Journal of Retail Analytics

Transcription

1 Jounal of Retail Analytics platt etail institute Binging Reseach to Retail SM Sponsoed by: The Jounal of Retail Analytics is published quately by Platt Retail Institute, LLC. Aticles on elevant topics will be consideed fo publication. Request aticle submission guidelines. Magot Myes Managing Edito U.S. Office: P.O. Box 158 Hinsdale, IL U.S.A Geman Office: Rathe Kichplatz Dusseldof Gemany Phone: [49] Spanish Office: Cta de Mig, L'Hospitalet de Llobegat Bacelona, Spain Phone: [34] Volume X, Issue 2 Second Quate 2014 ARTICLES PRI 2Q 2014 Retail Economic Outlook: Retail Sales Will Revive 4 in a Resilient Economy Capable of Recovey and Gowth Consume Location-Based Analytics Delive Actionable Insights 13 Matin P. Block, Pofesso, Medill School, Integated Maketing Communications and Executive Diecto, Consume Analytics Institute, Nothwesten Univesity, and Steven Keith Platt, Diecto and Reseach Fellow, Platt Retail Institute and Reseach Diecto, Consume Analytics Institute, Nothwesten Univesity Fom Roadkill to Nivana 19 Don E. Schultz, Pofesso (Emeitus-in-Sevice), Medill School, Integated Maketing Communications and Diecto, Consume Analytics Institute, Nothwesten Univesity Jyske Bank Delives Live News Using Digital Signage Technology 23 A Case Study by Scala Nodic AS PRI Reseach Aticle Summay: Deployment and Test of the 26 Digital Life Expeience at an AT&T Retail Stoe Godon Helm, Diecto, Publication Management, Platt Retail Institute Solutions as a Sevice: A Fesh Appoach fo the Retail Industy 29 Venon R. Slack, Owne, Venon R. Slack and Associates Testing the Sevice Recovey Paadox: Myth o Reality? 32 Jean-Chales Chebat, Honoay Pofesso, Ecole des Hautes Etudes Commeciales and Adjunct Pofesso, Technion-Isael Institute of Technology, and Muiel Mantoua, M.Sc. The New Kids on the Block: E-tailes and Consume Poduct 46 Bands Ty Thei Hands at Bick and Mota Matt Schmitt, Pesident, Reflect Undestanding and Leveaging Emotions in Retailing, Pat III: 49 How Retailes Ceate Emotional Expeiences in Stoes and Online Denise Dahlhoff, Reseach Diecto, Bake Retailing Cente, The Whaton School, Univesity of Pennsylvania COLUMNS PAGE PAGE Retail Secto Pefomance Chats 10 PRI Reseach Aticles 55 PRI Reseach Publications 56 PRI Reseach and Event Sponsoships 57 PRI Resouce Libay 58 Industy Events Calenda 59 Contact PRI 60 Copyight PLATT RETAIL INSTITUTE, LLC All ights eseved.

2 PRI Membes Platt Retail Institute (PRI) is an intenational consulting and eseach fim that focuses on the use of technology to impact the custome expeience. In an omnichannel envionment, PRI woks with its clients to develop maketing stategies that build bands by integating vaious custome-facing technologies. PRI clients include etailes, media companies, financial institutions, hadwae and softwae companies, educational institutions, and othe businesses. We ae gateful to the membes of the Platt Retail Institute fo thei suppot. To lean moe about PRI membeship, please click hee. This document is not to be epoduced o published, in any fom o by any means, without the expess witten pemission of Platt Retail Institute. This mateial is potected by copyight pusuant to Title 17 of the U.S. Code. Copyight PLATT RETAIL INSTITUTE, LLC All ights eseved. platt etail institute 2

3 PRI Membes (cont d.) platt etail institute 3

4 PRI 2Q 2014 Retail Economic Outlook: Retail Sales Will Revive in a Resilient Economy Capable of Recovey and Gowth I n ealy July, slow stoe taffic in vaious etail segments, such as geneal mechandise, was causing some to opine that consume spending was slowing. The fact that etail sales gowth was flat in July may be viewed as suppot fo this assessment (see Chat 1). We, on the othe hand, believe that the economy continues to ecove, that consumes ae geneally in good shape, and that etail sales will evive. Chat 1. Souce: Have Analytics Second quate GDP ose by a stong 4.0 pecent, following a fist quate decline of 2.1 pecent (see Chat 2). The fist quate was negatively impacted by vaious events, such as sevee weathe conditions. The esult was that much of this spending was defeed into the second quate. If nothing else, this indicates a esilient economy capable of ecovey and gowth. platt etail institute 4

5 Economic Outlook (cont d.) Chat 2. Souce: Have Analytics In consideation of the sput in gowth in the second quate, and a slight modeating in economic activity this summe, we estimate thid quate GDP gowth will be in the 2.0 to 2.2 ange. Oveall, fo 2014, we look fo GDP gowth of about 2.3 pecent, an impovement vesus the 2.2 pecent ate in Vaious othe institutions shae ou view. Fo example in June, Goldman Sachs noted that, despite the don eal GDP in the fist quate, we believe that the U.S. economy is now gowing at an above-tend pace. The Intenational Monetay Fund, in its July 2014 County Repot, noted that U.S. economic activity is pojected to acceleate in the emainde of this yea to above potential (in the 3 3½ pecent ange). In fomulating ou opinions, we conside many diffeent data sets. We pesent a small sample of those that we analyze below to demonstate the vast aay of data inputs we eview in fomulating ou opinions. As well, this infomation will assist ou eades in developing thei own opinions about the diection of the economy. platt etail institute Manufactuing poduction inceased by 1.0 pecent in July (up 4.9 pecent yea-on-yea), fo instance. Of note is the incease in the poduction of goods intended fo the consume secto, which inceased by 0.5 pecent in July (up 4.2 pecent yea-on-yea). Automotive poduction ose a stong 8.5 pecent (19.8 pecent yea-on-yea); appliance, funitue, and capeting poduction inceased by 1.8 pecent (9.2 pecent yea-on-yea); and clothing poduction inceased by 2.0 pecent (5.0 pecent yea-on-yea), afte thee months of decline. Changes in wholesale sales and inventoies, fo example, which ae consideed lagging indicatos, ae useful fo undestanding intemediate consume demand because most of the fims suveyed sell to etail. Fo ou puposes, we consideed that wholesale sales ose by 0.2 pecent in June (up 6.5 pecent yea-on-yea), and inventoies ose by 0.3 pecent (up 7.9 pecent yea-on-yea). Both ae indicatos of stong end-use demand by etailes, and 5

6 Economic Outlook (cont d.) confidence in futue demand expectations, as evidenced by the building of inventoies by wholesales (see Chat 3). Chat 3. Souce: Have Analytics Pesonal income inceased by 0.4 pecent in June (3.9 pecent yea-on-yea, vesus 2.2 pecent yea-on-yea duing the same peiod in 2013). Wages and salaies inceased as well, by 0.4 pecent in June (4.9 pecent yea-on-yea). Pesonal spending also ose (see Chat 4) by 0.4 pecent in June (4.0 pecent yea-on-yea, vesus 3.6 pecent yea-on-yea fo the same peiod in 2013). Chat 4. platt etail institute Souce: Fedeal Reseve Bank of St. Louis 6

7 Economic Outlook (cont d.) Anothe data point is the New Yok Fedeal Reseve s Quately Repot on Household Debt and Cedit (see Chat 5). Fo the second quate of 2014, it found an $18 billion decease in oveall household debt fom the pevious peiod, with delinquency ates continuing to impove. It was noted that the oveall 90-plus day delinquency ate fell by 4.5 pecent, the lowest it has been since ealy Chat 5. Souce: Fedeal Reseve Bank of New Yok Gowth in consume cedit outstanding, fo example, has a 54 pecent coelation with consume spending. In June, consume cedit outstanding inceased by $17.3 billion, o 6.7 pecent yea-on-yea. The employment pictue also continues to impove. Fo example, continuing claims fo unemployment insuance in the week ended August 2 ose, but ae down by 14.1 pecent yea-on-yea (see Chat 6). platt etail institute 7

8 Economic Outlook (cont d.) Chat 6. Souce: Fedeal Reseve Bank of St. Louis A bit moe fa afield, conside the following economic indicatos: Nealy 70 pecent of all feight tanspoted in the U.S. goes by tuck. As such, tansit activity is a easonable indicato of economic activity. In June, the Ameican Tucking Associations Tuck Tonnage Index declined 0.8 pecent, but is up 2.3 pecent vesus June 2013, and up 3.2 pecent fo the second quate of 2014 vesus 2013 (see Chat 7). Chat 7. Souce: Ameican Tucking Association platt etail institute 8

9 Economic Outlook (cont d.) On July 29, United Pacel Sevice epoted that, fo the second quate, U.S. daily package volume impoved by 7.4 pecent, and that intenational expot shipments inceased by 9.1 pecent ove the pio yea, with gowth coming fom all egions of the wold. So how does this, and all the othe economic data available come togethe to help us fom a concise view of the economy? The answe is it does not, and that it is the intepetation of economic infomation that is the at of the science. Ou ead is fo continuing modeate economic impovement. platt etail institute 9

10 Retail Secto Pefomance Chats The following table and chats povide seveal pespectives on etail sales pefomance. Table 1. Retail Spending Retail Spending % July June May July Y/Y Total Retail Sales & Food Sevices Excluding Autos Non-Auto Less Gasoline & Building Supplies Retail Sales Souce: Have Analytics Chat 1. Retail Sales and Food Sevices (pecent change) Souce: Have Analytics platt etail institute 10

11 Retail Secto Pefomance (cont d.) Chat 2. Real Retail and Food Sevice Sales Souce: Fedeal Reseve Bank of St. Louis Chat 3. Retail Sales and Food Sevices Excluding Moto Vehicles and Pats Deales Souce: Fedeal Reseve Bank of St. Louis platt etail institute 11

12 Retail Secto Pefomance (cont d.) Chat 4. E-Commece Retail Sales Souce: Fedeal Reseve Bank of St. Louis platt etail institute 12

13 Consume Location-Based Analytics Delive Actionable Insights By Matin P. Block, Pofesso, Medill School, Integated Maketing Communications and Executive Diecto, Consume Analytics Institute, Nothwesten Univesity, and Steven Keith Platt, Diecto and Reseach Fellow, Platt Retail Institute and Reseach Diecto, Consume Analytics Institute, Nothwesten Univesity A dvances in in-stoe, location-based technology ae empoweing etailes with cutting edge insights about consume behavio in thei stoes. 1 A majo benefit associated with these new technology platfoms is that they can be inexpensive to deploy, paticulaly when compaed with moe taditional measuement instuments such as taffic-counting devices and video obsevations. Now, systemwide deployment is financially possible. In geneal, this technology enables a etaile to accumulate infomation on the following: Date, time, and numbe of customes detected in a stoe. Stoe taffic pattens. In-stoe location dwell time. Stoe penetation ates. Repeat visits. This infomation povides a etaile with vaious types of actionable, eal-time infomation that enables apid esponse. Additional stoe pefomance metics ae geneated when this infomation is integated with othe data, such as that fom Point of Sale (POS) and human esouce management systems. In this aticle we discuss how this technology enables etailes to lean moe about consume behavio in-stoe and use that infomation to impove opeating pefomance. We also pesent two scenaios: one fom a hypothetical depatment stoe chain that addesses vaious elated questions; and anothe that demonstates the benefits gained by using this technology on a univesity campus. Stoe Taffic Data elated to the date, time, and numbe of customes detected in a stoe can be useful fo vaious puposes. Hee we addess the use of taffic infomation to impove stoe pefomance and gain insights into the impact of maketing and pomotional activity. platt etail institute Taffic data is a key stoe pefomance measue because stoe evenue and mechandise management infomation (such as inventoy tunove and goss magin) might not be evealing the entie pictue. Conside this example. Two compaable stoes ae located in the same town. Top- and bottom-line numbes ae the same, so one may daw the conclusion that the stoes have compaable pefomance chaacteistics. Howeve, one of the stoes has 12 pecent moe taffic. The inability of this stoe to convet taffic into sales points to vaious pefomance shotcomings. These may include, among othe things, poo staff taining, inconsistent mechandising and/o out-of-stock positions, a failue to popely institute pomotional pogams, o extended wait-times at checkout that ae causing custome abandonment, etc. 1 These technologies include, among othes: Bluetooth Low Enegy Beacons, Wi-Fi, RFID, Magnetic Field, and Visible Light communications, fo example. 13

14 Custome Analytics (cont d.) Taffic infomation is also useful fo undestanding maketing and pomotional campaign effectiveness. Fo example, an indicato of local mass media campaign success may be tied to its ability to dive taffic into the stoe. This taffic incease, if any, can futhe be evaluated to detemine campaign cost efficiency. That is, what is the etun ealized fom an investment in mass media advetising by inceased stoe taffic, which ceates a sales oppotunity? Stoe Taffic Pattens The study of in-stoe taffic pattens can help a etaile undestand and impove many opeational aspects of its business. These include the following: Optimizing stoe and fixtue layout. Impoving mechandise placement. Pogamming in-stoe maketing activities based on taffic flow and speed (i.e., tacking consume movement along a path can povide an oppotunity to engage with them at coodinated locations whee the custome and mechandise intesect). Positioning staff to impove custome sevice. Fo example, by knowing the flow of customes fom cetain aeas of the stoe to the checkout aea, manages can incease staffing at the checkout befoe wait-times build. Diecting customes fom cowded to uncowded assets can incease asset utilization and custome satisfaction. Fo example, a depatment stoe has seveal estauants in its building and one has a wait line while the othe does not. Rediecting customes to the less-cowded estauant can incease utilization, as well as incease custome satisfaction. Hee we exploe how stoe taffic pattens can be studied to measue the effect of messages deliveed by digital signs on consume behavio. Consume behavio is geneally defined as the decisions and associated activities of individuals elated to buying and using goods and sevices. It encompasses both the mental decisions and the physical actions that esult fom those decisions. While pimay eseach focused on gaining insights into both components of consume behavio can be undetaken, an undestanding of consumes physical actions is a stong indicato of how those decisions ae manifested. This is paticulaly tue when a consume s physical actions ae measued in esponse to a stimulus, such as messages communicated on digital signs, static signs, and those deliveed to a handheld device, such as a smatphone. When consideing the investment equied to ceate effective messages fo digital signs, it is helpful to undestand if those messages ae poducing the desied esult. Fo instance, is a message deliveed in one pat of the stoe moving taffic to anothe pat of the stoe as desied? Is a message displayed helpful in upselling, affecting dwell time, o educing peceived wait time? By tacking taffic pattens, insights into message impact can be obtained that answe these types of questions. platt etail institute In-Stoe Location Dwell Time Undestanding custome dwell time in a stoe and in-stoe, location-specific dwell time can povide a wealth of insights. The study of stoe visit duation is useful because inceased visit length has been found, in cetain instances, to lead to inceased puchases, as well as seve as an indicato of custome loyalty. 14

