“Soft-Skills Training for Front-Line Hotel Associates” | by: Ramiah Daniels | Hospitality Biz India

When one travels internationally, it amazes us how levels of service are not at par in most cases. While parts of the western world have honed the art of ‘processed’ service, parts of the eastern world have endorsed the art of the ‘warm human element’ in their services.


Scenario in India : 

Currently, India as a developing nation does not have the strength of great efficiency and infrastructure, but its warm culture sets it apart from the west. This is what hotels must realise and capitalise on, as this is our real differentiator.

In spite of salaries climbing the scales, hotels also realise that money is no longer the sole motivator to retain good talent. Self-development and learning along with achievement motivation, has climbed up the Gen Y employee need charts this century, and this has to be addressed by the learning and development cells in hospitality organisations.

There is no doubt that guest contact is a special art, and the hotel industry has recognised this. With falling ‘staff to room’ ratios over the years, one would suppose that guest contact would reduce alongside. However, the staff has become more receptive and sensitive to guest needs.

One of the issues that bother hoteliers is reaping benefits from brand Ambassadors. It is now an accepted fact that associates at the shop floor are the actual experience enhancers. The majority of wow factors from a hotel would stem from superlative guest experiences with these front-line staff, hence looking at creating brand ambassadors out of them is the way to go.

Training : 

Exceptional customer service can be achieved via training through a combination of two ways, procedural and convivial training. Broadly, procedural training covers the policies and procedures of the organisation while convivial training cover the soft skills required to enhance the guest experience.

Thus, procedural training would cover the technical aspects of grooming, guest preferences, telephone handling, sequence of service, modes of service, recipes, standard procedures, etc. while convivial training would cover the gentler nuances like body language, teamwork, flexibility, caring, empathy, motivation, a positive attitude, telephone etiquette, etc.

There was a time when ‘repeat guest’ recognition was a supreme form of guest delight – now it is simply a necessary tool for guest satisfaction. The ‘wow’ factor has reduced, as most hospitality organisations embrace this nowadays as the guest has already had multiple experiences in being recognised in various hotels. Thus, what was initially an experience enhancer is now simply a regular experience for the guest. Nowadays, the guest looks for those special ‘moments of truth’, which buy his unending loyalty. Hence, what worked procedurally in creating guest delight until a few years ago now requires a convivial supplement.

Wow Factor : 

To illustrate this, a general manager of a deluxe five-star hotel recently shared an interesting story with me where a guest who had service issues on previous stays was wowed by a steward from in-room dining, who met the guest while his fruit basket was being replenished and apologised for the lack of pomegranates, due to its non-availability in the hotel. The guest was quietly impressed that the steward remembered his ‘likes’ from an earlier stay.

However, what surprised the guest more was the fact that the next day the same steward bought pomegranates from the market for him. Thus, while a procedure of checking on guest preferences on the opera software produced an impressed guest, the conviviality of the steward to please the guest made a superlative ‘wow’ impression on this guest who will definitely be a repeat guest for the future.

To understand the importance of both types of training being done alongside, try to imagine a session on telephone handling(pitch, promptness, standard phrases, technically correct answers) without telephone etiquette’s (voice intonation, empathy, a patient hearing, caring to resolve). This training session would end up with a call-centre like result, viz. robotic telephonic addressals / redressals. Hence, it is important to understand the need for both types of training to be done jointly.

Behavioural Training : 

The Oberoi group was the foremost to recognise the importance of behavioural training for front-end staff and they have been followed by most chains and stand-alone hotels in the country. International chains have only enhanced this process and in order to keep their associates motivated, hotels are attaching great importance to enhancing the training managers role by supplementing them with a modernistic cognitive approach to communication, personal development and psychotherapy. NLP (neuro-linguistic programming) – a connection between the neurological processes, language and behavioural patterns that have been learned through experience and which can be organised to achieve specific goals in life is one such example. The training manager needs to understand these approaches as they are dealing with employees.

Front end associates comprising reception, valet, concierge, bell desk, restaurants, bars and banquets, housekeeping, spa, etc., all need to be trained on their organisational processes perfectly, without which, crisp and efficient service can not be possible. However, the heart of the training must really be about reaching to the gut-strings of the guest and helping create an emotional connect between the guest and the hotel. The training manager must encourage training to yield results that will help the organisation to eventually connect with the guest at a subliminal level.

Personal Experience : 

I had an interesting experience as a guest in a hotel a few years ago, when I walked into a glass door without realising its presence. As I stood stunned, not knowing what had happened to me, a front desk staff member who had heard the noise came running up to me, immediately got me some ice and attended to my pain. He offered to call in a doctor and when I refused, he got me a lime juice and made me sit down. All this while there was a group checked-in and many guests to be attended to. No amount of training can really make associates perform in such ways; it has to stem from empathy and feelings of caring for the guest.

Skills Required for Butlers : 

The closest contact with a guest may possibly be with his butler who is expected to provide a very personal, detailed and seamless service, taking care of the guest’s needs in a highly professional manner. The butler is required to possess attention to detail and the ability to anticipate the needs of guest’s, using verbal and non-verbal communication skills, successfully understanding and interpreting body language.

Inter-personal skills such as conversing with people, explaining systems, understanding and carrying out guests’ requests, dealing with guests’ complaints and coping with challenging situations are pre-requisites of an ideal butler. Hotel butler training encompasses technical skills along with broader skills involving general knowledge, common sense, empathy, passion and a great presence of mind. At the end of the day, if the butler’s personality is not endearing enough, the guest will never be vowed, in spite of all the professional moments he has experienced. The same applies in varying degrees for all the above mentioned front-line associates.

Skills Required by Front Hotel Employees : 

One of my favourite behavioural training for the front-end employees is ‘body language’, a part of non-verbal communication. If the steward in a restaurant for example could only be made to realise that his every move and posture is public and speaks volumes of his attitude towards guest service, it would imply successful soft-skill training in itself.

In another case, the body language of a front-desk associate while dealing with a guest complaint could possibly define the outcome. Whatever the complaint, sometimes simply giving the guest a patient empathetic hearing is more than half the battle won. The body language by the employee during such interactions is crucial.

A guest once called for me at midnight to complain about a security issue. Interestingly, he wanted to complain that his car was let through the gate without being adequately checked. Unfortunately, the security associate was extremely casual when the guest complained to him in this regard. The casual body language of the security manager angered the guest further, as a result of which he insisted on meeting with me. Thus, a simple complaint was escalated to higher level thanks to poor non-verbal communication by a front-end associate.

Why do guests ask for a particular butler or housekeeping staff whenever they return to a hotel? I had an interesting chat with a Croatian couple who used to regularly stay at my hotel. They would always insist on a particular boy doing up their room while they stayed with us. Of course, we would oblige and the room attendant was always willing to change his shift for these guests. It was not that this boy did the rooms absolutely perfectly. The wife would supervise and correct him whenever it was not to her satisfaction. However, what endeared him to them was his cheerful smile, his attitude to please them, his willingness to learn and adjust to their idiosyncrasies along with his empathetic caring for their needs.

