is so much easier to really know what your customers want.  Here’s a fascinating extract (p.139-140) from Malcolm Gladwell’s book Outliers.

In 1889, Louis and Regina Borgenicht boarded an ocean liner in Hamburg bound for America.  Louis was from Galacia, in what was then Poland.  Regina was from a small town in Hungary.  They had been married only a few years and had one small child and a second on the way ……

….. They had enough money to last a few weeks, at best.

…..Louis and Regina found a tiny apartment on Eldridge Street, on Manhattan’s Lower East Side, for $8 a month.  Louis took to the streets, looking for work.  He saw peddlers and fruit sellers and sidewalks crammed with pushcarts.  The noise and activity and energy dwarfed what he had known in the Old World.  He was first overwhelmed, then invigorated.  He went to his sister’s fish store on Ludlow Street and persuaded her to give him a consignment of herring on credit.  He set up shop on the sidewalk with two barrels of fish ….

….. By the end of the week, he had cleared &8.  By the second week, $13.  Those were considerable sums.  But Louise and Regina could not see how selling herring on the street would lead to a constructive business…..

….The answer came to him after five long days of walking up and down the streets of Lower East Side, just a he was about to give up hope.  He was sitting on an overturned box, eating a late lunch of the sandwiches Regina had made for him.  It was clothes. Everywhere around hi, stores were opening – suits, dresses, overalls, shirts, skirts, blouses, trousers, all made and ready to be worn.  Coming from a world where clothing was sewn at home by hand or made to order by tailors, this was a revelation.

Borgenicht took out a small notebook.  Everywhere he went, he wrote down what people were wearing and what was for sale – menswear, women’s wear, children’s wear.  He wanted to find a ‘novel’ item, something that people would wear that was not being sold in the stores.  For four more days he walked the streets.  On the evening of the final day as he walked toward home, he saw a half dozen girls playing hopscotch.  One of the girls was wearing a tiny embroidered apron over her dress, cut low in the front with a tie in the back, and it struck him, suddenly, that in his previous days of relentlessly inventorying the clothing shops of the Lower East Side, he had never seen one of those aprons for sale.

This is such a wonderful example of what understanding your market is all about. Louise was sufficiently smart to know that selling herrings, while lucrative in the short term, was not the long-term answer. He was sufficiently patient to watch and not jump to conclusions until the answer was clear. He was sufficiently tough to keep at it until he had his answer.

Now let’s jump back to Riverford Organics. Here are the words of Guy Watson.

a cooking odyssey Monday 26th October 2009

As you may have guessed, I am a vegetable bore. Twenty five years ago when I sowed my first leek I was fairly well adjusted but now my wife reckons I can turn any conversation to growing, cooking or eating veg within seconds. The box scheme was founded on the invigorating but dangerous assumption that my obsession was, at least partially, shared by customers.

This year I set out on a cooking odyssey to understand how others use or don’t use our vegetables. I cooked in village halls, in my bus, on the beach, in tents in Wales, on stage at WOMAD [World of Music, Arts and Dance, Ed] but most of all in customers’ homes. The experience has been fascinating (for a veg bore), frustrating (you are all so different) and humbling (there is life after vegetables).

My abiding impression is that most of you do share an enthusiasm for our veg, but that we need to make it easier for you to incorporate them into often busy lives. According to our customer survey last year only 5% of you find it really easy to use your box and 32% struggle. However fresh and tasty, local and minimally packaged, fairly traded and sustainably grown those carrots and beans are, if you are struggling to use them we will lose you in the end. (My underlining)

Our mission for the coming months is to make life with a box easier. There will be a few minor changes like less clods of mud but mostly we want to do this by cooking with you; both virtually and in person. We plan to team up with around 100 like-minded professional cooks who are inspired by our veg and on a par with our chef, Jane Baxter, when it comes to cooking them. They will work part-time with us and our customers, inspiring, teaching, demonstrating, creating recipes. We plan to run initiatives including affordable cookery classes and demos in homes, workplaces and community venues; lunch clubs, supper clubs and cooking clubs and a recipe exchange for customers. We have already run some pilot events and now we really want to get going.

get involved

Would you like to improve your cooking, help others improve theirs or do you know a cook who might want to work with us? If you’d like to get involved, email riverfordcooks@riverford.co.uk with your name, contact details, postcode and what you are interested in and we’ll let you know what is going on in your area.

The underlined sentence is the key. Without this insight, Guy would have had no way of knowing what was influencing his sales figures. And if sales were continuing to grow then this potential loss of business would have remained deeply hidden from sight. Only getting out there and mixing it with your customers revealed this problem, potentially a serious problem.

Tomorrow the concluding part of this three-part Post in which we examine some very practical ways of listening to the market.

By Paul Handover

Understanding your Market, Part One

Market research for sales people.

