Design Your Customers' Decisions

There is a vital lesson buried in the August 19, 2009 Jet Blue announcement that they were suspending sales of the $599.00 "All You Can Jet" promotion they'd debuted only seven days before. Any student of Behavioral Economics could have predicted that an "all you can eat" approach would inspire vastly different behavior than if Jet Blue had charged a lower fixed fee plus $1 per mile. Similarly, over a decade ago when AOL switched to a usage-independent flat price, connection time increased four times more than they anticipated.

"All you can eat" is an entirely different price than "very, very cheap."

Traditional economics says that lowering the marginal price from $2 to $1 should have a similar effect to lowering it from $1 to $0 — but experience and experiments have both shown that the traditional demand curve acts in an odd manner when we reach $0 marginal cost. Jet Blue's executives should have known better.

But the Jet Blue management team is not alone.

Many executives assume their customers are more rational than they really are. For example, most leaders believe in enhancing the options given to customers, but increased choice can actually freeze decision-making by overwhelming the shopper. Excessive options is a key reason that an average of 60% of all online shoppers abandon their purchases mid-stream. Behavioral Economics is the study of how people really think as opposed to how we think they think. To some of us, who were never fully convinced by the hyper-rational assumptions of neo-classical economics, it is a welcome return to reality.

Yet, many firms have such a deep case of rationality-itis that they continue to treat their customers as if they were designed by Adam Smith. In working with Dan Ariely, we've begun to apply a set of ideas from Behavioral Economics in real world settings, around four distinct areas: framing, aversion, social context and timing — what we call FAST decision-making designs — and their impact can be significant. Our aim is to make the choice process easier for the customer.

In their famous recommendation engine, Amazon combines framing and social context, which gives the shopper an easy way to traverse millions of possible selections. In our work with clients we have found that it's possible to increase choice to a higher value and higher-priced product by as much as 10 or 20% by framing the option that is contextualized to them (e.g., "Someone like you also bought this other book.") This is consistent with Amazon's belief that their recommendation engine increases the average purchase by 20%.

In our world of information overload, every new choice is an effort — so companies need to give as much thought to the process of choice as to those choices and options themselves. For instance, Dan noticed that the Economist, at one time, showed three options for their potential subscribers: online-only for $59.00, print-only for $125.00, or online and print for $125.00. He designed an experiment, using his students, in which 84% chose the $125.00 for print and online, 0% chose print-only, and only 16% chose online-only. Any rational manager would say the $125.00 offer print-only offer was useless.

But when Dan removed the $125.00 print-only offer, 68% of people bought the online product for $59.00 while only 32% shelled out for the $125.00 bundle! In other words, the higher-priced option was chosen less than half as often. By having the decoy of $125.00 for print-only, the customer could make an easy comparison to the other $125.00 offer in which they got online for "free." Even something as simple as choosing a magazine has enough complexity in it that a decoy choice can radically change buyer behavior.

If Jet Blue had understood the implications of Behavioral Economics, they may have raised the price on their offer — but despite the data that shows the power of designing the decision process, few companies trust Behavioral Economics because stands in the face of much of the economic logic executives were taught in school.

Every manager should remember that in a world of excess choice, an easy place to differentiate is in the careful design of the decision process itself. It is especially powerful in the ever-increasing realm of e-commerce. Few companies have optimized their customer choice process to make the most of the web. Fewer still do regular experiments to find out how their customers really act instead of how they are supposed to act, and they are leaving money on the table because of it. So ask yourself: is your company's choice process optimal — and do you have data to prove it?

More marketers use social networking to reach customers

Ford Motor has high hopes for Fiesta, a popular model abroad launching in the U.S. next year.
So how does it introduce the subcompact car to Americans?

A massive ad blitz on TV? In-house promotions at dealers nationwide?

Nope.

In April, Ford tapped 100 top bloggers and gave them a Fiesta for six months. The catch: Once a month, they're required to upload a video on You Tube about the car, and they're encouraged to talk — no holds barred — about the Fiesta on their blogs, Facebook and Twitter.

