Top 10 Must Reads: Winter 2020 Edition

TM

Top 10 Must Reads +1

Winter 2020

About Level5™ Strategy

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Level5 Strategy is a leading strategy and transformation consulting firm that helps our clients achieve profitable growth and a superior ROI by leveraging the power of their brand. We focus on four distinct yet interconnected core services: Insights, Strategy, Transformation and Customer Experience. Since our inception in 2002, Level5 Strategy has partnered with over 300 clients across B2B, B2C, government and not-for-profit sectors in Canada, the U.S. and other parts of the globe to navigate their most critical challenges and opportunities and to build and execute practical strategies that convert decisions into actions.

Since 2002, Level5 Strategy has advised over 300 Canadian and global clients across a wide range of industries.

Beverage

Public Sector

Retail

Financial Services

Consumer / Tech / Communication

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Healthcare

Education

President’s Message Welcome to the Winter Edition of Level5’s Top 10 Must Reads.

Over the course of the last few months, the Level5 team published a number of thought leadership papers on various topics, including Canada’s newly legalized cannabis industry, multicultural growth opportunities, disruptions in retail, and the importance of a strong and consistent customer experience. We’ve selected the most popular pieces and are excited to share them with you.

Cannabis’ first year of legalization proved to be quite volatile; there were several inaccurate forecasts and several cannabis companies had to revise their financial forecasts. Our selected articles provide cannabis brands with the tools and support to build a sustainable organization based on business fundamentals, a clear understanding of who their key stakeholders are, and an enduring promise.

Multicultural consumers are one of the fastest growing consumer segments in Canada and are increasingly critical to business’ success. We outline why having a multicultural strategy team isn’t enough. Brands need to embed a multicultural lens into their strategy, and the entire business system. Doing so will create powerful brand ambassadors and drive revenues—just ask Tim Hortons.

Several trends have emerged as key disruptive forces in the retail industry over the past year, including hot topics like AI and sustainability. Our retail articles address these trends to ensure you are up to speed on these industry game changers. We demystify consumers’ rational and emotional purchase drivers when using AI to buy products and provide an overview of how brands can respond to consumers’ sustainability demands.

Whether or not a packaging revolution is upon us, we’ve provided our perspective on environmentally friendly solutions and how they can impact your brand.

To gain a better understanding of how successful brands are winning in this changing sector, we also sat down with Canadian Tire’s SVP Marketing, Susan O’Brien, to hear how Canadian Tire has navigated this sea of change and become Canada’s most valuable retail brand.

Knowing your customer has always been a critical key success factor for brands, and in today’s increasingly omnichannel world it is even more important to understand and continually improve your customer experience. We outline how brands can increase revenues and decrease costs through our reimagined CX perspective, and how maintaining a customer-centric perspective can help organizations operate more efficiently.

We hope you will find this Edition of Level5’s Top 10 Must Reads insightful. We also hope that this collection will help you transform your brand and take the next step towards future growth.

Happy reading,

Ian Madell

Managing Partner, President

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Efram Lebovits, Sean Pavlidis

Efram Lebovits, Sean Pavlidis

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18

Hua Yu, Frank Zhang, Richard Wang

Hua Yu, Frank Zhang, Richard Wang

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The Cannabis Industry: Crossing the Inflection Point

In Shanghai, Why Tim Hortons is the Hottest Brand on Earth

Is a Sustainable Packaging Revolution Upon Us? Rob Gizzie

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Retail: The Key to Building Cannabis Brands

The Imperative for a Multicultural Growth Strategy

How Canadian Tire Stays as Canada’s Strongest Retail Brand An Interview with Susan O’Brien Ian Madell

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Artificial Intelligence is Impacting Linking Customer Experiences the Future of Retail, Are You Ready? Across Multiple Channels is What The Great Retailers are Building Lauren Singer Ian Madell

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Customer Centricity: Customer Experience Reimagined Efram Lebovits, Claude Ricks, Rob Gizzie

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Bonus Article Brand Building: The 10 Key Lessons Learned David Kincaid, Ian Madell

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How a Customer-First Mindset Can Help Public Organizations Keep Their Promises to Canadians Rob Gizzie, Garnet Tosswill, Pooja Patel

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Cannabis

Top 10+1 Must Reads - Winter 2020 Edition

1 The Cannabis Industry: Crossing the Inflection Point Efram Lebovits, Sean Pavlidis

The Dramatic Shift in Competitive Realities Facing the Cannabis Industry

O

ver the last 17 years, in many regulated industries, Level5 has been fortunate to work with hundreds of clients helping each of them build and keep a unique and ownable go-to-market promise that allows them to grow market share, create loyalty and increase profits. Across industries, from retail to beer, from packaged goods to gaming, we have worked with our clients to plan and execute against distinct challenges and opportunities.

Some of the most challenging issues involve government and regulatory considerations – where public interests and commercial ones collide.

Without question, the next 12 to 36 months will be the most intensely competitive and dynamic time for the industry.

Before the dust settles, clear winners and losers will be identified. This is simply what happens as industries begin to mature. The question for those associated with the industry is this: How can you better prepare your organization to ensure you remain on the right side of that equation?

We have seen many business inflection points over the years, but October 17, 2018 marked the dawn of a particularly exciting yet complex one. In the months prior to legalization and in the months since the industry has experienced highs and lows. Nowhere is this more evident than in the stock price swings in the sector. Investors are reacting to an ongoing flow of news whether it be the latest joint venture, an emerging scandal, new proposed regulations, a changing retail framework, and so on.

Companies are on the hunt for acquisitions or on the lookout for their suitors. This wildness is not new. It is what emerging industries experience.

In this perspective piece we will lay out our initial take on the Cannabis sector. In the coming weeks, following pieces will cover a range of topics that are critical for organizations looking to land on the winning side of this exciting industry.

These include: building a brand in this tightly regulated sector, developing a strong customer experience across owned and influenced touch points, and overcoming the challenges of current cannabis perceptions and stigmas.

Winners know how to navigate this challenge.

Historically, they have done so through a well-developed brand and well-developed business system.

“Level5 has been fortunate to work with hundreds of clients helping each of them build and keep a unique and ownable go-to-market promise that allows them to grow market share, create loyalty and increase profits.

Level5™ Strategy

Cannabis

9

A strong brand drives a larger, more profitable business

In turn, higher business returns allow investment which drives a more valuable brand.

Brand Finance Top 10 vs. S&P 500 (Jan 2008 — Jan 2017)

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The dawn of a new age It is rare that one can pinpoint the exact date on which a new industry is born, but that is precisely what Canadians can do with October 17, 2018. It was on this date that Canada legalized recreational cannabis use, bringing a black market with an estimated value of $5.7B1 out from the cold and (at least to some degree) into the safe, governed, and regulated confines of a full-blown, tax-generating, national industry.

As we in the Canadian business world witnessed, the lead up to October 17 created a race to licensed producer (LP) status. Companies were formed, business plans created (and re-created as regulations were clarified), operating strategies were built, talent was hired, and market share strategies were initiated. October 17 literally begat the dawn of the recreational cannabis sector in Canada. However, with every sunrise inevitably comes a sunset, and that is when those who fail to prepare find themselves left in the dark.

Predictably, the months immediately following October 17 represented a period of rapid and dynamic growth for those involved in the production, manufacturing, and distribution of cannabis. It seems that everyone, from growers to investors, has been chasing the notion of “more,” “bigger,” and “broader.” In other words, scale, and the race for it, has shaped the primary competitive battlefield these early days.

However, many of today’s players are still nascent, with little revenue and unproven operations.

As the sector begins to mature and investors begin to look for returns, there will be a predictable change in attitude. The focus will turn towards enterprise strategy, operations, and go-to-market execution. Consolidation will emerge and winners and losers will become evident. We will see a shift from the short-term focus on “grow at all costs” to a longer-term perspective – one that stresses the

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development of a sustainable brand and business system with the strength to survive and thrive in the long-run. After all, businesses across sectors with strong brands endure and are valued significantly higher than those whose brands are weaker.

This is not a novel prediction. One need only look to recent history and current industry dynamics to see the proverbial writing on the wall.

A shift is upon us The first hints of the shift in market maturity are already evident. M&A activity nearly doubled in the first half of 2018 from a year earlier, with 145 deals happening in the cannabis industry in North America.2 Much of this activity took place in the Canadian market as major players sought to rapidly increase their capacity and improve their strategic positioning in anticipation of legalization.

Large established players have already started moving into the market, raising the stakes, expectations, and professionalism of the entire category. Constellation Brands, for example, acquired a 38% ownership stake in Canopy Growth Corp; Molson Coors entered into a joint partnership with The Hydropothecary to develop cannabis-infused beverages; and Altria acquired 45% of Cronos Group for $1.8B. These moves are early signs of a landscape that is shifting towards a more disciplined and mature state.

In the coming months, the market’s obsession with capacity will compound the challenges for players that have not started to move towards building a brand and sustainable business. The capacity of Canada’s top 10 licensed producers alone is projected to be double the country’s demand by 2020.3 Soon, playing only the capacity game – without the partnerships and contracts to protect supply and demand – will no longer be enough to woo investors and please the market.

1 https://www150.statcan.gc.ca/n1/daily-quotidien/181017/dq181017c-eng.htm 2 https://www.forbes.com/sites/nickkovacevich/2018/08/29/with-a-wave-of-consolidation-the-cannabis-industry-rises-to-the-nextlevel/#2a9f0490f368

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Cannabis

Top 10+1 Must Reads - Winter 2020 Edition

“Excess capacity combined with limited export opportunities will, in short order, place a greater emphasis on revenue growth, supply agreements, partnerships, and IP ownership.”

While Canada may be a leader on the global stage, the export market isn’t a silver bullet for sustaining growth, and this adds a new level of complexity to the cannabis industry. In the U.S., cannabis (outside of the Farm Act) is still illegal at a federal level meaning it is essentially a no-go for Canadian excess capacity. International markets outside North America are quickly establishing domestic production to meet local demand for medical-use cannabis.

In fact, companies wishing to participate in international markets for the long-term are building even more capacity for production in regions across Europe, South America, and beyond. This includes Canadian licensed producers such as Canopy Growth Corporation, Aurora, Tilray, and The Cronos Group.4,5,6,7 Excess capacity combined with limited export opportunities will, in short order, place a greater emphasis on revenue growth, supply agreements, partnerships, and IP ownership.

Consolidation for strategic purposes is a likely end game.

We have already seen the beginnings of consolidation in the U.S. High Hampton Holdings, a company with the stated intent of “Consolidating California”, has acquired major edibles manufacturer California Gold Inc. as well as leading extract producer Mojave Jane.8 Origin House, aiming to become the first global brand house in the cannabis industry, recently acquired California-based craft producer Cub City9 and increased its ownership stake in leading Florida and Arizona medical producer AltMed.10

50% In Colorado, the top five concentrate brands have captured roughly half the market share for concentrate products.15

We’ve seen this before This type of turbulent and financially speculative business environment was seen during the dot-com bubble and, more recently and relevantly, in those U.S. states in which adult-use cannabis has been legalized.

