Margaret Mead of the Mall Has Retail Tips for Cable

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With the cable industry settling back into its familiar
groove following the CTAM Summit in San Francisco, could there be more a opportune time to
get an outsider's perspective of the challenges cable operators face as they sally
forth into the uncharted terrain of digital services? Paco Underhill, a leading retail and
marketing consultant, has been referred to as the "Margaret Mead of the mall."
His firm, Envirosell, advises companies on how best to optimize the retail environment to
maximize their bottom line. Taking a quasi-anthropological approach, Envirosell films,
records, and follows 50,000 to 70,000 shoppers in an unobtrusive manner designed to
capture the true essence of the shopping experience and the factors that influence
consumers' purchase decisions. Underhill, who has been busy promoting his new book,
Why
We Buy: the Science of Shopping, recently sat down with Multichannel News
editor-in-chief Marianne Paskowski and senior editor Hank Kim to discuss how MSOs can move
cable modems and digital video off the shelves at outlets like Circuit City and Radio
Shack. Underhill, whose top-drawer clientele includes such cable programming titans as the
Walt Disney Co. and Discovery Communications Inc., also shared some thoughts on the retail
extensions of entrenched entertainment brands.

MCN: Is the retail environment necessarily the best place
to sell high-tech products to consumers ?

Paco Underhill: It can be. The issue is: What are the
dynamics of that sell? What are the expectations of the consumer on one side and the
retailer on the other? A good example is the evolution of selling mobile-phone services.
In the mid-80's, a typical cellular phone retail outlet cost about $9 a square foot.
You had a desk, a phone and a person. It was bare bones. There were brochures passed over
a desk. There were some examples of phones handed to you. And the primary pitch was to
men, to men who spent lots of time in their cars. It was often the installation of
cellular equipment into your automobile or the office.

Starting in the early 90s, the market for cellular services
hit a quick plateau -- that is, its penetration into the business market started to peak
-- and they suddenly recognized that there were huge consumer markets opening up for them.
I remember looking years ago in the early 90's at a prototype cellular store which
cost, I was told, approximately $140 a square foot, or many times the cost of the original
store.

I went to a meeting of the executive board of this store,
where the president got up -- a crusty old cellular veteran -- and he complained bitterly
about having to spend $140 a square foot versus the store that he had started at $9 a
square foot. And a very effete woman, who ran the prototype store, stood up across the
table and said, "Harry, we are outselling you in terms of dollars and profits about
30 to 1."

MCN: So obviously, that's a clear example that it
could work.

PU: It's a clear example, but the nexus here is
the degree to which the store design and the store communication package all work
together. One of the critical pieces of selling a

high-tech product is the clear recognition that it may take
more than one trip to the store to close the sale.

MCN: What do you make of the Internet as a retail forum?
Both Gateway [2000 Inc.] and Dell [Computer Corp.], for example, sell personal computers
over the Internet. Actually, Dell's modus operandi is to sell directly to the
consumer. What do you make of that arena?

PU: I think it's a clear indication that the
computer manufacturer, to a certain segment, has gone from a purveyor of technologies to a
purveyor of appliances. Everybody assumes that something works. They assume a certain of
measure of competency to it. There are people in the market who are not purchasing their
first PCs, not their second, not their third, but maybe even their 10th PC, and
therefore are coming to the market with a huge degree of expertise, which gives them the
confidence to buy over the phone or buy over the 'Net.

MCN: Well, that is one of the things that's so
interesting about a cable modem. Virtually no one has any experience with these. I
don't know how much you keep up with this particular area, but Excite@@Home [Corp.],
not unlike the electrical companies, had to cut voltage down because there are too many
users. In people's first brushes with the cable modem, they're finding they may
be running at 28 kbps, and that's not what they were expecting.

PU: That's not what this is all about.

MCN: So I think it would be difficult to sell cable modems
at a Gateway or a Dell, because of what you just said. Most of the people up there have
bought things. They're on their 10th computer. They know what they want.

PU: I think they've got some discernable
expertise. One of the things that's interesting in the world of selling -- and in
some ways makes the selling experience in a store interesting -- is that there are often
customers walking in that have much more expertise than anyone working in that retail
store. And the degree to which often it's customers listening to other customers
that, in effect, starts to build up peoples' purchase confidence.