"It's extremely important to this company's history," says Scott Monty, whose job as head of social media at Ford was created about a year ago to take advantage of the growing social-networking wave. "It's about culture change and adapting to this ongoing way of communicating. The bloggers are fully free to say what they want."
Social-media services, such as Facebook, Twitter, YouTube and countless other websites, have had a profound effect on how millions of Americans — especially those under 35 — interact with others (or don't), shop and view brands. It's a real-time digital lifestyle, powered by smartphones and netbooks, that often colors what products they purchase, how they view brands and where they spend most of their waking hours.

Marketers have noticed. Social-networking services increasingly are indispensable business tools, says Forrester Research. According to its survey of 1,217 business decision makers worldwide late last year, 95% use social networks to some extent.
And 53% of more than 300 marketers planned to increase social-media marketing spending this year, according to a Forrester presentation in April.
Some of the biggest companies — Ford, Levi Strauss and Chevron, to name a few — are reengineering marketing operations to embrace digital tools to more nimbly brand products, support customers and cash in on the social-media wave. In doing so, they are creating online communities and aggressive outreach programs, and being brutally honest in talking directly to their customers/followers/fans/friends.

"It was an easy call. This is where our customers are," says Megan O'Connor, director of digital marketing at Levi's. The more-than-150-year-old company last month launched a social-media program on Facebook and Twitter along with a larger "Go Forth" traditional marketing campaign. Its goal is to burnish its brand name among young men.

Grown up digital

At their core, social networks are fostering a blistering number of personal connections and chatter online. The share of Americans 18 and over online who use a social-networking service more than quadrupled to 35% in 2008 from 8% in 2005, according to Pew Internet & American Life Project.

"It's the modern-day version of knitting — to kill downtime," says Kaitlin Villanova, 26, a social-media strategist in Brooklyn who is an avid iPhone user. "I use social networking to communicate, bank, comparison shop, everything."
Facebook is up to 250 million members, 50 million of whom joined in the past three months. In April, they spent 13.9 billion minutes on Facebook, up 700% from April 2008, says Nielsen NetView.

More than 300,000 businesses — one-third of them small businesses — have a presence on Facebook. Members of its fastest-growing demographic — those 35 and older — have enormous purchasing power, a powerful incentive to marketers.
Twitter has about 40 million users who each day produce a staggering amount of tweets, Twitter's quaint word to describe short messages. Its users spent nearly 300 million minutes on the site in April, 3,712% more than in April 2008, Nielsen says.
Increasingly, consumers don't search for products and services. Rather, services come to their attention via social media, says Erik Qualman, author of Socialnomics, a new book that explains how social media have changed how companies do business.

Social-networking-savvy businesses have appointed social-media directors to help:
•Add customers quickly. When software maker Intuit built a site for small businesses in late January, it integrated elements of Facebook, Twitter and LinkedIn, the social network for business professionals. After 12 weeks, it generated more than 1 million visits and helped spike QuickBooks unit shipments 57% in June, year-over-year.

"Social (media) is one of the key trends driving our business," says Kira Wampler, social-media marketing leader at Intuit. "It's more than pure marketing. It's about fast connections with customers and building an ongoing relationship."
National pizza chain Papa John's added 148,000 fans on Nov. 17 through a guerrilla marketing campaign on Facebook. It offered a free medium pizza to anyone who signed up to be its fan on Facebook. The promotion gained it thousands of customers and drove its Web traffic up 253%. It now has more than 300,000 fans and hopes to top 1 million by the end of the year.

•Word-of-mouth marketing. Sometimes a company's best advocates are its customers. Just ask Best Buy and MyFICO, the consumer division of Fair Isaac, which invented the FICO credit-risk score used by lenders. They've built specialized online communities where their customers freely evaluate products and services.

Those who visit MyFICO's community website are spending 41% more than other customers, says Lyle Fong, CEO of software Lithium, which helps build online communities for more than 150 companies, including MyFICO.
Nine in 10 consumers trust their peers more than marketers, according to a recent survey of 25,000 by Nielsen.

The Federal Trade Commission is in the process of amending guidelines that would require bloggers to disclose their relationships with marketers whose products they endorse, says Mary Engle, associate director of advertising practices for the FTC.