The dot-com scenario of the late ‘90s and early 2000s was rampant with big ideas followed by big investments and big opportunity. However, as quickly became evident, high hopes and sustainable success do not go hand in hand. Roughly 50% of dot-com companies survived those early days, often due to companies simply running out of cash.11 When the bubble burst, many companies were losing between $10 million to $30 million a quarter.12 For a cautionary tale, look no further than Pets.com, which went from an $83M IPO and peak market cap of over $300M to liquidation in less than 300 days.13 The company literally launched, grew, and liquidated within a two-year span.14 We raise this comparison not to draw a literal parallel (after all, the dot-com era spawned a new technology and cannabis has been around for millennia) but to outline how enthusiasm around new industries eventually peters out while a focus on strong business strategy and consistent execution endures.

This rise and fall pattern has also been playing out in U.S. state-based recreational cannabis markets, where obvious winners and losers are emerging.

17% In Washington, 10 farms harvested 17% of Washington state’s dry weight cannabis yield in 2017.16

20% In California, 20% of cultivation licenses are held by twelve licensees, representing just 0.7% of the cultivation businesses in the state.17

Level5™ Strategy

Cannabis

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So, what’s next?

Navigating the choppy waters ahead will require the development of a strong brand, the systems to uphold that brand through execution and a clear plan for differentiating and growing consumer loyalty in a complex and vertically segregated retail environment. Important factors to consider when creating such a plan include establishing and communicating your value proposition; strategically managing your value chain, establishing the partnerships and supply agreements required to protect revenues; establishing the IP, competencies, and core processes to avoid commoditization; and continuously keeping an eye to international markets for opportunities to establish first-mover advantage in friendly regulatory environments.

But above all, building a sustainable branded business system in a historically commoditized environment requires purposeful differentiation from the pack, founded on a deep understanding and focus on the customer.

At Level5 we define a brand as The Value of a Promise Consistently Kept™. For players in the cannabis industry, driving value and ending up on the right side of history will entail making an exceptionally clear promise to customers and partners. This promise must be the guiding light that informs every product, channel, partnership, and IP decision that the company makes on its journey towards becoming a sustainable branded business. It is the clarity and relevance of this promise that will help distinguish one business from its competitors as a potential partner; help an employee at retail recommend and communicate the uniqueness of a product brand; and help customers understand and differentiate one product from another and ultimately create an emotional connection.

Once this promise has been defined, players will need to organize their people, processes, and technology around it in order to ensure it is actually delivered, for it is consistently keeping a powerful promise that ultimately separates strong business ideas from strong businesses.

“At Level5 we define a brand as The Value of a Promise Consistently Kept™. For players in the cannabis industry, driving value and ending up on the right side of history will entail making an exceptionally clear promise to customers and partners.”

3

https://www.fool.com/investing/2018/09/23/predicting-the-10-largest-marijuana-producers-in-c.aspx

4

Canopy Growth Corporation Investor Presentation, September 2018

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Aurora Investor Presentation, January 2019

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Tilray Investor Presentation, August 2018

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The Cronos Group Investor Presentation, October 2018

https://www.technical420.com/cannabis-article/high-hampton-holdings-has-been-busy-making-major-acquisitions-and-installing-keyIDC Canada Study sponsored by SAP 8

https://www.originhouse.com/origin-house-to-acquire-cub-city-craft-cannabis-production-facility-and-operational-team-to-expand-brand-accelerator-program/ 9

https://www.originhouse.com/origin-house-to-convert-muv-royalty-interest-to-altmed-equity-increasing-ownership-position-in-leading-florida-and-arizona-cannabis-company/ 10

11

http://www.content.time.com/time/subscriber/article/0,33009,996667-1,00.html

12

Ibid.

13

https://www.forbes.com/sites/greatspeculations/2010/12/13/the-biggest-ipo-flops/#39e663126391

14

Ibid.

15

https://www.cannabisbusinesstimes.com/article/bds-arcview-report-concentrates-sales-market-growth/

16

https://www.fool.com/investing/2018/06/23/big-business-is-taking-over-californias-marijuana.aspx

17

Ibid.

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Cannabis

Top 10+1 Must Reads - Winter 2020 Edition

2 Retail: The Key to Building Cannabis Brands Efram Lebovits, Sean Pavlidis

Building Awareness and Loyalty through Strong Channel Management

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he legal recreational cannabis industry in Canada and the world is in its infancy. However, unlike many industries before it, this one will enjoy a short introductory period as it rapidly matures into a large, developed sector by taking and building on share from the illicit market.

Driving this rapid maturation are the bones of the industry that have been present for years: • A pre-existing consumer base; • Shallow and limited understanding of the product; • Comparable regulatory and distribution frameworks mapped out by the alcohol and tobacco industries.

All these factors set the stage for an industry that will be plunged into different phases of the maturity cycle over the next 2-3 years. The formative years of the industry will be a race to scale and capacity; but as the supply gap begins to close, the primary pillar of competition will evolve to the level of differentiation between brands.

Building Brands in a Regulated Industry The industry has recognized this challenge, and the race to build brands started well before its legalization on October 17th. The large players made concerted efforts to establish awareness before their direct communication channel to consumers was halted by regulatory reform. They have also invested significant resources in hiring the best ex-CPG talent to harness the brand-building prowess of the industry that pioneered it.

Yet despite all of these efforts, recent Level5 research indicates that they have had limited success. Almost 70% of Canadians have zero top of mind awareness of any cannabis brands1. Each of the 4 largest Canadian cannabis companies by market capitalization (Canopy, Aurora, Tilray, and Cronos) have public awareness levels at 29% or lower, with meaningful awareness (having some or a lot of brand knowledge) hovering between 4 and 14%2.

Fielded to n=1,516 Canadians on Maru Voice Canada April 1st, 2019. Balanced to Canadian census by age, gender, and region. A representative sample frame of this size has an error rate of +/-2.52% 19 times out of 20.

1

2

Ibid.

Level5™ Strategy

Cannabis

“Companies should establish brand equity through a well-organized and executed business system, not through traditional marketing efforts.”

The issue all cannabis brands are running into while looking to build awareness and loyalty is clear: the tools that consumer-branded organizations typically rely on don’t work in this environment. Regulatory guidelines have clamped down on some of the most obvious means of brand differentiation – advertising, promotions, etc. – enacting a filter between end-consumers and the brands that are vying for their loyalty.

From Level5’s perspective, the solution is equally clear: companies should establish brand equity through a wellorganized and executed business system, not through traditional marketing efforts.

While the traditional brand-building channels (a.k.a. marketing communications) are extraordinarily limited, what’s not limited is big “B” brand building. This is the understanding that a “brand” is a summation of a promise made by the business and brought to life by all aspects of that business. The organizations that recognize strong brand-building as synonymous with the development and execution of a well-managed and aligned business, will be the ones that win. The rest will be absorbed or die out.

Producer/Processor • Hyper-competitive environment • Eat-or-be-eaten consolidation scenario • Need to uphold and broaden supply agreements • Concentration on technical capabilities and product features • Heavy regulatory constraints act as barriers to differentiation • Unclear or changing regulatory guidelines driven by multiple agencies (Health Canada, AGCO, etc.)

Distributors • Distribution channels are primarily government-controlled in a highly dynamic industry • No international comparable • Critical supply chain requirements with no room for error

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70% of Canadians have zero top of mind awareness of any cannabis brands

Where to focus in the short term To understand where organizations should focus their efforts, we need to look across the industry value chain and identify the most fertile opportunity to influence awareness and loyalty.

The needs of consumers within their current context are well understood: industry players should work on reducing the cultural stigma, improving the consumers’ understanding of cannabis use in the newly formed legal market, reshaping personal experiences and benefits in this new environment, and providing education about the product. That said, the means of reaching the consumers to address those needs are far less clear.

Given regulatory limitations, Level5’s experience in comparable industries tells us that the biggest opportunity to address these needs and build loyalty doesn’t actually come from focusing on the consumer. The focus needs to be on the retailer instead – however counterintuitive it may sound.

Retailers • Short window to establish supply agreements, build desired customer experience and meet regulatory requirements • Limited tools to manage customer experience and product stories

Consumers • A strong cultural stigma toward the industry and its consumers • An understanding driven by personal experience when the industry was only a black market

• Untrained and inexperienced employee base

• Customer experience that’s historically been shaped by a black-market

• Limitations on pricing and promotions

• Limited, or fear inducing education on the product

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Top 10+1 Must Reads - Winter 2020 Edition

“Budtenders are ultimately the best, unfiltered resource for the unique stories and differentiating elements of individual brands that assist in reaching end-consumers.”

Being Consumer-Centric by Not Focusing on the End Consumer In the highly regulated world of cannabis, the means of bridging the communication gap between the producers and consumers is reduced (due to regulatory burdens), to the detriment of both. Brands are unable to reach consumers through traditional methods; and consumers are left confused and uneducated as they explore an entirely new industry that has historically been associated with stigma and full of misleading information.

Recognizing the need to address this information gap in the shortterm, the strategy that best supports brands and consumers alike is the one that reduces this disparity. In the case of this industry, the most impactful opportunity to do this is at the retail level. At the point of sale, most consumers are relatively uneducated and highly influenceable. An estimated 41.7% of current and potential consumers having little to no experience with cannabis.3 On top of that, differentiating between an unending deluge of scientific terms and product names leftover from legacy cannabis culture further impedes informed decision-making.

Analogous to the craft beer industry, where the bartender is often the best sales person a brewery has in their arsenal, the most powerful influencer in the formative years of cannabis will be the front of house retail sales person or “Budtender” / “Cannista”. Budtenders are ultimately the best, unfiltered resource for unique stories and differentiating elements of individual brands to reach end-consumers.

According to a recent cannabis study done in 2018, 71% of current consumers and 69% of potential consumers consider having staff with strong product knowledge the most critical feature of cannabis stores4.

Furthermore, retailers recognize that differentiating their own channel from other physical and virtual competitors requires building a memorable experience that addresses consumer needs. To do this, they require support from their upstream partners in supplying them with the information, story-telling elements, and differentiating product attributes that act as informational guides for their customers.

Although counterintuitive, the best way for cannabis brands to be consumer-centric in this environment is to support their retail partners.

Establishing Differentiation at the Retail Level Given the limited degree of vertical integration legally allowed within Canada, establishing differentiation through this channel isn’t an easy task. That said, there are plenty of industries with less vertical integration that have built concerted processes and structures around executing this strategy.

Our experience establishing go-to-market strategies within the beer industry and other consumer industries has unearthed five keys to success that, if executed thoughtfully, will help differentiate cannabis brands in this channel:

1. A Clear Positioning and Portfolio Strategy Producers and processors need to think about their products from a portfolio perspective and develop products for specific audiences, consumer segments, needs, use cases, etc. The composition of the whole portfolio is as important as the development of the specific product. Specifically, companies should look to: • Define the specific market audiences you’re looking to serve and the needs of each audience – in other words, segment and target.

