Synqera Revolutionizes Retail with Facial Recognition Technology

A few weeks ago we heard the news that Ulybka Radugi, a large Russian chain of cosmetics and household products, was partnering with Synqera, a technology startup, to pilot a digital personalized experience in their physical retail stores.  Synqera has developed a number of combined hardware-software products that are meant to incentivize a consumer's path to purchase and foster loyalty. 

The piloted solution, Simplate, is marketed as the first intelligent retail technology capable of leveraging a combination of big data and real-time customer response.  Essentially, Synqera's software uses facial recognition technology at checkout to analyze the customer's response to a proposed product and it syncs the data with additional information it derives from the customer's loyalty card and actual shopping basket.  The software then creates compelling visual media, taking into account each customer's unique purchase, shopping tendencies and response rate, and it delivers it in real time through the interactive customer display. The visual media includes offers, coupons and promotions for additional products, as well as compatible and complementary products. This highly personalized content can be also delivered outside the store through mobile apps, SMS text messages, e-mail or web-site content customization.

In an interview with Fast Company magazine, Synqera's COO, Filipp Shubin said that the project's goal is to "make the consumer experience more compelling than shopping online".  It is quite easy to understand the merits of a technology that is capable of recognizing that a customer is smiling when seeing an item and of presenting in real-time to that client an offer or a coupon for that same item. 

The same technology could eventually evolve to develop special promotions and coupons to customers that after seeing an item pull out their cell phones in a motion typical of "showrooming".  Synqera itself markets another product to be installed inside retail stores, which is meant to deliver interactive advertising, promotions and customer assistance and which eventually could be used to actively prevent "showrooming".  You could find more information on Synqera's products on their website.

Synqera's solutions or similar emotion-reading technologies are not currently available in the US or in a number of other countries.  However, they are bound to be widely utilized.  While most retailers will need to put some restriction on how far facial recognition can and needs to go, it is fair to say that most retailers will concede that emotion-reading technology could potentially revolutionize the in-store experience.  It could elevate, differentiate and even customize the customer experience and increase engagement and store traffic.  Nevertheless, any of these solutions could not successfully replace actual and live customer service.  Instead, retailers will need to properly integrate the technology within their store concepts to allow customer service and sales representatives to provide a flawless, unified and compelling customer experience.

McDonald's Solution to its "Broken Service" Should Include Freedom and Trust

Last week I read an article on the Wall Street Journal that pointed to poor customer service and execution to explain McDonald's recent earning disappointments.  You can find the entire article at this link.  McDonald's own management acknowledged those problems in a web-cast with franchise owners.  They candidly admit that "service is broken" in most of their locations, mentioning that a high number of complaints cited "rude and unprofessional employees".  The WSJ article reports that some analysts say that the fast food chain is continuing to lose customers because of these service issues.  Let's analyze the likely reasons behind McDonald's poor financial performance and present some ideas and suggestions that might improve the current operations.

McDonald's recent troubles are indeed the result of a service failure.  The WSJ article reports how McDonald's scores poorly in both friendliness and service timeliness when compared to its competitors.   It also mentions that complaints related to "friendliness" are on the rise.  Ironically, the tough economic conditions of the last few years masked these weaknesses, as a larger share of consumers relied on fast food restaurants for an increasing number of meals.  However, today's improved customer confidence and the abundance of alternative choices in the market, have highlighted McDonald's problems with customer service.  Consumers can be more discerning and are suddenly more aware of the customer experience and service.

McDonald's, because of the intrinsic characteristics of its current business model, is faced with particular constraints that make it especially challenging to develop efficient, if not remarkable, customer service.  It is worth considering the following:
  • 90% of the chain's restaurants are owned by independent operators
  • The restaurants are plagued by high employee turnover, estimated at 60% per year
  • The restaurants need to minimize staffing expenses, especially salaries
The company's management has already instituted a few measures aimed at improving service, specifically it introduced a new ordering system, it added the new position of "runner", and it adopted a new software that optimizes staffing levels.  These measures are likely to be beneficial, but they are probably not going to be enough to develop exceptional customer service. 