•Enhance customer service. For more than a year, Comcast has pioneered the use of Twitter to talk directly to customers. Its Twitter page, @comcastcares, has 28,000 followers.
Comcast's blueprint for unfettered customer support — no more waiting on hold on the phone — fomented a movement. Software maker Sage North America, to cite another example, routinely receives instant feedback from hundreds of people within an hour on specific products and services. "It is a living, breathing, 24/7 think tank of users and employees," says Ryan Zuk, a company spokesman.
Besides being instant, such feedback is cheap. Typically, companies have relied on third-party focus groups that let them observe the reactions of customers during a two-hour session that can cost $10,000 to $15,000, says Natalie L. Petouhoff, an analyst at Forrester Research.

Lenovo has seen a 20% reduction in call-center activity in the U.S. over six months because nearly 50,000 customers go to its community website for information about laptops.
•Speak directly to customers. Blogs, Twitter or Facebook can be an ideal forum for CEOs to offer customers a candid viewpoint.
When a hack attack disabled Twitter's service for hours this month, co-founder Biz Stone gave up-to-the-minute updates on the company's blog.
The Carphone Warehouse, Europe's leading independent retailer of mobile phones and services, has a simple credo: It says, "I'm sorry" when necessary on its Twitter page for customer support.

"There is no gap between the CEO and customer. They now talk directly to each other," says Promise Phelon, CEO of UpMo, a career-management website. "The network is so connected, there's no need for a middleman."
"These customers want honesty, and quickly," says Shiv Singh, who wrote a report on social-media marketing for ad agency Razorfish.

Challenges ahead

But with rewards come risks.

Reaching out to millions of consumers who thrive online around the clock requires an investment, a different type of thinking and some courage, says Petouhoff. She spent six months on a just-released report on monetization of social-media tools at 20 companies, including Lenovo and Intuit.

Many companies — reflecting the general public's sentiment toward social media — fall into two camps: Those who embrace it and those who eschew it. "Those that don't know how to get their arms around it seem to be held back by worrying about the legal implications of customers helping customers, and about being too honest with customers," Petouhoff says.
Most corporations are still wedded to a traditional marketing approach, based on TV, radio and print ads, says Charlene Li, partner at technology consulting firm Altimeter Group. "Ford and Levi's are at the avant-garde of social-media use, but they are not typical," she says.

A social-media plan is hardly a guarantee of success, Li and others say. While some companies — especially market leaders such as Starbucks and Nike with consumer products — are predisposed to the medium, others aren't. Tightly regulated health care providers, for example, may think twice about making the public's comments readily available on Facebook or Twitter.

"Social media is not the messiah," says Michael Brito, social-media strategist at Intel. "It is one of several tools."

Still, a growing number of marketers can't afford to ignore millions of potential customers who are consuming media in new ways.

Three-fourths of men ages 18 to 34 say they spend most of their time in front of a computer screen vs. 18% in front of a TV screen, according to a survey of 50,000 by AskMen.com, a lifestyle website. Those who don't have a social-media plan don't at their own risk, say marketing experts.

"Companies have no choice. This is where their customers are going," says Shel Israel, author of the forthcoming Twitterville: How Businesses Can Thrive in the New Global Neighborhoods.

"Companies have no choice. This is where their customers are going."

IN:FUSE Overview

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In Fuse Overview

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Social Media Rewrites the Rules for Brands

by Lauren Benet Stephenson June 24, 2009

Gucci is doing it. So are Oscar de la Renta, Donna Karan, Target, Urban Outfitters, Louis Vuitton and Rachel Roy.
Fashion houses, designers and retailers are rushing into the free social media phenomenon that is reshaping not only interpersonal communication, but how apparel, accessories and beauty products are marketed and sold.

They are tweeting, blogging and updating their profiles in an effort to mold their brand personalities on real-time global platforms and form relationships with a community of customers, particularly consumers for whom the Web is as important as a limb.

“Customers can feel like they are part of the brand’s extended family, and therefore the brand itself, while the interactive element further deepens that relationship,” said Alex Bolen, chief executive officer of Oscar de la Renta. “These characteristics address and satisfy that ‘tribal’ part of the fashion consumer — the way in which people identify themselves by the brands they buy.”

A key component of social media “is real-time feedback — an ability to accurately measure marketing results,” Bolen said. “While this aspect of the Internet’s promise has yet to be fully realized, one can adjust, fairly quickly, to emphasize those initiatives that are working best.”
The newness of the platforms has made quantifying the sales impact of social media tough to pinpoint, although companies cite rising Web traffic and more customers using promotions.