• Align your organization’s competencies to these needs.

Add competencies if needed and/or exit market plays that don’t align well with your current capabilities.

• Develop the narrative for each product line and your portfolio that Budtenders can leverage. Keep it simple, specific, memorable and differentiating. Back it up with data and “romance it” where possible.

• Reinforce this narrative wherever possible given regulatory constraints – on company/product websites, through CSR initiatives, product/portfolio naming, etc.

3

HIGHER GROUND: Insights from Canada’s Most Comprehensive Consumer Cannabis Study, Environics Analytics, 2018

4

A society in transition, an industry ready to bloom: 2018 Cannabis Report, Deloitte, 2018

Level5™ Strategy

Cannabis

• Establishing a clear strategic narrative for an associated product line that Budtenders can use to support, inform and connect with consumers will go a long way. It will make a significant difference between being talked about eloquently by the most influential person at the point of sale (POS) and being another commodity product on a crowded shelf.

2. Well-Coordinated Commercialization Support The retail channel has its own needs, concerns and regulatory guardrails. The greater the producers’ and processors’ ability to understand the needs of retailers and support them as partners, the better they can influence the retail experience. This is why it’s important to: • Understand the retail landscape, including, but not limited to: training requirements, technological innovation, key provincial partnerships, etc.

• Provide the data that retailers need (especially front-line Budtenders) to help make their work easier.

• Actively seek feedback from retailers and address their input.

Supporting retail partners with the education, tools and data they need to enhance their in-store experience and make better category management decisions will ensure that your brand is always leading the strategic conversation.

3. Influence Retail with IP and Partners Producers and processors can affect the retail landscape via intellectual property in a direct way, but bringing other tangential players into the fold can impact the retail landscape as well. Here are five areas where third-parties can yield important influence: • Leveraging brands via licensing and franchise agreements.

• Identifying key brand assets (e.g. colours, naming conventions, etc.) to cement relationships and recognition with retailers.

• Providing educational tools and training, strategically via third parties (and directly).

• Harnessing media relationships to develop stories that aid retailers and, potentially, your brand.

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Impacting the cannabis industry requires addressing a broad set of needs through a complex regulatory framework.

Establishing an ecosystem of partners and support systems that add value to your stakeholders without conflicting with regulatory guidelines is important to establishing leadership credibility in a crowded space.

4. Work on Stigma to Support Retail Cannabis is now legal which promotes broader acceptance.

But to broaden appeal and grow beyond a small, devoted user group, the cannabis industry will need to address the stigma of cannabis use. There are two critical points related to addressing the stigma that will influence retail stores.

The first is connected to the fact that only 24% of surveyed Canadians are willing to publicly disclose their cannabis use. This means that the brick and mortar retailers must be cognizant of having to split traffic with online options (like the Ontario Cannabis Store’s online platform) that helps maintain anonymity.5 Second, 48% of those surveyed in a separate study said they’d reconsider their decision to buy a home in a neighborhood where a cannabis dispensary is present – this attitude negatively impacts retailers’ ability to develop locations in a broader range of municipalities.6 Here are a few actions companies can do to broaden the cannabis appeal: • Ensure government relations is not only focused on the concerns of producers and processors but also on supporting the retail side of the equation.

• Understand cannabis views beyond those of current users and consider the attitudes among skeptics and those audiences opposing cannabis use.

• Develop Public Service Announcement (PSA) campaigns and Corporate Social Responsibility (CSR) initiatives to address stigma at the consumer and governmental levels.

• Aim to help alleviate community angst when proposed cannabis retail locations are called into question at the local level.

Impacting how the industry is viewed in a broad sense may be the tide that lifts all boats. Being known as the catalyst for positive attitude change can be especially helpful when looking to develop positive corporate relationships.

• Connecting and partnering with data and research organizations to help drive retail affinity to your brand/ portfolio.

5

Canadian Cannabis Survey 2018 Summary, Health Canada

6

How Canadian Homeowners and Renters Really Feel About Legal Cannabis, Zoocasa, 2018

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Cannabis

5. Relationship Management Capabilities Establishing all previously listed aspects requires the development of broad-based, company-wide capabilities and processes to make this happen. Understanding the impact on the organization while operationalizing smoothly in this dynamic space is necessary to breed success. Here’s how cannabis brands can do just that: • Develop research and insight capabilities – both at the consumer and retailer level.

• Ensure that your supply chain (from production and inventory management, to secure and timely delivery) is well thought through and running smoothly.

• Develop your Customer Relationship Management (CRM) strategy and key account management capabilities to actively and properly manage the sales engine. This should be implemented at the corporate level (and the store level, to the extent possible).

• Ensure that your service team is trained to handle questions or concerns from retailers, partners and consumers.

The key to developing the right relationships lies in ensuring that the organization has a clearly understood and well-executed go-to-market strategy rooted in well thought through capabilities and business processes. This would encompass the proper sales systems, IT capabilities and key account management systems to service retailers.

Top 10+1 Must Reads - Winter 2020 Edition

These five keys to success can help organizations bring their brand to life, and can be categorized into something that Level5 has coined “the new 4P’sTM” of managing a brand: People, Process, Intellectual Property, and Partnerships. Leveraging these 4Ps via the retail node in the value chain is crucial. Ensuring organizations do this while maintaining compliance with cannabis regulations is all the more important.

Conclusion Simplifying the lives of retailers and providing them with the tools, support and service they need to easily discuss a cannabis brand in a differentiating way will be the single most powerful go-to-market opportunity that producers and processors have in standing apart and building their brands.

The organizations that get this right will benefit from a stronger connection with consumers and will drive loyalty, within regulatory guardrails that limit traditional marketing channels.

But doing so in a way that makes sense to retailers and consumers while complying with regulations means starting with a clearly defined strategy and anchoring your business around it.

“Retailers will be producers’ and processors’ single most powerful tool to effectively engage end customers, build their brands, and differentiate from competitors.”

Level5™ Strategy

Multicultural

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In Shanghai, Why Tim Hortons 3 is the Hottest Brand on Earth Hua Yu, Frank Zhang, Richard Wang

W

hen Tim Hortons opened its first Chinese store in Shanghai on February 26, 2019, it received an incredible warm welcome from Chinese consumers – some lined up for 18 hours just to try a Tim Hortons coffee.

Thinking back to when Tim Hortons first announced its expansion to China in July 2018, many Chinese Canadians were excited to see another Canadian brand enter the Chinese market and shared the news with their friends and family in China. As a result, Tim Hortons, a brand with low awareness in China, suddenly attracted significant attention from Chinese consumers. As the chart below illustrates, online search volumes peaked in July 2018 when the expansion was first announced, and again in February 2019 when the first store finally opened.

The popularity Tim Hortons has gained in China thus far can be largely attributed to its strong brand loyalty among the Chinese Canadian community, the second largest visible minority in Canada. According to a survey conducted by the Chinese Research and Analytics Society of Canada, Tim Hortons has extremely high brand awareness (97%) among Chinese Canadians in the GTA. 93% of Chinese Canadians have visited a Tim Hortons branch in the past year and 60% of them do so at least once per month.

Tim Hortons’ strong brand awareness and loyalty have also been coupled with its community engagement, converting many Chinese Canadians to become advocates for the brand. In 2006, Tim Hortons launched the Every Cup Tells a Story campaign. One featured commercial, Proud Fathers, tells a story of a Chinese father who was always very strict to his son about putting his studies ahead of playing hockey.

Fast forward to decades later: that same boy is now a father

cheering on his own son at a hockey game. During the game, his father unexpectedly shows up with two cups of Tim Hortons “double-double” coffees, and it is revealed that he had secretly attended his son’s hockey games to watch him play all those years. This commercial spoke to Chinese parenting styles and cultural differences in the expression of parental love, and resonated with many Chinese Canadians who felt deeply touched by its message.

This Tim Hortons commercial demonstrates the importance of relevant and nuanced storytelling in executing a successful multicultural strategy. Multicultural consumers have a vast array of experiences that exist outside the mainstream Canadian narrative, and bringing them into the spotlight in a culturally appropriate way can create a deep mutual understanding and strong emotional connection with a brand. This unique opportunity should not be ignored, as multicultural consumers are becoming increasingly important within the Canadian market. Visible minorities are projected to account for 36% of the Canadian population by 2036, and building a strong multicultural strategy will be crucial for businesses to maintain their market share as they move into the future.

While the road ahead for Tim Hortons in the Chinese market will be challenging, underscored by shaky diplomatic prospects and fierce competition from both global and local players, the company has managed to score a spectacular opening goal. Perhaps there is a key lesson to learn from this story: Canadian brands should consider engaging with local multicultural communities before stepping into overseas markets.

Search interest for Tim Hortons by volume of searches.

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4 The Imperative for a Multicultural Growth Strategy Hua Yu, Frank Zhang, Richard Wang

Navigating an Increasingly Diverse Marketplace

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t’s no secret that multicultural customers are a growing population as the world becomes more global. In Canada, 22% of the population (roughly 8 million people) report being or having been an immigrant or permanent resident—a figure estimated to grow to 30% by 2031. Even today, multicultural populations are the majority in Canada’s largest cities. Such a large and growing population of customers simply cannot be ignored.

Some organizations have recognized this and attempted to cater to these segments. Canada Goose has added Fusion Fit as a sizing option for its jackets, designed specifically to better fit the average body frame of Korean, Chinese, and Japanese consumers. Tim Hortons significantly developed its brand loyalty within the Chinese Canadian community and then leveraged crossborder word of mouth to help launch a highly successful expansion into Shanghai.

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While some companies have been successful at engaging multicultural consumer segments, conducting business across different cultures rarely comes naturally to organizations and blunders can prove very costly – both financially and in terms of brand reputation.

Example 1: Superficial communications A bank produces Chinese language advertisements for Chinese New Year, but they go no deeper than promoting existing products using Chinese zodiac imagery and traditional themes of “luck” and “happiness.”

Example 2: Fundamental cultural misunderstandings A grocery chain promotes halal chicken, a Muslim product, when celebrating Vaisakhi (a Sikh and Hindu religious holiday), while being unaware that Sikhism prohibits the consumption of halal meat.

Example 3: Direct translations of existing messages A not-for-profit healthcare organization translates its donor marketing materials to target Chinese Canadians, but fails to recognize the importance of creating messages that resonate with Chinese Canadians. By simply taking a direct translation approach, they only manage to generate a minimal increase in donations.

The problem behind all these missteps is a fundamental misunderstanding of the customer. Traditional thinking applies the logic that “people are buying from us today,

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so let’s use the same products/services and messaging with multicultural customers.” As a result, organizations’ multicultural strategies get “stuck” within marketing communications, with many taking the superficial approach of simply translating their marketing (e.g. websites, advertisements) into another language.

The reason why this doesn’t work—beyond potential misinterpretations when directly translating words—is because there are different motivations, behaviours, and context from being brought up in a different culture that cannot be reflected through direct translations.

Without a deeply rooted understanding of multicultural beliefs and behaviours, companies risk not delivering what matters to different customers when doing business across cultures, countries, and ethnic groups. Worse yet, they may make significant cultural mistakes that can permanently hurt their reputation and brand among these groups.

