Published for Western Michigan University Food Marketing Conference 2014

Probably not a week goes by anymore that I don’t read yet another article about a young internet startup company being valued at some obscene amount of money: WhatsApp for $19 billion, Pinterest for $3.8 billion, Oculus Rift for $2 billion and AirBNB for $10 billion. Just consider the bizarre market logic of AirBNB. In less than six years, AirBNB—a website that lets average people rent their home or apartment out to random travelers—is worth more than Hyatt hotels, with a market value of $8.3 billion, or Wyndham Worldwide Hotels, currently valued at $9.3 Billion. Hyatt manages over 500 properties, while Wyndham manages 7500 hotels under the brands Wyndham, Ramada, Super 8, Howard Johnson’s and others. AirBNB doesn’t own any properties or brands: not one hotel, gift shop, shuttle van, luggage cart, treadmill or swimming pool. Nor does AirBNB manage any bellhops, chefs, concierges, housekeepers, life guards or doormen. The engineers and tech geeks at AirBNB probably couldn’t even manage room service if they wanted to (I imagine they just order out for pizza every night, or perhaps champagne now). AirBNB has less than a thousand employees, compared to the tens of thousands who work at Hyatt and Wyndham.

AirBNB vs. Wyndham. This kills that, right?

For all intents and purposes, it looks to a lot of observers that we have two parallel economies today: the old world business economy and the new internet-fueled economy. For those of us now stuck in the old economy—including myself—you kind of have to ask yourself: What do we do now?

This Kills That…But Something New Emerges

To be totally honest, somedays I feel like I’m stuck in that famous scene from Victor Hugo’s novel The Hunchback of Notre-Dame set in medieval Paris, as the antagonistic character Claude Frollo looks at the newly printed book on his desk and then turns to the window of the church and utters the terrifying line: “This will kill that!” Frollo’s grim declaration was a reference to how the printing press was going to kill the primary importance of the mighty cathedral’s architecture. He feared that a powerful new technological force—the Gutenberg printing press and its mass-reproduced books—was about to kill a powerful traditional institution—the cathedral, or more broadly speaking, the sites and the networks of how and where people gathered and congregated.

It looks to a lot of observers that we have two parallel economies today...

But in the end, architecture didn’t die, nor did the church. In fact, the printing press allowed for more Bibles to be published, which only helped spread Christianity further throughout the world. And that further necessitated architects to design and build churches in more places. Granted, these churches were very different from the grand gesture of Notre Dame, but they still served a critical supporting purpose for the “brand” of Christianity. Churches big and small, sometimes magnificent and sometimes in a strip mall, still serve regular people today throughout the world as a place where people convene to follow their faith.

While the architecture purists of Victor Hugo’s era positioned the building against the book, architecture had already reached an impasse and needed to evolve to stay relevant in a changing society. Thanks to the creativity and imagination of thousands of talented designers, architecture continues to thrive today as an evolving force. While the most impressive architectural influence isn’t found in churches as much, architecture has continued to redefine the life of major cities, such as the way the Petronas Towers in Kuala Lumpur has impacted that city’s skyline, or how Frank Gehry’s Disney Concert Hall has reshaped the cultural life of Los Angeles. And in a similar way, though in a very different register, the work we do at Shook Kelley at everyday places, including Harley-Davidson dealerships, Whole Foods stores and countless other retail destinations big and small, has also had an important impact on everyday life and culture throughout America.

One of Victor Hugo’s major themes in the Hunchback of Notre-Dame was about cultural evolution, and how new technologies can impact social change. We are now living in a similar state today of fundamental shift. There are many that see the web dethroning the power of the bricks and mortar retail store. But actually, much like cathedral architecture in medieval times, traditional retail, in our opinion, has reached an impasse and needs to evolve to find greater relevance in a new world. Physical retail is still alive and still has a potential draw, but it needs to take on a slightly different purpose and role in consumers’ lives. And this is where imagination, creativity and freedom really come in handy.

How To Make Retail Relevant Again

No matter how far-reaching AirBNB is or how well-stocked Match.com is, online worlds don’t actually make much sense without their counterpart physical world. AirBNB still needs a giant catalog of great places where people want to travel to. And people who connect on Match.com still need to meet up for a date at a great restaurant that can set the mood for romance, love and possibly even marriage someday (although we hear that’s falling out of fashion these days, too). In short, people will always need to leave the comfort of their home to experience what the world has to offer. We are social animals after all, and our physical bodies are hard-wired for a sense of discovery. Places and spaces will always have the potential for a certain type of value, relevancy and meaning, if created and conceived in the right way.

That’s why, at our firm, we have always focused less on what a space looks like and more on what we call The Power to Convene. Convening refers to the magnetic power of a brand or idea to bring people together in any number of ways.