15 Custome Analytics (cont d.) Tacking the duation of custome stoe visits can help a etaile undestand its pogess in attacting and keeping customes engaged. Intoducing evenue measues into the equation can povide insights into spending levels duing each visit, and how vaious pomotional and maketing activities ae affecting sales based on time spent in the stoe. In addition, stoe dwell time, when combined with epeat visit infomation, can povide consume loyalty insights. Reseach into consume in-stoe, location-specific dwell time can also be valuable. Changes in zone-specific dwell time, as well as whethe customes ae moving to tageted zones because of the effect of messages deliveed to a custome s mobile device, fo example, can be measued. The length of a zone-specific message also can be optimized based on undestanding dwell times. Finally, poduct placement and assotment can also be impoved based on zone dwell time measuement. Stoe Penetation Rates A stoe s penetation ate efes to the numbe of customes that walk past a stoe vesus enteing the stoe. While not useful in all instances, measuement of this in a mall envionment, fo example, can yield inteesting insights. As an illustation, it is possible to study whethe messaging (static o digital) o poduct mechandising visible at the font of the stoe ae successful in dawing customes into the stoe. In addition, the significance of vaious pomotions can be analyzed by taffic daw. Finally, this measue can also be helpful in undestanding whethe vaious othe maketing and media campaigns ae diving taffic into the stoe. Repeat Visits Tacking custome epeat visits is useful fo undestanding, among othe things, if out-of-stoe maketing activities, such as a diect mail campaign, ae successful in dawing customes back to the stoe. Moeove, it is possible to estimate poduct and sevice puchase cycles and how they ae influenced by vaious maketing activities. Futhe, measuing epeat custome visits can lead to new insights into loyalty pogams with a etaile s best customes, as well as tacking new visitos. The five coe consume location-based analytics discussed above, when combined with othe data, can povide additional stoe pefomance feedback. We discuss hee those that esult fom combining taffic with POS and human esouce management system infomation. Sales Convesion and Poductivity Sales convesion efes to the pecentage of shoppes that ente a stoe and make a puchase. Stated anothe way, it consides the available pool of customes in a stoe and how many of them make a puchase. It is calculated as the total numbe of tansactions divided by taffic. To illustate, conside the following example: A stoe completes 25 tansactions in an hou duing which 50 customes visited. This esults in a 50 pecent convesion ate (25 50). Assume that the same stoe then changes the messages on its digital sceens and/o pomotions deliveed to smat devices. Subsequently, the stoe completes 35 tansaction in an hou duing which 50 customes visited. This esults in a 70 pecent convesion ate (35 50). One could theefoe conclude, all else being equal, that those messages and/o pomotions ae having a positive effect on custome behavio. platt etail institute 15

16 Custome Analytics (cont d.) platt etail institute Sales poductivity, on the othe hand, is an indicato of the aveage amount spent by each shoppe. It is calculated as stoe sales divided by taffic. Fo example, if a stoe sells $100 woth of mechandise to 25 customes, the aveage spend is $4 pe custome (100 25). Late, the stoe manage decides to incease stoe sales staff, which esults in sales of $200 to 25 customes, inceasing the aveage spend to $8 pe custome (200 25). This demonstates that the cost of inceasing staff in this instance may be justified. Factos such as in-stoe maketing, picing, mechandising, and staff skill level, among othe things, can impact sales convesion and poductivity. Depending on the etaile's investigative equiements, these and othe factos can be isolated fo futhe study. Staff Availability Staff availability is a measue of available labo to seve each shoppe. It is calculated as stoe labo hous divided by taffic, and can be measued fo both a stoe and/o a specific zone. This aids a etaile in achieving opeational efficiencies by matching staffing to desied custome sevice levels based on taffic. Fo example, if 100 customes visit a stoe in an hou when thee ae 50 available labo hous, the esult would be a 50 pecent custome sevice coveage atio (50 100). If the labo hous available ae educed to 40, the esult is a 40 pecent custome sevice coveage atio, meaning that less labo is available to seve customes (40 100). When the impact on sales and labo costs ae then consideed, ideal staffing levels can be achieved. Taffic data can also aid in staff scheduling and impact in the following ways: Schedule moe pesonnel to wok at high taffic times. Schedule employee beaks at low taffic peiods. Schedule mechandise deliveies and estocks at low taffic peiods. Assign the most qualified associates to peak taffic peiods. Evaluate employee pefomance based on sales convesion. Measue the impact of taining on sales convesion. In the following section of this aticle, we focus on the use of Wi-Fi technology in two situations. In the fist, we answe some questions elated to consume location-based analytics in a theoetical depatment stoe scenaio. In the second, we detail some of the benefits that may be ealized by opeating this technology at a theoetical univesity. Depatment Stoe Maddy s opeates moe than 800 depatment stoes in the U.S. As pat of its omni-channel pogam, it has made Wi-Fi available to customes in its stoes. Having aleady made this investment in Wi-Fi, the fim s stoe technology manage is exploing whethe to intoduce Wi-Fi consume location-based analytics. In this egad, he has advanced the following questions: 1. How expensive will it be to add this to my existing Wi-Fi infastuctue? This will depend on the level of accuacy desied. If the oiginal wieless deployment was designed with optimized location-based analytics in mind, o if optimal location accuacy is unnecessay, the expense is faily minimal. All that is equied is licensing the softwae necessay to gathe signal stength infomation, calculate location, and analyze the data. This softwae typically involves a centalized component and a pe access point component fom a picing pespective. If Maddy s is looking fo optimal location-based analytic data and did not design the oiginal wieless deployment with this in mind, they will likely need to add and eposition access points, as most wieless netwoks ae not 16

17 Custome Analytics (cont d.) designed to yield optimal tiangulation. Fo the highest accuacy, Maddy s may need a diffeent class of access point devices, along with specialized location modules. 2. Othe than the potential need fo additional o a bette class of access point devices and specialized location modules as noted above, what is equied to opeate this, in tems of hadwae and softwae? Fom a hadwae pespective, Maddy s will need to make some compute capacity available to un the location and analytics softwae. The amount is detemined by scale and use case equiements. In tems of softwae, the pimay component is the softwae that collects data fom the wieless netwok, calculates location, and pefoms the analytics. 3. How long will it take to get this technology opeational? If the equied hadwae is in place, this can be accomplished faily quickly. 4. As well as the five coe location-based analytics offeed, I want sales convesion, sales poductivity, and labo staffing insights. How do I tie this into ou existing POS and labo databases? This is achieved by means of open APIs. Data can geneally be eithe pushed o pulled fo integation. 5. We need othe customized analytics. How do we ceate and manage this? In geneal, analytic models can be ceated in statistical pocessing softwae, which then pushes out the esults to a custom UI. Data can eside behind the company s fiewall fo pocessing locally o can be pushed out fo extenal pocessing. 6. Finally, with this inceased knowledge, how do we make this infomation actionable within the oganization? Univesity This will be etaile specific, but this geneally can be pefomed in vaious ways. One etaile has detemined to ceate a specific position within its oganization that is esponsible fo eviewing activity and ceating epots, alets, etc. Rules-based pogaming, which geneates messages to a specific depatment and/o individual based on cetain activities, can also be ceated. As well, specific management dashboads can be ceated. West New Yok Univesity sits on 1,400 aces, has moe than 400 campus buildings, and a student population that exceeds 29,000. The Univesity s Manage of Infomation Systems Opeations is consideing adding student location-based analytical sevices to the school s Wi-Fi infastuctue. The potential benefits associated with opeating this technology on campus include, among othe things, the following: platt etail institute 1. In a campus emegency, messages ae deliveed by means of Web, audio signal, phone calls, text messages, digital signs, and TV and adio communications. Rathe than have boad distibution of these messages to aeas that may not be impacted o ae affected diffeently, specific instuctions can be deliveed to devices in the location of an emegency, while students on othe pats of the campus eceive diffeent messages. 17

18 Custome Analytics (cont d.) M a t i n P. B l o c k i s Pofesso, Medill School, Integated Maketing Communications and Executive D i e c t o, C o n s u m e Analytics Institute, Nothwesten Univesity. 2. The Univesity has five majo dining facilities. Thoughout the day, utilization ates at each fluctuate widely. Fo example, dining oom one may be at moe than 100 pecent capacity at lunchtime, while dining oom two may be at 60 pecent. Advising students in the aea of dining oom one that thee is a 20-minute wait time, while neaby dining oom two has no wait time, can both incease utilization at estauant two and student satisfaction. 3. The football stadium at WNYU holds ove 60,000 people. This technology enables the delivey of specific messages to those attending events in the stadium. 4. On-campus paking is limited at WNYU. Messages about available paking can be deliveed to a device based on its location. 5. Campus safety is of pime impotance at WNYU. Students who download the Univesity s app o on-boad the netwok ae povided with accuate diections that will easily guide them to thei destinations at diffeent times of the day. Fo example, if the shotest path to a student s destination is consideed less safe at nighttime, students can be guided to take a safe path. 6. Students and guests, as they tavel the campus, can eceive welcome messages, geneal school infomation, and infomation elated to thei suoundings, such as a specific building s o depatment s histoy. In addition, infomation on exhibits in the Univesity s museum, and pomotional deals while shopping in the univesity stoe, fo example, can be tageted based on location. 7. Pedestian taffic and cowd contol can be monitoed and safety and elated coective action taken ealy. Conclusion This aticle discusses the wealth of eal-time insights geneated fom consume location-based analytics. We addess both the data ceated and how it can be used to impove stoe opeating pefomance. In addition to the insights discussed hee, thee ae many othes that can be implemented by a etaile, depending on its specific testing needs. Technology customization and setup, such as integating ule-based notices in esponse to defined factos, will also be etaile-specific. Finally, we pesented two hypothetical examples to povide additional insights. Steven Keith Platt is Diecto and Reseach Fellow, Platt Retail Institute and Reseach D i e c t o, C o n s u m e Analytics Institute, Nothwesten Univesity. platt etail institute 18

19 Fom Roadkill to Nivana platt etail institute By Don E. Schultz, Pofesso (Emeitus-in-Sevice), Medill School, Integated Maketing Communications and Diecto, Consume Analytics Institute, Nothwesten Univesity O ve the past few decades, most maketing oganizations have tied to monito, measue, and map the steps they believed thei customes took on the way to shopping in thei stoes and puchasing thei poducts. This analysis, which goes by many names, seems to have stated with fast-moving consume goods manufactues such as P&G, Unileve, Colgate, and the like. All tied to hypothesize what customes wee doing mentally o sample and estimate what they thought they wee doing physically as they made etail puchase decisions on vaious categoies. Ove time, they developed vaious concepts such as a puchasing funnel, a path to puchase, and the like, all of which eventually ended up at a point of decision o moment of tuth, commonly esulting in a consume decision point at the etail stoe shelf. This was done as a way to undestand the seemingly impenetable consume black box of puchase decisions. Retailes, being majo band manufactue patnes, and thus heavily influenced by them, mimicked what thei supposedly moe sophisticated associates wee doing. They developed thei own set of shoppe concepts, focused mostly on consume in-stoe behavios. So they tacked o followed stoe shopping time, aisles visited, time at the shelf, and so on. They wee essentially measuing physical behavios compaed to the manufactue s hypothesized concepts of what was occuing. All wee tying to find points in consumes puchasing pattens whee they could intecept, intude, and most of all, impact consume decisions, whethe those wee estocking/esupplying the family efigeato o to make puchase decisions on moe impotant and expensive poducts such as appliances o even automobiles. What they leaned, o thought they leaned, thus influenced stoe layouts, shelf stocking, distibution of pomotional mateials, in-stoe incentives, sales foce activities, and the like. Fom all this sometimes coopeative but, often competitive, eseach activity on consumes, the goal was clealy the same: attempt to pesuade o sell the consume one o moe of the poducts on offe, geneally in the etail stoe. In othe wods, sell what they had made, inventoied, o what was in stock. All this eseach and analysis geneated a massive numbe of concepts and appoaches, each one supposedly unique and each one sue to impact consume behavio. Today, they all seem to fall unde the geneal ubic of the consume shopping jouney. The one thing all these activities had in common was the makete s o etaile s goal of tying to inteupt o influence the consume s shopping expeience though the delivey of a commecial message o incentive on behalf of the makete s poduct o the etaile s stock. The basic pemise was: if we can disupt the consume s shopping jouney, pehaps we can get him o he to conside ou poduct and maybe even puchase it. This thinking led to a plethoa of new activities in-stoe, nea-stoe, in the shopping cente paking lot, and elsewhee designed with just one thing in mind inteupt the shoppe, beak into thei shopping patten, and ty to sell o pesuade the shoppe to econside o ethink what they wee doing in favo of the makete s offeings. The esult has been an eve-inceasing avalanche of in-stoe pomotional tools, all of which claim to have a elevant place in the shoppe s puchasing jouney. Inteestingly, in the study of the consume shopping jouney, little o no thought seems to be given to what the consume bings with him o he to the 19

20 Fom Roadkill to Nivana (cont d.) platt etail institute shopping situation. It is as if the consume s mind o memoy is a blank slate. Thus, whateve they expeience in the etail shopping situation is to be peceived as new, inteesting, exciting, and most of all, pesuasive. Thee was nothing subtle about the makete s goals eithe at the manufactue o etaile level. Inteupt, intecept, stop, challenge, aest if necessay, but, get the consumes attention. Rediect them fom what they wee doing to focus on something that would be of value to the makete o etaile even though it may be peipheal to the consume. Maybe, somewhee along the way, they will benefit fom these inteuptions, although that seemed to be fa down the list of etaile o manufactue goals. The whole idea of this appoach, and the many othes pattened on it, was to maintain o gain contol of the maketing situation. Let s face it maketing, advetising, pomotion, and any of the othe dozens of maketing concepts have only one goal in mind: to contol what the custome does and influence o manage thei actions in such a way as to gain eithe competitive o maketplace advantage. In shot, the goal is to pesuade the consume to buy what the makete wants to sell. It was all summed un the etail maketing manta: Right message. Right time. Right place. Right custome o pospect. Delive those and captue custome dollas. And it woked. Fo decades, maketes and etailes have been honing thei pesuasive skills and becoming moe adept at inteupting the consume shopping jouney. The point of contact. The shelf situation. Povide what the custome supposedly wanted to know. Then, along came 1994 and the commecial intoduction of the Intenet. The doos to the conucopia of knowledge and infomation maketes and etailes had so caefully contolled, i.e., ingedients, altenative solutions, elative picing, othe distibution points, and a whole bevy of useful consume infomation, suddenly was thown wide open. Consumes had infomation, knowledge, backgound, histoy, compaisons, and all the massive amount of infomation that had been so difficult fo them to acquie in the past, suddenly became instantly available. With this data, they could make moe intelligent decisions decisions that benefitted them, not the makete. Suddenly, consumes had access they had neve had befoe: seach engines; compaison tools; consotia of fiends and associates with knowledge and expeience; and, social media. Compaing pices and tems in competitive stoes and altenative channels was just a click away. Expeiences and comments fom othes could be accessed and combined with multiple expeience points so that what seemed too good to be tue was suddenly shown that it pobably wasn t tue. That s when most of ou maketing concepts about funnels and shopping jouneys and pathways to puchase, whee maketes tied to push consumes along a one-way path to puchase thei poducts, began to develop majo potholes and lage cacks. Pathways the maketes had ceated o conceived suddenly wee exposed to the light of day as fictional shopping jouneys that poved to be nothing moe than a makete s vesion of Doothy and he fiends on the Yellow Bick Road headed fo Oz. It was all designed fo the benefit of the selle, and often involved smoke and mios makete-made fog that had been deamed up, codified, and then applied. The Empeo (ead hee: the manufactue and etaile) eally had no clothes. But, because maketes and thei supplies had ceated such a wondeful wadobe of hypothesized concepts and models of how consume wee supposed to behave, most maketes have been loath to give them up and walk away fom them. So, what has been done fo the past decade o so is what is commonly done when a maketing concept fails thow moe money at it. 20

