Nyenrode Business University’s Henry Robben Speaks Out:
How To Win A Sustainable Business Advantage
Jim Prevor’s Perishable Pundit, June 3, 2014
Many of the things we are doing in the UK at The London Produce Show and Conference are adaptations of successful approaches we pioneered in New York. One of the unique components of The New York Produce Show and Conference is our University Interchange Program. In this program we reach out to the great universities and bring in professors to share with the trade the cutting edge research they are doing and students to expose them to the industry and excite them about becoming the next generation of talent to work in the field. The students always find the events fascinating and their attendance productive. The professors typically provide great value. In New York we have seen academic presentations such as these:
Dr. Roberta Cook Will Talk About Increasing Produce Consumption At Global Symposium
New York Delegates To Receive An Education In Ethnobotany From Eminent Italian Professor
A Cornell Study On New York Wines Raises A Fresh Question: What Do We Mean When We Ask About Local?
What Makes Consumers Willing To Pay More? University Of Delaware’s Kent Messer To Unveil A Unique Synthesis Of Multiple Studies At The New York Produce Show And Conference
Global Trade Symposium Keynote Speaker, Professor Tom Reardon, Will Discuss The Rapid Transformation, And Increasing Opportunities, Of Produce Markets In Emerging Countries
Immigration, One Of The Hottest Post-Election Issues, Will Be Brought To The Floor Of The New York Produce Show And Conference
Meet The Gastronomes — And Learn About Their Mission To Increase Produce Consumption — At The New York Produce Show And Conference
Food “To Die For” May Do Just That… Seminal Study Encouraging The Eating Of Bitter Vegetables For Health To Be Unveiled At New York Produce Show And Conference
Perceptions And Misperceptions: Consumer Attitudes On Organic And Local — University Of Connecticut Study To Be Unveiled At New York Produce Show and Conference
Cornell Professor Miguel Gómez To Speak At New York Produce Show And Conference On Fruit & Vegetable Dispute Resolution Corporation
Riding The Roller Coaster: Roberta Cook Of UC Davis Explains How Economic Fluctuations Create Marketing Opportunities
Vitamin D Enhancement In Mushrooms: Can This Be A Portal For The Produce Department Into Functional Foods? Professor Neal Hooker Of St. Joseph’s University Unveils The Latest Research At New York Produce Show And Conference
Foodservice At The New York Produce Show And Conference: Amy Myrdal Miller Of The Culinary Institute Of America To Engage The Industry Toward MyPlate Solutions That Will Increase Sales, Consumption And Public Health
ETHNIC AMERICA: Opportunities For Growers, Wholesalers And Retailers In Ethnic Produce Items... Rutgers University's Dr. Ramu Govindasamy Unveils New Research
What's In A Name? Professor Brad Rickard Of Cornell Produces New Research That Indicates Shakespeare May Have Been In Error... On Apples At Least
Cornell Professors To Present At The New York Produce Show And Conference: New Ways Of Thinking About Local: Can The East Coast Develop A Broccoli Industry?
Pundit Mailbag — Professor John Stanton’s Presentation At New York Produce Show And Conference ‘Worth The Registration Fee Alone’
Professors From Cornell And Arizona State Universities To Unveil Generic Produce Promotion Research Results At New York Produce Show And Conference
Research To Be Unveiled At The New York Produce Show And Conference Shows ‘Local’ Preference Versus Organic
Rutger’s Professor Ramu Govindasamy To Speak Out At The New York Produce Show And Conference… Research On Asian And Hispanic Produce Marketing On The East Coast Identifies A Profitable Opportunity
A New Hypothesis On Local: To Boost Sales, Sell It Through Supermarkets… Cornell’s Miguel Gomez Previews His Upcoming Talk At The New York Produce Show And Conference
We have extended the concept and invited Cornell University, one of the schools we work with in New York, to contribute to The London Produce Show and Conference. We profiled that presentation in a piece we titled:
At The London Produce Show And Conference: ‘Room at the Top? — What U.K. Retailers Can Learn From U.S. Natural/Gourmet Retailing’ Cornell University’s Rod Hawkes Points Out That ‘Upscale’ Has Changed And That The American Experience Points To The Possibility Of Big Changes Ahead For UK Retailing
We also reached out to a Dutch university where Cornell’s eminent Professor Ed McLaughlin holds an adjunct appointment. We are hosting eight students from this university and we asked Pundit European Correspondent Gill McShane to find out more about the Professor’s talk:
Professor of Marketing
Nyenrode Business University
Breukelen, The Netherlands
Q: Can you provide a sneak preview of your talk at the London Produce Show and Conference? What key marketing insights will you be highlighting in particular?
