Crowdsourcing: tapping the collective want…

Following the impact of our NamNews item: Nestle checking views on Kit Kat flavours (1,265 hits in two days), we felt it might be useful to point you at some useful sources of potential applications

Definitions: Essentially, crowdsourcing is a technique whereby the long tail plays an important part i.e. each member of the crowd submits an insignificant contribution to the total outcome, but the total of these contributions amounts to a considerable difference. (More on definitions)

How it started: The Social Path tells the story of a 1906 country fair at which attendees were invited to guess the weight of a large ox. Hoping for a cash prize, about 800 people made guesses, though no one got it right.

Afterwards, a statistician analysed the written guesses and discovered something shocking: the average of all the guesses was a mere one pound away from the exact weight of the ox. The site also gives some great examples with spooky implications…

Examples: For a comprehensive coverage of examples see Anjali Ramachandran on the following

1. Individual businesses or sites that channel the power of online crowds

2. Brand-sponsored initiatives or forums that depend on crowdsourcing. I've included those that are no longer active as well, for reference.

3. Brand initiatives that allow users to customise their products

4. Brand-sponsored competitions/challenges focussed on crowdsourcing

Curiously, much of the good source material is two years old…an indicator that given its success, perhaps companies are paradoxically now keeping crowdsourcing to themselves?

Have a crowded weekend, from the NamNews Team!

High Street survival and leases

For many years, UK and Irish retail property markets have been compromised by the existence of 25 year upward-only leases with no break clauses. This has ensured that institutional landlords like banks have been able to put the leases on their balance sheets as assets with a guaranteed income stream. In fact commercial property is valued not on its sale price, but rather as a multiple of annual rental*.

This explains why bank-landlords cannot renegotiate rentals, in that to acknowledge a lower yield means lowering the value of the asset in the balance sheet, leading to a need for re-capitalisation…God forbid,,,

Because of the global financial crisis, a two-tiermarket has emerged for high street leases depending on whether they have an upwards-only reviews or not.

For retailers the new leases mean there is a stronger focus on the unit, the pitch, the covenant and the lease terms. In other words, a more realistic, commercial approach to risk-sharing by the landlord.

There is a commercial logic to aligning the interests of the landlord and the tenant to ensure both maximise the performance of their capital. But it requires a more forensic approach to retail development in the future, with developers/investors, governments and banks taking a greater, long-term interest in how a retailer will trade.

Until then high street retail will continue on a downward spiral, as most of the action moves to the suburbs and retail parks…


* Deep down the same logic applies to domestic housing. In most countries outside the UK & Ireland, houses are regarded as places where people live, and are not seen as investments. In other words a house is valued at approximately 20 times its annual rental…a yield of 5%. This may explain the periodic housing bubbles that occur when consumers lose track of what their houses are really worth...
Incidentally, why not sit down with a strong coffee and try the 20x multiple on your home…?

Will ‘behavioural pricing’ affect your behaviour?

'Behavioural pricing' tailors pricing to individual users - with special offers targeted to certain shoppers, but also taking into account information from social networks such as Facebook or Twitter

Online shops already have an unprecedented amount of information at their fingertips - from whether you've purchased from them before, to what sites you've visited before you arrive at their shop, accessible via browsing history.

If price is simply part of the total shopping experience then it is surely appropriate to match price to shopper need?

In the same way, regional pricing variations in the same retailer’s branches across the country, and even differing prices for the same product in different types of store such as convenience and superstore variants for that retailer, should not be a cause of concern.

Also, reports that Tesco plan to overhaul its stores to reflect location and income of families who shop there, has to be an attempt to improve the shopping eperience 

The real issue with behavioural pricing is potential abuse of the insight, an increasing risk for any retailer attempting to deceive the socially-networked savvy consumer.

Instead of attempting to resist the inevitability of behavioural pricing, suppliers should encourage this move towards more focused shopper-satisfaction by factoring the process into their consumer marketing and varying their trade marketing initiatives according to degree of congruence between consumer-profile of the brand and shopper profile of the retailer.

This will help suppliers to anticipate the evolution of location-based offerings in retailing.

In other words, accept the fact that national conformity and uniform brand positioning is now too blunt an instrument in today’s connected society. This means that patchwork regional brand launches, tailored completely to local tastes will allow a more cost-effective allocation of scarce resources, based upon real need, with pricing simply part of the package.

In fact why not consider the Coca Cola idea whereby a thermometer on the top of a vending machine varies the price of a can with change in temperature….