One of the interesting things with technology at a retail
store is that at least for men, the technology store has replaced the auto-parts store of
the 50s. There's no one in our culture now that has grease under his fingernails.
Whereas if we look at a particular group of men in 1960, they would have had some
experience opening the hood of their engines and tinkering.

MCN: That leads to my next question on this gender thing.
When I go into a CompUSA [Management Co.] store or any of those places with my husband, I
feel like I'm going to have a near-panic attack: the rush of people, stuff all over,
badgered help. I cannot wait to get out of that store. How do you sell a cable modem to
me, a woman?

PU: This is one of the interesting issues about selling
technology going into the 21st century. Women are often buying technology based
on what it's going to do, rather than what it is. It's like the difference
between selling drills and selling holes.

MCN: So women are more results oriented?

PU: It's more "Where is this going to take
me?" I think women selling directly to women is a very effective way of selling
technology. Just as seniors selling to seniors is a very effective way of building
confidence.

MCN: Or taking a girlfriend with you, because you said two
women shopping together were more likely to egg each other and reinforce the decision to
buy.

PU: I think this is true of apparel. In terms of
technology, women often come in with a very focused need. This is what I'm interested
in. The key in terms of selling a sophisticated technology is recognizing [that] the woman
needs a certain measure of purchase confidence to pull the trigger, and that if you could
whet their appetite the first time, you will get them back. You want to give them
information, soft sell it. Don't insist on closing it today, which is the typical car
salesman's pitch. Give them the information to fuel and back off.

MCN: Radio Shack. Circuit City. CompUSA. These are the
retailers that cable companies will likely partner with, if they have not already. Knowing
how these stores are laid out, how the aisles are situated, do you have any hints for
these people in terms of the ergonomics of the store -- that is, maximizing the store
layout to create the best experience?

PU: Recognize that a certain number of the visitors to
a technology store involve an interested party and an uninterested party. The store has a
vested interest in making the uninterested party comfortable. A technology purchase takes
time, and the degree to which you can liberate the interested party from the
responsibility, or accountability, to the uninterested party is critical.

If my significant other takes me into The Limited, and if
she has a place to effectively park me, she becomes a much more effective shopper. It
should be something that's clean, that's well lit and that gives people a number
of different reading options. It's important the store conceives this not as an
amenity, but as a marketing tool.

It may be also used as a discreet way of pitching services
to that uninterested party, because that uninterested party will look at anything that you
give them to look at in that seated position.

Second, we believe that the technology sale should be done
with both the customer and the sales associate on the same side of the table. Trying to
sell something over a counter going into the 21st century is a bad idea,
because it then sets up the process of me trying to sell you, as opposed to both of us
being on the same side of the counter where it's me trying to help you understand
what this product is and what it can do for you. So in effect, what we're doing is
trying to triangulate between the two people on one side of the counter and trying to
focus our attention on the product. It is also in the modem manufacturer's critical
interest to understand something about the specific market and the specific store that
you're selling into, and this is often a difficult issue to get across to someone
who's sitting in Sunnyvale, Calif.

There are different ways to sell products in a
computer-products superstore versus an office-product superstore versus some form of
specialty store. Secondly, there is a different pattern of use between urban and regional
malls and strip-mall settings.

MCN: How so?

PU: In an urban setting, you are often getting a very
distinct customer mix walking in the door. It may be more business focused. They're
passing the store on a frequent basis and they don't have a lot of time to kill. An
urban store can be more focused in terms of who it's selling to, in terms of
understanding what the immediate neighborhood is.

The regional shopping mall tends to have a more
female-focused audience. They tend often to have children. Children and teens are often a
very effective advocate for technology purchases. It's time for us to deal with
technology stores in malls who don't understand that mall rats advocate and are heavy
influencers on a family's discretionary purchases.

In the strip mall, you have somebody who is coming in who
is more focused.

MCN: Getting back to your comment about mall shoppers and
"mall rats," what are some of the things one could do to enhance their
participation in the purchase decision?