21 Fom Roadkill to Nivana (cont d.) platt etail institute That s what seems to be happening now. Consumes don t follow the pathways maketes have defined. They don t follow the peconceived puchasing funnel, and don t espond to taditional sales and pesuasion effots. In shot, consumes seem to be out of contol. That is the wost thing that maketes, both manufactues and etailes, believe can happen losing contol of a system they themselves ceated. Today, much of the hype and hope of how consumes wee supposed to behave on the pathway to puchase became nothing moe than oadkill ideas, concepts, methodologies, i.e., things that should have been tossed out the window yeas ago but ween t simply because they had been dessed un teminology and mystical cloaks that hid o tied to hide the fact that consumes had escaped fom the pen. They wee out wandeing aound, doing what they wanted to do, following thei own instincts, building thei own pathways, blazing thei own tails and ignoing many of the methods and appoaches that maketes had so caefully constucted to explain and illustate what they wee supposed to do. What caused all this puchase path oadkill? Simply put: infomation. This infomation has tansitioned fom the closely held vaults of the makete and the etaile to open systems of the consume. The pathways and funnels maketes thought they wee building suddenly became one-way oads to nowhee simply because the consume didn t o wouldn t follow the ules that maketes had developed. Like a hed of cats, consumes today have thei own, individual pathways to solving thei own pesonal etail poblems. Those ae pathways they have ceated o adapted, not ones the makete had plotted fo them that they ae supposed to follow. What s a makete o etaile to do? Clealy, the concept of makete o maketplace contol is ove. Shaing is the ode of the day: shaing of data and esouces and the shaing of value. In a wod, ecipocity must ule the day. Recipocity simply means both paties in a tansaction must shae the value ceated. That s as old as Aistotle, the Geek philosophe, who ecognized the concept eons ago. What all this means is that maketes must bette undestand consumes: what they ae tying to do; what the goals of thei lives ae; how they appoach the shopping situation; and, how they view value, elationships, and band value. We ae moving away fom selling and pesuasion to influence, which is diven by the idea of shaed value and tanspaency, two tems that have gotten much attention in the pess, blogs, and consultant pesentations, but not much in pactice. The question, of couse, is: How will maketes make the change? How to move fom the age-old belief in the sales peson who could sell efigeatos to Eskimos to a coopeative view of how maketes can eally make the lives of consumes bette and still make a pofit that can ewad shaeholdes fo thei investments. Big data, and all the amifications of what this seemingly infinite esouce can povide, is likely the key to all this demand fo a new view of maketing. But not big data as it has been peached and pacticed fo the past few yeas. Maketes need to undestand not just what customes did but why they did it; not just what they bought but the poblem o poblems they wee tying to solve in thei lives; not what coupons they edeemed but how and why they picked one cents-off offe compaed to anothe; and, what this paticula visit to a etail 21

22 Fom Roadkill to Nivana (cont d.) location, no matte what its fomat, was tying to esolve. In shot, stating to look at the puchase funnel o shopping jouney fom the consume s pespective, not the selles, is what s needed. Ganted, this type of appoach is somewhat adical. Manufactues make poducts and then ty to sell them. If I have a factoy that is designed to make toothpaste, I have to find ways to sell o at least get consumes to buy and use toothpaste. If I have a etail location in which I have invested millions, I must get customes to come to my location and buy the poducts in my inventoy. In shot, all maketes ae facing majo dislocations unless we begin to take a consume view of the system. Taking this consume view is going to be difficult and most likely unsettling. It s not what we have always done; not what is in the cuent textbooks; not what the thousands of consultants and softwae applications designes ae hawking today; and, not what today s manages ae pepaed to do o to manage. In shot, this may well mean that most, if not all, of the taditional custome jouney concepts and appoaches that have been developed duing the age of the selles and pesuades become nothing moe than oadkill on the way to new ecipocal models and appoaches that focus on co-ceated and shaed value. Can maketes, and most especially etailes, make this change? Can they evise thei focus fom supply chain and inventoy management to custome and income flow management? In essence, can maketes einvent themselves fo this new maketplace? Can they move fom being dee in the headlights to guides and diectos in making custome s lives bette? Moe impotantly, what is the altenative? D o n E. S c h u l t z i s Pofesso (Emeitus-in- Sevice), Medill School, Integated Maketing Communications and D i e c t o, C o n s u m e Analytics Institute, Nothwesten Univesity. platt etail institute 22

23 Jyske Bank Delives Live News Using Digital Signage Technology A Case Study by Scala Nodic AS Objective Leading Danish financial institution Jyske Bank is a maketing tendsette. The coe of the bank s communications to its customes and the wold at lage is a live news channel, which is poduced and distibuted fom its own boadcast cente at its headquates in Silkebog, Denmak. The bank s live TV channel, jyskebank.tv, launched in Octobe This boadcast flow channel is now visible in all of its banches, boadcasting pofessional-gade live infomation on financial makets, beaking economic news, and mattes elating to eveyday life. The ole of the live TV channel is to position Jyske Bank as a thought leade and to diffeentiate it fom othe banks, by einfocing the unique, dynamic image it also potays in its banding and inteio design. Ou oveall look is vey diffeent (fom) nomal banks, said Steen Metz, Diecto, Communications Technology at Jyske Bank. We stive to stand out on pupose, so if people ae inteested o bowsing the maket they will like ou way of communicating and ou look. Challenge platt etail institute The bank needed to find a playout solution, i.e., a way of distibuting its content ove the Web and to the netwoked sceens in all its banches aound Denmak. In a taditional TV boadcast wokflow, that ole is taditionally assigned to a playout seve. The last sten the poduction wokflow is tanspot of content to a playout seve that collates video, banding gaphics, and othe content. Jyske Bank appoached taditional boadcast technology manufactues, but found thei playout seves stuggled to handle the vaiety of image souces and delive the equied effect within a pice-point that was acceptable to the bank. 23

24 jyskebank.tv (cont d.) We have VOD, live video, text-based news, Facebook feeds, Instagam feeds, Twitte feeds, stock infomation and so on, explained Metz. All of this is had to put togethe in the boadcast wold. We ealized that we could achieve this bette by tuning to the digital signage wold. Solution In the boadcast television wold, an image is made up of diffeent layes. Meging those layes is costly and difficult. The Scala digital signage softwae platfom delives one laye, made up of disceet independent boxes instead, which is simple and easie fo Jyske Bank to use. Each independent field uns its own content, which allows the bank to pesent vaied content fom the same sende. Jyskebank.tv takes up a lage aea of the sceen. Aound it, othe boxes show news feeds fom othe souces: video, stock infomation, text-based news, and Twitte feeds, all consisting of one laye each and endeing on-sceen to make up a pictue. A Scala digital signage softwae solution was integated as pat of the boadcast equipment unning the bank s TV poduction studios at its HQ in Silkebog. This inceased the efficiency of the station and educed the need fo manual supevision of the pocess. It s always a nice supise when you find an application fo a softwae that is pehaps a little off what it was intended fo but it tuns out to be extemely well woth it, commented Metz. It eplaces the need fo exta boadcast technology to mege the image layes. In this paticula scenaio, the softwae povides the content management capabilities to the bank s live TV channel, which is boadcast to appoximately 700 displays, anging fom 22 to 42 inches in size, and visible in pime locations in its 120 banches all ove Denmak. platt etail institute Scala s Open API offes an open platfom that can be witten to and that can be used to contol othe systems. It boils down all of the content steams so the whole thing can be un on one sceen at the same time, at the desied pace and with the desied content. The solution consists of standad Scala poducts: the Content Manage (seve) and Playe (clients) with data integation to etieve live stock maket, cuency, and Twitte infomation. The Jyske Bank news staff insets additional content on an ongoing basis, alongside the occasional live news boadcast steam. 24

25 jyskebank.tv (cont d.) The softwae solution in essence fetches news feeds and video clips and combines them as desied. Once the pogam is up and unning, it acts autonomously. It will automatically download the most ecent stoies into existing foldes and the communications depatment at Jyske Bank can make coections o adjustments at any time, fo example to clea the page in the event of beaking news that needs to be pioitized full-sceen. The content management capabilities of the digital signage softwae allow Jyske Bank to pesent new infomation on a daily basis at a highe volume. The bank was also able to implement an open-editoial pocess, whee viewes have a voice via social media. The audience can contibute content to the netwok, binging an inceased level of engagement with Jyske Bank. Results Jyske Bank s live TV channel is visible in the bank s own banches. The bank is also cuently woking on secuing distibution ageements with othe venues such as aipot lounges, o with national boadcastes. All jyskebank.tv LIVE boadcasts ae available fo fee to eveyone fo use in thei own poductions. Anyone can add content fom jyskebank.tv to thei blog o website and all boadcasts ae available online. This communication stategy has given Jyske Bank a unique position in the financial secto in Denmak and has contibuted to making Jyske Bank s stock among the highest ising and anked in the Danish stock maket in Being able to distibute content at a high level has enabled the bank to secue patneships with some of the lagest media companies in the wold. Jyskebank.tv now has its own jounalist at NASDAQ in New Yok City. We think jyskebank.tv s effots ae well known in the maket, fa beyond the each of ou customes, concluded Metz. platt etail institute 25

26 PRI Reseach Aticle Summay Deployment and Test of the Digital Life Expeience at an AT&T Retail Stoe By Godon Helm, Diecto, Publication Management, Platt Retail Institute A T&T continually tests etail design fomats to meet the evolving needs of its customes. This includes the design and deployment of the Digital Life Expeience (DLE) at the AT&T etail stoe in Alington Heights, Illinois, a subub of Chicago. This new stoe fomat is detailed in a Reseach Aticle published ecently by Platt Retail Institute. The Reseach Aticle, sponsoed by LightHaus Logic, descibes how the AT&T etail stoe in Alington Heights was econfigued to incopoate the DLE aea and test its consume impact. Located at the ea of the stoe, the DLE is used to demonstate how AT&T s Digital Life sevice can be used in a home envionment that includes a kitchen, living oom, and office/den. The Digital Life sevice includes a vaiety of home secuity and home automation options that allow uses to tailo the system to meet thei specific needs including: a home secuity system with pofessional monitoing, sien, and emote access via smatphone, tablet, o PC; sensos to detect doos opening, motion, smoke, CO2, etc.; and emote adjustment of lights, themostats, and small appliances, among othe featues. The objective of the DLE test in Alington Heights was to see if having a moe obust use expeience in an inteactive envionment would lead to inceased client adoption and sales. The DLE is designed to simulate a home envionment whee customes ae able to see vaious AT&T solutions in action. This is a diffeent appoach than in a typical stoe, which displays poducts moe simply. This obust envionment gave AT&T the oppotunity to study how customes inteact with the sevice. The feedback fom both customes and the sales epesentatives has been vey positive, with customes saying that they pefe being in the DLE envionment and immesed in the expeience. platt etail institute The consume launch fo the Digital Life sevice was in Apil 2013 and included 15 makets acoss the county. The pimay sales channel was AT&T companyowned etail stoes, but the company also had local deales, a call cente, the website, and a field sales team to suppot the sevice. Sales epesentatives in the stoes wee able to educate customes and complete sales tansactions fom stat to finish. They also could set up appointments fo customes so that 26

27 Digital Life Expeience (cont d.) platt etail institute technical staff membes would go to the custome s home to conduct a site suvey and make ecommendations fo Digital Life equipment installation. In August 2013, AT&T launched the DLE in the Alington Heights stoe. Elements of the DLE ae being incopoated into the AT&T stoe of the futue design as well. Taditional television advetising, social media, and othe maketing effots in suppot of the Digital Life sevice ae binging people into the stoes. Once they get thee, it is the live Digital Life demonstations that sell the poduct. Unlike a standad etail display, the DLE allows sales epesentatives to help customes envision how the Digital Life sevice can be used in thei own homes. The statue of a dog in the DLE is an example of a elatable c o m p o n e n t t h a t a l l o w s customes to see how having this sevice installed in thei own home could ease thei minds about thei pets wellbeing. When it comes to home secuity monitoing systems, a sales epesentative might say, You can use that camea to monito you childen o monito you secuity, but the key is to detemine what is impotant to an individual custome. The focus is on the custome s concens in ode to build inteest in the sevice. So, fo a potential custome who does not have childen, but does have pets, the dog statue is a convesation state. Customes may wok long hous and the ability to keep an eye on thei pets may be desiable. The Digital Life cameas can give them that peace of mind, and by honing in on that peceived need, the sales ep has an oppotunity to demonstate the value of the Digital Life sevice. Once the DLE infastuctue was put in place, AT&T stated to ealize the tue benefit of the system in the stoe, which functions much the same as it would in the custome s home by allowing ealistic demonstations of the Digital Life sevice. Fo example, a sales epesentative could demonstate a nighttime pogam, showing that at 10 p.m., doos will lock, exteio lights will tun on, TVs ae switched on o off, and so on. Anothe example is a good moning pogam that tuns on lights, switches on the coffee make, tuns off outside lights, etc. An additional example of how the Digital Life sevice can be configued to a custome s desies is by specifying that when the custome leaves fo wok in the moning, he can send a command to lock the font doo, automatically tun on the secuity system, tun off 27

28 Digital Life Expeience (cont d.) G o d o n H e l m i s Diecto, Publication Management, fo the Platt Retail Institute. cetain lights, and eset the themostat. The eseach objective was to measue consume behavio in esponse to the intoduction of DLE aea in the stoe. Taffic counting equipment has been in place in the Alington Heights stoe since Novembe Test data elative to DLE was accumulated between Decembe 1, 2013, and Mach 8, To facilitate data accumulation fo this eseach, cameas wee positioned to povide infomation egading total taffic in the DLE aea, a heat map of taffic pattens in DLE aea, dwell time in the DLE aea, and the convesion of font doo taffic to those enteing the DLE aea. The analysis of the data showed taffic to the stoe has geneally inceased since the intoduction of the Digital Life sevice, with taffic to the living oom and home office aea of the DLE showing stong and gowing inteest fom customes. In addition, customes ae spending moe time in the DLE aea. It was found that taffic in the DLE aea stays faily constant thoughout the d a y, a n d i n c e a s e s towad the end of the day and end of the week. When the DLE edesign was completed in August 2013, AT&T did not see an immediate incease in sales. One of the tactics used to incease consume awaeness was to use mobile tablets, so that stoe associates could complete tansactions in the DLE aea. If a custome came into the stoe to buy a tablet o a smatphone, once he made his decision and was eady to complete the tansaction, the associate would walk him back to the DLE living oom and seat him on the couch. The associate would use the mobile tablet to complete the tansaction in that aea and then he o she would tansition ove to a convesation about the Digital Life sevice. Once they stated doing that with evey tansaction and having the Digital Life convesation, sales impoved significantly. With leadeship and associate focus, and the enhanced DLE envionment, AT&T saw an incease of moe than 400 pecent in Digital Life sevice sales in the Alington Heights stoe. The test of the Digital Life Expeience demonstated how valuable it is to povide a ealistic expeience fo customes in the stoe whee they can touch, feel, and gain a bette undestanding of the sevice offeing. Download a copy of PRI's Reseach Aticle, Deployment and Test of the Digital Life Expeience at an AT&T Retail Stoe. platt etail institute 28