McDonald's should consider empowering their staff and developing a restaurant environment that stimulates freedom and trust.  Restaurant operators should genuinely get the entire staff involved in the decision process and earnestly listen to every suggestion, instituting a more collaborative structure rather than a rigid and coercive organization.  They would also need to give their staff the freedom to modify standard operations to address any sudden service issues.

A number of studies have demonstrated that organizations that promote trust and freedom and as a result a more inclusive and collaborative workplace experience significantly more innovative thinking and ultimately better financial performances.  They also tend to develop a more involved and loyal workforce. 

In McDonald's case, a restaurant environment that incites staff's operational freedom and that invokes trust would increase the staff's degree of involvement and attachment to the restaurant and even an interest in its success.  It could also reduce employee turnover.  Most importantly, it would certainly improve customer service.

Would "Just Looking" Fees Be Effective Against "Showrooming"?

A few months ago I wrote a post about "showrooming", the practice of some shoppers that entails visiting physical retailers to see a product with the intent of then buying it online.  You can read it again at this link.  In that post I described the efforts that Toys 'R' Us was making to counter "showrooming" and I listed a few ideas of my own that would benefit retailers that feel endangered by that practice. 

Today I read that an Australian retailer started charging a $5 "just looking" fee starting in February to all shoppers upon entering the store.  That fee is then deducted from the price of any item that the customer ends up buying. 

Similarly, a Vera Wang boutique in China started charging shoppers close to $500 just to try its gowns.  The practice lasted only briefly and it was cancelled, amid the shoppers' outcry.  Could "just looking" fees be effective against "showrooming"?

It is conceivable that the fees would indeed drastically reduce "showrooming" in the stores that adopt them.  Most shoppers would not want to incur any fee, unless they had a reasonable intention to place an in-store purchase. 

Nevertheless, it is also likely that traffic in those stores would suffer.  Only determined customers, who are also certain that the store carries their desired item, would visit the store.  Additionally, stores that stock any item that is not a popular consumer product would most likely encounter adverse effects on their bottom line.  In fact, charging a fee and depressing traffic would not only impact shoppers intent on "showrooming", but also shoppers that could be converted into buyers. 

It is important to note that a study by the mobile marketing firm Vibes found that "just 6% of shoppers overall are likely to do what we think of as pure showrooming, in which they check out an item in person in a store before purchasing it from a competitor".  I would argue that an innovative and remarkable retailer could stand a chance of converting into customers even a number of these "showrooming" customers.

However, they would need to offer an in-store experience that provides compelling and higher value than online retailers.  Here are the suggestions that I have mentioned in a previous post:
  • Create a multi-channel strategy that allows customers to buy items at any time through multiple channels.  The Vibes survey mentioned above also reports that almost 30% of "showrooming" customers ultimately purchase from the physical retailer's website.  Retailers should integrate their stores with their online operations, allowing customers to purchase in-store, online and via their mobile devices. Tourneau is a great example, as I have noted in a previous post (Tourneau Delivers Luxurious Experience with Multi-Channel Strategy).
  • Enhance the in-store shopping experience, increasing sale staff, stressing the importance of customer service, organizing specific monthly activities and events, and allowing store managers to modify the regular in-store experience to cater it to specific customers. LEGO's "Esperience Wheel" would be a useful tool (LEGO's Experience Wheel Reveals the 'Wow" Factor).
  • Offer price-matching and train in-store staff to approach customers intent on "showrooming" to relay that information and help them with any other doubt or concern.
Let me know your ideas on "showrooming" and your suggestions to retailers on the comment box below.