Brand ambassadors can be created by identifying potential from within and then implementing a structured program to hone their technical skills along with an ongoing behavioural training Programme  It is these brand ambassadors who will ultimately offer those experience enhancers, which eventually build brand loyalty for guests.

” Measuring Marketing’s worth ” | McKinsey

” You can’t spend wisely unless you understand marketing’s full impact. Here are “FIVE questions” Executive’s should ask to help maximize the bang for their bucks “.

It’s 8 AM, and the chief marketing officer is wading through his inbox. A board member has e-mailed him about an opportunity to invest in an emerging digital platform. It looks cool, but it’s speculative and not cheap.

Minutes later, the chief financial officer appears in the doorway: “ The boss wants to sign a big sponsorship deal. Can we drop out of TV for a couple of months to pay for it ? ”

The CMO has barely started to explain what happened the last time the company went dark on TV—an aggressive rival grabbed market share—when his assistant interrupts. The CEO is calling: “ What’s going on with our brand image ? ” she asks. “ The latest monitor report looks bad.”

The CMO promises a full debriefing later in the day, but he’s not looking forward to the conversation. Brand scores are down, and the reasons are tough to manage:  Factors such as bad experiences with intermediary retailers and mediocre word of mouth. The number and strength of such competing pressures has been growing.

7 years ago, when digital advertising was still in its infancy and long before social media had become a marketing force, we described in a McKinsey article how many traditional mass-marketing advertising models were under attack and suggested some approaches to make marketing investments count in an increasingly complex environment. Since then, we have been fortunate enough to see more than 200 organizations tackle the difficult issue of How to improve Marketing’s, Return on Investment (ROI) ? 

Over that period, as new kinds of media have grown in importance and mobile communications have created new opportunities to reach consumers, the ROI challenge has become more intense.

In the face of growing complexity, relentless financial pressure, and a still-challenging economic environment, marketers are striving to exploit new-media vehicles and to measure their impact through new analytic approaches and tools. Most are making progress. Yet we are consistently struck by the power of asking five seemingly basic questions. These questions, detailed in this article, cut to the heart of the quest to drive returns on marketing spending. Coming to grips with them, and gaining alignment across the C-suite, is critical for making real progress rather than becoming bogged down by excessive firefighting and ultimately futile debates about the precision and certainty of measurement.

1. What exactly influences our consumers today ?

The digital revolution and the explosion of social media have profoundly changed what influences consumers as they undertake their purchasing decision journey. When considering products, they read online reviews and compare prices. Once in stores, they search for deals with mobile devices and drive hard bargains. And after the purchase, they become reviewers themselves and demand ongoing relationships with products and brands. Although companies have access to terabytes of data about these behavioural changes, many still can’t answer the fundamental question: How exactly are our customers influenced?

Time & time again, we find that companies are aware of the growing importance of touch points such as earned media but don’t understand the true magnitude of their effects or how to influence them. The solution is usually to commission research that gets at the heart of understanding the consumer’s decision journey. Such foundational work must shine a light on the touch points and messages that actually influence consumer behaviour. Marketers must be ready to use the findings to debunk accepted wisdom and legacy rules of thumb. In today’s fragmented media world, only by knowing how the way consumers interact with your company has evolved can you begin to make more cost-effective marketing investments that truly influence purchase decisions.

2. How well informed (really) is our marketing judgment? 

Marketing has always combined facts and judgment: after all, there’s no analytic approach that can single-handedly tell you when you have a great piece of creative work. A decade ago, when traditional advertising was all that mattered, most senior marketers justifiably had great confidence in their judgment on spending and messaging. Today, many privately confess to being less certain. That’s hardly surprising: marketers have been perfecting the TV playbook for decades, while some of the newest marketing platforms have been around for months or even weeks. But it can be tough to admit publicly that your judgment is incomplete or out-of-date. And given the money required, it’s hard both to make a rational investment case for additional marketing spending and—in the same breath—to admit that you are really making a passionate guess.

Marketers often hear that the answer to improving their judgment in this rapidly changing environment is data, and some companies have sophisticated analytical tools. Yet it’s difficult to integrate all of this information in a way that not only provides answers that you trust but can also inform smart marketing changes. We counsel a return to what creates great marketing judgment: start by formulating hypotheses about the impact of changes to your marketing mix and then seek analytical evidence.

3. How are we managing financial risk in our marketing plans ? 

Successful communication requires hitting the right audience with the right message at the right time: a small, moving target. With traditional media, marketers have mitigated the risk of failure through years of trial and error about what makes great advertising. That’s not the case with today’s new media. Influence can shift rapidly, and there is little accumulated experience about which messages work, when marketers should apply them, how they can be scaled, or even whom they influence. Looking to external agencies is little help; they’re in the same boat. At a basic level, the degree of ROI risk—getting the sales results you want from a given amount of marketing spending—has increased.

Yet while spending on new media is a risky bet, it’s a bet companies feel compelled to make. So the question becomes how much risk is too much—or, for that matter, too little. We’ve, seen efforts that result in short-term sales dips: A retailer moving too quickly away from circulars and a consumer-goods player reducing TV spending too fast.

We’ve, also seen companies feel the heat from investors for rapidly ramping up spending on digital channels without cutting it elsewhere.

One media provider developed a straightforward decision support tool for precisely that purpose. Geared to brand managers, not post-doctoral researchers, the tool used simple response curves that allowed the marketer to simulate different scenarios of marketing spending. The tool was embedded in an easily used PowerPoint slide and proved invaluable for settling on marketing approaches that hit the sweet spot for a number of variables, from cost to effectiveness to risk.

Such decision tools do more than provide marketers with valuable information. They stimulate dialogue about real trade-offs and help to manage expectations across business units and functions whose cooperation is often critical when companies change the broader commercial mix. Managing risk is critical, and marketers shouldn’t be shy about putting this issue squarely on the table. With thoughtful scenario planning and cross-functional participation, such discussions can be extremely rich and rewarding.

4. How are we coping with added complexity in the marketing organization ? 

As the external marketing environment becomes more complex, so must the internal environment. Marketers historically had only a handful of communication vehicles; now they have dozens of them, and the number is growing rapidly. This proliferation has led to the emergence of both external and internal specialists, with accumulated experience not only in media channels (such as social media) but even in individual vehicles (such as Facebook). The exponential growth in marketing complexity seems unending and needs to be managed.

We’ve found three things that are always true in managing complexity within the marketing organization. First, you’ll require a number of specialists. You just will. You can’t get the skills and knowledge you need in just one person, and you’re not likely to get everything you need internally. Second, you’ll need somebody who both integrates marketing efforts across channels and communications vehicles and focuses on the bottom line.