29 Solutions as a Sevice: A Fesh Appoach fo the Retail Industy platt etail institute By Venon R. Slack, Owne, Venon R. Slack and Associates O ve the yeas, IT vendos of etail solutions have been pimaily developing and selling PC-based etail solutions, including Point of Sale (POS), self-checkout, kiosks, etc. These solutions have mostly been based on the offeings of the existing entenched CPU industy, which continues to offe moe and moe pocessing powe in smalle footpints that ae moe enegy-efficient. In this envionment, the question is, will Solutions as a Sevice eally wok? On the othe side of the sales equation, etailes, because of thei thin magins, have been notoiously cost conscious and have pitted vendo against vendo in evese auctions, sepaated hadwae fom softwae in ode get costs out of the system, and geneally woked vey had to get the best possible pice fo any puchase. All of these well-established tactics ae used in ode to peseve thei own magins. As a esult, in many cases IT vendos have been in a position whee they ae sacificing magins on each deal in ode to win the business. When a vendo has been announced as the winne, it is left wondeing if it eally won, based on little o no magin in the deal. The vendo may actually lose money on the deal even though thei top line looks healthy. An exteme example of this is IBM s announcement that it was selling its etail division to Toshiba Tec, and will completely exit the maket in This deal was closed on July 31, At the time of the announcement, they wee the numbe one IT vendo in the etail maket. This is gaphic evidence to IT vendos that etailes have been ovewhelmingly successful in winging evey magin dolla out of IT deals. The poblem, howeve, is that as new PC-based POS and IT solutions ae announced, it is clea that the cost of these solutions is not going down significantly. An example of questions that IT vendos ae stating to ask themselves is, As I follow the path of moe poweful CPU pefomance, am I impoving the POS wokflow (o pefomance of self-sevice o self-checkout systems) in geneal? In custome satisfaction suveys pefomed by the National Retail Fedeation and the Food Maketing Institute ove the yeas, the numbe one complaint of consumes egading thei shopping expeiences is the time that they wait in line at the cash wap o at checkout. In eality, despite faste CPUs and moe poweful POS applications, the tue bottleneck at checkout is usually not the technology. Moe likely, slowdowns ae elated to the speed and expetise of the cashie, a declined cedit cad, o a custome who waits to stat witing a check until afte seeing the total. While new methodologies have been exploed, such as scanning RFID tags o building checkout stands with 360 degees of UPC scanning capability, the costs have been vey pohibitive elative to the benefits. All of this suggests that vendos and etailes need to look at new and moe effective ways of educing costs while offeing beneficial technology solutions. The Cloud, Business Intelligence, and Mobile Solutions Meanwhile ecent tends among etailes ae showing an incease in the acceptance of cloud computing, the need fo business intelligence (BI), and the need fo mobile solutions to enhance the consume shopping expeience. All of these tends seem to have thei genesis in the competition that bickand-mota etailes ae seeing fom Intenet-based etail entities. With no physical stoes, these businesses have a low ovehead, which allows them to compete vey favoably on pice. As a esult, taditional etailes ae seeing cloud computing solutions as a way fo them to extend the aisle in thei stoes 29

30 Solutions as a Sevice (cont d.) platt etail institute by offeing an Intenet option to consumes and, at the same, time using social media to pomote poducts and enhance the oveall shopping expeience. BI is something that etailes have been tying to implement fo yeas with limited success. The pimay eason fo the limited success seems to be the shee volume of the aw data and the etaile s limited capability in analyzing the infomation and poviding it to the ight people in thei oganization in a timely fashion. Also, with new technology, mobile applications have exploded on the scene, including mobile POS, which is etaile-owned technology. Retailes also ae expanding thei loyalty pogams, and using Wi-Fi and Bluetooth beacons to tack custome-owned smatphones aound the stoe in ode to offe individualized pomotions to the ownes of those phones. The meging of these technologies (cloud computing, BI, and mobile solutions) seves as notice to IT vendos of an emeging way to sell thei solutions to etailes. The old way of bundling o unbundling hadwae and softwae to sell a pice-competitive solution to etailes has outlived its usefulness. Vendos who continue to follow the PC path fo geneal POS-based solutions with eliance on the newest, most poweful CPU and monolithic opeating system will epesent the expensive end of the in-stoe IT solutions fo etailes, and ultimately will be consideed legacy solutions soon. New solutions will be based on cloud computing fo the heavy pocessing and cunching of POS data, POS analytics, and digital signage. Extemely light font-end appliances fo POS, analytics, and digital signage will be aimed towad system on chip (SOC) achitectue and based on open souce and nocost opeating systems. Peipheal manufactues will continue to enhance the pefomance of thei devices and invest in dive suppot fo Linux, Andoid, and Chome opeating systems to povide high pefomance fo the new SOC technologies. With the development of ARM s pocessos with multiple coes and 64 bit computing capabilities, these inexpensive CPUs will be moe than adequate to dive POS, analytics, digital signage, and kiosk font ends, while elying on the cloud fo the heavy lifting of computing algoithms fo sales infomation, audience tacking, and tacking of custome-owned smatphones in a stoe envionment. All of these amazing featues will happen in eal-time on seves that ae located in safe and secue seve fams while communicating with stoes via encypted VPN and wieless boadband connections. Focusing on seving customes, not managing technology The value fo vendo and etaile alike is that the solutions will be sold as a sevice, usually with a monthly fee that will lowe the need fo capital expenditues in favo of opeating expenses. Fo etailes, the eal savings will be in loweing pesonnel costs. Instead of having intenal staffs of pogammes, IT suppot pesonnel, and maket analysts tying to keep up with and suppot thei IT solutions, they will be able to steamline these depatments to a few supe uses who inteface with the vendos and who will monito the cloud-based solution fo the etaile and pefom the functions cuently done intenally. Ultimately, this appoach will affod etailes the ability to focus on thei stengths, which ae selling, pomoting the band, and offeing consumes a diffeentiated expeience. This will give etailes the ability to focus on what they do best and cut costs because of pesonnel savings. The BI will allow maketing pesonnel to actually un mico-maketing campaigns to individual consumes and goups of shoppes using Web-based, dashboadstyle tools. As an example, a custome ecently implemented a new netwok secuity system in his entepise. This solution contols which devices can be connected to the netwok and which cannot, and monitos ogue devices tying to get on the netwok. The system was sold as a capital investment, and the etaile povides the IT suppot staff to manage and update the netwok as needed. Ove the past yea and a half since it has been implemented, I have 30

31 Solutions as a Sevice (cont d.) Venon R. Slack is the owne of Venon R. Slack and Associates, LLC, a consulting sevice poviding new IT solutions fo the etail industy. platt etail institute visited my custome fom time to time. They told me that because of the complexity of the system, thee have been times when thei desktops wee blocked fom sending and eceiving s, o accessing epots and data necessay fo pefoming thei tasks. Most ecently, duing an update of the fimwae in the Wi-Fi access points, all of the digital signs in thei stoes that wee connected to the netwok via Wi-Fi had to be updated with new Wi-Fi cads because the old cads (just two yeas old) wee no longe able to automatically connect to the netwok afte the update. These sevice inteuptions and unbudgeted upgades have been costly, not to mention the salaies of an ovetaxed IT staff that has limited knowledge of the secuity system. Imagine the savings and the ease that the etaile would have expeienced if he signed a contact fo this solution whee the vendos, with thei intimate knowledge of the solution, wee esponsible fo the daily maintenance and opeation of the system. The intenal staffing, taining, and upgading of a system epesents a geate cost to this etaile than the initial puchase of the system. Can this model wok? In othe industies, this model aleady is woking. Secuity and suveillance companies ae selling secuity systems as a sevice to homeownes and commecial businesses alike. Mobile phone companies ae selling solutions as a sevice as well. These industies have deployed thei solutions to thei customes as a sevice fo many yeas. They have simplified thei solutions to be based on low-cost appliances diven fom the cloud and monitoed by thei employees to povide excellent esults fo thei customes. At the same time, they allow thei customes the ability to see in eal time what is going on in thei homes o businesses with easy-to-use intefaces o dashboads that ae accessed by thei smatphones, tablets, o PCs. This allows them the ability to monito the secuity of thei envionments fom anywhee at any time. Thee is no eason this same type of technology cannot be applied to the etail solutions that ae being installed in stoes today. Examples include: cloudbased POS systems with font-end appliances eplacing PC-based POS; digital menu boads being monitoed and scheduled fom the cloud via the same types of appliance; and monitoing devices to tack Bluetooth and Wi-Fi MAC addesses aound the stoe and povide individualized pomotions to customes. Whee this will take off the fastest is with small and mid-sized etailes and fanchisees that have a limited headquates staff. Using the sevice-oiented solutions descibed above, they can have access to big data, social media solutions, and individualized pomotional solutions, just like thei tie one competitos, in a manne that is easily deployed and completely affodable. Reconfiguing IT solution offeings These new solutions will allow etailes to focus on thei stengths of selling the band, pomoting poducts, and poviding a bette custome expeience, while poviding eal time Retun on Investment (ROI) and Retun on Objective (ROO) infomation. IT vendos, with existing maket shae, will need to econfigue thei offeings to take advantage of this tend. They need to focus on sevices that they can offe to assist etailes in attaining thei goals. They need to think about being povides of cloud solutions and focus on a Solution as a Sevice model. A ealignment of thei oganizations to synchonize sevice oganizations with poduct depatments will be necessay. Those that ae able to do this quickly will be able to impove maket shae, incease magin pecentages, and emain viable fo the long tem. Those who ignoe this tend will do so at thei own peil. New competitos ae aleady using SaaS selling techniques and will be able to ente the etail secto with poweful new tools, offeing etailes bette sevice models with significant savings. 31

32 Testing the Sevice Recovey Paadox: Myth o Reality? By Jean-Chales Chebat, Honoay Pofesso, Ecole des Hautes Etudes Commeciales, and Adjunct Pofesso, Technion-Isael Institute of Technology, and Muiel Mantoua, M.Sc. Abstact Is it tue that an outstanding sevice ecovey can enhance attitudes about the sevice povide bette than a flawless sevice? We conducted live expeiments in a eal estauant with actual customes (sample size=140) who wee exposed eithe to flawless sevice (contol goup) o to failed sevice. We manipulated (low-high) failue seveity and (distibutive, inteactional, and pocedual) justice (o esponse type, as discussed below). Recovey paadox does exist, only afte non-sevee failues. In nealy all cases, justice has no effect on attitudes and behavioal intentions. Satisfaction with complaint handling and global satisfaction mediate the elationships between failue seveity and behavioal intentions. Theoetical and manageial implications ae povided. The Sevice Recovey Paadox It is possible that all the mistakes lead to an incalculable benefit." Goethe Undesiable encountes occu inevitably in the sevice secto (Gönoos, 1988), and may ende consumes fuious (Bougie, Pietes, and Zeelenbeg, 2003). In the midst of the sevice ecovey liteatue, an inteesting phenomenon sometimes sufaces, that of sevice ecovey paadox. Customes satisfaction with the sevice povide may paadoxically be shifted to an even highe level than if no failue had occued, leading to positive wod-of-mouth (WOM) and puchase intentions (McCullough and Bhaadwaj, 1992). In these cases, failue is a deviation fom the jouney towad customes satisfaction, not a dead-end to the povide-custome elationship. Howeve, the liteatue on the sevice ecovey paadox is fa fom conclusive. The pesent study aims: platt etail institute 1. To popose a model integating the elevant constucts (failue seveity, justice, satisfaction, wod of mouth, and puchase intent). 2. To test if the sevice ecovey paadox empiically exists. 3. To study which (if any) justice dimension (distibutive, inteactional, o pocedual) affects satisfaction and behavioal intention, unde low vesus high failue seveity conditions. To enhance the ecological validity of ou findings, we conducted ou empiical eseach using a lifelike expeiment involving setup failues in an actual estauant seving actual customes. Is Sevice Recovey a Myth? Because one single sevice failue may have long-tem effects on customes satisfaction with the sevice povide (Hocutt, Bowes, and Donavan, 2006), sevice fims must povide the ight sevices when aiming to ecove it (Bey and Paasuaman, 1991). The pesent study deals with these key moments of tuth following a sevice failue, when the povide has to find the ight stategy that will be egaded by the custome as an appopiate ecovey. 32

33 Sevice Recovey Paadox (cont d.) platt etail institute Sevice ecovey is a cental element of sevices maketing (Gönoos, 1988) fo many easons. One of them is that it is significantly less costly to etain cuent customes than to acquie new ones (e.g., Hat et al. 1990). Complaints fom customes incease sevice fims awaeness to the dysfunctions in thei sevice delivey (Chebat, Davidow and Codjovi, 2005; Michel and Meute, 2008). McCullough and Bhaadwaj (1992) coined the tem Sevice Recovey Paadox. It labels the conditions unde which customes who ae dissatisfied by a sevice failue and eceive an outstanding ecovey become moe satisfied and moe loyal than if no failue had occued in the fist place (Hat et al., 1990). By going beyond thei pofessional equiements, employees ae able to win a custome fo life (Hat et al., 1990: 149) if the failue is ecoveed in a timely, fiendly, empathetic and geneous manne (Michel, 2001: 23). If the Sevice Recovey Paadox eally exists, focusing on custome etention though effots put into the ecovey stategies would convey the benefit of these customes lifetime value contibutions, lessening the global ecovey costs (Piluck and Lala, 2009). Howeve, if the ecovey paadox wee unconditionally achievable, it would be woth it fo oganizations to delibeately set up failues in ode to ecove them in an excellent manne, and manages would only focus on taining thei staff fo offeing ecoveies, at the expense of concentating on potential souces of failues and attempts to eliminate them (Cosby, 1979; Deming, 1986; both cited by McCollough, 2009). While seveal authos have pointed to its existence, many othes have demonstated that it is a vey ae allegoy. We elaboate hee on the diffeent points of view, in elation to satisfaction, and WOM and evisit intentions. Some findings indicate that this paadox exists in nealy all pocess types (Michel, 2001; Hocutt et al., 2006; Smith and Bolton, 1998; Piluck and Lala, 2009). In a study by Bitne et al. (1990), the pope employees edess of failues in the ailine, hotel, and estauant industies was the diect cause of moe than 23 pecent of satisfaction atings, tuning negative encountes into positive ones. Othe findings suggest that global satisfaction matches satisfaction with the ecovey when the edess is exceptional. The latte would geneate futhe satisfaction than if no failue had aisen, leading to loyalty intentions (Ok, Back, and Shanklin, 2007; Goodwin and Ross, 1992). Recoveies can thus be consideed tools fo fims to impess thei clients, and the success o failue of a ecovey may affect the clients loyalty to the fim as well as the likelihood that dissatisfied clients will switch to a competito. In the estauant milieu, both cumulative satisfaction and loyalty intentions incease when the edess is geatly satisfying (Smith and Bolton, 1998). Piluck and Lala (2009) suggest that customes put time and effot into thei complaint esouces. The positive evaluations of the ecovey symbolize a ewad fo the complaints and lead to bette attitudes. On the othe hand, Maxham (2001) shows that the satisfaction following a ecoveed eo is not geate than the satisfaction afte flawless sevice. In the same vein, ecovey effots can t emedy failues no estoe tust, satisfaction, o WOM (Kau and Loh, 2006); and eo-fee sevices bing about much highe satisfaction levels than all flawed sevices (McCollough, 2009). Fo Bock, Blut, Evanschitzky, and Voohees (2010), satisfaction and behavioal intentions decease afte a failue-ecovey scenaio. The ejection of the paadox emphasizes the impotance of examining sevice opeations to identify potential pitfalls with the objective of poviding fail-poof sevice at the fist instant (Kau and Loh, 2006: ). Othe eseaches popose the following nuance: the ecovey paadox may be achieved only in paticula situations and with specific customes. Theefoe, manages would not be advised to conside it a focal point fo satisfying 33