A: My specialization is marketing strategy, and I investigate how companies can compete and remain sustainable in changing markets by creating competitive advantages, or, in other words, reasons for customers to buy and to stay. In what appears to be an increasingly competitive environment, with thin margins and rising customer demands, I will present a general picture of how companies will not survive in the market unless they have competitive advantages that make them more relevant for customers. In some industries the economies of scale are important but I would like to emphasize the duty of companies to first create effectiveness and then search for efficiencies, and not the other way around. Given that fresh produce is a very important category for most households (and mostly isn’t branded) the question becomes how can we achieve a competitive advantage through mainly non-branded products like fresh produce in what is a highly branded retail environment?
Q: Can you describe what you term as competitive advantages and explain how fresh produce companies and retailers can achieve them?
A: In Fast Moving Consumer Goods (FMCG) and retail, we need to create competitive advantages in terms of image, offering, customer process, and sometimes price. It is only when these competitive advantages truly act as compelling reasons for customers to buy that we can think about sustainability. If you look at Lidl, the German discount chain, they have won an award in the Netherlands four times in a row (2010-2013) for having the best produce in a supermarket chain. Given that they are a hard discounter this raises a few questions. We have a hard discounter that is winning market share with non-branded produce. You could say that the retailer’s own brand rubs off on that produce and it’s also the additional services and products that they sell that attract the customers.
Q: So, you believe that reputation and image play a key role in developing a competitive advantage?
A: Yes, my research shows the biggest differentiator between companies that are winning and losing is their image. We have found that to be true across several industries: B2B, B2C, services, products and so on. Of course, image is something that doesn’t happen overnight; you work towards it over many, many years. Image is also customer-specific, it’s not product-specific and it may not be company-specific, which makes it difficult to make a very clear-cut suggestion to companies because it’s their customers that experience a certain image. It’s customers who say: ‘I like this company because…’.
What every company should do is think about how they are being perceived at a particular moment, and ask themselves what are the particular components of their image that their customers like. Find out what your image should be in order to retain your customers. In my research you don’t see any significant statistical differences in terms of the offering as most supermarkets and companies have an OK offering. They don’t distinguish themselves in terms of how they treat the customer either because in western Europe we do know what customers like and we know how to treat them. So maybe it’s the image that needs working on.
Q: In what ways could a company improve its image?
A: You can improve your image but it takes time. I think for a retailer it’s very important to have an image that demonstrates that they are reliable and sustainable. Most people care about their food whatever their budget because they still want to feed their families healthy and sustainable meals. To facilitate that a retailer might need to change its assortment. For instance you only see cucumbers in store that are very straight because as produce is such an important category retailers like to present it in the best way possible. Yet cucumbers that are curved taste just as good. So retailers might offer those too as a value option or you could even sell these curved cucumbers at a higher price because they are special.
Q: How can the additional services and products offered by a company or retailer help that organization to gain a competitive advantage?
A: Albert Heijn, in the Netherlands at least, has its own label called ‘Excellent’. Under this brand the retailer offers fresh food (a salad or pre-processed pie) with an awful lot of margin but in general it’s made up of vegetables or fruit. But the products are assembled into a very nice package that looks very appealing and because of that the retailer can command a very high price. So it’s not the produce per se that is attracting the customers. You might have a nice, ripe apple but there is a lot more that you could and should do to obtain its competitive advantage.
Q: In effect, you’re saying that it’s possible for a company or retailer to use other products to boost their fresh produce sales?
A: That’s right. Simply marketing the produce itself isn’t good enough unless it has outstanding quality or you have a very surprising assortment. But coupling produce with other products is very enticing. For example, asparagus is big in the Netherlands and to cook it you can use a certain kettle which not everyone owns. Of course you can still cook asparagus without this particular kettle but it’s much more fun to use it. So, if you have the asparagus and can sell the the pots and pans that go with it that’s great, and perhaps there are some other vegetables that could be cooked in the kettle that you could also sell that would lead to further sales.