In packaged-goods companies, this was—and may still be—the role of brand managers, but the basic requirement is that it must be done by someone. Finally, you’ll need absolute clarity in processes, roles, and responsibilities not only within the marketing organization but also throughout your company (across functions and business units) and externally (with agencies and external vendors). The trust-based relationship between companies and agencies isn’t at risk, but everyone will have to accept that roles are changing. Addressing complexity in a comprehensive way requires a dedicated effort.

5. What metrics should we track given our (imperfect) options ? 

In an ideal world, the financial returns and the ability of all forms of communication to influence consumers would be precisely calculated, and deciding the marketing mix would be simple. In reality, there are multiple, and usually imperfect, ways to measure most established forms of marketing. Nothing approaches a definitive metric for social media and other emerging communication channels, and no single metric can evaluate the effectiveness of all spending. Yet you must have a way to track progress and hold marketers accountable. That’s nonnegotiable. How do you do it?

Even in the absence of a single way of measuring ROI for different channels, marketers should move toward an apples-to-apples way of comparing returns across a range of media. One international logistics company, for example, faced this necessity after committing more than $200 million to re-brand itself following a series of acquisitions. Senior executives wanted proof that the effort was working—and in a form they could readily understand, not marketing jargon.

So the company adopted a simple three-step approach: measuring the impact of advertising on consumer recall, on the public’s perceptions of the business, and on sales leads and revenue. With these data in hand—and proof that the re-branding effort was ultimately improving performance—members of the C-suite had the assurance they needed to reaffirm the investment and to commit themselves to more complex measurements, such as marketing-mix modeling. Because the metrics were developed internally, members of the company’s board were similarly reassured.

Metrics are rarely perfect. Yet the volume of data available today should make it possible to find metrics and analytic opportunities that take advantage of your unique insights, are understood and trusted by your top team, provide proof of progress, and lay a foundation for more sophisticated approaches to tracking marketing ROI in the future.

The marketing environment continues to change rapidly and often feels like a moving target that’s impossible to hit. It’s genuinely difficult to overemphasize the magnitude of the change or the challenge. Yet time and time again, we find that marketers who have good answers to the five basic questions are better equipped to do battle for the effectiveness of marketing and to win the war for growth.


The social economy: “Unlocking Value & Productivity” through social technologies | McKinsey

In a few short years, social technologies have given social interactions the speed and scale of the Internet. Whether discussing consumer products or organizing political movements, people around the world constantly use social-media platforms to seek and share information. Companies use them to reach consumers in new ways too; by tapping into these conversations, organizations can generate richer insights and create precisely targeted messages and offers.

While 72 percent of companies use social technologies in some way, very few are anywhere near to achieving the full potential benefit. In fact, the most powerful applications of social technologies in the global economy are largely untapped. Companies will go on developing ways to reach consumers through social technologies and gathering insights for product development, marketing, and customer service.

Yet McKinsey finds, that twice as much potential value lies in using social tools to enhance communications, knowledge sharing, and collaboration within and across enterprises. McKinsey estimates suggest that by fully implementing social technologies, companies have an opportunity to raise the productivity of interaction workers—high-skill knowledge workers, including managers and professionals—by 20 to 25 percent.

The social economy - improved communication

The Report explores their potential economic impact by examining their current usage and evolving application in ” 4 Commercial sectors ” –

  • Consumer Packaged Goods 
  • Retail Financial Services 
  • Advanced Manufacturing 
  • Professional Services 

These technologies, which create value by improving productivity across the value chain, could potentially contribute $900 billion to $1.3 trillion in annual value across the four sectors.

Two-thirds of this potential value lies in improving collaboration and communication within and across enterprises. The average interaction worker spends an estimated 28 percent of the workweek managing e-mail and nearly 20 percent looking for internal information or tracking down colleagues who can help with specific tasks. But when companies use social media internally, messages become content; a searchable record of knowledge can reduce, by as much as 35 percent, the time employees spend searching for company information. Additional value can be realized through faster, more efficient, more effective collaboration, both within and between enterprises.

The amount of value individual companies can capture from social technologies varies widely by industry, as do the sources of value. Companies that have a high proportion of interaction workers can realize tremendous productivity improvements through faster internal communication and smoother collaboration. Companies that depend very heavily on influencing consumers can derive considerable value by interacting with them in social media and by monitoring the conversations to gain a richer perspective on product requirements or brand image—for much less than what traditional research methods would cost.

To reap the full benefit of social technologies, organizations must transform their structures, processes, and cultures: they will need to become more open and non-hierarchical and to create a culture of trust. Ultimately, the power of social technologies hinges on the full and enthusiastic participation of employees who are not afraid to share their thoughts and trust that their contributions will be respected.

Creating these conditions will be far more challenging than implementing the technologies themselves….


“The Archipelago Economy”: Unleashing Indonesia’s potential | McKinsey

Most international businesses and investors know that modern Indonesia boasts a substantial population and a wealth of natural resources. But far fewer understand how rapidly the nation is growing. Home to the world’s 16th-largest economy, Indonesia is booming thanks largely to a combination of domestic consumption and productivity growth.

By 2030, the country could have the world’s 7 th-largest economy, overtaking Germany and the United Kingdom. But to meet its ambitious growth targets and attract international investment, it must do more.

Indonesia has an attractive value proposition. Over the past 20 years, labor productivity improvements, largely from specific sectors rather than a general shift out of agriculture, have accounted for more than 60 percent of the country’s economic growth. Productivity and employment have risen in tandem in 35 of the past 51 years. And unlike typical Asian “tiger” economies, Indonesia’s has grown as a result of consumption, not exports and manufacturing. The archipelago nation is also urbanizing rapidly, boosting incomes.

By 2030, Indonesia will have added 90 million people to its consuming class—more than any other country except China & India. 

90 million indonesians will have joined the consuming class by 2030

Nevertheless, to meet the government’s goal of 7 percent a year growth by 2030, the economy must grow faster. Given current trends, the McKinsey estimates that Indonesia has to boost productivity growth to 4.6 percent a year—60 percent higher than it has been during the past decade. Amid rising concern about inequality, the country must also ensure that growth is inclusive and manage the strains that the rapidly expanding consumer classes will place on its infrastructure and resources.

Of course, Indonesia should tackle well-known problems such as excessive bureaucracy and corruption, access to capital, and infrastructure bottlenecks. But in addition it must address its impending skills gap; the country could, for example, develop a private-education market that might quadruple, to $40 billion, by 2030. If at the same time Indonesia took action in the three key sectors below, it could create a $1.8 trillion private-sector business opportunity by 2030 :

  • Consumer services : Indonesia faces a range of challenges to productivity growth—including complex regulation of financial services, poor transportation infrastructure, and barriers to entry for new retail players and expansion limits for existing ones. If Indonesia overcame these problems, consumer spending could rise by 7.7 percent a year, to $1.1 trillion, by 2030.

