Professor Piyush Kumar Sinha – CRI Advisory & Research – IIM Ahmedabad

 

Recipe for innovation: ethics, emotions and differentiation:

The opening presentation at the SGL Retail Jeweller India Forum 2019 was titled, simply and accurately, “Innovate to win”. It highlighted the need to innovate to stay relevant and sustainable in the retail space. It was delivered by Prof. Piyush Kumar Sinha, director, CRI Advisory and Research, a leading business consultancy based in Ahmedabad, Gujarat.

Sinha, who has taught at the Indian Institute of Management Ahmedabad, asked his audience to remember that consumers can gain strong impressions from a retail environment — and often not the ones the retailer may wish to give. For instance, if the sales staff focuses all its energy on a single transaction, the customer takes the message that the retailer is desperate to prevent her leaving the store. This further reduces her interest in the brand.

Avoid this situation, said Sinha, by making sure that the customer is not being prodded to buy, but is sufficiently attracted to make a purchase on her own. “This is innovation, which is a drive and not a tactic,” he said. “Popular tactics to convert transactions by persuasion cannot sustain a business in the long run. So the moment you shift your focus from selling to actually making customers buy, you find yourself with fresh options.”

First and foremost for a retailer, he said, is to be differentiable. Lots of things we do appear differentiated us as to businesspeople. But customers often can’t tell the difference, or see any difference as relevant to themselves. In their own mind they categorise all our products simply as ‘jewellery’.”

Also, said Sinha, avoid excessively technical presentations. They are more likely to confuse than engage buyers. In a bid to emphasise variety, he explained, retailers often give customers a host of technical details about diamond or gold. But these are things that a non-expert may not understand. Consumers who are relatively new to the category, faced with inputs like these, may never learn to open themselves up to the beauty of jewellery. Instead they may ask for more and more options. The retailer may well run out of options, and lose the chance to make a sale.

“One must remember that consumers don’t come to the store with instruments to verify a salesperson’s factual presentation,” Sinha said. “They come to be moved by the beauty of jewellery. Retailers need to appeal to consumers at an emotional level, because this is what jewellery does best: it evokes positive emotions. The task, therefore, is to appeal to the five senses and ensure the best consumer experience.”

Drawing attention to a presentation on value propositions, Sinha explained the triangular relationship of retailer, customer and competitor. “Most of us strategise based on what our competitors do and end up copying, or incrementally bettering, an already widespread strategy. Sustainable leadership, on the other hand, nurtures a combination of effectiveness, efficiency and understanding of the complete value chain,” he said.

“Jewellers need to keep their products unique so that they can earn a premium over the price of competitors’ products. This is how a value proposition leads to profitability,” he added.

Sinha cited Starbucks as an example of the impact of consumer experience on a brand. “In 2007, Starbucks realised that from being a place that coffee-lovers saw as a home away from home it was eroding to a mere convenience store. Its value proposition was not being delivered, despite so many outlets.” To address this challenge, he said, Starbucks began by paying close attention to its customers’ cognitive, emotional, behavioural, sensorial and social responses to its marketing campaigns. The changes it implemented as a result of this analysis turned the brand around and sent its share price skyrocketing.

Service differentiation, said Sinha, is a solution when product differentiation is not possible day after day — particularly when consumers have continued to repose trust in the retailer. “Assuming that trust is already there,” he said, “as a retailer, I need to earn the customer’s commitment so that she picks me the next time she wants to buy a product.”

Sinha pointed out that the challenges faced by Indian jewellers are not dissimilar to those that were faced by some top international brands in the same space. The successful enterprises, he said, faced these challenges while keeping their organisational fabric intact.

“Many of them are family-owned businesses,” he said. “The path to corporatisation made traditional business processes difficult to manage for them, too, as they had partners and shareholders to please.”

The lessons for Indian family-owned jewellers, he said, include that they should first engage stakeholders other than family members in the business, with a sustainable business model. The entrepreneur should be the undisputed authority, so long as he or she assures extraordinary service and instils firm adherence to company ethics.

“In this way a financially healthy business is possible,” Sinha suggested, “enabling retailers to keep their families close and still corporatise the various functions.” In essence, he explained, brand legacy can be strengthened and sustained by implementing old and cherished values in up-to-date, in some cases tech-enabled ways.

Sinha had more to say on revamping company ethics. He indicated how processes, brand identity, store layout and employee culture can be replicated with succession planning. “One needs to understand and manage the chemistry, and not the physics, between old and new generations,” he said.

“If you are opening several stores and hiring at a great speed, the challenge is how to inculcate the same value and culture among your staff,” he said.

What successful brands actually do, Sinha said, is to invert the business pyramid by giving importance to customer’s wants instead of thinking of margins with movement of inventory. They internalise and become the voice of their consumers, while protecting their own core values. Indeed, he said, for some top brands, sales do not even feature in their corporate objectives. Their lists of objectives, instead, include items such as winning the emotional attachment of customers, becoming the undisputed authority in their category, committing to learning in all areas of business, providing extraordinary services, remaining financially healthy.

To sum up, Sinha said successful innovation relies on with three factors, namely, function; analysing consumer behaviour and improving the customer experience; and maintaining the value proposition through offers that continue to impress customers.