In order to create meaningful impact and truly win over multicultural customers, an organization must embed multicultural thinking into multiple facets of the business and ultimately deliver an experience that reflects the needs of these customers. Modern day companies need a growth strategy that considers multiculturalism; the time to act is now. This perspective paper explores how organizations can learn to incorporate multiculturalism at all levels to best serve their clients, customers, employees, and stakeholders.

“Multicultural strategy needs to be embraced by the organization. It is very important for businesses in today’s world to be mindful of this, and it must start from the leadership and flow down throughout the organization.”

- Retail Executive, Microsoft Canada

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Level5’s Perspective on Multicultural Strategy Level5 defines a brand as The Value of a Promise Consistently Kept™ (Figure 1). Brand is not just a market-facing identity, but rather represents the entire business system. This means that an organization’s brand promise filters through all aspects of the business.

A successful multicultural strategy must consider all operational areas in the organization, not just a flashy marketing campaign. Figure 2 shows examples of how a multicultural growth strategy would manifest itself in various parts of a business system.

A multicultural growth strategy must play a role within the overall brand and guide how each component of the company’s internal business system (e.g., sales, HR, IT, culture) operates, in addition to its market-facing components (e.g., logo, advertising, products and services). Not only can this improve a firm’s bottom line, but it can also help connect with new customers and find new avenues of growth. Figure 1 shows this relationship: multicultural research can uncover what these segments “value,” strategy work can be conducted to determine how to integrate these insights into the brand’s “promise” to multicultural customers, and deeper organizational analysis can show where and how the business has to change to “consistently keep” this promise.

We believe that identifying, understanding, and resonating with multicultural customers is critical to organizations’ success; these customers represent a major (often overlooked) growth opportunity. Companies will not be successful at attracting and retaining multicultural customers by simply running a separate webpage or producing translated content. Senior executives need to embrace multiculturalism and adopt a multicultural strategic ideology as a positive asset throughout their entire management team, transforming how each component of the business operates to address this growing market.

“A multicultural growth strategy must play a role within the overall brand and guide how each component of the company’s internal business system operates, in addition to market-facing components.”

Level5™ Strategy

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Figure 1: The brand is reflected through more than marketing-related activities and instead must be operationalized through the entire business system below the waterline.

Your brand is the Value of a…

Name

Promise

Logo Price Packaging

What do we stand for?

Advertising

Value Proposition

Public Relations Environment

Services

Human Resources Operations Recruitment

Consistently Kept

™

What must we do operationally to consistently deliver on our promise?

Finance

Culture

Customers

Sales

Quality Control

Financing Terms

Information Technology

Employee Training

Supply Chain

Systems & Structure

Level5™ views brand as your entire business system.

It’s not just what people see and hear (above the waterline) but also how you operationalize and consistently deliver your promise.

Core Knowledge Management Processes Internal Communications Assets

© LEVEL5 STRATEGY GROUP™ 2019

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Figure 2: A multicultural strategy should be part of an organization’s overall growth strategy and operationalized through all levels of the business.

Products & Services: Offer customized products based on a deep understanding of multicultural consumers

Name Logo Products & Services Price

Advertising: Communication messages need to be based on a deep understanding of multicultural consumers’ worldview and behaviours

Advertising Packaging

Value Proposition

Public Relations

Human Resources

Operations

Recruitment Financing Terms

Environment

Promise

Culture

Customers

Sales

Information Technology

Quality Control

Employee Training

Partnerships

Systems & Supply Chain Structure

Knowledge Management

Core Processes

Internal Communications Assets

© LEVEL5 STRATEGY GROUP™ 2019

Finance

PR: Leverage key influencers within ethnic communities and develop an overarching theme-based partnership strategy to engage the community Environment: Continuous scanning, analysis and learning of global trends and behavior, and understanding these impacts on the business locally and internationally Recruitment: Attract and retain top talent from the targeted cultures and communities Culture: Foster cross-functional appreciation of different cultures and an inclusive and collaborative approach to value creation Sales: Identify appropriate sales channels (e.g. direct, online, mobile)

Training: Equip employees with key skills to serve targeted ethnic groups Partnerships: Invest time and effort to foster authentic long-term partnerships within and across borders Knowledge Management: Continuous learning and dissemination of new global trends and insights that impact current and future customers of different cultures

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Multicultural

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Our Approach to Developing an Organization’s Multicultural Strategy Multicultural strategy can be thought of as a lens that is applied to an organization’s current strategy that positions the company for growth by tapping into and engaging with multicultural segments. It is not a standalone strategy, but rather a component of the overall growth strategy. When we talk about multicultural customers, it is important to note that this is not limited to newcomers; families continue to identify with and maintain connections with their home countries even generations after immigration.

Applying a Multicultural Lens: The Settlement Journey We cannot view a different culture or immigrant group simply as a single segment. Nor should we just break them into standard demographic cuts like age or income level. Instead, it is important to also consider the various “settlement stages” they go through as they enter a new country.

Understanding these stages also enables organizations to develop strategies that are based on customer needs across the settlement journey and their associated touchpoints. Figure 3 illustrates how one of our previous clients has looked at a specific culture’s settlement journey and considered influences from the home country and from Canada.

This is a high-level framework used to conceptualize the overall path of an immigrant, but when building a multicultural strategy it is also important to go deeper and develop more detailed journeys for the specific segments being targeted. For example, a student who is considering studying abroad falls within the “Pre-immigration” stage of the settlement journey. Some Canadian banks target this

group by partnering with local banks and appearing at information sessions for prospective students, promoting special products that mimic account structures in their home countries. Because these individuals are still under full home country influence, organizations must cater to these preferences in order to build an early relationship and become a familiar and trusted brand. Doing this will increase the bank’s ability to onboard the student once they land in Canada.

However, what prospective international students are interested in may be very different from what a family in the “Pre-immigration” stage looking to permanently re-settle might be searching for. Another international student who has already lived in Canada for a year may also have very different needs. This necessitates multicultural segmentation to factor in both the demographic dimension and where they are in their settlement journey. Using this approach helps us appreciate the fact that multicultural segments are not one-dimensional, and that it is crucial to consider the differences between them.

Figure 3: Example settlement journey of a Canadian Immigrant.

The journey does not end after an immigrant has settled, and their cultural background will always stay with them and influence the way they make decisions.

Before

Preimmigration Individual is thinking about leaving their country

Home country influence

Canadian influence

During

After

Planning

Landing

Settlement

Maturity

Individual decides to immigrate to Canada

Individual lands in Canada and lives in Canada for 6 months

First 2 years of living in Canada

Living in Canada for more than 2 years

Higher

Lower

Lower

Higher

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Understanding Multicultural Customers When generating market insights and building a fact base to inform new growth strategies, it is important to apply a multicultural lens. Figure 4, a traditional 5Cs framework, illustrates the need for an additional multicultural lens to filter through and adjust each of the existing dimensions.

Figure 4: A multicultural lens applied to the traditional 5Cs analysis.

Category

Category Context

Company

Competitors

Channel

© LEVEL5 STRATEGY GROUP™ 2019

Customers

Company

Competitors

Competencies

Comparators

Channel

Customers

Community

Multicultural Customers

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The Importance of Home Country Context In the past, we’ve used this framework in a number of ways based on the needs of each of our clients. For example, when analyzing an industry, our multicultural strategy framework reminds us of the importance of understanding both the category and the context of the customer’s local environment (e.g. in Canada), as well as that of the origin environment of multicultural customers (e.g. India, China) to see how their home countries have influenced their expectations and behaviours. Businesses are often unaware of these “self-imposed” cultural boundaries when scanning the market to understand product and service categories, and neglect to understand how one’s own business may need to change to best serve customers who call two or more countries home.

The Unique Behaviours of Multicultural Customers As previously discussed, it is important to also consider the unique settlement journey that each multicultural segment goes through. This allows for a more comprehensive strategy compared to just relying on demographic segmentation (e.g.

Filipino Canadians) in isolation. The settlement journey helps companies develop a strategy that fits the needs of a customer as they are in a particular point of their journey.

A recent immigrant from the Philippines and a long-settled Filipino Canadian have very different behaviours, wants, and decision-making considerations.

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FIgure 5: BrandMap™ of a Big 5 Canadian bank.

We regularly use our proprietary BrandCardTM and relevant comparators and not just direct competitors within BrandMapTM methodologies to quantify cross-cultural the local environment when taking a multicultural lens to perceptions of brands and map customers’ rational and assess the competitive landscape. emotional needs (Figure 5). Generally, an organization should cultivate a strong heat signature in the core while A prime example of this comes from some interesting also adequately differentiating itself in one of the other findings we uncovered in the financial services industry. sections of the BrandMap™. The above figure depicts Most major Canadian banks use similar tactics when customer perceptions of one of Canada’s Big 5 banks. What targeting the Chinese-Canadian population with little to no we see is a strong but undifferentiated brand that is mildly differentiation. However, we found that Chinese financial perceived as knowledgeable, confident, and rich. However, institutions are evolving to adopt new service models. For it lacks strong attributes relating to being interesting, example, we currently see a transformation from “fintech,” COPY trustworthy, friendly, and nurturing. How different would this CONFIDENTIAL which focuses– DO on NOT using technology to enable finance, CONFIDENTIAL – DO NOT COPY picture be for different cultures and settlement stages? to “finlife,” which is a scenario-based service model that emphasizes the importance of using tech-enabled finance Learning from Comparators to serve the real life needs of customers.

In terms of competition and broader industry learnings, we have applied both an “inside-out” and “outside-in” approach to understand how local competitors are targeting various cultures. This includes understanding what players in multicultural customers’ home countries are doing in terms of their communications, community engagement, and products and services. Hence, organizations must consider

“We regularly use our proprietary BrandCardTM and BrandMapTM methodologies to quantify cross-cultural perceptions of brands and map customers’ rational and emotional needs.”

Level5™ Strategy

Multicultural

Uncovering Unique Community Channels Following the development of a more nuanced view of customer touchpoints across the various settlement stages can teach us how direct and indirect sales and business development channels can be optimized to cater to each profile at each stage. The mapping of touchpoints across different settlement stages can even inform how businesses engage with customers before they arrive in the country through partnerships and community engagement initiatives in the home country. Insights in this dimension can help organizations serve their customers through the entire pre-immigration, landing, and settlement stages and become the “go-to” product and service provider upon their arrival.

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stands, what the various stakeholder perspectives are, and what competencies it needs to develop to move forward in an aligned manner. Businesses need to collaboratively uncover opportunities, challenges, potential solutions, and recommendations. Then, they must reaffirm the strategic push to better target and serve various ethno-cultural communities. This often requires a major cultural shift within the organization that changes its perspective. Importantly, in line with the company’s vision, it is important to develop new “future states” and value propositions that focus on serving multiple cultures. This keeps the organization accountable for delivering a consistent brand promise to its target customers and sustaining its new strategy across all cultures.