34 Sevice Recovey Paadox (cont d.) platt etail institute customes, but athe to concentate thei effots on initial encounte quality though impovements, which is also less costly (Michel and Coughlan, 2009). Michel (2002), and Smith and Bolton (1998) also show that only a potion of dissatisfied customes can become happy afte an effotful ecovey, and that customes who have not expeienced any failue ae the most satisfied. Recovey effots ae not sufficient, esulting in inconsistent eactions; and excellent ecoveies ae not always cost-effective, since highly satisfied customes afte a failue-ecovey expeience see thei expectations ise, and the povide is foced to satisfy them even moe afte a potential second failue (Tu, Chen, and Lin, 2009). Potential Effects of the Sevice Recovey Paadox It is difficult fo fims to consistently povide excellent ecoveies and the types of failues vay; consequently and paadoxically, failue-ecovey situations should not be seen as chances to boost custome satisfaction to high levels (Smith and Bolton, 1998). The liteatue elated to the ecovey paadox shows that failue seveity plays a special ole. This vaiable may be the key to disciminate the case when the sevice paadox exists o not. Failue seveity is the magnitude of (economic, psychological and social) loss expeienced by customes (Magnini et al., 2007; Hess, Ganesan, and Klein, 2003; Weun, Beatty, and Jones, 2004; Smith et al., 1999). It affects customes dissatisfaction, negative WOM, complaints, and switching behavio (Smith et al., 1999; Magnini et al., 2007). McCollough (2009) points out that the ecovey paadox is likely to be esticted to modest failues and supeio ecoveies, suggesting that expectations egading the ecovey ise when the failue is sevee; theefoe, supeio ecoveies ae inevitable in the case of highly negative encountes (Hess et al., 2003). Howeve, even if the ecovey is efficiently done, customes may still engage in negative actions against the company (Weun et al., 2004; McCollough et al., 2000). We hypothesize that the ecovey paadox is moe likely to exist if the failue seveity is low. Hypothesis 1 (H1): Sevice failue seveity modeates the effects of sevice ecovey on the pesence (vesus absence) of the ecovey paadox. Afte a failue-ecovey expeience, satisfaction is mainly shaped by the fainess peceived by the customes in the ecovey actions (Sabhawal, Soch, and Kau, 2010). In ou study, justice is opeationalized as a thee-dimensional concept poposed by Tax, Bown, and Chandashekaan (1998): distibutive, inteactional, and pocedual justice. Distibutive Justice (DJ) is the mateial compensation fo the peceived inequity in a failue. In this case, the edess is illustated by tangibles such as discounts, efunds, offes, and coupons (Hoffman and Kelley, 2000). A feeling of ecipocity is geneated, and custome satisfaction is estoed o popelled to a highe level than befoe the failue (Resnik and Hamon, 1983; McCollough et al., 2000; Kau and Loh, 2006). WOM (Blodgett et al., 1993) and evisit intentions (Lin, Wang, and Chang, 2011) ae also positively affected. Inteactional Justice (IJ) is the communicational fom of poblem solving (Bies and Moag, 1986). Refeing to both empathy and assuance (Paasuaman, Zeithaml & Bey, 1988), it involves employees concen, coutesy, apologies, honesty, and explanations why the poblem occued (Hocutt et al., 2006; Tax et al., 1998; Collie et al., 2000). Empowement of font-line employees is impeative fo embacing the desied inteactions (Chebat & Kollias, 2000; Chebat & Slusaczyk, 2005; Hat et al., 1990). Peceived inteactional justice inceases satisfaction and evisit intentions and lowes negative WOM intentions (Hocutt et al., 2006; Blodgett, Hill, and Tax, 1997; Goodwin and Ross, 1992; Lin et al., 2011). 34

35 Sevice Recovey Paadox (cont d.) platt etail institute Pocedual Justice (PJ) includes speed of the edess, efeing to Paasuaman, Zeithaml and Bey s (1988) esponsiveness dimension, as well as policy flexibility, effectiveness, and effots put into the ecovey (Chebat and Slusaczyk, 2005; Tax et al., 1998). In that case also, empowement is a key to a successful ecovey, as font-line employees must have a level of authoity and initiative in ode to make immediate decisions (Hat et al., 1990). Peceived pocedual justice impoves satisfaction (Kelley et al., 1993; Tax et al., 1998; Kau and Loh, 2006), and enhances WOM and evisit intentions (Ha and Jang, 2009; Witz and Mattila, 2004). We analyze the effects of these thee dimensions of justice attitudes and behavioal intentions: customes satisfaction is affected by a concete solution (DJ) and speed (PJ) (Michel, 2002; Kau & Loh 2006). Mattila (2001) poposes some nuances, that is, the effects of DJ and IJ depend on the specific sevice industies. As fo Hocutt et al. (2006), they show that pomptness (PJ) and coutesy (IJ) may elicit delight. These findings show that the effects of justice on satisfaction with the sevice ecovey ae not yet pefectly convegent. Simila conclusions can be dawn fom the liteatue elated to the effects of justice on behavioal intent of customes following a sevice failue. On the one hand, Ok et al. (2006) shows that futhe dissatisfaction can occu when only DJ is high, which vitually cancels any futue epuchase intent. On the othe hand, Lin et al. (2011) and Blodgett et al. (1997) show that DJ enhances evisit intentions. The liteatue also fails to solve a majo concen coveed in ou study: it usually deals with one justice dimension at a time, neglecting the fact that the ecovey pocess is a mission that involves thee stakeholdes : customes demanding an outcome (DJ), manages unning a pocess (PJ), and employees undetaking inteactions (IJ) (Michel & Coughlan, 2009: 3). Hypothesis 2 (H2): The thee Justice dimensions of a ecovey impacts Satisfaction with Complaint Handling, Global Satisfaction, Wod-of-Mouth, and Custome Intention to Revisit (see Figue 1 below). Sevice povides aspie to delight thei customes, not simply satisfy them, because delight leads to positive wod of mouth, commitment to the sevice povide and inceased pofits (Toes & Kline, 2006). Convesely, disappointing sevice ecovey has long-tem effects on the elation between customes and sevice fims (Bitne et al., 1990; Ok et al., 2007). In addition, negative WOM geneated by disappointed customes can dissuade potential new customes fom visiting the fim and influence existing ones to switch (Andeassen, 2001). Ultimately, a poo ecovey can be as damaging as (o even wose than) the absence of any ecovey. All elationships shape the double mediation illustated in Figue 1, and ou hypotheses ae: Hypothesis 3 (H3): Seveity affects WOM and evisit intentions (dependent vaiables) though the sequential and complementay mediation of satisfaction with complaint handling and global satisfaction. Hypothesis 4 (H4): Justice affects WOM and global satisfaction (dependent vaiables) though the sequential mediation of satisfaction with complaint handling and global satisfaction. Customes who have faced a sevice failue may engage in behavios such as complaining to the povide, switching to a competito, geneating negative WOM, and educing business dealings (Kishna et al. 2011). Afte a positive sevice ecovey, they may engage in positive WOM, and have thei satisfaction, tust, and loyalty incease (Kishna et al., 2011). In ou eseach, we study thee behavioal aspects: complaining to the povide, and the WOM and loyalty vesus switching intentions befoe and afte the ecovey. 35

36 Sevice Recovey Paadox (cont d.) WOM is the fee and diect communication, publicity, o ecommendations to people that customes engage in about a povide, to encouage them o discouage them fom buying fom the fim (Richins 1983b; Westbook, 1987). WOM is, among othe vaiables, diectly led by satisfaction o dissatisfaction (Kau and Loh, 2006), and may also be addessed to thid paties such as publications, TV shows, o legal sevices. Maxham (2001: 13) states that positive WOM may pove beneficial in spuing a band switch and theeby assist a fim in gaining new customes. But negative expeiences ae spead fa moe widely; dissatisfied customes shae them with 10 to 20 people (Zemke, 1999), which has much deepe effects on band attitude and consumption intentions than the WOM about pleasant expeiences (Lee, Rodges, and Kim, 2009). Today, angy customes use damaging tools like blogs and social netwoks that encouage opinions on the Intenet, wielding the powe to pesuade both the company s clients and its potential customes that the fim is incompetent (Wad and Ostom, 2006). Loyalty vesus Switching: Loyalty illustates the epuchase o evisit intentions and the commitment to a povide; it is a diect consequence of satisfaction (Yi, 1989; Kau and Loh, 2006). The focus on this constuct must be of geat impotance since the chances of having a cuent custome epuchasing fom a fim ae 60 to 70 pecent, while fo a new custome to puchase fom it, the chances ae 5 to 20 pecent (Giffin and Lowenstein, 2001). Loyalty can be attitudinal, indicating customes tue attachment to the povide, o behavioal, efeing to simple epuchases sometimes because customes do not have a choice (Day, 1969). Unquestionably, povides should ty to geneate tue loyalty high attitudinal and behavioal loyalty (Dick and Basu, 1994) since it is the most pofitable fom in tems of WOM and monetay etuns. Accoding to Kishna et al. (2011), as a esponse to an appeciated edess, customes emain committed to povides who have globally satisfied them. Switching, on the othe hand, is the voluntay discontinuation of puchasing a fim s poducts o sevices, (most often to a competito s benefit); it pictues the ending of the exchange elationship between the custome and the povide (Andeassen, 2000; Singh, 1990). Figue 1. Conceptual Model. Reseach Methodology Oveview: To test ou hypotheses with ecologically valid data, we designed a ealistic failue-ecovey expeience instead of the usual pape and pencil appoach. platt etail institute Sevice setting: The expeiment took place in a estauant/ba in ubanized Beiut, Lebanon. It has no paticula antecedents fo failues, and is known fo its casual ambiance (Chalhoub, 2011). The study was done in thee weeks, duing nights that wee mildly cowded. Reseach Design: We designed an expeiment involving two levels of sevice failue seveity (low vesus high) and thee types of ecovey (with each of DJ, 36

37 Sevice Recovey Paadox (cont d.) platt etail institute IJ, PJ emphasized o not) (See Table 2 below). Each paticipant was exposed to one expeimental condition. Paticipants: Randomly selected customes wee asked whethe they wee above 18 yeas old, and if this was the case, whethe they wee willing to paticipate in a geneal study about the estauant by answeing anonymous suveys afte thei meal. To avoid esponse bias, the goal of the eseach was hidden until afte the suveys wee filled out. Manipulation and Constuct Measuement Independent Vaiables: Failue Seveity has two levels (non-sevee and sevee). The non-sevee failue was an eo in the ode (i.e., the waite was poviding a salad instead of the quesadillas odeed). The sevee failue was an eo in the ode along with a 10-minute delay, compaed to the usual sevice timing suggested by Chalhoub (2011). Each of the thee dimensions of Justice (DJ, IJ, and PJ) was manipulated: high DJ was opeationalized as no billing of the meal plus a fee desset. In the high IJ condition, the staff was paticulaly couteous and offeed apologies and explanations. Fo high PJ, the ight meal was eceived less than five minutes afte the complaint and the waites wee flexible if the situation was paticula. In each of the thee situations, the two othe justice dimensions wee basic: the basic DJ consisted of giving the meal fo fee; the basic IJ was an apology without stessing on emotions; and the basic PJ was a 10-minute waiting time to get the ight meal, the nom in estauants of this type (Chalhoub, 2011). Manipulation checks wee conducted befoe the actual expeiments with 20 simila customes fo the failue seveity levels and the justice dimensions peceptions. Manipulation Check of Seveity: The scale ceated fo this study is a fou-item, five-point Liket scale with statements about thee types of failues and choices fom stongly agee to stongly disagee. We deduced that an ode eo was consideed to be a non-sevee failue, which gave us the ight to manipulate the non-sevee scenaio as such. Similaly, the level of seveity peceived in an ode eo along with a 10- minute delay is high. We deduced that an ode eo along with a 10-minute delay was consideed to be a sevee failue, which gave us the ight to manipulate the sevee scenaio as such. Manipulation Check of the Thee Dimensions of Justice: The same type of manipulation check was done to validate that each of the thee dimensions of justice we chose to emphasize in the ecoveies wee peceived. Thee scenaios wee povided descibing thee types of ecovey actions (a simple apology, a fee meal eplacement, and a fee desset o shot dink fo DJ; a wam and couteous apology, an explanation as to why the poblem occued, and a fee meal eplacement fo IJ; and a ecovey including a simple apology and a fee meal eplacement within five minutes of the complaint fo PJ), and each was followed by statements evolving aound the elated justice dimension. Each dimension of justice was peceived in the ecovey descibed in its coesponding scenaio, which gave us the ight to manipulate the DJ, the IJ, and the PJ as such. Measuements of the Fou Constucts: We used a semantic scale that the espondents had to ate and thee Liket scales with which they had to indicate thei ageement. Of the 15 statements used, some wee oiginally negatively evesed and othes wee a ephasing of existing statements fo a guaantee of coheence in the answes. 37

38 The statements wee only povided to the teatment goups those who expeienced a complaint handling. The aim of intoducing this vaiable was to measue the diffeences in satisfaction ates ight afte each type of ecovey and with the two levels of failue seveity. Table 1. Confimatoy Facto Analysis. Seveity/Justice Distibutive Inteactional Pocedual Non Sevee ND NI NP Sevee SD SI SP Expeimental Goups and Non-Complainants: The No Failue goup (NF) is the contol goup that eceived flawless sevice. Table 2 shows the sixteatment goups. Since the suveys wee believed to be about the estauant in geneal, the teatment goup espondents wee told that thee could be sections to be filled out only when applicable, so that they do not question the pesence of statements about complaint handling. We wamly apologized to the customes who did not complain, so that the estauant does not lose them, explained that the failue was set up fo eseach puposes, and offeed them a desset. They wee substituted to each the desied numbe of espondents. Table 2. Conditions Foming the Teatment Goups. Path B SE t p A (Sev-SCH) B (SCH-GSAT) C (GSAT-WOMI) D (Sev-GSAT) E (SCH-WOMI) F (Sev-WOMI) (Key to table abbeviations: Sev=seveity; SCH=satisfaction with complaint handling; GSAT=global satisfaction; WOMI=wod-of-mouth intentions; REVI=evisit intentions.) Reseach Findings and Intepetations Figue 2. Revised Model. platt etail institute Fo Sevice Complaint Handling: Seveity has a significant negative effect on satisfaction with complaint handling and the opposite is also tue. The nonsevee failue goups (ND, NI, NP) ae significantly diffeent fom the sevee failue goups (SD, SI, SP). This suppots the fist hypothesis, which states that satisfaction with complaint handling is highe afte a ecoveed non-sevee failue than afte a ecoveed sevee failue. Globally, no matte the level of failue seveity, the dimension of justice emphasized in the ecovey poduces simila effects fo all goups. 38