Q: Data shows that fresh fruit and vegetable consumption in Europe is in decline, while other (often cheaper) sectors that also claim to be healthy, such as yogurts, are doing well. In view of your comments about product coupling, could the fresh produce sector position itself better by working together with other sectors to market a combined offer?
A: I think it all boils down to what you want to be for each customer. The customer’s need for good food will always be there. The way we choose our food and which combinations may be subject to fashion. If people like yogurt so much, why not jazz it up with a little fruit to make it even better. You could entice people to make their own perfect breakfast of yogurt with fruit and leave it up to them to decide which fruits to use. It’s always good to look at what’s happening in terms of developments but you should also try to find out why customers are changing their behavior. If it’s because of price then of course you have a problem. If the customer thinks the largest part of the margins go to the retailer they will ask why doesn’t the retailer decrease its margins so the customer can have a better price. But if the retailer can show that most of the margins go to the producer then you would have an entirely different situation. Of course customer preferences always shift so companies and retailers should shift along with them.
Q: Do you think that a lack of ‘good marketing’ has played a part in European consumers not eating more fresh fruits and vegetables?
A: It’s about good marketing, yes. A lot of marketing that we see doesn’t deserve to be called marketing – it’s more like a bad way of selling. Marketing should always consider the needs of all stakeholders combined and not just those of one party. I think that suppliers and retailers should find out what is it that their customers really prefer. If they prefer a good assortment then change your assortment. It’s all about businesses being effective rather than being efficient. Any supplier, whether they are B2B or B2C, has the duty to make their customer happier, more competitive and profitable. It’s their duty to create value for the customer and you can only create value if you do something that satisfies a need, whatever that need might be. So my advice would be to focus more on the needs of the customer because if you fulfil that then you create value. Then a very nice principle called reciprocation comes in to play: ‘if you’re good to me, I’ll be good to you’, which is a natural tendency in human beings.
Q: Apart from using image and product coupling, are there any other ways that fresh produce suppliers can develop a competitive advantage?
A: Obviously recipes and usage instructions are attractive but that’s really a no-brainer as everyone is doing it. You could also look at changing your assortment according to seasonality, which is a big deal in some markets where people prefer to buy produce that’s in season. I know that many people in the Netherlands for instance like tangerines but for them tangerines are a summer product so you could just sell the fruit in summer. But, of course, there will be some who argue that tangerines can be supplied and eaten all year round. Local sourcing is another way. I know a local grower in the Netherlands that delivers its produce to customers at home and they only supply those fruits and vegetables that are in season. So they must be taking some market share from the supermarkets. The top restaurants in the Netherlands also get their produce from local growers and they simply use what’s available at the time.
Q: Do you think local sourcing could really lead to major sales growth in a market like the UK where consumers have become so used to having all of their produce items in stock all year round with consistently good quality and the option to buy a whole range of fruits and vegetables which the UK simply cannot grow under its climate?
A: For those that want to eat produce all year-round which are not grown in the UK, assortment comes into play. Produce is such an important category for households – you have to have it. Lidl has shown that if you offer a good assortment then you can win market share. I think that because no one expects a hard discounter to have such a good assortment of produce and such good quality that consumers are pleasantly surprised and shop there more often. It makes it more enticing. You could also differentiate your assortment by selling local produce at a regular or lower price and the more exotic produce at a higher price. But then you may put off those shoppers that want to do all of their shopping in one store.
Q: The rapid success of the discount retailers in the UK has led to the big four supermarkets responding to that competition with a raft of price cuts across their product ranges. Do you consider lower prices to be a competitive advantage?
A: What we see through research is that companies who focus on price are more often than not the losers in that industry. I think that if you start to compete on price it’s either because you’ve nothing to offer, or rather nothing that distinguishes you from your competitors so a lower price is your only instrument. Or, you want to engage in a price war which will not benefit anyone except the winning company. Supermarkets might say they’re not engaging in a price war – they’re just matching their prices in certain categories with their competitors. But customers think differently; they are happy to buy some products at one supermarket and others elsewhere. So you might distribute traffic to supermarkets differently and, if you don’t pay attention, in an unwanted direction.
Q: What would be a better solution than cutting prices?
A: I think it would be far better to offer an assortment that suits your customer segment so they are attracted by a better offer rather than a lower price. There are instances where consumers don’t mind paying a higher price because they have friends over for dinner or it’s someone’s birthday. Then there will be occasions when they don’t want to pay a higher price at all because they don’t see the difference between the products that they can buy at Aldi and Albert Heijn for example, especially if these supermarkets are located quite closely to each other because then it might be worth doing two trips instead of one.