“How do you quantify something that prevents a customer service problem that could’ve been a disaster,…[that] can create new buzz for a new product?” asked Paul Argenti, a professor of corporate communications at Dartmouth College’s Tuck School of Business. “How do you quantify that? Where else can you get that kind of instant feedback? It’s all unquantifiable and all incredibly useful.”

Reggie Bradford, ceo of Vitrue, a social media consulting firm, believes it’s important to view the situation in reverse, saying a brand will ultimately be “measured in growth or losses by being there [on social media] or not being there.”

More than any marketing medium, including print, where advertising is suffering, social media give brands a chance to be a part of a dialogue about their own companies. In this new and evolving framework, everyone is a participant. According to Forrester Research, Facebook, with an estimated 200 million users, classifies two-thirds of its users as being of post-college age, with 35-plus the fastest-growing demographic. Twitter, a platform for messages of 140 characters or less that had 20 million unique visitors in May, has 42 percent of its users in the 35-to-49 age range and 20 percent ages 25 to 34.

You don’t have to be famous to get a following, but it helps. The king of the Twitter hill is Ashton Kutcher, who got into the game early and has more than 2.3 million followers. Oprah Winfrey, whose first tweet didn’t come until April — “HI TWITTERS. THANK YOU FOR A WARM WELCOME. FEELING REALLY 21st CENTURY” — now has over 1.6 million followers.
The fascination with fashion has even helped breed followings for Twitterers masquerading as major industry figures, including fakekarl (Lagerfeld) and fakeanna (Wintour). WWD’s own Twitter page has grown to more than 688,000 followers from a mere 200 since its launch in February.

Designers such as Rachel Roy and Charlotte Ronson share snapshots of their personal lives and their company’s activities via social media.
Brands including Gap, Victoria’s Secret, Ralph Lauren, Calvin Klein, Nike and Adidas also have tapped into YouTube, MySpace and other sites, where their videos, commercials, behind-the-scenes footage and fashion shows are posted.

“Everyone wants to know what makes [designers] tick, why they design, and get closer to the brand,” said Frances Pennington, vice president of global marketing for Juicy Couture.
Ronson said she updates her Twitter fans at least daily “letting them know if something new comes in or something sells well. It’s a good way to keep everyone connected.”

The designer maintains a Twitter page for her business — Twitter.com/shopronson — with 2,084 followers since starting in the last three months. It includes examples of the Twitter-as-marketing technique, such as a recent tweet that said, “Just got in some great Rag & Bone items…hats, ties and belts…come check it out!!!”

Ronson’s attention to her Twitter page has yielded results in her retail site’s traffic. About 10 percent of Ronson’s total site traffic originates on Twitter, and 93 percent are new visitors. Ronson also posts daily updates on her personal Twitter page, Twitter.com/cjronson, which has 11,946 followers, with musings about her day, such as, “I’m watching ‘Funny Face,’ the musical with Audrey Hepburn and Fred Astaire…Need I say more…”

Roy tweets several times daily on Twitter.com/rachel_roy and has attracted 1,672 followers who frequently retweet — the Twitter term for forwarding a message — her posts. The designer mixes promotional tweets, such as, “The entire RR 2010 Resort Collection Lookbook has been posted on Rachel Roy’s official Facebook Page. Check it out,” with more personal tweets — “I found some cute wellies by Hunter for my daughter and I — green for me and purple for her. Here’s a link to more.”

The juxtaposition is engineered to nurture ties with customers. “I hope that my relationship with customers will become more intimate as they get to know me beyond my designs,” she said.
Facebook relaunched its company page platform in March with more options for organizations to elevate “the power of the brand,” said Tom Arrix, the site’s vice president of U.S. sales. The result is a company page that looks identical to a user’s page, with a “Wall” where the company and its fans can post messages, photos and video; a tab for information about the company, and additional tabs where a firm can add everything from sale promotions to trailers for new ad campaigns.

Facebook offers its users the ability to “fan” a firm or brand — a component that sets it apart from a standard company Web site. Once a user has “fanned” a brand, the business has direct access to them and is able to send messages and updates via a constant news feed on the user’s home page.