Developing New Competencies Finally, the fifth dimension involves engaging all client stakeholders to better understand where the company

“A change in practice and perspective requires a change in corporate culture, but corporate culture is something that is slow to change. Hence, it is important to identify where the pace of change would be the slowest across departments and anticipate the most critical barriers.”

- Business Growth Transformation executive, MaRS Discovery District

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5 Is a Sustainable Packaging Revolution Upon Us? Rob Gizzie

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ost of us would agree that doing what we can to ensure a healthy and sustainable planet for generations to come is a worthy endeavour. Today, much of the public focus in this regard tends to centre on “energy” – i.e., how we can continue to power our world in a “clean” way, with a primary focus on alternative forms of fuel that replace suboptimal existing solutions.

Though a transformative innovation of this kind (e.g., cost efficient solar, fusion energy) would be great, there’s only so much a busy person, or professional, can do to impact change in this area. I suppose you could write to your MP or Member of Congress, but when was the last time any of you did that?

Meanwhile, there are plenty of comparatively incremental innovation opportunities available to those of us from the business arena that can have a meaningful impact on our

world. One such area is packaging. The U.S. Environmental Protection Agency (EPA) reports that, as of 2015, the U.S. alone generated approximately 77.9 million tons of solid waste from “containers and packaging.” The good news is that the amount of waste that is landfilled every five years has gone down as recycling has become more pervasive.

On the other hand, as e-commerce continues to pick up steam globally, we can assume that the necessity for improvements in packaging will only continue to increase.

Loblaw Co., Canada’s largest food retailer, is taking notice.

Earlier this month, Loblaws announced a partnership with Loop, a company that produces reusable packaging customized for participating brands that is delivered by a courier, and then picked up when dropping off new deliveries (think of it as the return of the “milkman model”).

Loblaws plans to pilot the system in Toronto in 2020.

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“94% of Canadians are “personally motivated to reduce single-use plastic packaging” and that 71% of Canadians said they would support a ban on single-use plastics for food packaging.”

Loblaws is not alone in its efforts to reduce packaging waste.

On June 3rd, U.K. grocer Waitrose launched an 11-week trial of its plastic-free Unpacked initiative at one of its stores in Oxford. So far, the store has removed packaging on over 200 lines of product.

The model encourages shoppers to bring their own reusable containers for a variety of products including pasta, grains, frozen fruit, cleaning products and even wine and beer.

For those who don’t bring their own receptacles, Waitrose will provide bags and containers for purchase, much like the model used for grocery bags in many stores today. It seems as though consumers care about packaging waste as well – a recent study from the Agri-Food Analytics Lab at Dalhousie University found that 94% of Canadians are “personally motivated to reduce single-use plastic packaging” and that 71% of Canadians said they would support a ban on single-use plastics for food packaging.

Considering that consumer interest and global trends are heading in the direction of sustainable packaging, retailers must take note and begin planning for how they can meet these demands. As demonstrated by Loblaws and Waitrose, there are a variety of options that can be explored to meet these demands.

This exploration will necessitate an innovative, testand-learn mindset to find a solution that not only meets customer demands for environmental sustainability, but also stakeholder demands for financial viability within these solutions.

So, it looks like Loblaws and others are attempting to get ahead of what could become a growing issue in the minds of consumers. The challenge will be that many consumers aren’t willing to pay the price for sustainable packaging – the same Dalhousie University survey found that fewer than 38% of consumers would pay more for an item with biodegradable packaging.

https://www.epa.gov/facts-and-figures-about-materials-waste-and-recycling/containers-and-packaging-product-specific-data https://www.thegrocer.co.uk/store-design/unpacked-a-closer-look-at-waitroses-plastic-free-trial/594188.article https://www.huffingtonpost.ca/entry/loblaws-reusable-packaging_ca_5cf9551ae4b0e3e3df171467 https://www.forbes.com/sites/jonbird1/2018/07/29/what-a-waste-online-retails-big-packaging-problem/#519b7cd4371d https://www.dal.ca/faculty/management/news-events/news/2019/06/06/release__majority_of_canadians_actively_shopping_for_food_with_ non_plastic_packaging__dalhousie_survey_finds.html

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6 How Canadian Tire Stays as Canada’s Strongest Retail Brand An Interview with Susan O’Brien Ian Madell

Level5 sat down with Susan O’Brien, Senior Vice President of Marketing for Canadian Tire, to discuss how Canadian Tire has grown its brand value and strength year over year.

The new era of digital retailing has created a lot of casualties: how do you assess your preparedness for the new era?

In a time when retail is undergoing such a dramatic transformation, we are constantly looking at new ways to meet our customers expectations. We look at all metrics we have traditionally tracked and have also added a whole new set that help us monitor our customer engagement- from Net Promoter Score (NPS) to improved measures of Marketing ROI like Return on Ad Spend (ROAS). And of course, we use our rich customer data to help us test and measure new approaches and initiatives.

Owned Brands are a key component of Canadian Tire’s go-forward strategy – could you illustrate the impact of this strategy on your Brand?

Owned brands will continue to be a key element of our growth strategy. We look to differentiate ourselves by offering unique, high quality products which can only be found in our stores and offer a meaningful margin advantage. We are putting the customer at the heart of our business strategy and decision making, bringing them the latest and greatest products and engaging them through exciting marketing campaigns like ‘We Do New’, which puts a spotlight on the hottest innovative products. We do believe our strength in building and marketing our owned brands has been key to helping reinvent the Canadian Tire brand over the years.

What is the role of Triangle loyalty and credit cards in the company’s long-term strategy?

Triangle Rewards was developed to attract new customers, increase engagement and relevance, and create more loyal lifetime customers. It is enabling us to do this because it provides such rich data, informing a single view of our customer and their needs, wants and preferences.

We have attracted over two million new customers since Triangle Rewards was launched, creating the fastest growing loyalty and credit card program in Canada. We now have over 12 million loyalty members who are shopping across our banners and receiving personalized offers for shopping within our marketplace. Making the transition from mass merchant to a one-to-one retailer is not easy, however we now have 60% of our customers shopping across our banners at Mark’s, SportChek and Canadian Tire Retail using Triangle Rewards.

What trends in Canadian retail can we expect to see over the next year?

We believe the biggest trend in retail branding is personalization – creating unique, customized solutions and communications that show greater relevance to Canadians. And we believe the strength of our Triangle Rewards program, our enormous digital and physical footprint and our strong relationship with Canadians is setting us up well for that personalization journey.

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Artificial Intelligence is 7 Impacting the Future of Retail, Are You Ready?

Lauren Singer

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nattended retail (cashierless payments) is projected to be a $34B industry by 2023, and over 70% of retail and consumer products executives in North America plan to implement intelligent automation across their value chains by 2021 removing employee contact, unattended retail aims to create a more seamless retail experience for the consumer.

From the retailer’s perspective, unattended retail also allows for lower labour costs, increased efficiency, and uniform remote inventory management & sales data. This article will discuss a unique example of unattended retail in China, walk through the customer journey it offers, and provide an in-depth analysis of what learnings can be applied to the Canadian market. Ultimately, it is essential to understand your customers and each segment’s rational and emotional drivers of purchase intent and brand loyalty.

Unattended Retail Profile: BingoBox In China, self-service checkout is a growing trend, and competition is expected to increase. The world of unattended retail has come a long way and is growing rapidly—just ten years ago, only vending machines existed

in this space. The unattended retail sector originally focused on speed and function over innovation. For example, a vending machine would be placed in a corner and little thought would be given to its appearance other than making it identifiable. Today, unattended retail stores must be more than just visually appealing—they need to have increased and differentiated functionality. Retailers are starting to look towards leveraging AI and automation not just for efficiencies, but also to differentiate from competitors and improve their CX by providing customers with more convenience.

BingoBox, a franchised convenience store chain, has logged over a million transactions in over 300 stores across 30 cities in China. What makes BingoBox unique is that each location is a 24/7 self-service convenience store on wheels—their mobility allows franchisees to easily relocate as desired. BingoBox stores, although small, stock 500-800 items, including a smaller selection of fresh foods compared to the average Chinese grocer. Built-in scanning features mean that stock-taking and refilling can be completed in under 20 minutes.

Source: YouTube Video, BingoBox, a smart convenience store in China and a GGV portfolio company.

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By using AI to develop efficient recognition and sorting algorithms to stock the store, BingoBox provides consumers with a seamless customer journey; self-checkout allows for a speedy process and with BingoBox’s automated restocking, customers have the assurance that their products will be available.

A Customer-Centric Journey that Satisfies Rational and Emotional Drivers The average customer journey is highly predicated on convenience and reliability.

The journey begins when a customer first desires a good.

They then consider the vast number of convenience store alternatives within an accessible proximity. Because BingoBox stores are located in busy areas, Chinese consumers may pass by a location during their daily commute. When the consumer enters a BingoBox, they scan the barcode on the door with their phone. Inside the store, consumers choose their items for purchase, self-scan each item’s barcode, and pay through their phone using WeChat Pay or Alipay. As the customer leaves, a camera checks that only paid-for products are exiting the store.

Through facial recognition, these in-store cameras also check for unregistered users who are not allowed on the premises. In the case of any unforeseen inquiries, a human customer support contact line is available via video link.

At Level5, we know that both rational and emotional attributes have an approximately equal role in a customer’s decision-making process. Some of these rational and emotional attributes serve as key drivers for the consumer,

Top 10+1 Must Reads - Winter 2020 Edition

so it is critical for companies to identify, understand, and meet those particular attributes during the customer journey. BingoBox provides rational benefits such as a speedy purchase and a wide array of everyday items.

On the emotional side, the consumer feels independent and tech-savvy because they are able to complete their purchase without assistance, or potentially fulfilled as their purchase is extremely convenient and relaxed. BingoBox has built brand loyalty by identifying and meeting customers’ rational and emotional drivers.

Advantages of BingoBox • Reduced operational costs: costs lowered by 80% • Fewer staff needed: only 1-2 workers are needed to replenish goods for 5-7 stores • Short replenish time: store checking, and daily maintenance can be done in 20 minutes • High store security: security system features CCTV and facial recognition for customers • High mobility • Customer service is 24/7: consumers just need to press a button for help Today, consumers in urban China are busy, so they don’t want to waste time waiting in line and dealing with cashiers.

They want a convenient purchase experience, and unattended retail is built around the promise of convenience.

To this end, BingoBox allows for a quick customer journey with a limited but high-quality selection of goods.

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Checkout Preferences

If both a self-checkout kiosk and a cashier are available at a store, which one do you prefer to check out with?

55+

19%

35-54

75%

36%

18-34

55%

46% Self-Checkout

6%

39% Cashier

10% 15%

No preference

Source: CBC News (CivicScience)

Not All Customers Are Alike However, while many customers want a convenient experience, Canadian retailers may be making a large assumption if they equate convenience with cashierless service. In fact, removing the cashier from the average Canadian customer’s journey may actually be adding more friction and inconvenience to the experience. Market research shows that many North Americans still prefer cashiers to self-checkouts, and these consumers feel they are being forced to use self-checkouts at retail stores across Canada and the United States.