The Italian Elections and the "Politics Business"

Despite the fact that I currently reside in the US, I was born in Italy and lived there for a good part of my life.  My family and childhood friends still live there and the issues that surround the country are hence close to my heart.  This week's elections in Italy have had great resonance around the world and are expected to have quite an impact on the world's economy.  I enjoy politics.  Policy changes can affect business and retail activities.  However, in most instances politics would not be related to this blog.  Nevertheless, the latest Italian elections, when viewed under a strategic, professional and business angle, constitutes an interesting case study for business owners and executives.
Let's recap the results with a brief summary.  The elections had a clear and unexpected winner, the Five Star Movement of Beppe Grillo.  Grillo's party won the second highest number of votes and is now the third biggest coalition in the Italian parliament.  It is a remarkable result for a party that was only officially constituted in 2009 and that was participating in its first parliamentary election.  It is also notable that the coalitions that finished first and second, Bersani's PD and Berlusconi's PDL, essentially earned just a few more votes than Mr. Grillo's  in percentage terms and would not be able to form a government without either bowing to Mr. Grillo or partnering together in a "national unity" government.  The latter option would signify a repeat of the uneasy alliance that was caused by Italy's economic crisis and that brought about the technocratic government of Mario Monti in the last year and a half.  Both PD and PDL were eager to put put that experience behind with this week's elections.

The losers were Bersani's PD, Berlusconi's PDL and Monti's centrist coalition.  Bersani's party squandered a giant lead in the polls, relinquishing a great number of votes to Grillo's Five Star Movement.  The PD's coalition is indeed the leading force in Italy, but it enjoys such a tiny relative majority that it is expected to have substantial difficulties in forming a government and actually governing. 

Berlusconi's PDL has been hailed as one of the winners by part of the press, as its chances just before of the election looked extremely bleak.  It is undeniable that Mr. Berlusconi's showmanship, charisma, and sheer political shrewdness, helped the party.  However, we have to remember that the PDL's coalition lost almost 15% of the votes that it had gained in the previous election.  Those votes went to fuel Mr. Grillo's victory.  These result were not the result of the voters' concerns for Mr. Berlusconi's questionable personal behaviour, his legal problems or his political track-record.  This outcome is exclusively a product of a program that did not satisfy the electorate. 

Mr. Monti's coalition suffered the biggest defeat and now ranks as the forth force in parliament.  The meager number of parliamentary seats that the coalition won would not allow it to be a relevant force in the political discourse and in the process of forming a government.

Let's try to pinpoint and understand the reasons for Mr. Grillo's remarkable success and for the impressive failure of all the other parties.  To facilitate the process we can draw a parallel with any random company engaged in any business.  Most successful businesses around the world design, market and sell products based on their customer's preferences and tastes.  The products are then continuously updated and modified, as consumer's tastes evolve, shift and change.  Companies engage in countless activities, like focus groups, surveys, and product trials just to name a few, to ensure that their offering is likely to satisfy their clientele.

Curiously most political parties around the world and especially those in Italy have first formulated their ideas and designed their programs years ago often based on philosophical, social and economic principles, which seldom accurately reflect and represent the views of the majority of their citizens.  These are usually the product of political leaders with big egos and a conviction that regular citizens do not understand what they and their country needs.  These ideas have now grown to become ideologies, which parties consider as foundations that cannot ever be modified.  They rarely tap their constituencies to gauge, design and modify their programs.  Rather they design their programs to respond to the current issues at hand based on those ideologies and then try to convince their electorate that those programs are the best option.

However, electorates evolve and change as consumers do.  The Italian demographic and economic composition for instance is markedly different from what it was 20 years ago when the original PD and PDL parties were founded.  Their ideologies should reflect those differences and change accordingly.  Most importantly the changes should come as a result of an in depth study and conversation with the electorate.

Mr. Grillo's victory was the result of this very strategy.  His party organized countless meetings in squares around the country, called "meetups".  Through Mr. Grillo's blog, the movement encouraged any and every Italian to be part of the conversation and all the points in its program were proposed and discussed in the forum.  The resulting product was a program that reflected the frustrations of a great part of the electorate and that ultimately determined the movement's success at the polls. 