The result is a “powerful brand advantage….The company is now in the middle of two-way communication with their consumer,” Arrix said.

To join Twitter, a user creates a free user name and password and then sifts through a search function to find friends and companies the user would like to “follow.” Once a user is following a company, the user’s home page is refreshed with every update that company sends. For instance, if LouisVuitton_US tweets “Louis Vuitton’s new Core Values campaign profiled in today’s @nytimes,” all 10,492 of its followers will see this message on their home pages.
Some naysayers may find it hard to understand why a person would invite a company into their virtual personal life by fanning a company on Facebook or following them on Twitter, but millions have done just that.

It remains difficult to decipher what an online following means for companies in the long term. The more established Facebook and MySpace now have retention rates of almost 70 percent, according to Nielsen Media. However, Nielsen Media estimated more than 60 percent of first-time Twitter users neglected to return to the site after a month.

Vitrue created a Social Media Index to measure what people are talking about online. The index is generated from an algorithm that scours the Internet for a specific term on searches and social media networks and produces a score. The higher the score, the more frequently that term has been mentioned on the Web. Vitrue looked at 35 major fashion brands and retailers from May 26 to June 1. The five most-talked-about brands were Gucci, Target, Gap, American Apparel and Urban Outfitters.

These brands are, not coincidentally, active on social platforms. They “leverage their presence on social networks, have great content [updated frequently] and tools for engagement and conversation,” Bradford said.

“Fashion brands are emblematic of a person’s personality and how they want to be perceived; it’s woven into [her] identity,” he said. “Everybody loves brands — whether they’re generic or Gucci. It’s a statement.”

Gucci first became involved with Facebook in November 2008 after noticing that about 50,000 fans had signed up for a Gucci page started by a person unaffiliated with the fashion label. So Gucci decided to launch a company page, raising the fan count to its current total of 402,502.
The weekly updated page contains original video uploaded to the site, photos from events and new product announcements.

The Gucci by Gucci label launched its Twitter page — twitter.com/GuccibyGucci — in March and has 2,840 followers.

The “currency of the Internet is such that if you’re not updating on a timely basis, individuals are disappointed,” said Robert Triefus, worldwide marketing and communications director for Gucci. “In fact, it can end up backfiring.”

Target has used its Facebook page — with 452,856 fans — for advertising its latest designer collaborations. The retailer most recently posted a video of Dror Benshetrit explaining his collection for Target. The chain also used the page to publicize its philanthropic efforts through a user-interactive application. The company launched the “Bullseye Gives” campaign that allowed its users to vote on the charity to which Target should give money. When a user chose a charity, she was offered the option of publishing her choice to her own news feed.

For instance, if Facebook user Jane Smith voted for Red Cross, it would appear on her home page and on all of her friends’ news feeds, with the message “Jane Smith voted for the Red Cross for the Target Bullseye Gives project,” with a link to the Target Facebook page. This component is illustrative of the allure of Web 2.0 — interacting with a customer who then spreads the company’s message.

Gap has a Facebook fan page with 321,875 fans, and is active on Twitter with 5,269 followers. The Gap Facebook page has videos of designer Patrick Robinson talking about the brand, as well as photos of events and original content.

Urban Outfitters posts promotions and events, and encourages its 101,453 Facebook fans and 27,948 Twitter followers to get involved with the brand. A recent Facebook post read: “It’s your favourite time of the year again — Sale Time. Our Boutique sale starts today online and in store! This means Luella, See by Chloé, Anglomania by Vivienne Westwood, Thomas Burberry, Karen Walker, Peter Jensen et al. are all waiting for you; but not for long!”

Within four days, 72 Facebook users had responded to that post, one of whom recommended a particular Urban Outfitters location, saying, “Best sale upstairs at santana row!”
When American Apparel and its ceo, Dov Charney, were embroiled in a lawsuit filed by Woody Allen over unauthorized use of his image, the company used its Twitter page, with 31,167 followers, and Facebook page, with 133,577 fans, for direct access to customers by posting its official statement on Facebook and linking to Twitter. “We were able to speak and reassure customers,” said Ryan Holiday, an American Apparel spokesman.

According to company estimates, 10 percent of all traffic to americanapparel.net originates from four social media sites — Facebook, Twitter, Chictopia and LookBook.