39 Sevice Recovey Paadox (cont d.) platt etail institute The thee non-sevee failue goups (ND, NI, NP) ae thus not significantly diffeent fom one anothe. Theefoe, in cases of non-sevee failues, the emphasis on each dimension of justice poduces simila ates of satisfaction with the ecovey than the emphasis on each of the two othe dimensions, making it impossible to favo one justice dimension. Fo Global Satisfaction: Seveity has a significant negative effect on global satisfaction. This suppots the hypothesis that global satisfaction is highe afte a ecoveed non-sevee failue than afte a flawless sevice, but lowe afte a ecoveed sevee failue than afte a flawless sevice. In elation to global satisfaction, the ecovey paadox only exists in the case of a non-sevee failue. In both conditions of seveity, the emphasis on each dimension of justice poduces ates of global satisfaction simila to the emphasis on each of the two othe dimensions. The two sets of compaisons lead us to eject the hypothesis that the justice type emphasis has an impact on global satisfaction, making it impossible to favo one justice dimension. Fo WOM: Seveity has a significant negative effect on WOM intention. Examining the values in the estimated maginal means test, we notice that none of the thee means (fo the non-sevee condition, fo the sevee condition, and fo the no failue goup) is included in anothe condition s confidence inteval. The thee conditions ae theefoe significantly diffeent fom one anothe. This suppots the hypothesis that WOM intention is bette afte a ecoveed non-sevee failue than afte a flawless sevice, but wose afte a ecoveed sevee failue than afte a flawless sevice. In elation to WOM intentions, the ecovey paadox only exists in the case of a non-sevee failue. Justice has no significant effect on WOM intention, no does the inteaction of seveity and justice. No matte the level of failue seveity, the dimension of justice emphasized in the ecovey poduces simila effects fo all goups. In both conditions of seveity, the emphasis on each dimension of justice poduces ates of WOM intentions simila to the emphasis on each of the two othe dimensions. The two sets of compaisons lead us to eject the hypothesis, which states that the Justice type emphasis has an impact on WOM intentions, making it impossible to favo one justice dimension. Fo Revisit Intentions: Seveity has a significant negative effect on evisit intentions. Examining the values in the estimated maginal means test, we notice that none of the thee means (fo the non-sevee condition, fo the sevee condition, and fo the no failue goup) is included in anothe condition s confidence inteval. The thee conditions ae theefoe significantly diffeent fom one anothe. Moe pecisely, the mean fo the non-sevee condition is geate than the mean fo the flawless condition, which is geate than the mean fo the sevee condition. This suppots the hypothesis, which states that evisit intentions ae highe afte a ecoveed non-sevee failue than afte a flawless sevice, but lowe afte a ecoveed sevee failue than afte a flawless sevice. In elation to evisit intentions, the ecovey paadox only exists in the case of a non-sevee failue. Justice has no significant effect on evisit intentions and the inteaction of seveity and justice has no significant effect; no matte the level of failue seveity, the dimension of justice emphasized in the ecovey poduces nealy the same effect fo all goups. Theefoe, in both conditions of seveity, the emphasis on each dimension of justice poduces ates of evisit intentions simila to the emphasis on each of the two othe dimensions. The two sets of compaisons lead us to eject the hypothesis, which states that the Justice type emphasis has an impact on evisit intentions, making it impossible to favo one justice dimension. Testing fo the Double Mediation of Satisfaction with Complaint Handling and Global Satisfaction: Hypothesis 3 states that satisfaction with complaint handling and global satisfaction ae sequential complementay mediatos in the elationships between seveity and the two behavioal intentions. 39

40 Sevice Recovey Paadox (cont d.) Testing fo the double mediation of complaint handling and global satisfaction between seveity and WOM intentions, all six diect effects and all thee mediations ae significant (Table 3): Seveity has a diect effect on satisfaction with complaint handling, global satisfaction, and WOM intentions; Satisfaction with complaint handling has a diect effect on global satisfaction and on WOM intentions; Global satisfaction has a diect effect on WOM intentions; Seveity impacts satisfaction with complaint handling negatively, which impacts global satisfaction positively, which impacts WOM intentions positively; Seveity diectly impacts WOM intentions negatively. As speculated, the moe sevee a failue is, the less customes ae satisfied with the ecovey, the less they ae globally satisfied with the sevice, and the wose ae thei WOM intentions. Since both diect and indiect elationships ae found, WOM intentions ae patly wosened though the decease of the two foms of satisfaction. The diect impact of seveity on WOM intentions might be explained by othe mediatos that have not been consideed in ou study (Zhao et al., 2010). Table 3. Double Mediation of Satisfaction with Complaint Handling and Global Satisfaction between Seveity and WOM Intentions. 3a. Diect Effects Effect Boot SE BootLLCI BootULCI Total Sev>SCH>WOMI Sev>SCH>GSAT>WOMI Sev>GSAT>WOMI b. Indiect Effects of Seveity on WOM.I Path B SE t p A (Sev-SCH) B (SCH-GSAT) C (GSAT-REVI) D (Sev-GSAT) E (SCH-REVI) F (Sev-REVI) (Key to table abbeviations: Sev=seveity; SCH=satisfaction with complaint handling; GSAT=global satisfaction; WOMI=wod-of-mouth intentions; REVI=evisit intentions.) platt etail institute Testing fo the double mediation of satisfaction with complaint handling and global satisfaction between seveity and evisit intentions, all six diect effects and all thee mediations ae significant (Table 4). Seveity has a diect effect on satisfaction with complaint handling, on global satisfaction, and on evisit intentions; Satisfaction with complaint handling has a diect effect on global satisfaction and on evisit intentions; 40

41 Sevice Recovey Paadox (cont d.) Global satisfaction has a diect effect on evisit intentions; Seveity impacts satisfaction with complaint handling negatively, which impacts global satisfaction positively, which impacts evisit intentions positively; and, Seveity diectly impacts evisit intentions negatively. Theefoe, the hypothesis is suppoted: satisfaction with complaint handling and global satisfaction ae sequential complementay mediatos in the elationship between seveity and evenue intentions. As speculated, the moe sevee a failue is, the less customes ae satisfied with the ecovey, the less they ae globally satisfied with the sevice, and the wose ae thei evisit intentions. Since both diect and indiect elationships ae found, evisit intentions ae patly degaded though the decease of global satisfaction. Othe mediatos that have not been consideed in ou study might explain the diect impact of seveity on evisit intentions (Zhao et al., 2010). Table 4. Double Mediation of Satisfaction with Complaint Handling and Global Satisfaction between Seveity and Revisit Intentions. Effect Boot SE BootLLCI BootULCI Total Sev>SCH>REVI Sev>SCH>GSAT>REVI Sev>GSAT>REVI (Key to table abbeviations: Sev=seveity; SCH=satisfaction with complaint handling; GSAT=global satisfaction; REVI=evisit intentions.) The fouth hypothesis states that satisfaction with complaint handling and global satisfaction ae sequential mediatos in the elationships between justice type emphasis and the two behavioal intentions. The analyses of vaiance have shown no evidence of diect effects, yet the mediated effects ae to be examined. Testing fo the sequential mediation of satisfaction with complaint handling and global satisfaction between justice and WOM intentions, justice type emphasis has no diect effect on any of satisfaction with complaint handling, global satisfaction, o WOM intentions: Satisfaction with complaint handling has a diect effect on global satisfaction and on WOM intentions; Global satisfaction has a diect effect on WOM intentions. Taking a look at the indiect elationships, none ae significant. Neithe satisfaction with complaint handling no global satisfaction is a mediato in the model. Theefoe, this hypothesis is ejected: Justice type emphasis has no impact on WOM intentions, even though any mediation. This is a No-Effect Non-Mediation case (Zhao et al., 2010). Testing fo the sequential mediation of satisfaction with complaint handling and global satisfaction between justice and evisit intentions, justice type emphasis has no diect effect on any of satisfaction with complaint handling, global satisfaction, o evisit intentions: Satisfaction with complaint handling has a diect effect on global satisfaction and on evisit intentions; and, Global satisfaction has a diect effect on evisit intentions. platt etail institute 41

42 Sevice Recovey Paadox (cont d.) Taking a look at the indiect elationships, none ae significant. Neithe satisfaction with complaint handling no global satisfaction is a mediato in the model. Theefoe, this hypothesis is ejected: Justice type emphasis has no impact on evisit intentions, even though any mediation. This is a No-Effect Non-Mediation case (Zhao et al., 2010). Discussion With espect to ou eseach objectives, we found that only seveity has a significant negative effect on satisfaction with complaint handling, global satisfaction, WOM intentions, and evisit intentions. Since all fou constucts ae highe afte ecoveed non-sevee failues than afte flawless sevices, but all ae lowe afte sevee failues than afte flawless sevices, it is concluded that the ecovey paadox only exists afte non-sevee failues. Howeve, justice type emphasis has globally no significant effect on any of the fou constucts. Theefoe, we could not detemine which dimension of justice is to be emphasized given a level of failue seveity. Finally, we wee able to build a evised model indicating the elationships between seveity and the fou constucts. As suggested by Zhao et al. (2010), the two types of satisfaction ae sequential complementay mediatos of the impact of failue seveity on the two behavioal intentions. These findings extend the woks of many eseaches including Michel (2001), Hocutt et al. (2006), Smith and Bolton (1998), and Piluck and Lala (2009) who found almost absolute evidence of the ecovey paadox without accounting fo failue seveity, which can impede its existence. In the same way, the findings extend othe eseaches conclusions such as those of Maxham (2001), Kau and Loh (2006), and Bock et al. (2010), which completely ejected the existence of the ecovey paadox, again without accounting fo failue seveity, which can ceate a paadox. Ou methodological design finally adds ecological validity to the findings of McCollough (2009), Hess et al. (2003), McCollough et al. (2000), Magnini et al. (2007), Weun et al. (2004), and Smith et al. (1999) among othes. Although the authos did account fo failue seveity, thei esults wee based on scenaios o past incidents. Theoetical and Manageial Implications The evised model contibutes to the liteatue fist by exposing failue seveity as a poweful deteminant of the existence of the ecovey paadox, and second by clealy indicating all diect and indiect elationships between failue seveity, satisfaction with complaint handling, global satisfaction, and WOM and evisit intentions. The moe sevee a failue is, the moe customes ae likely to be dissatisfied both with the ecovey of any type and with the sevice geneally, and the moe they ae pone to geneate negative WOM and to stop visiting the fim. The model also shows the sequential complementay mediation of the two foms of satisfaction (Zhao et al., 2010). Justice has been emoved fom the model because globally, the change in justice type emphasis (DJ, IJ, PJ) has no significant impact on the constucts. platt etail institute The main manageial implication infeed fom ou findings is that since thee is no absolute evidence of the ecovey paadox, sevice povides should pemanently focus on the delivey of the initial pefomance, emphasizing the need to stay eliable. As Michel and Coughlan (2009) and Ok et al. (2006) ague, ecoveies should not be consideed as the main souce of satisfaction. Instead, it is the continuous impovement of sevice quality that should be emphasized. Yet, ecoveies should be given cucial consideation because, fist, when failues occu, only few employees know how to eact to custome dissatisfaction, and since they ae clumsy, they ham the 42

43 Sevice Recovey Paadox (cont d.) platt etail institute fim (Ulich, 2006:11, fee tanslation); and second, it costs consideably moe to acquie new customes than to etain existing ones (Hat et al., 1990). Accodingly, manages who ae compaed to sceenwites should be poactive instead of eactive, in poviding thei employees who ae compaed to actos with detailed job desciptions that ae compaed to scipts (Solomon et al., 1985) addessing diffeent situations and teaching them to thooughly follow them. If thee ae nonconfomities in the scipts, the employees must edess them so that the sequences continue. We suggest that eliability be focused on in both the initial pefomance and in the ecovey actions; even if a peculia incident has to be tackled innovatively, eliability has to be peceived in the apologies and explanations, in the speed and flexibility of the ecovey, and in the expetise of the employees who have to be pepaed to handle difficult situations. Fo sevice povides to emain eputable, Ulich (2006) ecommends complaint management pogams, which help fims be eliable. Comment cads actively encouage diect complaints and povide custome feedback and suggestions, all of which should be acted upon to bette answe the clients needs. In non-sevee scenaios, failues ae toleated when ecoveies ae well made, and the ecovey paadox is vey likely to occu. The thee dimensions of justice ae equally beneficial when one is emphasized and the two othes ae basic, as manipulated in ou study. We theefoe ecommend that employees choose to focus on one dimension depending on the customes and the situations. Howeve, sevee failues poduce lowe satisfaction and behavioal intention ates than flawless sevices. Because these cases efute any evidence of the ecovey paadox, it is isky to believe that ecoveies ae oppotunities to beed positive post-failue outcomes. As noticed, the influence of justice emphasis on satisfaction is diffeent fom the one on behavioal intentions. Theefoe, oganizations focusing on single ecovey activities and single outcome measues isk ovelooking othe citical outcomes (Bhandai et al., 2007: 182). Ou ecommendation would then be that ecoveies include the pope use of all thee justice dimensions; whee the ecovey pocess (PJ) and outcome (DJ and IJ) ae both peceived, the chances of favoable custome attitudes and behavios ae inceased. If customes attitudes and intentions ae undesiably shifted, potential damaging behavios must be limited. In these cases, ecoveies do not have the powe to yield a ecovey paadox, theefoe, fo fims to pevent negative WOM to ham thei name and futue pofits, they should wok on thei band image, because consumes having a stong positive attitude towad oganizations ae less likely to tust and act upon dissuasions and negative opinions (Babin and Hais, 2010). As fo limiting switching behavio, fims should cultivate long-tem elationships with thei customes. Switching costs/ baies can give the oppotunity to late povide bette pefomances [switching costs being the peceived esouces in tems of money, time, and effot that a custome spends when ending a elationship with a povide and stating a new one with a competito (Hellie, Geusen, Ca, and Rickad, 2003)]. But since thei ole is to coece customes to evisit a fim, they ae not the advised solution in tems of attitudinal loyalty. Zeithaml et al. s (2009) eight ecovey stategies ae to be consideed in an oganization s action plan. Fo these stategies to be effective, manages should povide thei font-line staff who diectly tackle the poblem with taining, motivational pogams, and empowement (Kishna et al., 2007). In addition to knowing fom thei scipts how to eact to some incidents, employees should ty to notice failues without getting complaints; o as was done in ou 43

44 Sevice Recovey Paadox (cont d.) expeiments with the pupose of having a maximum numbe of complaints, ty to constantly ask customes if the sevice is as expected, since few customes complain, especially in cases of non-sevee failues whee they lack the motivation to do so (Richins, 1983a). They should also have initiatives and the know-how to make suitable decisions. This can be acquied though oleplaying and simulations (Hat et al., 1990). Finally, ecovey teams and/o ewads fo good ecoveies may pove vey beneficial (Maxham, 2001). Limitations and Futue Reseach Ou eseach has sought to ovecome the subjects engagement weakness found in scenaio-based expeiments via live setup failues followed by appopiate ecoveies. Yet, this aticle has cetainly left untouched issues that would be beneficial to conside in futue eseach. To begin with, the study involves only one setting: the failue-ecovey expeiments took place in a estauant, one of seveal industies offeing sevices. Failues may be peceived and tackled diffeently; one o moe of the justice dimensions may be impossible to use, which can affect custome outcomes. The level of involvement in the sevice also fluctuates. In hospitals, fo instance, patients may not be lenient at all afte a mistake since thei involvement is vital. Sevice povides in othe industies should thus be caeful when extending these eseach esults to thei cases. The best altenative is that the hypotheses be tested in diffeent businesses in ode fo the conclusions to be moe genealizable. In ou method design, we used two dimensions of justice at a basic level and emphasized the thid. It would be inteesting to conduct expeiments in a eal setting and be able to use only one dimension of justice in ode to compae each dimension s total effect. Futue eseach can also be caied out emphasizing two o all thee dimensions of justice in the sevee failue scenaio, whee the possible occuence of the ecovey paadox would be exploed. Anothe shotcoming of the cuent eseach is that it did not take into account the customes pevious expeience with the sevice povide. Clients who had aleady encounteed a failue in the same estauant may have been less toleant of any mistake (Zeithaml, Paasuaman, and Bey, 1990). Thei attitudes and intentions could possibly have been lowe fo all scenaios than if thei elationship with the estauant was spotless. The ideal, yet difficult and expensive, appoach to popely pefom the study would be longitudinal eseach, tacking elationships ove time instead of analyzing single tansactions. It would be inteesting to study the ecovey paadox with the same vaiables in diffeent pats of the wold. Multinational sevice fims would cetainly benefit fom such eseach in being able to tailo thei ecovey stategies to each cultue s expectations. platt etail institute The fact that the suveys wee administeed immediately afte the failueecovey encountes ensued that the paticipants answes wee not swayed by alteed involvement o memoy. Howeve, because espondents wee still affected, thei answes may be much wose o much bette than had they been given the time to look at the expeience fom an objective pespective (Hocutt et al., 2006). Some time actually elapses befoe consumes make decisions egading WOM and loyalty, so these ae often likely to change. This bings us to the fact that it is the customes intentions and not thei actual actions that ae measued. Fo WOM, the ideal, yet nealy impossible, way to ovecome this dawback would be to tack each comment the custome makes about the fim. As fo evisit behavio, it can be measued with custome elationship management pogams that povide tacking of failues and epuchase/evisit 44

