Ethnography offers a way to know our customers better

How many times have you observed your customers shopping at a vending bank? Not just casually, but carefully. More than simply watching the activity during a busy lunch period or a 15-minute break.

Have you timed them – from entry to departure with purchase in hand? Did you notice how they reacted when they had a problem or could not find what they wanted?

Have you carefully analyzed the notes you took during the observations – to take action based on what you saw and what you learned?

If you have not done this sort of rigorous customer observation, you're missing out on one of the most important opportunities in managing your business. The process is called "ethnography" – and since you are a retail source of food, snacks and drinks – it is retail ethnography. Knowing how your customers shop and make decisions at the point of sale is not just nice to know – it's an essential ingredient in contemporary sales success.

Retail ethnography takes a hard look at what shoppers are doing at the moment of purchase and explores the factors driving them to one particular brand or another. It is alive and in real time – usually video-recorded for later analysis.

Most other methods of customer research like phone surveys and focus groups depend on shoppers' ability to recall what they did or to speculate on the future. Retail ethnography, on the other hand, captures and analyzes the actual buying situation.

The purpose of this article is to encourage support for an ethnography study in vending. The authors of this article are part of a team that sees some tangible benefits for all players in vending, operators and suppliers alike.

Building on existing customer research
The National Automatic Merchandising Association (NAMA) sponsored an excellent consumer survey conducted by Harris Interactive that Automatic Merchandiser Magazine reported on extensively in its January issue. The most important finding is that consumers don't view vending as having a high value.

Many vending industry members wondered why a survey was needed to confirm this perception.

Some of the more insightful members noted that the survey did not provide sufficient context. In other words, is it fair to ask how consumers view the value of the vending machine when we don't really know how people use vending machines any more?

Hasn't the consumer changed in ways that might change what they need from vending machines?

Vending consumers: how well do we know them?
Ten years ago, Frito Lay sponsored a study that examined some of these issues. That study, titled "The Winds Of Change," identified different types of vending machine shoppers, based on their consumption habits and buying motivations. It was an excellent study, but it is now 10 years old. A lot has happened in convenience retailing since then.

The vending industry's retail competitors are addressing changing consumer needs very aggressively, which is why they are introducing cashless transactions and self-serve order kiosks.

This article will review how some of our competitive channels are using ethnography to improve their customer service. Hopefully, this will strengthen the case for an ethnography study for the vending industry.

Hy Mariampolski's new book, "Ethnography for Marketers," asserts, "Ethnography provides behavioral as well as attitudinal data. It pays attention to what consumers actually do as opposed to what they say or wish to have done." This can involve a "shop-along" with a researcher or an intercept interview to understand what is going on in the consumer's mind in context, in addition to video recording.

Focusing on the customer rather than pushing a particular technology or product has become the key to contemporary marketing.

Consumer product firms are there
Companies such as Proctor & Gamble Co. and McDonald's Corp. are using retail ethnography to develop new products, improve existing products and change the way they serve their customers.

Ethnography places customer satisfaction at the center of a service business and demonstrates a commitment to be the best at meeting shopper needs and expectations. This customer-driven focus becomes the central core of what the service provider does everyday.

For vending and on-site foodservice operators, it puts the emphasis on satisfying customers – because satisfied customers mean repeat business and higher volume per transaction.

At the NAMA Expo in Orlando, Fla. in October 2006, Paul Schlossberg of D/FW Consulting introduced the concept of retail ethnography in his session – "The Customer or The Competition: Which Comes First?"

A key point in the presentation was that "shopping is changing, and what the customer expects is changing, too." Examples were cited of how manufacturers of retail brands in other channels observed customer behavior and changed how they responded based on what their customers wanted and expected.

Schlossberg then made the point that retail ethnography can be applied in vending and on-site foodservice. Among the issues to be addressed are:

  • How do you place machines to make it easier for your customers to shop?
  • How do you arrange the products in each machine to simplify decision-making?
  • What else should vending and on-site foodservice operators do to speed up shopping?

Speed up shopping
What are the benefits of speeding up shopping? Chase Bank realized that their customers wanted faster ATM transactions. Chase responded with improved ATM service by introducing a new program called "Gt $ fstr."

They cut the time for the ATM process from 42 seconds to 24 seconds. After observing their customers using ATMs, the bank changed its hardware and software to speed up the process.

Saving 18 seconds per transaction might not sound like a lot, unless there are five people in line in front of you at the ATM and you're in a hurry because you need to be someplace else. Chase Bank decided that this is important. They're using television advertising to introduce their new and improved ATM service.

Fast feeders also focus on faster shopping
Fast food restaurant chains are also looking to save time for their customers. The fast food segment is one of the biggest competitors for vending and on-site foodservice operators. There are two ways QSRs (Quick Service Restaurants) are working on this issue.