Oscar de la Renta and Donna Karan have each dedicated a Twitter page to their “PR girls” — Twitter.com/OscarPRgirl and Twitter.com/dkny. OscarPRgirl, which promotes itself as “reporting from inside one of the world’s most prestigious design houses,” began tweeting on June 4 and has 162 followers. A recent tweet: “Hathaway is the new Hepburn: Anne H. looking impossibly chic @ the tony awards in Oscar de la Renta.”

The DKNY page, which launched on May 8 and has 981 followers, bills itself as providing “behind-the-scenes scoop from inside DKNY” written by a “PR girl.” The tweets are personality-laced messages that promote the Donna Karan label, such as “So great! Karen Olivo won the TONY (Award for “West Side Story”). She looked so chic in Donna. Huge pic in the @dailynews.”
Betsey Johnson began her Twitter page, Twitter.com/xoBetseyJohnson, Jan. 23 and has 8,068 followers. The page is updated several times daily with promotional tweets such as “Don’t miss out on our Memorial Day sale! Tomorrow is your last day to save 30%!” mixed with attentive dialogue with her followers — for instance one follower said “doing some damage on the @xoBetseyJohnson Web site. retail therpy” and xoBetseyJohnson responded “Nice! Everyone needs retail therapy! Xox”).

“We saw [social media] as a real opportunity to reach out to customers, to use it as free advertising and be a human voice for the brand,” said Agatha Szczepaniak, public relations director.

Kate Spade coined the term “tweetwriter” — a combination of “Twitter” and “typewriter” — as a tool in the company’s venture into social media. The Tweetwriter is an antique typewriter, which was set up in the brand’s Fifth Avenue store in May. The staff encourages customers to type messages they would like to see on the Kate Spade Twitter page, which has 641 followers. Eclectic entries such as, “from 135 5th ave: i could watch the clouds pass all day” fill the page, giving it a quirky feel. Lindsay Stevens, director of marketing and strategy, said the aim is to project “a collective point of view from our customers.”

Juicy Couture launched an interactive social media platform on its own site, called Club Couture. The technology allows consumers to put together looks from the collection and share the outfits with friends who can then rate the outfit and create their own.

This social interaction has resulted in a conversion rate 162 percent higher than any other part of the site — meaning a user who happens upon the Club Couture page on the company’s Web site is 1.62 times more likely to purchase an outfit on the site than if she had been browsing any other page on juicycouture.com.

It is essential for businesses to have a clear strategy and goals regarding social media, said analyst Diane Clarkson of Forrester Research, who wrote the report, “How Twitter Can Influence eBusiness.” Diving in without them is not a viable option.

Social media is “a little bit of a Pandora’s box,” Gucci’s Triefus said. “If you’re going to get involved, you have to have the resources to be able to do it correctly.”

If a brand isn’t vigilant, a constantly adapting, public organism like Twitter or Facebook might do more harm than good. For instance, a “Twitter storm” is a digital mob of sorts that forms around a topic or current event — which, when negative in nature, can harm a company’s image if there’s no counterpoint from the brand in question.

“We’ve seen Twitter storms with fast backlash when a company does something that [fans] don’t like,” Clarkson said. “I’d want someone accountable for the brand to be behind that.”
What appears certain, however, is social media platforms will keep evolving, proliferating and gaining influence.

“The fashion world is shifting, needs are changing and people’s shopping habits are changing….It’s clear that [consumers on social media] are part of the overall fashion conversation,” Roy said. “And I don’t think that is going to change.”

State jobless figures show signs of stabilizing

From the Minneapolis Star Tribune:

Minnesota employers cut 1,600 jobs in May -- the smallest number of cuts in 10 months -- putting the monthly unemployment rate at 8.2 percent. That rate is up slightly from April's revised 8 percent. Minnesota employers cut 7,000 trade, transportation and utilities jobs and 2,100 manufacturing jobs last month, but restaurants, hotels and others in the leisure and hospitality industry added 7,100 jobs -- a significant jump from the same month in 2008.

Nationally, the unemployment rate soared to 9.4 percent in May and there are predictions by research firms that the national rate could top out at 10.4 percent next year. Minnesota's May results gave some hope that the state is further distancing itself from the national recession.
"The leisure and hospitality gain ... was a huge increase,'' said Steve Hine, Minnesota's director of labor market information. "Not only was there a real surge in jobs at food and drinking establishments, but it was across the board."