  • Agriculture & Fisheries : Indonesia needs to raise productivity per farmer by 60 percent just to meet domestic demand. If the country can boost yields, reduce post harvest waste, and shift to higher-value crops, it could become a net exporter of agricultural products, supplying more than 130 million tons to the international market. Revenue from these sectors, together with the related upstream and downstream revenues, could increase by 6 percent a year, to $450 billion, by 2030. 

  • Energy : Demand not only for energy but also for other key resources, such as materials and water, is likely to increase rapidly through 2030. Indonesia could meet up to 20 percent of its energy needs by turning to unconventional sources, such as coal-bed methane, next-generation bio-fuels, geothermal power, and biomass. This approach could also help boost resource productivity—for example, improving the country’s energy efficiency could reduce energy demand by as much as 15 percent. By 2030, Indonesia’s energy market could be worth $210 billion.


Levi’s struggles to be a regular fit for Gen-Next, rivals like US Polo, Benetton on faster growth in India | The Economic Times


Levi’s struggles to be a regular fit for GenNext; rivals like US Polo, Benetton on faster growth track – The Economic Times.

India: Beer drinking nation | IndianRetailer

” There has been a significant switch in the industry and many reasons clubbed together have changed the way the country drinks beer today.”

In India, beer is fast becoming one of the most preferred alcoholic beverages, with 31 per cent of the nation taking it up in pubs. However, globally the industry is much mature as compared to India. The industry holds immense potential owing to its young population.

The industry stands at about 250 million cases today and is growing at a figure of 15 per cent. As per ASSOCHAM, beer consumption is about 2.4 billion litres.

Strong beer dominates beer drinking in the country with 84 per cent share to its name. Draught beer has an essential preference whereas bottled beer offers wider choice for customers to pick from. According to Shabaori Das, Research Analyst at Euromonitor International, “Metal cans are growing faster than bottles. While the market for non-alcoholic beer in India is negligible, imported beer accounted for less than one per cent of beer volume sales last year.”

Global Serving: 

India’s beer drinking numbers have a contrasting difference when we look at its consumption globally. India’s beer consumption stands at a mere 1.5 litre per person per year as compared to the average world consumption of 22 litres.

Changing Scenario : 

Though India’s consumption figures are really low, the trend today points towards a high. There has been a significant switch in the industry and many reasons clubbed together have changed the way the country drinks beer today. Samar Singh Shekhawat, Senior VP, Marketing, United Breweries Ltd tells, “India has a population of about 700 million below the age of 25, the Indian climate is hot across 80 per cent of the country for 80 per cent of the time and the social acceptance of beer are acting as enablers for the growth of this industry.” Adding to this, Pravesh Pandey, Regional General Manager, North, JSM Corporation says, “Beer is a very versatile drink and caters to almost every segment who likes celebrating happiness”.

Not just men but women too have taken to beer drinking and are enjoying it too. Around 32 per cent of men and 18 per cent of women prefer beer as an alcoholic beverage. The trend is also shifting towards beer being consumer in afternoons and at brunches along with being a favourite in the night.

Market & tax structure: 

Beer retailing is a complex business. In India, the complexity of the business is what hampers its growth to an extent. There are four major avenues through which beer is retailed in India, liquor shops, modern retail, pubs and bars and micro breweries. Micro breweries are a trend that is fast catching up.

The beer industry’s biggest hurdle is the tax structure that hauls the movement of beer across state borders. Beer is taxed 60 per cent higher than hard liquor. Export and import fees are levied on beer moving out of one state and moving into another. Certain states allow the sale of beer manufactured within that state only.

The industry is poised for growth with a long way to go to be able to compete with its international counterparts. It is witnessing double digit growth and is on the path for progressive growth. Beer price for sure will see an increase owing to inflation, state taxes and high cost of raw materials.

“Retailers Should Invest More in Employees” going forward | by: Zeynep Ton | H B R

Doug Rauch, the former president of Trader Joe’s, visited my Service Operations class at MIT last week. When he mentioned that Trader Joe’s invests in its employees a lot more than its competitors do, he was challenged by one of my students: ” Isn’t it a bad idea to invest in employees in settings like yours where shopping is transactional and can easily be done online? ”

Doug had a strong reaction. ” Nowadays you can go through an entire day without a single person acknowledging your existence. But don’t forget that we are people who generally like connecting with other people.” He went on to explain how profitable it is to invest in employees, even for a supermarket that competes on the basis of low prices, and how most online grocers have not found a way to make money.

My class had already discussed QuikTrip, a convenience store chain with over 500 stores, and Mercadona, Spain’s largest supermarket chain. We also talked briefly about Costcoa large and publicly-traded wholesale club. 

All of these retailers, along with Trader Joe’s, invest significantly more in their employees than is typical for their retail peers. They also have high profits, low prices for their industry, excellent operational metrics, and a reputation for great customer service. These retailers deliver great value to their customers, employees, and investors all at the same time. (My article in the January-February 2012 issue of Harvard Business Review, why “Good Jobs” are Good for Retailers ? analyzes how they manage to do this).

Even so, I was not surprised that my student was questioning Doug on his company’s choice to invest in its employees. Many in the business community still see employees in low-cost retail as interchangeable parts. They can see with their own eyes that most large retailers, such as Wal-Mart, do not invest much in their employees. And it makes sense to them, as it made sense to my student, that low-cost retailers really have only one thing to offer their customers: the quick, cheap sale. That’s what the customers are there for and there’s no point in offering more.

These people miss two things: 

1. Even in low-cost retail, it takes a lot of human effort and judgment to get the right product to the right location at the right time and to make an efficient transaction: 

It’s the low-paid employee, not the inventory-management software, who notices that a shelf looks messy or that some of the products are in the wrong place. It’s the low-paid employee who notices that some of the lettuce has gone bad or that there are still signs up for last week’s promotion. It’s the low-paid cashier who can tell the difference between serrano peppers and jalapeno peppers during checkout. It’s the low-paid employee who notices that there are too many customers waiting in the checkout and offers to open an additional cash register. When retailers don’t invest in human capital, operational execution suffers and the company pays with lower sales and lower profits than it could have had.

2. Even in low-cost retail, there is still interaction between customers and employees: 

It’s the employee who notices a customer standing in the aisle looking lost and offers help. It’s the employee who can read from a familiar customer’s face that he’s had a bad day and could use a friendly smile. It’s also the employee who can turn a customer off — maybe permanently — by being rude or even just not very helpful. It’s the people who make you want to shop here even though you can easily buy the same stuff there. Yet most low-cost retailers forget about that.

Those are what we could call the business reasons for more investment in employees. But business on the scale of these retail chains is never just business. It’s people’s lives — the employees’ and the customers’.