Peacocks' debt-structure doomed it to failure

According to the Telegraph, Peacocks was the subject of a highly leveraged buy-out in 2006, led by two hedge funds. The structure put in place relied heavily on not only senior debt, but also a tranche of mezzanine finance, and a series of expensive so-called payment in kind (PIK) notes in favour of the two main equity holders. The structure and variety of the borrowings was so complex that the administrator has so far been able to  say only that total borrowings stood at £750m at the point of administration last Wednesday.

With total borrowings of £750m, the company had more borrowings pound for pound than it did annual sales, which came in at £720m in the year to April 2010.

Given the current financial climate and cut-throat markets in which the retailer operates, even a Peacocks NAM with a modicum of financial nous* will have seen the writing on the wall years ago...and hopefully suspended supplies before Christmas?

*  Essentially, a company should operate within a gearing level of 30% i.e. borrowing should not exceed 30% of a company’s net assets. In time the Administrator’s report will reveal the Peacock’s gearing level along with the distribution of remaining funds, with suppliers coming end of the list…

Managing shopper expectations and missing the 'big picture'?

The latest breakthrough 'retro-movie', The Artist, is novel, very entertaining and illustrates perfectly the importance of not forgetting to get the context right as one is swept up in the excitement of producing something really different...
Reports are coming in of audiences in some cinemas demanding refunds because of the small square screen, its use of black & white, and the fact that  'it is silent!!'   Susie W
In other words, never underestimate the consumer's ability to miss the point...
                                                                                                   

Could Kodak's demise have been averted?

A fascinating article in today's Observer by John Naughton explores the possible causes of Kodak's difficulties, revealing that the company invented digital photography, the medium that supplanted film, in 1975. The article explores the issue in depth and includes several useful links.

However, for me the money-quote is in the final paragraph where Naughton quotes an extract from a lecture by Rebecca Henderson of MIT in which she imagined what a Kodak executive might have said to the developer of the first digital camera:

"I see. You're suggesting that we invest millions of dollars in a market that may or may not exist but that is certainly smaller than our existing market, to develop a product that customers may or may not want, using a business model that will almost certainly give us lower margins than our existing product lines. You're warning us that we'll run into serious organisational problems as we make this investment, and our current business is screaming for resources. Tell me again just why we should make this investment?"

Why indeed?

Coping with post-Christmas cash shortages…

Coping with post-Christmas cash shortages…

Shoplifting-to-order has emerged as a way of removing  some of the wasteful duplication and inefficiency of ‘grabbing what you can’ allowing more time for the planned-theft and increased pricing stability in the knock-off end of the market. Ranging from choice cuts of meat to full x-box packages, the fenced-offer can be tailored to most market segments and levels of need. It is even possible to access detailed instructions on skill development in all stages of the shoplifting process including preparation, shop-floor behaviour, blind-spots and other lifting techniques, leaving the store safely and even coping with being caught…

Time to drill into your sales-stats and factor shoplifting-to-order into your still buoyant sales in early 2012?

Have a soul-searching weekend, from the NamNews Team! 

Walmart launches video-contest for suppliers

Walmart has highlighted the internet’s potential to change the way companies source goods by inviting entrepreneurs to pitch their products in a video contest that will bypass the strict protocols of its buying department.

Called “Get On The Shelf”, the winning product will be sold at the retailer’s US stores and online after an internet vote, like TV shows such as American Idol, in which members of the public will be asked to choose the best pitch uploaded to a Walmart website.

Suppliers in any Walmart categories can create and submit videos of their latest products at www.GetOnTheShelf.com (See examples of current submissions here).

The public will then vote online for the top three winners at GetOnTheShelf.com. The three will be sold on walmart.com and the top winner will also automatically get shelf space in select Wal-Mart stores around the country.

Suppliers (US only) can submit their video pitches until Feb. 22. The first round of voting will happen between March 7 and April 4 to select 10 finalists.

Apart from the possibility of gaining a listing with the world’s biggest retailer, this initiative presents a terrific opportunity for suppliers to cover some of their production costs by gaining access to all the consumers that Walmart attracts to GetOnTheShelf.com.

The real issue is how soon Walmart will decide to adapt the technique to some of their routine sourcing (cost saving for suppliers, cost reduction, every little helps…Get it?)
Also if the initiative 'can make it there, it can make it anywhere' ...(apologies, Frank!)

Time to check out your video-pitching skills and upgrade the Skype connection?