PU: I think one of the issues that I find interesting
is the degree to which American advertising culture in an MTV era has done wonders to our
visual language here. Why we don't have more people advertising mowers on MTV is
beyond me. It is the teenage son who is going to end up mowing the lawn. There can be a
variety of ways of doing it. Guerilla tactics using online promotions are a wonderful way
to drive people to the Web and then drive the Web surfer to the store.

MCN: You had AT&T as a client. AT&T this past year
has acquired two very large cable-TV operators. They are in the video business. Have they
contacted you to help with the retail level?

PH: No. And we did help AT&T get into the retail
phone business 15 years ago. I think we are looking for some new classes of retail to open
as they relate to technology. And they're going to be true hybrids, in terms of what
our 20th-century understanding of what retail, is because they will be crosses
between bricks-and-mortar and cyber.

They are going to be looking closer to people. They are
going to be looking to places where people drop by. Look at the evolution of the bank,
which used to be some downtown stuffy branch with very high ceilings and marble desks, and
we look at today's in-store branch, in the supermarket where things are eminently
more casual.

We're focused less on selling transactions than on
dispensing advice. Even in a tech-savvy country, we need some form of personal contact to
give us the confidence to be able to make our own decisions and to pull the trigger and
say, "I want it."

MCN: You've devoted an entire chapter to the
five senses and creating the optimal environment. Do you think there are ways you can make
the environment a little less intimidating to the average shopper without alienating those
early adapters who are looking for a real hard-core tech place?

PU: I really liked the strategy that went into the
Gateway stores, where they've married the idea of the cow to technology. I really
enjoyed walking through the store, which had a certain amount of country-music elements to
the store and was homey and anti-tech yet the process worked as a place to sell
technology. I thought that was very brilliant.

MCN: Let's get back to something you alluded to at the
beginning. Generally, how many visits does it take before somebody pulls trigger on a
high-tech purchase?

PU: I think we saw it at a little over three.

MCN: In your experience, who controls the buying of tech
products in the home?

PU: What we'll see for the foreseeable future is
male dominance, however, what we know across the board is that the gender models in
marketing, while they work, they work nowhere near as well as they used to. Women and
teens and kids have a huge influence and an influence that is growing.

MCN: What advice can you give programmers at retail? After
a while it almost becomes like 42nd Street. Some people don't like that.

PU: That's referred to as the third generation of
entertainment retailing. The first wave was the Disney Store approximately 11 years ago,
which was a new, fresh and exciting introduction to the world of retail, from the design
of the carpets to the role of the mezzanine to the simple conception of the staff as cast.
It was very fresh. The second wave was characterized by the Nike store, the design of
which was in effect a replacement to a TV commercial, a physical manifestation of a
commercial.

The third generation has been characterized by mainstream
retail, which has watched what has happened and realized that in order to compete for the
customer's discretionary dollar, the customer's increasingly precious free time,
that it has to give something back. It has to have some "edutainment" edge to
it.

MCN: What advice do you have for cable operators, cable
programmers and equipment manufacturers who do go retail in terms of managing that
relationship with their retail partner? Obviously, there will be agendas that are not
always going to come together.

PU: I think it is being smart enough to give the retail
partner the illusion of some form of control. Not only do you have to know something about
your business, you have to know something about the business that you're selling into
as well. And you, of course, have to keep track of the evolving 800-pound gorilla that the
American consumer has become.

MCN: How do you correct a mistake? Let's say
you're rolling your product out into the marketplace and selling it as a
plug-and-play product, when, in effect, your own field representatives cannot get it to
work right in the home and you're fighting with your cable modem hardware-tech
vendor. Nobody's taking responsibility. How do you get out of that box?

PU: We're dealing with a cowboy business. We, as
consumers, should have the right to say no. When the cable company knocked on my door and
asked for access to my backyard and one of the workmen didn't have ID, I threw the
entire team out. As a consumer advocate, I can say, "If you don't deliver what
you promise, take it back and refund my money."

MCN: Given the scenario that I just laid out, if Time
Warner came knocking on your door here in Manhattan and said they're getting ready to
go to the retail marketplace to sell cable modems and other tech products, would you be
inclined to take them up?

PU: Certainly. I'd be very interested in the
process. We would be happy to walk through the evaluation process. That's what we do
as a business.

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