I care that millions of retail employees are not given decent wages, benefits, work schedules and an opportunity for growth, even though doing so is free for retailers. I care that a lot of human talent is wasted. When I’m shopping with my children, I care what view they are forming of the society they live in. I try to go to places where they will see what people are like at their best, not at their most disengaged. I want them to live in a society in which people acknowledge each other’s presence and are kind and respectful to each other, and I think that begins with being brought up to see kindness and respect as normal.

What Doug Rauch and others have shown is that what I want for my children is not at all incompatible with what they want for their companies.


How to “Make your company think like a customer ?” | Accenture


For too many companies, ensuring that every customer has a tailored experience remains an elusive goal. 

The stakes are high. Some studies suggest that failing to deliver a high-quality customer experience can result in a staggering erosion of a company’s customer base—a loss of as much as 50 percent over a five-year period.

Why do some companies succeed while so many fail ? Often, the cause is internal barriers. Even the best-intentioned attempts at customer-centricity can be sabotaged by siloed strategies, organizations, processes, technologies and data, which can result in disconnected sales, marketing and service functions. Your customer views all of your functions and business units as a single company. Shouldn’t you ?

Merely adding customer-centricity to your vision statement isn’t enough. Thinking like your customer is the first challenge, and delivering a positive customer experience is even harder. Achieving customer-centricity requires rethinking the way business is done. And this, in turn, requires a holistic approach that encompasses everything from analytics and insights to strategy and customer experience, from operating model design and execution to governance and transformation management.

Identifying the obstacles. The rethinking begins by breaking down the challenge into its constituent parts.

Your competition is expanding. In the past, competitive intelligence from outside your industry wasn’t required. But today’s consumers compare their experience with your company not just to their interactions with your immediate competitors but to their experiences with companies in general. The pampered luxury car customer expects the same attention from the cable provider and at the retail store at the mall. Are you prepared to meet that expectation ?

Your customers are evolving. The traditional shopper has been joined by the digitally oriented, multichannel customer; as a result, operating models must accommodate both. The traditional customer may still be reluctant to share personal information, but the growing base of digital customers tends to be more open with data, especially if it is used to provide them with a better product or service experience.

Nike did exactly that with its Nike + iPod Sport Kit, partnering with Apple to change the running shoe forever. Anticipating that runners would be eager to adopt technology and online channels to augment their training, the company developed a sensor for the left shoe that sends workout data wirelessly to an iPod. The sensor tracks distance, time, pace and calories burned—and even tells runners if they’ve beaten their personal best. Back at home, Nike’s online portal enables the runner to plot goals and compete with others. Can you identify similar ways to reinvent yourself as markets evolve ?

The voice of dissatisfaction echoes louder than ever before. Social media sites and online research are accelerating word of mouth. According to conventional wisdom, a dissatisfied customer might tell 10 people of a negative experience; today, social media enables that same customer to reach thousands with a few keystrokes. Do you have a strategy to address negative feedback hitting the Web ?

You must kill the back-office mentality. The days of a cloistered back office are over. What once seemed like smart organization—discrete processes, databases and designated teams designed for efficiency—creates siloed operating models that prevent companies from coordinating interactions and customer experiences. Is there a backroom firewall at your company that’s become a liability ?

You need effective connectivity, not just flashy capabilities. Few companies understand what actually happens as a customer moves from one interaction to another. To offer the best customer experience, it is necessary to connect customer-facing and non-customer-facing functions. For example, an increasing number of companies are connecting internal data and analytical capabilities such as “next-best-action” decision making to enable contact centers and sales forces to dynamically drive interactions based on real-time customer insight. Look closely at your own company: Are handoffs seamless and informed? Are the right people armed with the right information, at the right time, to anticipate and address customer needs ?

Having familiarized yourself with the obstacles in the dramatically altered customer environment, you can begin to build a framework for a customer-centric operating model. There are 6 areas of focus surrounding the customer. 

1. Analysis and insights – 

” Your strategy and operations must be guided by the people they’re meant to serve: your customers.” 

Once you’ve resolved to pursue customer-centricity, market research and analytics can help you understand what you’re aiming for. Next, auditing your company’s current performance in meeting customer needs and wants can help you improve your products and services.

Research conducted by Wells Fargo offers a case in point. Even as account holders flock to new services online, at ATMs and via mobile devices, the bank’s analysis revealed that 60 percent of ATM transactions are made by customers who still prefer banking with a teller.

That insight, along with others, led to Wells Fargo’s decision to tie platforms together, meaning a customer can open an account online, make a deposit at a branch, withdraw cash from an ATM and check balances on a mobile device, confident that everything will work just as it would with a teller. Wells Fargo’s investment in multiple integrated channels thus makes for a unified customer experience. Your analysis will produce more valuable insights if you keep a few simple rules in mind.

Don’t be afraid to collect criticism. Un-addressed customer feedback can have harmful repercussions, but if you develop the ability to gather and organize customer reactions, you can use them to inform and enhance your operations. Links across functions are usually required, since a poor customer experience with one channel is often communicated through another, only to have a third group tasked with resolution. Think car rentals: Reservations are made online or by phone, then the consumer encounters different employee teams at pickup and drop-off.

Conduct an “enterprise customer experience audit.” The audit aims to assess the effectiveness of customer-facing and internal capabilities of working in unison to deliver the intended customer experience. Navigate a series of interactions with your company from your customer’s perspective, understanding not just the external but also the internal capabilities that drive the experience. Be on the lookout for awkward transitions—for example, where the customer moves from browsing to purchase and on to service, shifting from retail store to Internet or other mediums of communication.

On the back end, determine whether the right information gets to the appropriate people at the right time to delight the customer. The intelligence gained in a customer experience audit will provide the insights required to move from vision to execution.

2. Powerful information – 

” Customer experience audits can act as internal benchmarks as well. If analyzed and conducted routinely, they will guide the journey toward customer-centricity.” 

Harness the power of reporting and analytics. Tools that provide a 360-degree view of customer profile information, preferences and behaviors give leaders in customer-centricity a more complete understanding of their customers. By building on such a foundation with technologies that drive predictive modeling and next-best-action decision making, you can anticipate a customer’s needs or actions in order to tailor messages or offers to that customer, distinguishing your company from the competition.

Although some companies long ago implemented vital strategies like these, few have fully realized the potential. One financial services provider has, however. A multi-channel analytics strategy that drew upon Web and phone data provided insights into which channels were preferred by customers in different age brackets. By matching the evolving financial and insurance needs of aging customers with its products, the company improved both service delivery and marketing effectiveness.

Understanding industry dynamics, assessing your internal capabilities and leveraging insights to deliver responsive service and make operational improvements are all essential to enhancing the experience of your customers.

3. Strategy and customer experience – 

” Customer experience is the North Star of your company’s strategy.” 