The Power To Convene: the magnetic power of a brand or idea to bring people togther in any number of ways

For the last 20 years, Shook Kelley has been studying the evolution of how various retail places and spaces convene people. Our list of clients includes a diverse array of companies in different industries: Harley-Davidson, Whole Foods, Kroger, Harris Teeter, SuperValu, Hess, United Supermarkets, USAA, Kraft, Cadbury, SeaWorld and many other notable names. While all of these brands “sell things,” they don’t all convene people in the same way. Some brands try to convene people around price, variety and convenience, while others convene people around social values, meaning, community, a sense of belonging or a quest to change the world. While there is something universal and timeless about the concept of convening—the social instinct is essentially hard-wired in all of us—finding the most compelling way for a brand to convene people is a constantly moving target.

Not unlike fashion cycles, convening is usually a reflection of our times and an expression of what we value. At one point in time, McDonalds was a modern marvel that convened families looking to relax or celebrate. In short, it offered specific value that fit the times. But today, fast food brands like McDonald’s and Burger King are being “killed” by a new breed of gathering places, including Starbucks, Panera Bread and Chipotle—and ironically enough, McDonald’s was once a major investor in Chipotle before their IPO in 2006. While all of these food concepts are pretty much just basic box buildings, the values, beliefs and behaviors that these brands capture and transmit in their building experiences are radically different.

Or consider the ebb and flow of another retail trend, moving from escapism to connectedness, and from nostalgia to authenticity. Throughout the 1990s and much of the 2000s, the “experience economy” was focused on creating a lot of themed up, immersive experiences that invited consumers into a fantasy bubble. Inside that themed bubble, whether you were at Rainforest Cafe, The Disney Store, The Nike Store or Build-A-Bear Workshop, consumers would escape from the real world, and temporarily become someone else. In some ways, these extravagant retail palaces were like the Notre Dame cathedrals of Victor Hugo’s era. The most touted and talked-about retailers promised shopping plus entertainment, a model that worked pretty well during those years (before escape became a lot more difficult, thanks to our smart phones). But today, we see great retailers more focused on how to meaningfully connect their in-store experience to real life problems—like what Trader Joe’s offers with single-size serving solutions or even what J. Crew does with their “In Good Company” program—or to real world lifestyle communities—like Lululemon’s connection to women’s fitness. These days, retailers strive to integrate into existing networks of meaning in the world and to offer experiences that play a supporting role in all of this, not a leading role. Today’s successful places are reflections of what consumers care about and have to contend with in their everyday lives.

While the experience economy retailers were getting a lot attention, the 1990s was also a time when the big box retailer started dominating the scene with their price, size, variety and convenience approach, and their intentionally spartan, utilitarian and functional environments. For a while, it looked like the big boxes might rule the retail world. They certainly confused, distracted and preoccupied a lot of regional retail players. But today, it’s increasingly clear that these behemoths can no longer own this mountain singularly in the same way they did before. The internet has no bottom, and its eventual ability to compete on price, size, variety, customization and convenience is almost limitless. Bigger than big box brands— like Amazon, e-Bay and Overstock.com—pose a giant threat to the formerly formidable big box model. If convenience and price are all you are offering, then the internet (with the aid of a same-day delivery drones maybe (big maybe!)) might eventually have a leg up. Meanwhile, at the other end of the price spectrum, high-end luxury and high-quality markets are also suffering as a new breed of fast fashion retailers find ways to manufacture high quality products with much greater ease and speed. Brands like Zara, TopShop, Uniqlo and Target are rapidly superseding the status of high-end retailers like Barney’s, Nordstrom’s and Saks Fifth Avenue.

The old rules of retail no longer work as well as they did just a few years ago

Suffice it to say, we live in an entirely different world today, and the old rules of retail no longer work as well as they did just a few years ago. But forgetting the past can be a big challenge. For brick and mortar retailers to survive, we need to discard a lot of the past rules of retailing, and develop a new system for thinking about how to convene people. We need to build a more clear and compelling case for how our retail places can still matter to consumers. And we need to come up with a simple and intuitive system for how to create, monitor and measure the ability of our retail spaces to effectively convene people.

Dialing It In

There are no silver bullets when it comes to convening consumers. It is a complex challenge that requires a lot tinkering and constant adjustment. A good metaphor for finding relevance in retail today comes from an increasingly quaint and outmoded model: the tuning and dialing in of radio stations from a radio receiver. Dialing it in means setting up a system where the core elements of your brand signal are completely clear of static and precisely aligned, much in the same way that a radio receiver tunes in to a radio signal.

Developing successful retail stores is not all that different.

In order to generate the Power To Convene, successful brand need to engage in a process of dialing to get in tune with their consumers. Culturally resonant brands, like Whole Foods, Harley-Davidson, Starbucks and even Chipotle, all know how to dial it in, while brands like Sear’s, JC Penny and Radio Shack have struggled to find the right brand frequency. Admittedly, establishing a clear, strong and relevant signal is not easy. It takes lots of experimentation, fiddling and fine tuning. And above all, it requires that brands create a clear and coherent system where there signal can originate in the first place. The key is to find clarity and focus, because great brands resist chasing random tactics that would make it hard for consumers to understand them, and ultimately weaken their signal. Sadly, too many retailers incorporate trendy features in an ad hoc manner, which only ends up confusing their brand signals. The strongest brand retail spaces out there have always been good at the fundamentals of creating a strong signal and maintaining clarity. But frankly, most companies don’t have the patience, much less the key dials and instruments, to fiddle with and get their reception just right.