Hine credited some of the surge to improved consumer confidence, tax relief provided through the federal stimulus package and pent-up demand.
Another positive sign came from the construction sector. For the first time in two years, construction companies added jobs, hiring 900 workers last month as the stimulus packaged kicked into gear, providing funds for highway construction.
The trend is expected to continue as stimulus money flows to new water treatment projects around Minnesota, state officials said.

"It's not clear if we have reached a turning point in our economic recovery, but there are some optimistic signs," said Dan McElroy, commissioner of Minnesota's Department of Employment and Economic Development. "We are encouraged that the unemployment rate has held steady in recent months and that the pace of job losses appears to be slowing."

The weekly number of new unemployment claims was about 7,500 two weeks ago and 6,500 last week. However, there were also about 2,800 reactivated claims, which put the news claims figure at 9,300, down from around 11,900 in January.

While its down, "these are high numbers compared to other years," McElroy said.
Minnesota currently employs about 2.67 million workers. State economist Tom Stinson said that prior to the recession the state had been gaining about 30,000 to 40,000 jobs in a year. But over the past year Minnesota has lost 96,000 nonfarm jobs, or about 3.4 percent of total employment.

Changing consumers

Changing consumers: WRC 09 insights

ANDREW JOBLING, WGSN 04.06.09

Consumers are changing.

Whether being moulded as a result of the global financial crisis, shaped in response to the advances in technology or enlightened as emerging markets flourish, the shoppers of tomorrow will be very different from those of today.

Of all the important themes to emerge at the World Retail Congress, held in Barcelona in May, one of the most important stressed that many previous strategies could no longer be relied upon. Consumers are changing, and retailers need to keep up.

Several factors are influencing these changes, and unsurprisingly global recession is one of the biggest. The slowdown has hit the consumer mood hard, shifting attitudes. It has altered the perception of what is required in a product and, importantly, what is desired. In many ways, the aspirational consumer is no longer aspiring but instead seeking out value for money, with Jim Stengel, CEO of Jim Stengel LLC, noting that it had "become fashionable to be thrifty".

David Roth, CEO of WPP's retail division The Store, said that consumers have reprioritised and there will not be a return to "business as usual". Instead there is now a focus on sanity, and from a retail perspective that means range rationalisation becoming the new cost-cutting agenda.

One area likely to feel the effects of this mood shift is affordable luxury, with consumer aspirations to be seen as enjoying the glamorous trappings of wealth being replaced by a focus on value. Concetta Lanciaux, CEO of Strategy Luxury Advisors, describes the process as trading up, where consumers are still willing to spend but only on products that offer inherent quality rather than superficial glamour.

"Trading up means removing fake," she said. "Consumers today prefer to buy semi-precious stones rather than zirconium."

But amid the frugal mood, Stengel suggests that there are "ripples of opportunity" for retailers who really emphasise the consumer experience throughout the retail journey. Play an important role in their lives, stand for something that matters and focus on the ownership of the product rather than just the purchase, he says.

"Those that really understand what is going on with the shopper will be the ones that lead the way in the future," he said.

Emerging middle classes.

Emerging markets are seeing a different consumer change, driven primarily by a rapidly expanding middle class. China, for example, is expected to see its middle class surge from 6.15% of the population currently to 55% by 2020, and fast growth is predicted in many other developing markets.

What this means is that demand for many items, including discretionary consumer goods, will drive upwards. Of course this isn't a new development - emerging markets have interested major retailers for years, but they have met with mixed success and speakers at the World Retail Congress offered some explanations for this.

Key recommendations included focusing on local markets rather than trying to implement broad strategies; and really getting to know what the local consumer wants - something that can vary wildly across huge countries. However an important point to note is that as markets mature, so does the consumer, and those in some of the major target countries are learning quickly.
"The Indian consumer will be very demanding," said BS Nagesh, MD of Indian retailer Shoppers' Stop. "There is a new class of consumer that demands his rights and knows to shift to someone else if they are not satisfied."

Bijou Kurien, CEO at Reliance Lifestyle, went on to add that consumers in the country were now much more brand-aware, demanding the latest season's ranges as well as a much wider choice. However, they are also more willing than ever to spend, due to a higher confidence in the future among young consumers.