Simple insight can lead to powerful business models. Take leading online shoe retailer Zappos.com. In typical offbeat style, Zappos calls its policy “WOW,” and it reflects a basic insight into selling footwear: No consumer can know from a catalog whether a shoe fits. So Zappos offers free shipping and returns. By removing the risks, Zappos makes shopping online the next-best thing to walking into a shoe store.

Again, a few simple principles : 

Design from the top down and the bottom up via a “customer experience blueprint.” First, define the big picture by establishing a strategic vision. Next, define what “good” looks like on the ground, outlining the ideal customer experience blueprint at the tactical level. Make clear for your employees the step-by-step path you expect your customers to follow. When compared to your existing enterprise architecture, the blueprint can reveal changes that will ease customer access, and may offer insights into how to phase in such changes. Finally, connect the top-down vision with the bottom-up blueprint, and define the roadmap to make both a reality.

There are lots of ways to rearrange resources, whether they’re people, processes, technologies or data. But leaders in customer-centricity have found that the right plan creates both customer value and business value. Zappos is a prime example.

Establish collaborative planning across functions and business units. Isolated planning can lead to fragmentation—the survival of those dreaded silos—at the product or functional level, or both. Integrated planning—going to market with a cohesive, unified approach and integrated customer experience blueprint—leads to compatibility between customer and product strategies and collaborative execution across business units and customer-facing functions.

Consider expanding core products and services. Adopting a customer-centric strategy may require growth beyond the current product portfolio or service model. Think of Nike as a purveyor of digital fitness services, or Ford Motor Co. as a provider of electric vehicle management services.

The two companies provided important new value propositions to their customers by shifting both their product lines and operating models.

The proposition doesn’t have to be that big or far-reaching. US restaurant chain Applebee’s, for example, expanded its menu and provided increased nutrition information in a partnership with Weight Watchers International. Adopting the Weight Watchers points system helped reposition Applebee’s as a restaurant offering healthy choices to customers looking for healthier lifestyles.

4. Operating model design and execution – 

” A successful operating model merges strategies, people, processes, technologies and data.” 

Designing and implementing an operating model means taking a holistic approach as you address issues ranging from corporate culture to IT. While the biggest challenge is to achieve unity in design and execution, that often means—once again—dismantling silos. As with an orchestra, everyone must play from the same score and follow the conductor if an operating model is to produce a harmonious customer experience.

Refine customer-focused processes. Connecting processes, linking organizational structures and integrating systems can ease the flow of information. Be prepared to define customer-impacting processes as they will define activities, drive technology and channel requirements, and define roles and responsibilities. A customer-focused process architecture makes clear where customer handoffs occur; which steps shape the customer experience; and how data, technology, processes and people must be leveraged.

Build new internal- and external-facing capabilities. Some companies using advanced CRM capabilities know whether the customer contacting the call center has previously voiced opinions about a product online, prompting the agent who answers to deliver relevant messaging or offers. The result is a more personalized interaction.

Keep in mind that new platforms such as online portals, capabilities like mobile-enabled video chat and other advanced tools are not, in themselves, the answer. During the customer-centric transformation, technology becomes an important focus across the company as new foundational, operational, process management and decision-making technologies are needed to manage the operating model. The result will be greater precision in executing the customer experience blueprint.

Consider connectivity. Collaboration is key in a customer-centric operating model. Once your company decides to break the silos, you must decide how this should happen. The answer, dependent on culture, could vary from formally connecting processes across the organization to fostering collaboration in a less structured way. Before redefining an operating model, examine your company’s capacity for collaboration. Processes are very structured at some organizations; at others, they are more flexible. How does collaboration work in your company? Is there a willingness to change? Be realistic about what is appropriate for your company’s culture. If the changes seem too radical in the short term, consider smaller steps that can be made now and plan for larger shifts over time. Leverage individual objectives and incentive compensation to get employees moving in the direction of collaboration.

5. Governance – 

” This is the glue that holds together a customer-centric operating model.” 

As your company shifts from a product-centric to a customer-centric model, there are many questions to ask when establishing governance. Among the most important: How flexible do you want your vision to be? How are decisions made, and who has the power to make them? Both questions affect the essential tension between maintaining discipline and encouraging creativity.

By definition, governance is about making decisions and handling exceptions. Yet too rigid an approach may limit innovation and the autonomy of individual managers to make the best decision for their parts of the business. On the other hand, leaders need to be wary of promoting an undisciplined “Wild West” mentality. Deciding where to draw such lines requires a thoughtful reading of company culture and behaviors.

Typically, governance involves creating a board from various customer-facing and impacting functions that is responsible for an array of issues, including maintaining the vision, creating a roadmap for evolving enterprise architecture, initiating an approach for sourcing new capabilities and stemming deviations from customer-centric decisions. Governance is the conductor; when one section starts playing from a different score, the sound of the whole orchestra changes.

Maintain a shared vision and control scope. Adhering to a vision can be difficult because different stakeholders have different priorities and new information can drive decision makers to stray from the path. Visions evolve based on new insights, but traditionally, that evolution is deliberate. When individuals are asked to adhere to a vision they do not fully understand, they tend to make decisions that are not aligned with that vision, thus requiring governance. If one function within the organization deviates from the larger plan, a formal escalation process needs to be in place to manage any potential negative impact. The governance team needs to be in a position to make the right calls so that everyone keeps focused on the same goals.

Be explicit about who owns customer relationships. The governance board must decide where ownership lies based on the company and its products; it can be at the corporate, franchise or brand level. Clear ownership of the customer helps to ensure a deliberate and consistent customer experience. If ownership is not clear, inconsistent customer experiences or internal turf battles for share of voice may ensue. If multiple business units or brands within a company have overlapping customer segments, the company will need to be careful not to over saturate its customers with proactive and unsolicited communications.

Keep track of Touch-points. Analytically driven capabilities and commonsense rules concerning how the company interacts with its customers can prevent over saturation. A governance committee can help define the appropriate business rules around frequency and cadence of customer touch-points. When a company proactively engages its customers too frequently, the contacts become spam; therefore, it should establish business rules around the ideal number of customer touch-points so that the contacts drive a positive experience. Coordination is even more critical when multiple business units or brands share targeted customers.

6. Transformation management – 

” These initiatives integrate new behaviors and allow the business to serve customers without interruptions to operations.” 

Ensuring adoption of a customer-centric focus across the organization requires a strong leadership commitment to managing change. A traditional project management office won’t be enough. Significant attention needs to be dedicated to the behavioral changes, cultural implications, operational impacts and interim plans.

How do you get to the new ? One of the greatest challenges during the transition from the old operating model to the new is building the new model while simultaneously continuing to operate the old without disruption. How do you balance the old world with the new? How do you prepare your team for these changes? Your company’s culture may embrace or resist change, but to realize the full return of customer-centricity programs, employees and vendors need guidance during the transition.