Major Canadian retailers should be acutely aware of their customers’ wants and needs. For example, Walmart has stopped its Scan & Go program, which allowed customers to self-scan and pay for items without checkout lanes, cashiers, or registers. This option experienced low customer participation, as it was actually creating unintended friction in their journey. According to a CBC article, consumers thought the scanner technology was frustrating and the entire process was cumbersome.

These pain points could have been caused by a variety of reasons, including pressure to adapt quickly to growing trends in the marketplace, a desire to cut costs, or a strategy that may not have been well-communicated to all employees and customer groups. Regardless of the

cause, the result was a misalignment between the initiative and consumer preferences. Because most retailers will eventually add some form of automation to their physical retail stores, it is vital that they understand and consider consumers’ wants and needs when deciding how to introduce or expand automation.

Analysis This discussion is meant to emphasize the importance of customer drivers. As a retailer, it is critical to keep your customers’ wants top of mind, rather than simply reacting to market trends. While the retail industry is heading in the direction of automation and AI, it is important that retailers proceed at a pace that fits their customers’ wants. If a retailer only focuses on reducing costs without considering the needs of its customers, attempts to implement unattended retail will likely fail.

One retailer that has succeeded with unattended retail is Amazon Go. Amazon has plans to expand to 3,000 Go stores by 2021. These stores will allow customers to simply walk out with their goods, while BingoBox requires them to scan in order to purchase. It is important to note that both companies considered consumer preferences when deciding how to work automation into their customer journeys. Given the widespread use of mobile payment platforms like WeChat Pay and Alipay in China, Chinese consumers are likely more comfortable scanning items

“It is essential to understand your customers and each segment’s rational and emotional drivers of purchase intent and brand loyalty.”

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on their own and paying through their phones. While both BingoBox and Amazon Go have proven successful in each of their geographies, it is not fair to assume one unattended retail format would be equally successful in the other.

The need to match services with customers’ priorities makes customer research all the more important. Research serves as a voice for customers and helps companies identify key emotional and rational drivers, decrease uncertainty in the market, and ultimately make better business decisions.

BingoBox and Amazon Go succeeded in implementing automation within their processes, while Walmart might have to rethink its approach to align it with customers’ preferences.

Below are some tips for retailers to consider as they consider how to implement automation and AI: 1. Rethink the way work gets done in a digital age 2. Consider consumer preferences 3. Start small and expand slowly 4. Communicate with your consumer regularly 5. Educate all internal and external stakeholders about the changes 6. Partner with automation experts and host work sessions with executives, employees, and even customers to learn the process 7. Monitor the technologies closely and update according to customer preferences

Retail

85%

Supply Chain planning

85% Demand Forecasting

79%

Marketing, advertising and campaign management

81%

79%

Consumer Products

86%

Product design and development

81%

Manufacturing

75%

Consumer Intelligence

Demand Forecasting

https://www.techinasia.com/china-version-amazon-go-bingobox-funding https://www.kioskmarketplace.com/articles/move-over-amazon-gochinas-bingobox-is-on-the-move/ https://www.newswire.ca/news-releases/canadian-consumers-aregrowing-less-patient-with-retailers-702557331.html https://www.pymnts.com/news/payments-innovation/2019/ worldnet-unattended-retail-vending-machines/ https://www.globalpaymentsinc.com/en-us/blog/2019/03/06/ unattended-retail-future https://www.prnewswire.com/news-releases/the-meteoric-rise-of-unattended-retail-the-next-multi-billion-dollar-industry-681614821.html

Consumer Intelligence

73%

73%

79%

77%

Store applications

Supply Chain planning

Pricing and Promotion

Production Planning

http://www.ufcw.ca/index.php?option=com_content&view=article&id=32228:consumers-want-cashiers-not-self-checkouts&catid=10043&Itemid=6&lang=en https://www.cbc.ca/news/business/self-checkout-shoppers-drugmart-zehrs-loblaw-1.5067618 https://www2.deloitte.com/insights/us/en/industry/retail-distribution/potential-of-artificial-intelligence-consumer-products.html https://asia.nikkei.com/Business/Business-trends/China-Japantry-cashier-free-stores-for-different-reasons2 https://advantage-marketline-com.proxy1.lib.uwo.ca/News/ walmart-concept-scraps-cashiers https://advantage-marketline-com.proxy1.lib.uwo.ca/News/samsclub-set-to-open-cashier-less-store-in-texas

https://www.fbicgroup.com/sites/default/files/New_Retail_in_ Action_BingoBox.pdf

https://advantage-marketline-com.proxy1.lib.uwo.ca/News/jdcomunveils-first-cashier-less-store-in-market

https://technode.com/2017/09/28/bingobox-unveils-new-ai-tech-forits-unmanned-stores/

https://adage.com/article/news/reality-consumers-control/100744

https://www.cbc.ca/news/business/self-checkout-cashiers-retailjobs-technology-1.5020299

https://www.cbc.ca/news/business/walmart-canada-self-checkout-scan-and-go-amazon-go-1.4899698 https://www.businessinsider.com/walmart-abandons-scan-andgo-cashierless-checkout-2018-5

Level5™ Strategy

Customer Centricity

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Linking Customer Experiences Across Multiple Channels is What the Great Retailers are Building Ian Madell

Level5’s global strategic partner Brand Finance launched Canada’s Most Valuable Brands 2019 in May. Brand Finance sat down with Ian Madell, Managing Partner and President at Level5, to discuss how Canadian Tire retains its title as Canada’s strongest retail brand year after year.

8

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Banking and Telecoms brands are some of the most established brands in Canada. What are some emerging sectors and brands that we should look out for in the next 5 years?

There is seemingly no traditional sector brand that is safe from tech sector disruption. What do traditional sector brands need to do to adapt and grow under these conditions?

The legalization of cannabis in Canada is, without doubt, one of the most interesting and exciting brand building opportunities in a generation. Not only for this country, but also globally as cannabis becomes legal in other jurisdictions. The sector is in the very early stages of development (lots of growing pains right now) but, for those organizations looking to build value for the long term, these brands will become the crucial driver of that value.

You are absolutely right that technology – or digital – should now be immersive in any organization’s business model.

It should be part of any strategic discussion and seen as an enabler to differentiation and the value proposition put forward to the market.

At Level5 Strategy we define brand as ‘The Value of a Promise Consistently Kept™’. It is far beyond marcom and requires the whole organization to play its part in building the brand. This becomes more important given the restriction on traditional ‘marcom’ techniques.

The brand will be defined by effectively delivering the promise in terms of product/service quality, consistency, availability, safety, product extensions and openness to learn and change in a very immature customer journey. This sector is highly regulated but differentiation is possible and needed for long term value appreciation.

I think it should be embraced by an executive team at a more traditional organization. When we use the term “digital” today, the reality is the necessary changes encompass much more than simply a process of redesigning IT architectures and business operations.

Rather, companies must rethink everything that touches the customer journey — design, research, product management, marketing, support, you name it —and create experiences that likely go beyond a product’s original purpose.

Level5™ Strategy

Customer Centricity

Organizations that we have worked with that take this approach are having success with this new competitive reality. I think the next 5 years will start to separate those who have embraced technology – are not afraid of this new competition – from those who are paralyzed by it and clearly show the winners and losers in the market.

What is unique about the way Canadian Tire Corp. approaches brand and brand management?

I think there are two significant things that they have done.

First, they have recognized that the traditional model of retailing – product driven – has dramatically changed to become customer driven. Customers have gained a lot of power thanks to technology.

For example, they can do instant price comparisons, quality comparisons and purchase wherever and whenever they want! Adopting this changing business model requires a new strategy, processes, competencies and culture. I think CTC has been working hard at this for the past several years. Second, the organization has taken the time to really understand their brand and treat it as a valuable asset – to be nurtured, leveraged and act as a driving force for profitable growth. Importantly, this brand ownership and culture must start from the top, the chief brand officer of a brand-driven company is the CEO and I believe Stephen Wetmore excels at this.

They are one of the only organizations I know that have a Brand & Community Committee at the board level.

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That sends a very powerful and positive message to all employees about the importance of their brand and the role they play in increasing the value of this asset.

What are some of the ways that traditional brick-and-mortar brands like Canadian Tire compete in the digital space?

The first thing is to embrace the multiple channels that consumers now engage in and then ensure your operations are extremely competent in all channels. This is table stakes and seems obvious but many brick-and-mortar retailers still have a way to go in this area (CTC has made great strides over the past couple of years). Once you have accomplished this – don’t be satisfied. Look for aspects within each channel that you can be the leader and innovator.

In addition, one of the most significant levers that brickand-mortar organizations have to strengthen their value proposition is in the customer experience. This is still a difficult territory for digital-only to compete in as effectively. It requires a clear strategy on the type of customer experience you want to deliver that is relevant to customers and touches the emotional and rational drivers of purchase intent along their journey.

Linking experiences across multiple channels – allowing customers to seamlessly transition from online to brickand-mortar and back again – is what the great retailers are building. When you do this right, it can’t be duplicated by your competition – digital or traditional – and YOU win!

“The first thing is to embrace the multiple channels that consumers now engage in and then ensure your operations are extremely competent in all channels.”

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9 Customer Centricity: Customer Experience Reimagined Claude Ricks, Efram Lebovits, Rob Gizzie

T

he business world is buzzing with the concept of customer journeys. They’re all the rage across most, if not all industries: from retail to financial services to consumer packaged goods – and, believe it or not, even government services. Journeys are as in vogue today as continuous improvement and process re-engineering were in days past. While popular business topics often become generalized and overplayed, a number of them are important. When refined, they endure for good reason.

The reason customer journeys will continue to endure is their impact on customer experience. Organizations are realizing that delivering effective customer experiences is critical to establishing competitive advantage, thereby improving loyalty which feeds revenue and market share growth. Said differently, customer journeys help facilitate a more customer-centric organization; they’re a tool that enables a business – B2B and B2C alike – to understand

customer expectations and align itself with these expectations (this also applies to stakeholder expectations, depending on the nature of your industry).

It is often said that “a good strategy implemented poorly is a bad strategy.” In the case of customer journeys, a poorly implemented strategy often looks like a “boil the ocean” approach that attempts to delight the customer at every step along their journey. Equally ineffective is when customer journeys are created in isolation of the operational accountabilities needed to bring them to life.

When implemented effectively, organizations are able to clearly define a promise to the market AND keep it in a sustainable way. When combined with channel strategy, a focus on customer experience leads to an integrated omni-channel experience.

“Organizations are realizing that the consistent delivery of an exceptional customer experience is critical to establishing competitive advantage.”

Level5™ Strategy

Customer Centricity

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“Looking to delight customers across their journey and trying to achieve top marks at all stages is a phenomenon we call the irrationality of delight.”

1. A Closer Look: The Irrationality of Delight journey nirvana wouldn’t be a good thing from a customer perspective; it’s just that it’s unrealistic from a delivery perspective across a number of channels and touchpoints.