Over the years working with hundreds of consumer-based brands, our firm has developed an effective system for helping companies develop a brand dashboard where they can dial in their signal and find the right frequency. To boil it down, you can think of this system like three basic knobs on a stereo: volume, treble and bass. Each knob controls a specific dimension of the system and with a dedicated purpose. Only when they are all aligned and configured correctly is there a sense of definition and clarity that makes the brand signal clear to their consumers.

Here’s a quick overview of the three knobs:

1. The Problem Knob

Humans have always been a problem-solving species. We are constantly on the search for ways to avoid pain and make life better and easier. Everything from the wheel, to the wheelbarrow, to the wheel on the iPad have been designed to solve problems and make life easier for people. So while a lot of companies tend to talk in terms of opportunities, positive results and delighting the customer, we encourage our clients to view the world as a series of problems to solve: what to eat? how to get a good night’s sleep? how to lose weight? or, how to celebrate your wedding anniversary? Some of the problems we have to solve in life are small—such as, how to whiten our teeth?—while others are much bigger—such as, what do with my 80 year old mother-in-law? or how to fund the retirement years?

View the world as a series of problems to solve

Problem solving is important to consumers, and retailers can play a vital role in helping solve all kinds for them. This is exactly why the internet’s “search” function has become so widely necessary today: because search results help people find solutions to an amazing array of problems, both big and small. And the internet provides answers seamlessly and effortlessly. But sadly, far too many place-based retailers cannot define clearly what problems they solve for consumers, nor do they understand entirely what people are searching for in place-based retail. Based on our experience, the best companies are exceedingly clear, internally and externally, about the problems they solve for customers and the solutions they provide society. And the most brilliant companies are adept at finding new problems to solve, such as how to get rid of gingivitis or how to clean every corner of their home. Sometimes, these are problems a lot of consumers didn’t even know they had until a brand came along to solve it.

In the world of retail, the problems consumers have can be literal—like, can I get a vegetarian option? or, can you accommodate my brief lunch schedule?—or they can be more emotive—how can I impress a first date? where can I take an important client to dinner? And then some consumers are asking even bigger, broader questions, such as how can I help the environment? The key for retailers is to identify the types of problems they are solving for consumers and to clearly present that capability in the brand and environment.

2. The Meaning Knob

Humans have always been a meaning-seeking species. We construct and use meaning as a way to make sense of our world. Without meaning, life would seem hopeless, empty and cruel. Meaning explains our pain, loss and tragedies, while also giving us a sense of purpose, hope, direction and quest. Great brands today don’t completely create meaning out of thin air, as much as they discover, adjust and tap into meaning that already exists in society. For example, Harley-Davidson didn’t create the idea of personal freedom or rebellion, but they tapped into it in a deep, compelling and visceral way. Similarly, Whole Foods didn’t invent the natural and organic movement, but they recognized and uncovered a receptive market for it.

For generations, most companies avoided addressing the issue of meaning because it seemed too fuzzy and esoteric. But increasingly today, companies must face the essential need consumers have for deeper meaning. A prime example: Walmart vs. Target. While Walmart has won on price perception, Target has carved out its strong market position more through meaning. And you can now see a similar dynamic playing out with food brands, like Chipotle, Tender Greens or Veggie Grill, in competition with the old line fast food destinations.

Companies must face the essential need consumers have for deeper meaning

More than ever, consumers appear to be rewarding retail brands with the ability to infuse a greater level of meaning into their brand value proposition. But many companies are not sure what their meaning is or where to find it. We suggest that you start with uncovering your values first. And from there, start to map out a mental and visual “field of meaning” where your brand is situated within.

3. The Experience Knob

Humans have always been a sensory-based species. We seek out experiences that activate our senses in heightened ways. This is one of the reasons we like going to a farmer’s market, a theme park or a Mongolian barbecue. These experiences can provide us with a sense of exhilaration and rejuvenation. Most great moments in life are less about thinking, and more about feeling and experiencing. The best companies create great experiences that not only manifest their strategy in clear, compelling ways, but also stoke and evoke meaning with a certain set of customers. For example, Whole Foods has been a master at creating the perfect “Mother Nature” meets agrarian utopia theater. This is the scene where the world of organic and natural food now exists for many people. Because our senses offer a direct portal to our perceptions, if you want to change the way your brand is perceived, change the way the senses are activated.

While there is no perfect system or set of instructions for managing a brand or designing the perfect retail space, we believe that using these three key knobs is a great way to develop the structure and clarity of a brand. The system can help companies determine the signals their brand is communicating, purposefully or not, as well as how that signal is being received by today’s new consumer. More importantly, though, we believe getting extremely clear on these three dimensions will be essential for convening consumers and maintaining the efficacy of places and spaces in the future.

If you want to change the way your brand is perceived, change the way the senses are activated.