Technological drivers.

Aside from economic factors, technology is playing a huge part in the changing consumer. Recent years have seen e-commerce, m-commerce and social networking all combining to add options for consumers and shake up the retail environment. But now consumers themselves are changing as the technology becomes an integral part of the shopping experience - and what's more, they are demanding that retailers change, too.

John Donahoe, eBay CEO, said that consumers are naturally now integrating online research with store visits, and with that integration only set to increase they are "demanding that we break down the boundaries" between online and brick-and-mortar stores.

"We need to embrace the fact that online and offline are blurring, and the consumer wants convergence," he said.

Social networking is seen as a crucial strategy, with retailers keen to tap into the powerful word-of-mouth marketing opportunities it could provide but also realising that the technology revolution has changed the way brands need to communicate.

Roth noted that consumers who have grown up in a digital world are used to communicating through interconnected "channels of me", and as a result the way a consumer interacts with brands has changed for good - with retailers needing to be much more efficient in their communication across the whole path to purchase.

However while social networking offers a multitude of possibilities, retailers need to be careful to maintain the medium's authenticity - attempts to turn it into a sales and marketing tool are likely to be met with resistance by the very audience they are trying to connect with.

They also need to be able to treat it as both friend and foe. Hot Topic discovered that the popularity of social networking was challenging the time-honoured tradition of teens hanging out at the mall and, as a result, having a direct hit on its sales.

"Retailers need to find a way to get people into their stores, rather than relying on mall traffic," said CEO Betsy McLaughlin.

The answer for Hot Topic was to have live music with bands playing in store, and the retailer garnered results in the shape of a turnaround from negative comps to record six consecutive months of gains.

Key points
Recessionary pressures
• The global recession is provoking long-term changes in consumer mindsets.
• Value is key, with more-superficial aspirations in decline.
• Retailers need to concentrate on consumer experience, offering value not just at the point of purchase.
Emerging markets
• Booming middle classes offer huge potential but successful market entry is often tricky.
• Retailers need to concentrate on local markets rather than broad-based strategies. Get to know the consumer.
• Consumers are becoming more educated and more demanding.
Technological drivers
• Consumers are pressuring retailers to "break the boundaries" between online and brick-and-mortar stores.
• Increasing technological integration in shopping experience is changing the way consumers shop.
• Brands need to communicate better across all paths to purchase.
• Tapping into social networking offers huge possibilities, but there are also challenges.

© WGSN 2009

Wal-Mart to add 22,000 jobs in U.S.

BENTONVILLE, Arkansas (Reuters) -

Discounter Wal-Mart Stores Inc says it will add more than 22,000 jobs in its U.S. namesake stores in 2009.

The forecast points to lower growth compared with last year, as the world's biggest retailer opens fewer of its U.S. Wal-Mart discount stores to focus on expansions and renovations.

Last year, the company created 33,800 U.S. jobs, though that figure also included new jobs at its much smaller Sam's Club members-only chain of warehouse stores.

Wal-Mart has gained market share despite the poor economic climate as shoppers seek out its low prices on everything from food to electronics.

But the retailer has not been immune to the downturn. At an October analyst meeting, executives said the company would slow expansion of new U.S. Wal-Mart supercenters to focus instead on spiffing up existing stores.
Last October, Wal-Mart announced plans to open 157 to 177 new or expanded stores and clubs during the current 2010 fiscal year in the United States.

Numerous retailers including Target Corp and department store operator Macy's Inc have announced job cuts in recent months as the recession slows sales.
Overall, the U.S. economy is expected to shed 520,000 nonfarm payroll jobs in May alone, according to a Reuters poll of 79 economists.

Wal-Mart said the new positions will be in all levels of retail operation, including cashiers sales, store management to pharmacists and other positions.

Benefits, including affordable health plans that offer customized health coverage options, will be available to full- and part-time associates, the company said.

The announcement comes as the retailer readies for its annual shareholder's meeting on Friday, and just four months after it slashed 700 to 800 jobs at its Wal-Mart and Sam's Club home offices in Bentonville, Arkansas.

(Reporting by Ian Sherr and Lisa Baertlein; Editing by Gary Hill)