You’ll often see literature that presents customer journeys as a way to understand how a customer interacts with your organization in a given set of circumstances – whether it’s a purchase journey, an acquisition journey, etc. Journeys typically outline what a customer is thinking at various stages of interaction (at various touchpoints) and highlight key moments of truth (MOTs) and pain points (PPs). Most of these journey analytics are based on rational wants and needs, i.e. what benefit a customer receives from interacting with your goods and/or services.

Fundamentally, the desire to perfect the journey stems from an insufficient understanding of customers’ emotional needs. These emotional needs include what customers, across segments, feel by interacting with your goods or services at the key MOTs and PPs. Emotions are known to drive action, increase loyalty, and influence purchase decisions. Without understanding the emotional side of the equation, we’re missing half of the picture.

This data is often attained through qualitative or ethnographic research. Organizations with more nuance will parse this data by key customer segments, creating a constructive, segmented view of how customers interact with their brand. This line of thinking often leads to the notion of “delighting” customers which can be problematic as it is often taken too far. Looking to delight customers across their journey and trying to achieve “top marks” at all stages is a phenomenon we call the “irrationality of delight.”

The likelihood

Layering both rational and emotional drivers into the journey is critical for prioritizing and optimizing management of the experience. By understanding the emotional drivers (in addition to the rational drivers) we can laser-focus our efforts – in terms of what matters and where that is emphatically brought to life. This leads to a targeted approach; it doesn’t lead to boiling the ocean.

The problem with this phenomenon is that an organization is trying to overachieve all the time. This isn’t just a waste toofrecommend is influenced equally by time, but a waste of money and organizational effort.

The root cause of this issue is an implicit assumption that the customer wants and needs perfection (and then some) at every step of their experience. It’s not that this type of

The question is: if we can’t do it all, how do we prioritize?

We prioritize by understanding rational and emotional drivers, and identifying how these drivers relate to rational and emotional drivers customer expectations.

Likelihood to Recommend / Reputation Drivers Among Different Categories

Likelihood to Recommend / Reputation Drivers Among Different Categories

Our research has shown that a typical decision is driven equally by emotional and rational drivers.

Investment Banks Enterprise Software Management Consulting Network News

50%

Travel Destinations

Emotional

Sports Broadcasts

50%

Rational

Charities Retail Brands Car Brands Post-Secondary Education Institution 0%

Source: Level5 © LEVEL5 STRATEGY GROUP™ 2019

20%

40%

60%

Emotional

80%

100%

Rational

CONFIDENTIAL – DO NOT COPY

1

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Customer Centricity

Top 10+1 Must Reads - Winter 2020 Edition

Sidebar: Focusing Journey Efforts in the Financial Services A leading financial services institution recently overcame the irrationality of delight by listening closely to customer needs and identifying that the greatest opportunity to deliver their emotional drivers of “simple” and “modern” came at the point of sign-up. Revising how they help customers from approval through onboarding within their service business was shown to be highly impactful. It allowed them to concentrate effort on a high opportunity set of processes at the point in the customer experience where these emotional drivers are expected to be experienced, as opposed to reinventing their entire customer journey to be simple, which would not align with customer expectations.

The few moments that matter most… and the many where table stakes do just fine!

At Level5, we focus on improving customer experience by focusing on the interaction points and customer needs that matter most. The prioritized interaction points are determined through the lens of the customer and are most often the points where emotional needs are met.

When organizations look to develop an understanding of their current customer experience, and opportunities to improve it, they’re fundamentally seeking how to best align their brand with customer interactions. In other words, organizations want their brands to equate to the journey their prospects and customers experience.

The interesting part about customer journeys is that some parts along the way truly mean more than others. Some are critical, some are important, and some are “nice to have.” It’s these expectations that organizations can and should use to help prioritize how they improve the customer experience. Organizations should leverage the journey to identify what really matters and focus how far they must go to meet customers’ expectations. We refer to these points that really matter as Moments of Truth. In other words, get these moments wrong and you seriously risk losing a

prospect or customer. Get them right and you build brand loyalty. Organizations don’t have to delight customers across all points of their journey – just those that matter most to the customer. That said, there may be other points where the expectations are at “table stakes” levels but an organization’s performance under-delivers. Investment at these points is needed as well.

Evaluating touchpoints based on whether they’re moments of truth and/or pain points, and how organizations perform relative to customer expectations is a critical way to prioritize where resources must be spent. It’s not that other touchpoints shouldn’t be managed, it’s simply that they don’t need to be prioritized in terms of over and above spending, fixing, resources deployment, etc.

Matching operational implications to the needs and expectations your customer has during their journey at particular touchpoints is a critical step in leveraging the journey effectively.

CONTEXT: STAGE 2 PLANNING

POSITIVE EXPERIENCE

Figure 1: Aligning Touchpoints with Customer Expectations

1 For positive moments of truth, stabilize and keep doing what you are doing

3 For positive touchpoints, stabilize and keep doing what you are doing 2 Some moments of truth may be above table stake; however, it still does not meet customer expectation. These moments need to be improved to meet those expectations

NEGATIVE EXPERIENCE

TABLE STAKE

Source: Level5

4

For negative moments of truth (i.e. critical pain points attached), fix this moment to meet customer expectations – this may be above table stakes

5 For negative touchpoints, fix this moment to meet table stake or industry standard. You do not get bonus points for going above and beyond for regular touchpoints

Legend:

Touchpoint

Customer Expectation

Moments of Truth

Table Stake

Pain Point

Level5™ Strategy

Customer Centricity

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“Those that lead today are taking a more proactive and aggressive stance on leveraging journeys to improve customer centricity at an individual touchpoint level, and are fundamentally changing how they operate, organize and innovate.”

2. A Closer Look: Journeys in Isolation The trouble with journeys is that they’re often developed in isolation. As products of a marketing or front-line operations role, they serve an isolated need and stop short of impacting the broader customer experience and the business system that supports it. It’s not that an understanding of the customer journey can’t serve to improve marketing or front-line work; it’s that this stops short of the power and impact that journeys can have – especially in orienting an organization toward operationally measuring customer experience and using these new insights to drive customer experience improvements.

Historically, organizations have been reactive in their approach to garnering value out of journeys.1 Those that lead today are taking a more proactive and aggressive stance on leveraging journeys to improve customer centricity at an individual touchpoint level, and are fundamentally changing how they operate, organize and innovate.

Journeys, operations, circles and squares With a high bar set on why customer journeys are valuable and how to think about them, we inherently seek to understand what those journeys mean from an operational lens. We do this by identifying the organization’s business process model and matching it to the journey. We then start to ask key questions such as:

• Does the owner of the performance metric for a specific touchpoint have the ability to influence or improve the process(es) that impact the specific customer experience?

• Are there gaps in our business process model where certain touchpoints are not actively managed?

This view of the business in light of the customer’s journey allows for clear delineation of responsibility in delivering the customer experience. If process ownership seems incorrect or unclear, we work to refine it.

When we work with clients in workshops and meetings, we do our best to simplify these concepts as much as possible. We focus on the real issues, not the jargon and background complexities. We have found that simplifying these concepts to their core allows our clients to discuss the root of the issues and not get caught up in varying understanding of “consultant speak” language. Our experience has shown that clients have different levels of comfort with concepts such as journeys, and we take that into account. To this end, we like to leverage easy-tounderstand graphics that make talking about this model easy to do. On the next page, you will find a genericized view of our “Circles and Squares” model for customer experience.

• Which groups are responsible (or which groups are related) for the touchpoints identified in the journey?

• Are there individual levels of accountability for key moments?

1

HBR, Competing on Customer Journeys, https://hbr.org/2015/11/competing-on-customer-journeys

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Figure 2: Customer Journey with Circles & Squares BRAND ESSENCE

Operational Processes

CUSTOMER SEGMENTS

CUSTOMER SEGMENT #1

CUSTOMER JOURNEY

Awareness/ Prospecting

Customer Value Drivers: • Rational Benefits (‘Get’) • Emotional Benefits (‘Feel’)

ALIGNMENT

CUSTOMER SEGMENT #2

Conversion

CUSTOMER SEGMENT #3

Usage

Post-Purchase Resolution

Build Community & Engage

P

D

P = Physical Channels, D = Digital Channels

Source: Level5

= Internal Process View

= Moments of Truth

= External Experience View

This model starts at the top with an outline of the customer experience across the key phases of the journey in question.

We identify all major touchpoints (denoted by circles) and highlight moments of truth or pain points. We then outline the processes (the squares) and owners accountable for delivering those touchpoints. This enables us to use simple and intuitive visuals to uncover important, nuanced insights:

When we look at the operational aspects of any customer experience, we ensure that they tie closely to the factors driving the brand in question. This requires a deep, up-front understanding of brand drivers and, particularly, a focus on the emotional brand drivers – those that drive action and loyalty and are often overlooked in the customer centricity landscape.

a. Does process and accountability match with the customer journey?

In our next paper, we will build on the concepts outlined here and summarize how we think about rational and emotional brand drivers. More importantly, we will outline how we connect these drivers to the design of customer experience.

Connecting all of these dots helps drive ultimate customer centricity – linking the customer’s wants and needs with the capabilities, accountabilities, processes, and intangible equities of the organization.

b. Is the organization clearly managing each part of the customer experience, especially the MOTs?

Putting this all together by starting at the beginning We tell the customer centricity story using three key models – journey map with expectations, business process model, and circles & squares. The key to pulling these elements together doesn’t just lie only in making them understandable and implementable, it also lies in making sure they align with the rational and emotional drivers of the brand across the business. We briefly touched on this earlier but it bears repeating – rational and emotional drivers of a brand are crucial for customer experience design and customer centricity success.

“Rational and emotional drivers of a brand are crucial for customer experience design and customer centricity success.”

= Pain Point

Level5™ Strategy

Retail

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How a Customer-First Mindset 10 Can Help Public Organizations Keep Their Promise to Canadians Rob Gizzie, Garnet Tosswill, Pooja Patel

I

t’s election time in Canada, which means political parties are making every effort to demonstrate that they are the ones with Canadians’ best interests at heart. Elections affect all citizens on a personal level; but for the government agencies that help run our society, promises made on the campaign trail can impact the way they will operate after the election— especially if the new government brings forward new priorities.

For both federal politicians and the institutions working to implement their visions, balancing frequently changing priorities can feel like an insurmountable challenge. At Level5, we believe that all of these stakeholders can cut through this complexity by applying a customer-first mindset.

A CX strategy can help public companies align their priorities All organizations, public and private, struggle to effectively manage stakeholder needs. In almost all cases, public sector organizations have a much wider base of stakeholders than private companies. To make matters

more difficult, public sector companies are often required to meet these various needs while managing tight budgets that are highly scrutinized.

So how can public enterprises manage competing priorities with limited resources? By focusing their efforts on what matters most to voters, patients, or taxpayers. Just like their private counterparts, public sector companies can use a customer-first mindset to transform the way they make decisions for society’s greater good.