One is at the drive-thru window and the other is handling orders at the counter in their restaurants.

The push for drive-thru productivity is tracked annually by QSR magazine. The study revealed the following:

  • Wendy's was rated the best in QSR magazine's 2005 study of drive-thru service for time. That was two minutes and 15.7 seconds.
  • Rally's was number one overall in the QSR study. The critical factors were speed, order accuracy, menu board appearance, and speaker clarity.

There has been significant time and money invested by the leading quick service restaurant chains to speed up drive-thru service time. Some important developments at the drive-thru include:

  • McDonald's learned that every six seconds saved for their customers at the drive-thru lane increases total sales at the unit by 1 percent.
  • Burger King improved its drive-thru productivity, realizing $15,000 in annual sales for each second saved.
  • Wendy's added credit card payments at the drive-thru. After that, non-cash transaction time was cut by 10 to 15 seconds.

Almost all of the chains opened a second drive-thru window. One for order-taking and payments and the other for assembling and delivering orders.

Remote call centers assist taking orders
Some chains are testing remote call centers to handle order taking. The dialog is transmitted over a more sophisticated communications line (the conversation is clearer since there is no need to keep repeating what you want, and thus the ordering process is faster).

Have you observed people queuing up in front of your vending machines during busy breaks or lunch periods? Those lines frustrate your customers.

Looking back a few years, the fast food restaurant chains expected a customer would be served in five minutes. This includes entering the store, standing in line, ordering, paying and walking away from the counter with an order in hand.

Today, that 5-minute standard has changed. It is now three minutes. Why? Because McDonald's and their competitors have learned that their customers have changed. They won't tolerate a 5-minute wait. What did the QSR chains do?

They changed the menu so that combination meals dominate the menu board. That speeds up the decision process for customers – so they can order faster.

The QSRs saved time in the payment process. Credit cards are now accepted at many fast food restaurants. That eliminates the time for counting money and making change.

Here come the order kiosks
They are testing ordering kiosks. That allows the customer to order without a counter person being involved – saving more time (and labor costs, too). And order accuracy is better – because you see the order details and approve it yourself.

Handheld ordering devices are being tested to shorten wait times. In addition, store employees go into the line to take orders. That's another time saver – all you do at the counter is pay and pick up your order.

From the drive-thru to the service counter, QSRs implemented faster solutions. New technology was deployed and tested.

Every step of the shopping process in fast food restaurants was studied. The focus was two-sided: What is the customer doing and what is the restaurant staff doing? What changes can be made to speed up service?

Maximizing each sale
It's not just a matter of timing. There are many additional questions vending operators should be asking themselves about how to serve customers. Specifically:

  • Are you maximizing each sale at the vending bank?
  • How should products be arranged and displayed in each machine to drive sales?
  • What is the best order to deploy machines at the site?
  • Does the machine arrangement need to vary from location to location, based on the unique layout of the room where the vending bank is set up?
  • Do you need to rethink how you set up and operate a vending bank based on the site population – ethnicity, age and gender?
  • What is the right product mix for the location?

The "bible" of retail ethnography, Paco Underhill's book, "Why We Buy," reviews many cases of how ethnography has delivered profitable innovations to mass merchandisers, supermarkets and drugstore chains and fast-food operators, the earliest adopters of this approach. This work points to many trends occurring at retail that will dominate the future world of shopping. These include:

  • Opportunities to interact with products through the senses: touch, smell, taste.
  • Stimulating opportunities for discovery.
  • Personalization, recognition and loyalty – your best customers want to be visibly valued. They are eager to demonstrate their loyalty to your brand.
  • Promotions and bargains at the point of sale.

Are your machines meeting the expectations of the newest customers in the marketplace? Young members of the "millennial generation" are growing up "wired."

Apple iPods, Sony Playstations, cellphones, bluetooth accessories and PDAs are embedded in their everyday reality. Will they bypass your vending banks because they appear old and boring, or will your brand be consistent with the technological interactivity they expect?

Is vending meeting all possible needs it can meet?
Another question that retail ethnography can answer is how well you are addressing your customers' desired product mix. Vendors sometimes miss out on sales – to give the customers what they want at the moment that they're ready with cash in hand.

Vending and on-site foodservice operators who base strategic decisions on a customer-centric view of their business will be the ones walking away with the sales in the years to come. It is time to understand what marketers in other retail channels have learned.

Step one is to learn how customers are shopping the vending banks. That is why we need a vending study using retail ethnography.

About the Authors:
Hy Mariampolski is the managing director of QualiData Research Inc., with offices in New York, N.Y. and San Francisco, Calif. He holds a Ph.D. in training combined with community sociology, social psychology and cultural anthropology.

Paul Schlossberg is the president of D/FW Consulting, based in Goshen, N.Y. and is a frequent speaker at NAMA expos.

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