John’s Post yesterday on Riverford Organics nudged me into writing this Post, something that has been in the back of my mind for ages.  My topic is understanding your customers or more properly described, understanding your market, because the word ‘market’ feels a better description of the objective: knowing why your present customers bought, what they like and dislike so you have a better idea of the buying intentions of your potential customers.

magnifying-glassThe term ‘Market Research’ is not a difficult or uncommon phrase (a Google search returns 132 million links!) but, in practice, it is one of those terms that is very tough to pin down as to what it means as a set of practical tasks.  Let’s try a few quotations from a Google search (this time only 6.6 million links!).

…. research that gathers and analyzes information about the moving of good or services from producer to consumer …
The systematic collection and evaluation of data regarding customer’s preferences for actual and potential products and services …
A study of consumer groups and business competition used to define a projected market.
The collection and analysis of data obtained from a sample of individuals or businesses relating to their characteristics, behaviour, attitudes …
…the activities undertaken by an organization to determine the nature of its customers and competitors, as well as the demand for its products or services along with the features that customers prefer in similar products or services. …

ad nauseum …

For something that is a critically important component of business strategy, such a wide variation in definitions is totally unacceptable.

Now it’s important that you know where I am coming from.  Since 1966, I have been working as a business-to-business salesman.  Since 1978, I have run my own companies but have still seen my only competence as that of a salesman.  (Technically I ‘retired’ in 2007 but still keep my hand in through mentoring and coaching.)

Cim_logoIn the early 80s, as my first company, Dataview Ltd, was growing rapidly, I became a chartered member of the Chartered Institute of Marketing. I thought that marketing was a skill I needed to know more of. But, to be frank, apart from a nice certificate and a glossy monthly magazine, it’s difficult to recall any life-changing experiences from that relationship.  Marketing seemed to be about medium to large businesses – not correct but that was the impression given.

Back to the theme of this Post. Read more about market research for sales people

Remarkable people update

Another quick look at Riverford Organics and a lesson for all.

Further to my post on Guy Watson of Riverford Organics, in the mini-series on remarkable people:

A couple of Saturdays ago (October 24), we had a great time out at Wash Farm, the home of Riverford Organics.

Our five year old son enjoys eating sweetcorn. Recently, having carried the weekly veg box from our doorstep to the sweetcornkitchen calling “Riverford coming through!”, he was then delighted to report: “there are three sweetcorns”, there having been two in previous weeks!

riverford 008On Saturday, he marched into a field of sweetcorn and, as if he had done it for years, went straight to a plant and, explaining what he was doing, tested the crop for size and ripeness and picked it by breaking it off like an expert. He then handed it to me and proceeded to pick many more of them. When I asked him how he knew what to do, all was revealed: “I saw it on the telly!”.

As luck would have it, I encountered Guy Watson at the event and it was great to shake his hand and offer a few words of congratulation on what he has done. Of course, he has no idea who I am!

Their customer service is great; and now they are embarking on more market research to understand better how their customers use their products! [See the relevant edition of their newsletter here!] [The subject of a Post on Market Research coming out soon. Ed.]

Although I am not an expert, I know enough to know that this is remarkable. To think about how customers are using the product, to measure it, to go into customers homes and find out what they are really doing with your products: this is at the pinnacle of good customer research!

No doubt there are others, but I have only ever heard of one other company who paid so much attention to customers in their homes. It was Intuit, the highly regarded US software vendor which, for decades, has consistently beaten Microsoft at providing accounting software. Their representatives would wait in a shop for a customer to buy their product and then request permission to travel with them to their home to record exactly what experience they had with installing and using it!

Final report from the day at Riverford: the event on Saturday was “Pumpkin Day”, its primary purpose being to buy (and have carved) your pumpkin for Hallowe’en. There was a competition to guess the weight of a (largish) pumpkin; I guessed by comparative lifting of the pumpkin and of said five-year-old son, and based my estimate on information from his mother about his most recent weight! Guess what? I have just heard that I won! So a case of (organic, of course) red wine is now expected to materialise alongside this weeks box of vegetables!

By John Lewis

P.S. The Riverford Blog is a good read

Good old-fashioned service values

What a delight to come across people who care.

This is a personal story with a wider message. That great after-sales service matters and in these difficult times will make the difference between surviving and even growing, or failing.

I drive a 2005 5.7 litre Jeep.  It was bought (second-hand) when I arrived in the US about a year ago, en route to JeepMexico.

Just recently the automatic transmission failed.  There was no choice but to commit it to the local Mexican Jeep dealership for repair.  This is a sophisticated transmission system and I was seriously worried that it was going to be a nightmare.

I didn’t account for the help from AASTRO in Tucson, where the Jeep had been serviced a couple of times.

Continue reading “Good old-fashioned service values”

Selling Change – Concluding Part.

Understanding the process of change – key learning points.

  • Good, really good, knowledge of your products and services is essential.
  • People don’t buy anything unless they are dissatisfied with their present circumstances.Questioning
  • Selling change means getting the client to recognise that change brings real benefits.
  • Only good, client-focused questioning will uncover real needs.
  • Only excellent listening skills will allow you to hear what those needs are.
  • Don’t worry about the type of questions – just question, question, question.  Oh, and listen!
  • Understanding the potential customer’s business and where their needs are is fundamental.

Needs questioning is a sales concept.

Continue reading “Selling Change – Concluding Part.”