Establish a customer experience champion at the executive level. Dedicated senior leadership involvement demonstrates the importance of the program. It will also make it easier for the organization to evolve its customer vision by having this leader focus on both high-level strategy and tactical execution. This individual will take a cross-functional perspective to connecting the discrete pieces into a comprehensive approach to customer interactions, enforcing the breaking of silos.

Don’t expect these changes to just happen. Some organizations assume these changes will take care of themselves over time. This is rarely the case, so resist the it-just-sort-of-happens mindset. The most successful transforming companies have a robust change management program that includes training—skills and knowledge—and communications.

Create a change management program for training and communications. Some of the most challenging moments of change take place after you go live. Plan for support beyond initial milestones until your organization has truly institutionalized your vision.

–  Customers today expect an imaginative, high-quality experience in a multi-channel environment. Failure to adapt to this new reality will mean not only lost business but a growing gap in product development. If you’re not listening and responding to your customers, chances are you’re not anticipating new needs and demands.

Industry leaders are constantly enhancing their customer-centric operating models and raising customer expectations; therefore, it’s critical for your company to get customer-centricity right. Regard this as an opportunity: Your company can leverage new processes, roles and data to create operations capable of making good on your customer-centric promise and growing your business. But you must put the focus of your company’s thinking on the customer, even if it means entering un-chartered waters.

Top 2012 Consumer Value Creators Report, Global | BCG

Like most industries, the consumer industry has been strongly affected by the economic slowdown: the weighted-average annual TSR (Total Shareholder Return) for the period 2007 through 2011, 5.4 percent, is significantly below the industry’s  long-term annual average of about 10 percent. However, averages can be deceptive. Many of the top ten TSR performers in the FOUR consumer sectors analyzed in our studyFast-moving consumer goods (FMCG), Consumer Durables and Apparel, Retail, and Travel & Tourism—produced significantly better returns.

For example, the top ten performers across all four sectors achieved shareholder returns ranging from 7 to 61 percent during the five-year period from 2007 to 2011, and the averages for each sector’s top ten companies ranged from 15 to 26 percent.

When we analyzed the top ten value creators’ shareholder returns against THREE main dimensions of TSRSales Growth, Margin Change & Changes in Valuation Multiples—we found a wide spread around the average on each specific dimension. We also found that the top performers took many different routes to value creation. Some were substantially below average while others were significantly above average.

For senior executives, such wide variations can be frustrating because there does not appear to be a clear path to superior value creation. But the encouraging takeaway from our analysis is that the path to above-average TSR is not a fixed route available to only a few, select companies: all businesses can potentially produce above-average TSR. The best path for any individual company will depend on that company’s starting point, as defined by the economics of its business and its current valuation in the equity markets. In the end, each company has to chart its own course and develop its own value-creation strategy.


Fast-Moving Consumer Goods (FMCG) – Leading the Field with High-Margin Brands :FMCG was the highest-performing sector in the consumer space: it outpaced every other sector, from chemicals to telecommunications, achieving a weighted-average annual TSR of 8.6 percent.

The top ten companies produced dramatically better results (24 percent on average), outstripping the sector average by a factor of nearly three. High-margin, distinctive brands lie at the heart of this success, generating the returns and cash flow needed to boost TSR through cash payouts or by reinvesting in sales growth. Different companies took different routes.

Cash machines continue to deliver results. One recurring theme across the FMCG companies is their ability to generate more cash than they need to grow. In developed markets, where economic growth is sluggish and could slow even further, the top TSR performers used their surplus cash smartly to fuel superior returns in conjunction with modest sales growth. This cash machine approach was illustrated by companies such as British American Tobacco and Lorillard. Even in high-growth emerging markets, robust cash flows and increased payouts can be powerful levers, as demonstrated by AmBev.

These out-performers struck the right balance between growth and throwing off cash, either through above-average cash payouts or by using the cash to fund M&A. For example, Brasil Foods (BRF) carried out a transformational M&A that helped the company achieve the sixth-highest TSR in the FMCG space. BRF accomplished this through a mix of growth and improved margins despite multiple compression.

Growth engines reap the benefits of emerging markets. Unlike their developed-world peers, companies in emerging markets have enjoyed—and capitalized on—a relatively high-growth environment, particularly in the brand-conscious Asian markets. In fact, seven out of ten of the top TSR performers in FMCG are from emerging markets, highlighting the importance of growth for superior returns; for the sector as a whole, sales growth accounted for 60 percent of TSR. Some companies, such as Hengan International, Tingyi, and Kweichow Moutai, produced and sustained spectacular growth from 2007 through 2011. As a general rule, companies that are structurally more profitable are able to grow more rapidly than the average company in this sector.

The power of multiples. In both developing and industrialized markets, some companies earned superior shareholder returns through a combination of growth, cash generation, and expanding multiples, reflecting heightened expectations from investors. For example, higher multiples contributed significantly to the TSR of Femsa and Estée Lauder, among others.

Potential pitfalls for the unwary. While many companies produced impressive TSR performances given the circumstances, others lost their way. Companies that fail to grow, especially if they concede market share, are often severely punished by investors. In a branded market, any move toward lower-margin commoditization is also likely to produce a backlash. Another common problem is a “leaky” capital-allocation strategy, including poorly timed share buybacks, one-off dividends that are capitalized by shareholders, and M&A deals that fail to deliver on their promise, often due to weak post-merger integration.

Going forward. Maintaining and cultivating brands with consumer pull will continue to be crucial for success and to enable both growth and margin expansion, when done correctly. Emerging markets will also be important for growth. For multinationals, M&A will offer opportunities to access these markets, including new distribution channels, while local businesses will have to professionalize further to compete with these growth-hungry “outsiders.” In all cases, effective utilization of assets and strong free-cash-flow generation will be essential, especially if economic growth continues to slow down.

Consumer Durables & Apparel – Sharpening Business Models and Building Growth Platforms : 

Consumer durables and apparel companies saw their weighted-average shareholder returns fall by 1.3 percent for the period 2007 through 2011. Nevertheless, the top ten players showed that above-average returns can be achieved, producing a weighted average annual TSR of 19 percent. Of course, the two types of business that make up this group—consumer durables and apparel—are quite different, and thus the challenges they face and the value-creation paths they have created are different as well.

Consumer durables become more efficient cash machines. Following the financial crisis, many top TSR companies in the consumer durables space introduced cathartic cost takeouts and margin improvements, striving to allocate capital to highest-value operations while bolstering the balance sheet and balancing a meaningful capital return to shareholders. Those companies, mainly in developed markets, have been confident in their ability to consistently deliver free cash flows, regardless of where in the cycle they are, and to use them to invest in new opportunities, including M&A. Tempur-Pedic International is a case in point. The company strengthened its core business and focused on innovation, a strategy that was enhanced through its acquisition of Sealy.