Challenges of operating in a multi-stakeholder environment In our work, we have identified some thematic challenges that many public sector companies face: 1. Divergent priorities. Government entities have to satisfy disparate internal stakeholders who often have conflicting views on how to make the most of their time and resources. By aligning around the idea that the end user should be at the center of all

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Retail

Top 10+1 Must Reads - Winter 2020 Edition

decision-making, public organizations can cut through the noise by prioritizing what the end user believes is most important, not the competing priorities of different internal stakeholders. In other words, there is a cascade of priorities to be met, but they start with the public promise or ask.

2. Limited resources for satisfying large groups of users.

Intense public scrutiny and recurrent budget cuts necessitate government agencies to make contradictory decisions and decide between competing priorities.

They must meet people’s needs on the one hand and satisfy their appetite for tighter budgets on the other.

Understanding the moments that matter most (“Moments of Truth”) within the customer journey enables not only prioritization of time, but also allocation of resources— both capital and people. Resources should be focused on the areas that deliver the greatest value to the end user.

3. Demonstrating impact as a direct result of initiatives.

The complexity of the stakeholder environment in a publicly operated organization is connected to the breadth of responsibility within it—public organizations are typically expected to generate value for everyone in their jurisdiction. However, this means it is often difficult to demonstrate that a meaningful impact has been achieved. Solutions are rarely silver bullets that meet every stakeholder group’s divergent wants and needs, and are therefore often ignored or unrecognized by select stakeholders. Once Moments of Truth are uncovered and well-understood, public organizations can track performance metrics and user feedback at each moment to paint a clear picture of how they are progressing against what matters most to the user.

A CX method and positive consequences for public organizations Don’t take our word for it when we say that a CX strategy can help public sector organizations satisfy their stakeholders; data supports the notion that a customer-first mindset leads to positive outcomes for public sector companies:

x9

Satisfied customers are nine times more likely to agree that an agency is delivering on its mission

x2

Dissatisfied customers are two times more likely to publicly express their dissatisfaction

x5

Satisfied customers are five times more likely to agree that public service is a good investment of taxpayers’ money

x9

Satisfied customers are nine times more likely to trust the agency.

Source: D’Emidio, Tony, et al. The Global Case for Customer Experience in Government. McKinsey & Company, Sept. 2019

A CX method is a valuable tool for identifying what matters most to your customers, however varied they may be.

Once you understand your customers’ needs, you can align your organization’s activities with those needs and agree on where to improve. The best part is that this is a true win-win methodology: customers have their needs met

leading to higher levels of satisfaction, and agencies have the tiebreaker they need when striving to deliver value in a complex multi-stakeholder environment.

“Just like their private counterparts, public sector companies can use a customer-first mindset to transform the way they make decisions for society’s greater good.”

Level5™ Strategy

Bonus Article

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Bonus Article Brand Building: The 10 Key Lessons Learned David Kincaid, Ian Madell

F

ew professional experiences can be as exciting and overwhelming as taking on the CEO role for the first time. Everything changes in unexpected ways; it’s not about climbing the next rung on the ladder, it’s a quantum leap into a new reality. Brand new CEOs need all the practical, impartial and time-tested advice they can get – the select few who can actually say, “Been there, done that.”

We have put together the top 10 “lessons learned” in building your personal brand as the new CEO. We hope you find this helpful.

1. Engage the Board as a Strategic Partner Boards today need to own strategic decisions jointly with the CEO; they no longer simply anoint them at an annual off-site. The CEO must keep the board engaged in the same way that business units are expected to engage the CEO. Do only what only a CEO can do. With so many tasks vying for attention the CEO must focus on shaping the company’s definition of success, breaking the frame (for example by changing some fundamental aspect of the company’s business model), resetting expectations, and integrating the company parts with the whole.

2. Move Faster, Drive Harder In hindsight, most CEOs wish that within their first six months in the job they had narrowed their agenda and quickened their pace. They wish they had selected very few high impact organizational priorities, stayed thoroughly focused on them, and then driven them to completion with a relentless sense of urgency.

3. Set the Tone of what’s Important Do something concrete that makes a difference to profitability. It establishes your value-add and even more importantly, sets a tone of what is important to you. Not process, not perception, but rather performance and that you hold yourself to the same standard of adding value in a measurable way.

4. You are the Company’s Face to the World Most executives spend years learning how to manage what goes on inside the company. But the moment they become CEO, they need to make a quick pivot and turn much of

their attention to the outside world – not just customers, but investors, shareholders, analysts and the media. It’s almost like learning a whole new job – including some critical lessons on what you can and can’t say, when, and to whom.

5. Find a few people to Confide in Most CEOs say the cliché is true: It’s an inherently lonely job.

As early as you can, identify a select group of confidants, coaches and trusted advisors, including some incumbent or retired CEOs. Every CEO needs some safe outlets – people with whom they can be candid, seek advice, admit to uncertainty, and just let their hair down once in a while.

6. Don’t get distracted by flattery and happy talk As one CEO advised another, “The moment word gets out that you’re going to be the CEO, your jokes suddenly are funnier, your wife is prettier and your kids are smarter.” Be prepared for how differently people treat you – starting with their reluctance to be the bearer of bad news. Be persistent; get beyond the smoke and smiles and discover what’s actually going on inside the organization.

7. Stop doing your old job All new CEOs have to establish their own leadership identity – but that’s particularly hard for those promoted internally, who must quickly achieve the requisite escape velocity to be viewed as “a boss, not a buddy.” Start by identifying the specific things you did in your previous jobs that you will now delegate and distance yourself from – even if you’re convinced you can still do them better than anyone else!

8. It’s all about leading through teams New CEOs quickly bump up against the limits of their personal influence, and come to understand the necessity of leading through others. It starts with your senior team; if they aren’t 120% aligned – with you and with each other – there is no way your influence will extend past the first row of offices. Make no assumptions, push for clarity from them and ensure everyone “is visibly dancing to the same music and willing to shape the culture.” In large companies, the CEO has to quickly figure out how to keep hundreds of managers reading from the same page and the leadership team is key to accomplishing this.

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Bonus Article

9. Getting the Culture working with you As you prepare for and then begin the new job, broaden your perspective beyond strategy, operations and finance to understand that one of the CEO’s greatest opportunities – and challenges – is to manage and, if necessary, change the organization’s culture and social dynamics. Successful and sustainable execution of strategy requires a culture that enables and supports the strategy. Many CEOs have failed because the culture “ate their strategy for breakfast”!

That begins with understanding what the culture actually is, versus what people say it is. Then connect the company’s strategy to everyone – connect the dots for them so they can see their role in helping achieve your goals. And when communicating, repeat and repeat again the key themes… and then repeat again!

Top 10+1 Must Reads - Winter 2020 Edition

regret acknowledged by first-time CEOs is that they didn’t act faster to remove people in key roles who lacked the necessary skill or commitment. With the best of intentions, new CEOs often delay the difficult moves far too long, at great cost to the organization and to the dismay of top performers. New CEOs – and in particular, those from the outside, who are still learning who’s who – need to gather information quickly, seek the best available advice, trust their instincts and then make a decision.

10. Don’t drag your feet on the tough talent decisions Pushing a new agenda is impossible without the right people in the right jobs. By far, the most common specific

“Every CEO needs some safe outlets – people with whom they can be candid, seek advice, admit to uncertainty, and just let their hair down once in a while.

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Authors

Top 10+1 Must Reads - Winter 2020 Edition

Authors David Kincaid

Managing Partner, Founder

David is the Founder of Level5 Strategy with over 30 years of experience managing household brand names such as Labatt, American Express and Corus. With the vision to help companies re-establish their brand as an asset, he formed Level5 Strategy in 2002. He was the 2014 Inductee into Marketing Hall of Legends, and has published two books: The Value of a Promise Consistently Kept™ (2015), and Brand Forward, and Brand Back (2012)

Claude Ricks Managing Partner

Claude is a Managing Partner at Level5 Strategy.

He is a transformational leader who helps clients align strategy and organizational capabilities – driving ownable competitive advantage. Claude co-built the change management global service offering for a tier one consulting practice and is a passionate executive change agent.

Efram Lebovits Principal

Efram Lebovits is a Principal with Level5 Strategy and has worked in a variety of industries including retail, lottery, healthcare, and the public sector amongst others.

He works closely with clients to develop enterprise and brand strategies as well as supporting them through transformation initiatives. Efram holds an MBA from the University of Michigan and a BBA from York University.

Ian Madell

Managing Partner, President

Ian Madell is the President and Managing Partner at Level5 Strategy. Ian is an accomplished executive and management consultant with over 30 years of experience in both Canadian and US business environments. He possesses deep experience in developing brand strategy and performing organizational transformation.

Hua Yu

Managing Partner

Hua Yu is a Managing Partner at Level5 Strategy. Hua has over 25 years of work experience in business and general management roles in Canada, the US, and China.

Hua possesses deep experience in multicultural growth strategy and people/organization strategy. Hua is the founder of #WeWorkingWomen, North America’s most influential Chinese Women Leadership platform. Hua received her BA in International Business from Shanghai University and her MA in Communication Arts from the New York Institute of Technology.

Rob Gizzie Director

Rob Gizzie is a Director with Level5 Strategy with experience developing, managing, and executing client strategy, transformation, and customer experience projects across a diverse set of industries. Rob holds a BBA from the Schulich School of Business.

Level5™ Strategy

Authors

Garnet Tosswill

Sean Pavlidis

Manager

Director

Sean Pavlidis is a Director with Level5 Strategy focused on building enterprise, brand, and customer experience strategies for a diverse range of clients. His work spans across a number of industries, with specific expertise in the retail and beverage alcohol space. Sean holds a BComm from Queen’s University.

Garnet Tosswill is a Manager at Level5 Strategy with experience in developing enterprise strategies and the structures/ capabilities that are required to implement them.

Garnet has worked across multiple industries, and holds a BCOMM degree from the Queen’s School of Business.

Frank Zhang

Richard Wang

Senior Consultant

Frank is a Senior Consultant at Level5 Strategy who is a versatile and analytical strategist with a decorated tenure in consulting for diverse and prominent businesses and organizations. He applies an international perspective and extensive consulting experience to inspire sustainable growth for clients. Frank holds a MSc from Ivey Business School and a BBA from the University of International Business and Economics.

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Consultant

Richard Wang is a Consultant at Level5 Strategy with experience in enterprise & brand strategy, customer experience design, and organizational transformation.

He has worked in a wide range of industries supporting both B2C and B2B clients to sustainably grow their business. Richard holds an HBA from Ivey Business School.

Lauren Singer Analyst

Lauren Singer is an Analyst at Level5 Strategy with experience in strategy and transformation using tools including market research, competitive analysis, consumer research, strategy development, and narrative sessions.

Lauren has had the opportunity to work with a variety of industries including retail, sports and entertainment, government bodies, and not-for-profit. Lauren holds an HBA from Western, Ivey. © Level5™ Strategy 2020. All Rights Reserved.

A special thanks to the following for their contributions for these articles: Richard Baran-Chong Aaron Zhou, James Ryan McRea James Hunter Farah Radwan Aaron Inocencio

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