Q: Clearly there isn’t a one-size-fits-all strategy to developing your competitive advantage, so how can companies work out what is the best marketing approach for them? Does it come down to working out the specific needs of your own customers and tailoring your offer accordingly?
A: As a marketer I’m fighting against the idea of there being one solution. I know that quite a few industries would like to have a very efficient solution that they can use at any time, in any place and anywhere. As a marketer I don’t think you should look for such a solution at all. I strongly believe that there are many segments in a market. I don’t believe that there is a homogenous market, so there will always be segments of customers who would prefer one assortment over another assortment. What you need is a solution suited to your environment and your customer, and preferably one that can’t be copied quickly. In other words, look for an effective solution and not so much an efficient solution.
Q: What would be an example of an effective solution for the fresh produce business?
A: I think rearranging your supermarket produce department or your produce offer to reflect the segmentation of your market would help. For example, I recently saw a very nice presentation in Belgium by a manufacturer of furnaces called Atag. They said there are three types of cooks: the every-day or efficient cook who cooks to eat; the social cook who cooks because they like to entertain family and friends; and the would-be professional chef. All three types of these cooks may show up at your store yet they are all looking for different products. So one idea might be to offer such an environment that reflects these three different segments.
Q: How would you suggest that a retailer presents its produce offer to reflect those three different market segments?
A: Of course you couldn’t segregate your supermarket for the different cooks because there is some crossover. For instance, I am a social cook but I’m also an everyday cook because I need to feed my children. So a good idea would be to offer several varieties of produce. You might also have different packaging options and presentations with different weights for the various customers’ needs. But for the hard discounters the best solution would be to focus on one or two of these segments and not on all of them. The power of many great marketing companies is their focus. They don’t want to be everything to everyone.
Q: If it really comes down to fully understanding who’s buying your products, how can companies and retailers learn more about their consumers?
A: The easiest way for retailers to find out about their shoppers is through simple observation. Go to your store and see what is happening. Another way is through analyzing data. Don’t assume, just analyze the data and see what it means. Loyalty programs would create a lot of data. You could also get data from watching how consumers behave in their own homes. There is a market research agency called Insites which has a different approach to gathering data. They use online qualitative research whereby they establish a forum on the internet and invite everyday customers to talk about their experience with certain products.
Most retailers are already sitting on enormous piles of data, so it comes down to how can they put it to good use. Albert Heijn in the Netherlands is doing a nice job online of trying to get people to buy more because once you’re browsing through the assortments online they provide hints about what else you could buy from them. But what about in store? They could seduce you to buy more in their stores but it would need to be based on whether you have the time to browse, the time to listen to advice and the time to make choices. Sampling is always a good idea too because it’s a very powerful way of letting consumers experience new products while finding out their immediate reaction.
Q: How easy do you think it is for retailers to truly understand who their customers are?
A: I think it’s fairly easy if you ask the right questions. If you insist on benchmarking your operations with other organizations or operations then you’re forgetting the customer. As a marketer I’d say if you can focus on certain segments or the certain needs of those segments it would be far better than simply looking at how can you organize things more efficiently. Asking the right questions about your customer is key but you have to give them chance to think about what they need. Observing them in their natural habitat – in the kitchen or wherever they eat their meals – is best. Then you would see that consumers also value other things that have to do with food such as having happy family members and healthy kids, or feeling that they’re contributing to society and not wasting energy or products and so on and so forth.
Q: So, retailers really need to put the consumer first and invest more in understanding their specific needs and the driving forces behind their purchasing decisions?
A: Yes, if you look at big companies like Unilever, Procter & Gamble and Gillette they practically live with consumers. They ask them to prepare a meal, to fry an egg or prepare a cup of coffee. Every day Gillette observes how hundreds of men shave in front of their mirrors. If retailers cooperated with manufacturers or other parties they would get this data. Also there’s no law against retailers doing this research themselves or they could engage with independent consultants or research institutes to do it for them. Instead of having an big annual conference retailers could spend that money on really good research to find out what it is that drives consumers.
Q: Do you think that over the years retailers have forgotten about the consumer and instead become caught up in competing with each other and offering consumers what they think they want?