Generally, capital returns to shareholders are an important part of the TSR mix for developed-market out-performers. This strategy is likely to become even more important in the near to medium term because a low-growth environment will not hide inefficient or decretive capital deployment back into R&D or operations.

In emerging markets, companies such as the Indian watchmaker Titan Industries generally relied on growth to lift their TSR, while others, such as China’s white-goods giant Haier, combined growth and margin improvements. Whether or not the growth-oriented approaches are a sustainable source of TSR will depend on the economic outlook of these markets; current indicators suggest that they may not be.

Apparel establishes brand-focused growth platforms. The most successful apparel companies have generally been able to develop sustainable growth platforms that are built on three key ingredients: brands that resonate with consumers, designs creating or reflecting trends that cannot be matched by competitors, and continuous innovation.

Consequently, sales growth has contributed far more to TSR for the top performers than dividend yield. For example, both Burberry and Deckers Outdoor have continued their growth trajectory with five-year average annual sales growth of 17 percent and 35 percent, respectively. Nike also relied on growth, although multiple expansion played a nearly equal role in producing the company’s TSR.

Dividends and share redemptions were also more influential with regard to Nike’s final TSR than they were with regard to Burberry or Deckers. Fossil, in turn, grew both its sales and margins simultaneously to achieve superior TSR, delivering double-digit improvements in both measures year on year.

Going forward. Growth is likely to remain a major driver of above-average TSR in the near term. Successful companies will capitalize on the growth of increasingly affluent populations in emerging markets (assuming that income growth materializes). In addition, durable-goods companies that continue to identify attractive adjacencies for growth, while effectively managing their core asset-base and margin structures, will outperform. Success for apparel makers, on the other hand, will continue to depend on their ability to commercialize break-out brands and products that both reflect current trends and cultivate an emotional connection with consumers.

Retail – Attracting Consumers with Innovative Value Propositions : 

Retailers are fighting major battles on two fronts. On one side, traditional models, such as big-box stores—and especially consumer electronics retailers and department stores—are increasingly being challenged by more-specialized competitors and nimble online rivals. On the other side, consumers, who have developed a keen eye for value and are becoming pickier about how and where they shop, are forsaking middle-market retailers in favor of trading down to value-focused stores or trading up to high-end retailers.

Yet despite these turbulent challenges, the weighted-average annual TSR for the retail sector was 6.1 percent. In contrast, the returns of the top ten TSR performers were more than four times higher on average, at 26 percent. More impressively, given the frosty economic climate, six of these out-performers generated double-digit sales growth. In fact, growth was the biggest contributor to shareholder value for the sector as a whole.

Significantly, companies that were able to deliver credibly sustainable growth were rewarded by investors with improved multiples—the second biggest contributor to TSR for the sector as a whole. Multiples for nine of the top ten retailers moved up. Conversely, many companies that lost investors’ confidence in their growth potential are trading at substantially lower multiples than in the past.

The Continuing Importance of Developed Markets. The TSR winners have a disproportionately high exposure to economically beleaguered developed markets, especially the U.S., underlining the importance of these markets for superior shareholder value. Six of the top ten retailers derive more than 50 percent of their sales from the U.S. (Note, however, that some effective companies may not appear in our sample only because they did not meet the criteria for ownership structure and size of retailers in developing markets.) While developing markets still have substantial potential, as consumers urbanize and disposable income grows, one of the key lessons from developed economies is the importance of innovation, particularly given consumers’ pursuit of value for money.

Enticing Consumers with Valued Innovations. Consumers continue to be focused on finding the goods they want at attractive prices. This is one explanation for the success of online retailers such as Amazon.com, which offers products more cheaply than brick-and-mortar rivals. But to attract and keep consumers, companies need to use innovative approaches. And the top TSR performers do this in different ways. For example, AutoZone delivers both affordable parts and value-add services to grow DIY auto repair, while Chipotle is changing expectations of what fast, casual dining can deliver, promoting new occasions to produce rapid sales growth. McDonald’s, in turn, is taking a two-pronged approach to value through a combination of Dollar Menu offerings and trade-up items using higher quality ingredients at relatively affordable price points relative to competitors.

Going Forward. While some innovative retailers will continue to generate strong growth in their respective markets and categories, a greater focus on improving margins and free cash flow is forecast to be required for achieving top-quartile TSR. The sluggish economic outlook, the growing share of online transactions, and a higher proportion of consumers seeking a distinct value or service offering will all drive the trend.

Travel & Tourism – Delivering Value via Targeted Growth and Effective Asset Utilization : 

Of the four consumer sectors analyzed, travel and tourism produced the least impressive TSR results, with average shareholder returns falling by 3.4 percent over the five-year period. Impressively, however, the top ten value creators in travel and tourism averaged 15 percent TSR. Three main value-creation themes emerge from this sector.

Leveraging Emerging Markets to Drive Growth. Asia has become a major source of revenue growth for many companies as consumers in the region become more mobile and have greater disposable income. Companies that have capitalized on Asia’s increasing appetite for travel include AirAsia, China Southern Airlines, and China Eastern Airlines. At the same time, businesses are seizing the commercial opportunities offered by more relaxed gaming regulations. Companies that have aggressively invested in local options for gaming include Genting, Kangwon Land, and Wynn Resorts.

Strengthening Asset Productivity and Market Consolidation to Improve Margins.In developed markets, the top TSR airlines are increasing their utilization of assets while optimizing networks and allocating existing aircraft to the routes with the highest yields. For example, Alaska Airlines drove margin improvements and increased revenues through smart selection of routes and improved utilization of its fixed-asset base. Although no U.S.-network airlines have yet become top ten TSR performers, that situation could soon change. Most have made major strides through consolidation-oriented M&A, effective post-merger integration, and smart partnerships that enable them to compete and grow on the global playing field while generating improved returns.

Creating New Business Models with Technology. A new breed of companies is disrupting traditional distribution channels through scalable, IT-driven models that offer consumers better value and service while allowing providers to capture an attractive share of the revenue pool. For example, Price-line.com delivered the highest TSR of all 208 consumer companies studied—an impressive 60.7 percent—through a combination of rapid growth and margin expansion, a pattern it sustained during the five-year period. At the same time, Expedia followed a more measured path to TSR with moderate sales growth and effective use of buybacks, which led to an improved multiple that contributed to its 8.5 percent TSR.

Going Forward. Emerging markets are likely to continue to drive growth and enable TSR as long as consumer incomes keep growing. In addition, liberalized regulation of gaming companies may provide an additional boost in emerging markets. In developed markets, market consolidation and improved utilization of assets will remain key drivers of value creation. Airlines are also likely to continue to leverage partnerships to augment their global reach and realize growth from the increasing connections between developed and developing markets. Finally, new economy models will likely create fewer TSR opportunities as the evolution of digital travel distribution enters its mature stage.