45 Sevice Recovey Paadox (cont d.) Jean-Chales Chebat is Honoay Pofesso, Ecole d e s H a u t e s E t u d e s Commeciales, and Adjunct Pofesso, Technion-Isael Institute of Technology. behavios. It is commonly believed that manages should focus on satisfying customes who have aleady encounteed an eo, should povide an even bette ecovey in the case of a second failue, and should possibly wok on egaining lost customes. These pogams easily identify the tagets of such actions. Futue eseach can also be led incopoating the study of switching costs/ baies, which discouage customes to switch to othe povides. Switching costs wee not included in the cuent eseach because customes patonize seveal estauants; theefoe the exclusivity and membeship aspects wee absent, unlike in the telecommunications industy fo example. Additionally, satisfaction with complaint handling and global satisfaction ae sequential complementay mediatos of the elationships between seveity and both intentions (Zhao et al., 2010). Since we should not conclude that the emaining pat of the influence is the diect impact of seveity on each intention, we should conside potential omitted vaiables that can play the ole of mediatos (Zhao et al., 2010) and shed futhe light on a simila eseach. A study of this type can finally be extended with the attibution of the failue cause (intenal o extenal) and its contollability, if applicable. Once a mistake occus in a sevice, customes geneally hold themselves, the situation, o the povide esponsible (Cuent and Folkes, 1987). If they attibute the cause of the eo to themselves, o if the failue happened because of uncontollable factos such as the weathe o the behavio of othe customes, they ae less dissatisfied and have bette intentions than if they attibute the cause of the eo to the povide. These vaiables wee not taken into account in this study because the povide was noticeably esponsible fo the failues. The vaiable was theefoe implicitly unifom among the subjects and could not geneate vaiations in thei satisfaction and behavioal intentions. Muiel Mantoua completed he Maste of Science degee at Ecole d e s H a u t e s E t u d e s Commeciales. platt etail institute 45

46 Photo souce: Waby Pake via Google Images The New Kids on the Block E-tailes and Consume Poduct Bands Ty Thei Hands at Bick and Mota platt etail institute By Matt Schmitt, Pesident, Reflect T he wold of etailing just keeps getting moe exciting as the landscape continues to adically shift and moph with new business models and appoaches in the age of the Connected Custome. Taditional etailes have been honing thei digital chops with omnichannel stategies. But we e also seeing othe bands that ae not taditional etailes now expanding with effots to get close to the consume with a physical etail pesence. A new fom of etailes is emeging and exploing the benefits of physical stoes and showooms. While many bands have leveaged pop-ups and stoe-in-stoe implementations, dedicated stand-alone locations ae inceasingly pat of the stategy fo many bands. Some bands have had long-standing pogams using thei own banded stoe locations. Some of these bands ely on the bulk of thei sales though wholesale channels and now, inceasingly, though online puchases. But they have also leveaged thei own physical stoes fo banding and custome insights. Examples include Nike, Levis, Polo Ralph-Lauen, and many othes. Newcomes continue to move into the physical stoe landscape. Samsung, seeking to incease band awaeness and bette custome education, made a big effot with a stoe-in-stoe patneship with Best Buy, and will soon be seeking to test its own dedicated stoes to futhe solidify its band pesence and compete with the likes of Apple. Now, even moe inteestingly, e-tailes ae getting aggessive with new foays into dedicated shops and showooms." While some of these effots ae still expeimental, toe-in-the-wate pogams, many examples ae poving to be quite successful to bands seeking to move beyond the confines of the digital wold to establish valuable face-to-face connections with customes. Some of these bands may keep thei physical footpints elatively small to gow awaeness in stategic makets and leveage custome insights to futhe stengthen thei online business. Othes may pove to be moe expansive and fathe eaching. 46

47 New Kids on the Block (cont d.) platt etail institute Thee ae many cases of bands moving into the physical stoe game, including Bonobos, Waby Pake, Bichbox, J. Hilbun, Tunk Club, Alton, Justfab, SwimSpot, Nasty Gal, BaubleBa, and othes. As noted, many of the newcome bands ae stating the move to the p h y s i c a l e t a i l i n g w o l d b y expeimenting with pop-ups and stoe-in-stoe fomats befoe taking the plunge into dedicated stoes. Bichbox, a New Yok-based appael e-taile, has been one of the oft-cited examples of this tansitional, phased appoach to establishing physical stoes. It patneed to make Photo souce: Bonobos via Google Images. selections of its mechandise available in Nodstom and Belk stoes. Bonobos expanded its own pesence with dedicated Guideshops in multiple majo makets. Athleta, peviously a w e b e t a i l e f o women s spotswea, was acquied by Gap, Inc. and is making the move into dedicated band stoes. While othe e-tailes will face leaning cuves on the science of mechandising in the eal wold, Athleta will likely benefit fom the opeations and taditional Photo souce: Athleta via Google Images. etailing expetise of Gap. And then thee s the povebial elephant in the oom Amazon. It s unclea what thei oveaching long-tem stategy is fo a physical etail pesence, but they ae likely to make waves. Some insights and lessons leaned fom bands moving to dedicated physical stoes include the following: Boosting band awaeness and ceating a connection with new customes is a big dive fo many businesses. Howeve, thee ae lessons being leaned elated to the timing of opening stoes and band awaeness. While going physical may be a good move fo some online-only businesses, it helps to have a ecognized band and buzz befoe opening physical stoes. Pesonalized sevices like beauty consultations and othe one-on-one appointments ae playing a big pat in this new wold of connected etailing. Stylists in Tunk Club locations consult with customes and fill a digital tunk with selected poducts to be shipped to the custome. This appoach is poving to be effective at helping men who may not like the hassle of shopping, but need help and consultation to quickly find the ight fit, bands and accessoies that ae ight fo them. 47

48 New Kids on the Block (cont d.) Matt Schmitt is the Pesident of Reflect, a national full-sevice povide of digital band media solutions. E-tailes and consume poduct bands ae ecognizing the customes desie to touch and feel poducts in the eal wold. Many poducts ae challenging to sell effectively online. Appael, eyeglasses, and makeup and beauty poducts in paticula can benefit fom physical shopping. This can be a challenge fo e-tailes as they move fom online to physical. They must lean o acquie the knowledge to mechandise poducts using best pactices ingained in taditional etail models. The at and science of poduct cuation has a big impact in showooms fo engaging the custome and educating them on offeings. Bands ae expeimenting with the beadth and depth of the poducts to show in the stoe, and they ae finding the best ways to mechandise in peson. Bichbox, fo example, has showcased poducts by categoy, athe than by band. In-stoe events like celebity appeaances, classes, and othe events like make-up and beauty paties povide bands with moe oppotunities to leveage the in-peson benefits of a physical location. Using the stoefont o showoom to leveage the at of the happening may pove to futhe enhance the band-to-consume connection. Digital is still playing a pat in the physical stoe. As taditional etailes ae embacing in-stoe digital technologies, e-tailes and band stoes have an even stonge eliance on having a seamless connection with the Web. Bichbox uses video content and poduct eviews with its inteactive in-stoe displays. Alton Lane, anothe men s appael etaile, uses a 3D body scanne to take measuements, poviding an in-peson edge ove the challenge of finding the ight fit online. Some of these new in-stoe fomats have shown highe aveage tansaction sizes vesus online. They ae also seeing customes acquie a highe comfot level with bands in-stoe, then tansitioning with ease to making follow-up puchases online. One of the big findings of e-tailes has been that thee ae still many people who just like the act of bowsing poducts in peson. While taditional etailes ae getting bette at thei Web pesence, e-tailes ae leaning how best to bing thei websites into the physical wold. Shopping, fo many, is still an activity and event poviding an outlet fo moving aound and exploing. As Waby Pake cofounde Neil Blumenthal has acknowledged, shopping is a fom of entetainment. While the online and physical wolds collide and alte the etail landscape, the ecognition of the value of physical pesence is gaining moe visibility. Online is big, but bands ae also getting physical. platt etail institute 48

49 Undestanding and Leveaging Emotions in Retailing Pat III: How Retailes Ceate Emotional Expeiences in Stoes and Online By Denise Dahlhoff, Reseach Diecto, Bake Retailing Cente, The Whaton School, Univesity of Pennsylvania T his aticle is the final pat of a thee-pat summay of the Bake Retailing Cente s confeence on emotions in etailing. It highlights etailes that ceate emotional expeiences in thei stoes and online though a vaiety of appoaches, as the copoate pesentations and stoe visits showed. (The fist two aticles cove academic eseach on maketing and management aspects of emotions in etailing and can be found in the PRI Resouce Libay.) Copoate panelists (fom left to ight): Anne Matin-Vachon (HSN), Lindsay Rice (The Noth Face), Gwyn Wiado (Unde Amou), and Gale Javis (Madame Alexande Doll Company) pesented at the Bake Retailing Cente confeence. Make shopping fun and entetaining Anne Matin-Vachon, Chief Mechandising Office fo HSN, shaed how HSN has edefined shopping as entetainment an expeience infused with fun, inteactive elements, and engaging poduct videos, among othe things. Tageting an audience that is pimaily female, ethnically divese and skews moe affluent, HSN uses an omni-channel appoach that featues TV, online, mobile, and social media channels. HSN s multimedia campaign helped sell 60,000 units of May J. Blige s My Life fagance within a mee six hous afte launch. platt etail institute HSN makes an emotional connection with its customes in diffeent ways. Fo example, when a custome buys appael at HSN, they focus on comfotable clothing that makes them feel beautiful, and finding the ight piece that pesonifies the way she views heself. Jewely customes in paticula want to have fun. They focus on the uniqueness of the piece and the element of 49

50 discovey. They pefe pieces that ae empoweing and want to contol thei own destiny. Stoes and associates fo an authentic band expeience Fo the Noth Face, band building involves ceating a positive connection with both customes and its associates, as Lindsay Rice, Vice Pesident, Diect to Consume, The Noth Face, explained. To engage consumes, The Noth Face leveages both its stoes and digital channels, and offes a pesonalized expeience. The stoes cay mechandise fom the band s key categoies: outdoo, action spots, pefomance, and youth. The in-stoe fixtues ae made of ganite, steel, ough wood, stone, climbing ope, and sleeping bag fabic einfocing the band s pesonality. Digital in-stoe featues such as HDTV and music, lighting, and community aeas ceate a unique shopping expeience. The maketing, which includes apps and digital content such as videos, poduct eviews, and infomation on outdoo activities, mechandise, and sustainability, is all about ceating a connection. The messaging highlights the quality and functionality of the mechandise, which is designed to solve eal needs: keep wam and dy, athlete-tested, and expedition-poven. Since associates ae invaluable pomotes, The Noth Face offes its staff fee equipment entals and athlete-led tips and encouages community sevice. It uses social media fo ecuiting and tains team membes on poducts via ipads. The powe of emotional messaging Emotional appeal is a coe element of the Unde Amou band. Gwyn Wiado, Vice Pesident at Unde Amou fo Women s, Youth, and Accessoies, shaed band videos, taglines, and ads designed to connect with athletes of all types as well as wholesale buyes. They cente on themes such as passion, challenge, humo, accomplishment, stength, and identification. Taglines communicate the band s emotional chage: Designed fo beauty. Engineeed fo geatness. (women s appael); We pobably shouldn t let you un this fast (unning shoe); Fo the most impotant job inteview of you life (football daft); the eal deal. Emotion is also the coe of Unde Amou s company cultue and self-identity as the undedog with a fighting spiit and a mission to empowe athletes eveywhee and make all athletes bette though passion, design, and the elentless pusuit of innovation. Beneath the healthy confidence, thee is a humble spiit though. Mechandise that tigges emotional esponses platt etail institute At the Madame Alexande Doll Company, custome emotion, expeience, and engagement stat with the poduct. The company makets its dolls unde the company s iconic band name and also poduces lines fo majo etailes, as Gale Javis, Pesident of The Madame Alexande Doll Company, explained. Some lines of dolls eflect histoical developments and pop cultue such as the Despeate Housewives dolls and the Daiy Queen Blizzad doll. The vintage dolls collection featues a Pan Am Stewadess designed with meticulous attention to detail in the shoes, hat, puse, make-up, and stockings to eflect the fashion of the time. Thee ae othe aww -evoking dolls such as Too Cute in Boots, Dessed Like Mommy, Running Away to Gandma s, Vasity Gil, and intenational collection dolls such as a Swiss doll weaing a ski outfit. Given the emotional appeal of the dolls, it s no supise that thee ae passionate adult collectos who give feedback and actively paticipate in 50

51 collectos clubs. Poviding a special custome expeience, the Madame Alexande Doll Factoy, exclusive to etail patne FAO Schwaz, the oldest toy stoe in the U.S., lets shoppes customize dolls by picking a doll, haistyle, and outfit. Ceate a wold of fun and play At Build-A-Bea, the custome expeience is font and cente, and the stoe concept and staff stategy evolve aound it. When customes childen and adults ente the stoe, Build-A- Bea tanspots them into a wold of play and fun. It also wants to set up childen fo a positive lifelong etail expeience, as Doie Kuege, Managing Diecto fo Stategic Planning and Analysis, and Jean Hemsen, the Philly Beaitoy Leade, shaed. The bea building is an immesive, playful expeience involving the diffeent senses touching the bea, adding a voice, etc. Games with the bea ceate a memoable expeience, fo childen as well as adult shoppes. When Build- A-Bea ecently evamped its in-stoe design and expeience, it sought input fom a etail consulting company and a goup of loyal young customes, the cub advises. Many of the new in-stoe featues ae tech-based to eflect childen s way of play today (e.g., an inteactive, digital bathtub and an audio station to ecod sound bites fo the bea). The stoe is designed to also cate to childen that can t ead o have othe special needs. Sales associates play a cucial ole in deliveing the Build-A-Bea expeience. They ae entetaines, facilitatos, and sometimes a shoulde to cy on, which is why associates ae caefully selected and tained. Reinventing a etail band and taditional business model platt etail institute New Yok City-based dugstoe Duane Reade, owned by the Walgeen Company, ecently einvented not only itself but also the taditional dugstoe model. Accoding to Jeffey Koziel, Vice Pesident of Opeations and C o m m u n i t y Management at Walgeens, it took a custome-centic focus, localized the assotment, and added new beauty, healthcae, and convenience offeings. The concept is all about diffeentiation and custome expeience. The beautifully estoed Wall Steet flagshis in 51