A: Well, the goals of a retailer are completely different to the goals of their consumers. So there might be a disconnect in terms of focusing on what their competitors are doing rather than what their regular consumer would like. If you focus on your competitor you are more or less bound to end up benchmarking and ending up providing a similar assortment. The customer sees that and then doesn’t want to pay more for an assortment of similar value. So retailers must make sure that they differentiate themselves in a way that’s relevant for their customers.
Q: How do you think companies and retailers can truly differentiate themselves when they’re selling mostly the same items, particularly when it comes to fresh produce?
A: That’s where part of the problem arises because supermarkets for example are all similar. They attract similar customers and those customers are looking for similar things so they expect to pay similar prices. But because they want to be everything for everyone they are no different. There might be some cosmetic differences like a different slogan, logo or gimmick but it’s not a form of strong marketing. Strong marketing is being different and relevant in the eyes of the customer but it takes guts to do this.
I think in most cases it simply boils down to assortment and presentation. If every retailer sells the same apples, which they typically do, then why should a consumer go to one supermarket in particular. But if one retailer can pride themselves on having the freshest apples then that would be a nice reason for the customer to shop there.
I think retailing by itself is perfectly positioned to carry out proper behavioral research; to find out how people buy, what they buy and why they buy. It’s more about systematically collecting the right information through which you can make the right decisions. I think retail is perfectly suited to do just that because they have a large number of people visiting their stores and they carry out many transactions. It would be pretty easy to conduct some experiments that really show what differences could be made with product presentation and assortment, etc.
Q: What do you think is the industry’s greatest challenge?
A: The most important thing is to focus. Don’t expect that you can sell everything to everyone. Don’t expect that you can be the number one in each category. I think companies and retailers should focus on those customers that for them are the right customers. If you try to cater for everyone you will have a problem. I firmly believe that the only way to become sustainable and to be sustainable is to focus on what it is that the customer needs and to make sure that you differentiate yourself and that you’re relevant in the eyes of the customer.
Q: And finally, what overarching message would you like the delegates at the London Produce Show and Conference to take away from your presentation?
A: I’d love to make everyone realize that if they want to win in their market they need to be different and relevant in the eyes of their customer, and that means making choices. You need to focus with the utmost discipline because it’s very easy to lose focus when your competitors are playing with prices or launching nice gimmicks as part of their marketing campaigns. You really need to have some backbone to continue focusing on what you do and not give in.
We find this thesis interesting but hope the good professor will push it to the limits of his logic in his live presentation. There is little argument that businesses should be customer focused and that one can go astray focusing on competitors rather than the customer.
It also seems unobjectionable to say that if an entrepreneur is looking to start a new business, say a new retailer, they would be better off focusing on a specific niche rather than trying to appeal to everyone. Indeed during Tesco’s journey to America as Fresh & Easy we often urged Tesco to split the stores into two concepts. Make some a deep discount Aldi clone, while others became a kind of epicurean Trader Joe’s clone.
But what, specifically, is the suggestion this piece is making to a Tesco? In what ways are Tesco shoppers so different from those who shop at Sainsbury’s that a change in assortment or merchandising is likely to provide a big competitive edge?
When Professor Henry Robben writes that … “if you start to compete on price it’s either because you’ve nothing to offer, or rather nothing that distinguishes you from your competitors …” he is doubtless correct.
Most companies would rather have a superior offering and offer superior value through that offering than have to compete on price. But almost inherently we are talking niche markets, such as a retailer who focuses on a particular ethnic group or consumers who want the healthiest food, etc. So, perhaps, one could argue that the direction retailers should go is to consumers themselves. Create divisions that specialize in different kinds of people.
There is a lot to this, but, less than it seems. Ethnic groups have special needs but many of their needs are the same as everyone else’s needs.
In produce perhaps the way to proceed is with proprietary items. Unique genetic variations that offer consumers compelling options. Because these items are typically limited in quantity that is allowed to be planted, not every retailer can sell the same thing.
Driscoll’s is big in this, and Sun World has an initiative to gather its licensee growers from around the world to showcase how a retailer can decide to differentiate itself and gain consumer preference by featuring unique and proprietary Sun World varieties year round.
So we hope the trade will join us to listen to Professor Robben’s presentation and then go out on the trade show floor and see how unique proprietary produce can help a retailer gain a competitive edge.
You can learn more about the event on our website.
You can register for the event right here.