It is obvious that Grillo's Five Star Movement targeted and appealed to a very specific section of the electorate.  Other voters would never grant Mr. Grillo their vote: I count myself among them.  However, the movement's strategy successfully energized and empowered its constituency.  Mr. Grillo made them part of the political process and essentially provided a better "customer experience". 

PD and PDL should take note and establish their own ground operations not just to convince voters, but to get them involved in creating and shaping their political programs.  Politicians at times, especially during crises, will need to push forward unpopular reforms.  However, parties that followed Mr. Grillo's lead and used the business world as a model, would be more likely to ultimately design a product that would satisfy their electorate, a process that would ensure a better experience and a government that would truly represent their voters.  It would be the birth of the "politics business".

American - US Airways Merger Might Reshape the Airline Industry

Last week AMR, American Airlines parent company, and US Airways Group announced that they intend to merge in what is essentially the last consolidation deal in the US airline industry.  The merger would create the largest airline in the world and reduce the number of major carriers in the US to four, namely American, Delta, United, and Southwest.  These four companies would control nearly 83% of all domestic seats.  However, most travelers are probably not that interested in the technical aspects of the deal, but rather on what changes would this deal bring to their flying experience.  It is relatively early to be certain of what is in store.  Nevertheless, lets try to make some educated guesses and put forth some suggestions. 

Assuming that the merger won regulatory approval and that the integration was relatively smooth, which is not by any means a given, American might finally be able to turn the corner in terms of profitability.  The industry as a whole, as well as consumers are likely to benefit too.  Prices would stay stable, as the remaining national airlines would be kept in check on the upside by low cost carriers like Southwest Airlines, JetBlue Airways and others.  The relatively small number of carriers and their large network of routes would encourage stability on the downside as well, making price wars unlikely.  This environment would allow executives to focus on improving operations and building better run airlines, which could finally be profitable.

Profitability would lead them to explore how to outperform their industry rivals based on these points:
  • The current flying experience in the US is generally poor, especially when compared to what is offered by Asian and Middle Eastern carriers.
  • Elite frequent fliers account for 1% of total frequent flier memberships, but for 25% of revenues.
  • Elite frequent fliers are mostly business travelers that mostly value perks, reliability and punctuality.
Therefore, all airlines would aggressively pursue frequent business travelers, improving their operations (reducing cancellations and delays) and offering a better customer experience before, during, and after the flight. 

Delta, which was the first of the above-mentioned airlines to go through bankruptcy, restructuring and a merger, has a leg up.  It has already updated its fleet and made some service improvements, placing iPads free of charge at gates and offering Porsche shuttle service for premium passengers in Atlanta.  United has finally resolved the disruptions that plagued the company as it struggled to integrate its computer systems with Continental's after their merger.  It is now moving forward looking to invest in new planes and facilities.  American would need to finalize the merger as fast as possible and hit the ground running.

Ultimately, all three major airlines would need to focus on the customer experience.  Most of the improvements would target the aforementioned elite frequent fliers.  However, most other travelers are likely to be positively affected too.  Airlines might consider some of these ideas:
  • Premium economy between business and coach classes with extra legroom seats (already offered at Delta and United)
  • Advanced entertainment systems, like the ones that Cathay Pacific and Singapore Airlines feature on most of their planes.
  • Complimentary access to lounges for elite frequent fliers even on national flights.
  • Remodeled lounges featuring a number of complimentary food items.
  • Remodeled gates featuring bright colors, comfortable seating, and technology, including TV screens, charging stations, iPads, and vending machines offering items useful for travelers, like phone chargers, headsets, earplugs, and toothbrush sets.
  • Luggage pick-up service anytime the day of the flight in key metro areas for all frequent fliers.
  • City check-in at a central rail station or metro station connected to the airport, like in Hong Kong and a number of other Asian cities.  It would appeal especially to tourists that would be able to check in hours before the flight in the city center already dispatching their luggage.
There are certainly many additional improvements that could tip the scale to the side of one airline versus another one.  As long as executives seriously pursued excellence in customer service and experience, they would be successful.