52 a histoic building, fomely a bank owned by the Rockefelle family (the instoe nail salon is whee David Rockefelle s office used to be), and featues a sushi and smoothie ba, as well as haicuts, blowouts, and manicues. Duane Reade upgaded its signatue healthcae section, leveaging Walgeens phamacy expetise. Cental to the stoe is the phamacy, whee the phamacist is made accessible to povide moe counseling and sevices to patients by woking in font of the phamacy counte to foste phamacistpatient elationships. New in-stoe technology includes an electonic display with pesciption status updates, text alets fo pesciption pickups, kiosks fo efill odes, and ipads fo associates to assist customes. The beauty section featues Euopean bands, such as Bitain s leading skincae band, No7, ceated by Boots, as well as a vitual makeove kiosk, and spa sevices at accessible pices to bing customes to the stoe, making it competitive with othe beauty etailes. Walgeens now has flagship stoes in seveal majo U.S. cities and has eceived a geat custome and pess esponse. Showooms to tell etail buyes the band stoy Haddad Bands, a licenso of Nike, Jodan, Convese, Huley, Nike SB and Levi s fo childen appael, is an extension of the licensed bands. Fan Bolle, Executive Vice Pesident Nike at Haddad, explained that the company woks closely with the licenso teams on the kids designs, using the seasonal point of view of the adult lines as inspiation when adapting the stoy to kids appael (only a faction ae mini-me adaptions), and coodinates the ad campaigns. platt etail institute An in-house visual designe mechandises Haddad s showooms evey season to tell etail buyes each band s stoy though displays, videos, music, colos, and even scents and band-specific cocktails. Each showoom is an immesive band expeience. Authentic band atifacts such as a Levi s waist tag unde a table s glass top o eclaimed bleache wood fom old school benches in the Convese showoom, with the iconic canvas Chucks hanging fom the ceiling, make up the displays. Thee is a Michael Jodan cutout of his wing span in the Jodan showoom. Bands ae clealy moe than poducts with functional benefits. Spots shoe collectos, o sneake heads, buy two pais of each model: one to wea and one to collect. Inteestingly, Jodans ae popula with childen who neve 52

53 saw Michael Jodan play duing his active yeas in pofessional basketball but ae still dawn to his legenday status. Localization and a stong company cultue fo diffeentiation Founded 125 yeas ago, Modell s Spoting Goods is a f a m i l y - o w n e d, New Yok-based c h a i n o f s p o t s stoes on the East Coast. CEO Mitchell Modell, along with two of his senio executives, explained how the company cates to the local maket, including passionate fans of local spots t e a m s. M o d e l l s caies local teams jeseys, displays upcoming games, and maintains a scoeboad (bulletin boad) with local teams highlights and esults, allowing the community to connect with each stoe. Each stoe has its own distinct pesonality because of localized featues like this. The Modell s cultue is unique and lagely inspied by CEO Mitchell Modell. Much like in spots, thee is passion, inclusion, suppot, and compassion. Each day stats with a stoe team huddle, a ecap of the pevious day s sales esults, and the eading of the lette of the day, an inspiational motto that detemines the coe value fo the day (e.g., P fo Passion and N fo Needs of the custome). Evey coe value lette contains a eal life example of that lette in action though the eyes of a Modell s associate. It is also ed to all associates within the company. Modell s selects new hies caefully to find the ight fit, and it ties to actively engage its associates since they ae an integal pat of the custome expeience. The tunove ate is elatively low, and some associates that left the company have come back. The management style is hands-on. Fo example, CEO Mitchell Modell visits stoes egulaly fo a business update, and thee is a 48-hou policy to get issues esolved quickly befoe associates contact the next management level. Stoes and well-tained associates fo a full band immesion Fomely a pivate esidence, the Ralph Lauen Mansion at Madison Avenue is a beautiful showcase of the vaious labels in the Ralph Lauen band potfolio. The diffeent bands ae housed unde one oof, yet convey each label s distinct band pesonality and lifestyle. Some poduct categoies such as watches, funitue, and bedding ae licensed to patnes that manufactue them. platt etail institute The Mansion s home envionment is edesigned evey six months to eflect the latest collection, accoding to Wayne Meichne, fome Pesident & COO of the Ralph Lauen Retail Goup. It s just one example of the amount of effot and attention to detail that goes into showcasing the Ralph Lauen lifestyle. Ralph Lauen himself is vey involved in the oveall pocess. New associates paticipate in a thee-month-long onboading pocess to lean all the nuances of the Ralph Lauen wold of bands to be able to povide an 53

54 authentic band expeience to customes. Dessed in Ralph Lauen unifoms, associates geet customes at the doo to make them feel welcome. To engage customes moe, the Mansion has hosted special events such as a unway show fo top etail and wholesale clients. Fo moe details about the confeence and pesentations, please visit the confeence website. Denise Dahlhoff, Ph.D., is the Reseach Diecto at the Bake Retailing Cente, The Whaton School, Univesity of Pennsylvania. platt etail institute 54

55 PRI Reseach Aticles Platt Retail Institute undetakes a vaiety of eseach pojects thoughout the yea. The esults of this eseach ae published as Reseach Aticles (available fo fee download with egistation). Some of the available PRI Reseach Aticles include: The latest PRI Reseach Aticle is Deployment and Test of the Digital Life Expeience at an AT&T Retail Stoe. This eseach, sponsoed by Lighthaus Logic, descibes a test conducted by AT&T in its Alington Heights, Illinois, etail stoe. The test was designed to detemine if having a moe obust use expeience in an inteactive envionment would lead to inceased custome adoption and sales of the Digital Life sevice, an AT&T technology that encompasses a vaiety of home secuity and home automation options. PRI eleased The Futue of Retail: A Pespective on Emeging Technology and Stoe Fomats, in conjunction with the PRI Retail Foum at Digital Signage Expo This eseach, sponsoed by Two West, examines the histoy of etail in the U.S., emeging technology that is impacting etail today, and how etail stoe fomats will change in the futue and integate vaious digital technologies. The goal of this Reseach Aticle is to infom the eade about the disuptive changes occuing in the etail industy, and to help etailes pepae fo and embace evolving etail fomats and technologies. PRI s eseach egading Retail Attitudes and Adoption Tends of Multi- Channel and Omni-Channel Maketing, was undetaken to gain insights into etailes attitudes about multi-channel use and the adoption of omni-channel maketing stategies. While most etailes use multiple channels to each thei customes, it was notewothy that the etailes who paticipated in this eseach expect and mobile maketing to incease in impotance while the physical selling location is expected to fall. This eseach was sponsoed by Digital Signage Expo. In PRI s Reseach Aticle, Digital Signage s Role as Pat of a Multimodal Appoach to Delive Emegency Messaging on Campus, the apid adoption of digital signage netwoks as an impotant communication tool on univesity campuses is examined. In 2010, PRI eleased a Reseach Repot, "Communication Effectiveness in Highe Education," which illustated that digital communication netwoks (DCNs) ae becoming a viable altenative to olde foms of on-campus communication. PRI conducted additional eseach, sponsoed by Digital Signage Expo, Fou Winds Inteactive, Intel, and NEC Display Solutions, to delve futhe into the ole of digital signage in deliveing emegency messages on campus. PRI's Reseach Aticle, "The Media-Satun In-Stoe Digital Expeience," is an extensive case study that details the technologies, management, and unique softwae that Euopean etaile Media-Satun built to ceate, manage, and distibute content in diffeent languages acoss its netwok. Not only is Media- Satun Euope's lagest electonics etaile, it aguably has the most advanced, complex custome-facing technologies of any etaile in the EU. platt etail institute Retailes' Investments in Technology: An Industy Pespective, pesents data that illustates the extent to which etailes undeinvest in Infomation Technology. In this Special Repot pepaed fo Digital Signage Connection, PRI illustates that unde conventional measues, etailes ae peceived to geneally spend on IT in line with othe U.S. industies. Howeve, PRI uses govenment data that pesents a much diffeent pictue. PRI concludes that accoding to this data, etailes do, in fact, substantially undeinvest in IT when compaed to othe sevice industies when consideing both total spend and spend as a pecentage of evenue. 55

56 PRI is the leading publishe of tactical eseach in the aea of In-stoe Digital Technologies, including Digital Communications Netwoks. Woking Papes and Reseach Repots ae available fo puchase fom PRI. PRI Reseach Publications Communication Effectiveness in Highe Education Steven Keith Platt, Platt Retail Institute; Kevin King, Diecto of Reseach, Platt Retail Institute PRI Reseach Repot No. 1 Pice: $250 A Detemination of the Revenue Potential fom Digital Sceen Advetising at a Majo League Baseball Stadium PRI Woking Pape No. 7 Pice: $250 Test Results fom a Bank Banch Digital Communications Netwok Steven Keith Platt, Platt Retail Institute; and D. Jean-Chales Chebat, Ecole des Hautes Etudes Commeciales, Monteal, Canada PRI Woking Pape No. 6 Pice: $1,000 Impacting the Custome Expeience at a Bank Banch though a Digital Communications Netwok Steven Keith Platt, Platt Retail Institute; and Pete VanSickle, BMO Bank of Monteal PRI Woking Pape No. 5 Pice: $1,000 Deployment and Test of a Retail Digital Communications Netwok by the United States Postal Sevice Steven Keith Platt, Platt Retail Institute; D. Kamel Jedidi, Columbia Univesity Gaduate School of Business; and Magot Myes, United States Postal Sevice PRI Woking Pape No. 4 Pice: $1,000 Leveaging the Impact of Retail Digital Signage Advetising though Behavioal Mechandising Steven Keith Platt, Platt Retail Institute; John Geening, Nothwesten Univesity; and Bill Pennell, Tesco Media Sevices PRI Woking Pape No. 3 Pice: $1,000 Establishing Retail Digital Signage as a New Media and Measuing its Effectiveness Steven Keith Platt, Platt Retail Institute; D. Fancis J. Mulhen, Nothwesten Univesity; and Guy Vaughan, Retail Maketing Sevices PRI Woking Pape No. 2 Pice: $750 Implications fo Retail Adoption of Digital Signage Systems Steven Keith Platt, Platt Retail Institute; D. Kingshuk K. Sinha, Univesity of Minnesota and Reseach Fellow, The Platt Retail Institute; D. Baton A. Weitz, Univesity of Floida; with Pat Hellbeg, Nike, Inc.; GV Iye, Bank of Ameica; and Magot Myes, United States Postal Sevice PRI Woking Pape No. 1 Pice: $250 platt etail institute 56

57 PRI Reseach and Event Sponsoships In concet with leading univesities and eseaches, PRI undetakes extensive studies elated to in-stoe maketing technologies and digital communications netwoks. These ae published as eithe Woking Papes o Reseach Repots. In addition, PRI seeks funding fo othe unique pojects. Sponsoship of PRI eseach offes a vaiety of benefits. These include establishing the sponso as an industy thought leade, ceating vaious pomotional oppotunities, and enabling the sponsos association with the leading eseach and consulting fim in the field. Cuent sponsoship oppotunities include: 1) Jounal of Retail Analytics (quately) 2) PRI Reseach Aticles. 3) Woking Pape and Reseach Repot sponsoship benefits can be customized, but geneally include the following: The ight to distibute copies of the eseach. PRI will pesent the eseach on behalf of the Sponso. In the font of the Pape/Repot, a desciption of the Sponso s fim and a fim logo will be pesented. On PRI s website detailing the eseach, the Sponso will be noted and its logo will be listed. 4) The PRI Retail Foum 2015 will be held on Mach 10 in conjunction with Digital Signage Expo at the Las Vegas Convention Cente. Oppotunities emain fo Gold-level sponsos fo the Foum, which will focus on Retail Analytics that Dive Stoe Pefomance. Lean moe about the Foum hee. Please contact PRI fo infomation about sponsoship oppotunities. platt etail institute 57

58 PRI Resouce Libay The PRI Resouce Libay is an extensive database of aticles and eseach coveing a boad ange of topics including, among many othes, coveage of Vetical Makets, Maketing, Content, Netwoks, and Analytics that elate to maketing-at-etail. Aticles and eseach on topics fom custome expeience to case studies to metics ae available on demand. Some ecent additions to the Resouce Libay include: Cultual Changes to Ceate an Innovative Company Envionment This aticle discusses a pocess companies may use to facilitate innovation by taking advantage of employee knowledge and ideas. Mobile POS Welcome to the Wild, Wild West! The aticle discusses some of the tends egading integation of mobile POS systems and the inceasing use of mobile devices by etail customes. Out-of-Home Media as the Gateway to Mobile Commece and Retageting This aticle discusses how contextually elevant OOH media povides a unique oppotunity to etaget viewes with behavioally tiggeed mobile communications. The Futue of Retail: A Pespective on Emeging Technology and Stoe Fomats This is a summay of a PRI Reseach Aticle that examines the histoy of etail, emeging tends, and possible futue etail stoe fomats. Retail Stoe Shoppe Cads: Competitive Diffeentiato? This aticle summaizes eseach by two Nothwesten Univesity pofessos egading whethe stoe shoppe loyalty cads contibute to etaile success. Tacking the Path to Puchase: Retail Analytics Offes New Ways to Tack and Seve Retail Customes This aticle discusses how etail analytics povide ways fo etailes to tack and bette seve thei customes. Undestanding and Leveaging Emotions in Retailing, Pat I: Consideing Custome Emotion in Retail Maketing Stategy This is the fist aticle in a thee-pat seies coveing the content discussed at a confeence on Emotions in Retailing pesented by the Bake Retailing Cente at The Whaton School. Unexpected U.S. Baies fo Global Pesonal Cae Bands And How to Get Aound Them This aticle discusses some of the challenges faced by global pesonal cae bands when expoting and selling thei poducts in the U.S. Find these, and hundeds of othe aticles, in the PRI Resouce Libay. While thee, you may subscibe to an RSS feed and get alets wheneve new aticles ae added to the Libay. platt etail institute 58

59 Industy Events Calenda Septembe 3-5, 2014 Intenational Retail Design Confeence Fontainebleau Hotel Miami, Floida Septembe 9-11, 2014 Supe Mobility Week (CTIA) Sands Expo Cente Las Vegas Septembe 10-12, 2014 ATM & Mobile Innovation Summit 2014 Capital Hilton Washington, DC Septembe 14-16, 2014 Retail Design and Technology Exchange Chaleston Place Chaleston, South Caolina Septembe 17-18, th OVAB Digital Signage Confeence Kempinski Aipot Hotel Munich, Gemany Septembe 22-23, 2014 Digital Sceenmedia Association Symposium Dallas Aboetum Dallas, Texas Octobe 8-10, 2014 Engage! The Confeence fo Shaping the New Retail Dynamic Ritz Calton Hotel Ft. Laudedale, Floida Octobe 20-24, 2014 Digital Signage Week Vaious Events New Yok City Octobe 21, 2014 DSE One TKP Confeence Cente New Yok City Octobe 21-23, 2014 Shoppe Maketing Confeence & Expo Minneapolis Convention Cente Minneapolis, Minnesota platt etail institute Novembe 5-6, 2014 Custome Engagement Wold Javits Cente New Yok, NY Novembe 13, 2014 Retail Infomation Systems & PRI Webina Leveaging In-Stoe Location-Based Analytics 59

60 Contact PRI Steven Keith Platt, Diecto and Reseach Fellow P.O. Box 158 Hinsdale, IL U.S.A. Phone: Juan Clotet, Diecto, Spanish Opeations Cta de Mig, L Hospitalet de Llobegat Bacelona, Spain Phone: (34) juanc@plattetailinstitute.og Godon Helm, Diecto Publication Management Phone: godonh@plattetailinstitute.og Robet Koolen, Adviso, EU Business Stategy Phone: (+1) obetk@plattetailinstitute.og Claudia Lehmann, Deputy Diecto, Geman Opeations Phone: (49) claudial@plattetailinstitute.og Magot Myes, Diecto, Global Maketing & Communications Phone: magotm@plattetailinstitute.og Fank Rehme, Diecto, Geman Opeations Phone: (49) fank@plattetailinstitute.og Ruth Stein, Vice Pesident, Business Development uths@plattetailinstitute.og platt etail institute 60