Deep Dive: Innovating the physical store

Can B2B companies launch the next frontier by giving customers new reasons to visit physical stores?

This edition is about innovating the customer-accessible spaces in a distributor’s real-world branch locations. Many distributors have responded to the threat of online disruption by launching e-commerce initiatives and webstores. I’m wondering if distributors, and all B2B innovators, can do more. Can B2B companies open a new front by giving customers a business-first reason to visit their physical stores? On the consumer side, Amazon is opening retail stores in the real world. Can distributors beat Amazon Business to the punch? In MIT’s Ideas Made to Matter series, I was inspired by a recent article by Sara Brown on how retail stores can survive against the odds. Below, each of my headers reflect the three “ways” offered in the article, and my ideas reference and build on Brown’s analysis. As always, I look forward to hearing your experiences, ideas, and questions. For more ideas on how B2B can learn from B2C, see my previous edition on the topic.

Know what makes people shop in stores

If innovation is about doing business differently, I might edit Brown’s imperative to “give people a new reason to shop in stores.” Traditionally, customers visit a distributor branch as a convenience: for a pickup on the way to a job site, to look at a product to confirm appearance and features, to retrieve inventory after hours from a secure locker, and so forth. To offer something new, distributors can begin by exploring two questions:

• Can you attract people other than the usual buyers or users of products?

• How can you create value that goes beyond convenience?

My first question considers the customer’s entire business and its communities. Can you attract owners, engineers, facility managers, data analysts, social media and marketing pros, finance managers, operations managers, and more? What about new employees, customer teams or working groups, or leadership teams? How about people from organizations that serve your customers or train their employees? Can you include members of your local government, business development organizations, educational institutions, or social organizations as representatives of communities important to your customers?

The answer to the second question lies in examining the new people and organizations identified in the first. Why would they come? What can you offer? How would you redesign and staff your store and other physical locations? Brown offers three criteria, rooted in research by Sharmila C. Chatterjee, to identify new value-creating opportunities through the “three Rs” of customer experience:

• Relevance. B2B innovators might explore relevance by considering what customers buy and how they do their work. This opens the door to a physical space that is a place to work, resourced with people, assets, and tools helpful in helping customers accomplish their specific work. Sometimes a fresh location is enough. Distributors can offer a new location steeped in products and services relevant to the customer’s markets. Or, distributors might provide tools that enable meeting facilitation, equipment calibration, product testing, or more. Or, perhaps, distributors might arrange for a meal provided by food trucks or a kickstart through coffee. The key is to offer something relevant to your customers’ needs in a refreshing, productive, energizing, or collaborative environment.

• Resources. My discussion of relevance offered a few resources. Other resources may include the distributor’s people or others invited to serve a customer’s business needs in the context of products and services the distributor offers. For example, a distributor might host an event designed to explore the application of data, analytics, and artificial intelligence (AI)—or a storytelling jam to help customers tell their own innovation stories. Many distributors are adding self-service kiosks to enable onsite and socially distant shopping. Building on the idea of self-service resources, kiosks in distributor stores may offer the ability to analyze distributor performance around purchase price, the total cost of ownership, delivery performance, and service execution—with the optional feature of requesting a meeting with a distributor’s customer service, technical support, or financial analyst resources.

• Relationships. Although attracting new customers and creating new value in a distributor’s real-world branches and stores may lead to incremental sales, strengthening relationships may be a more powerful goal. In this way, distributors use physical assets and human employees as a new and powerful tool within an overall omnichannel strategy. Distributors may build relationships with customers and suppliers, vendors, local governments, educators, and more. I’ve written elsewhere about the strategic power of communities in the digital age. Every distributor’s store may be a human-first asset for building relationships where they matter most—in the real world.    

Use nudges, winks, and smiles to build smart rewards programs

In my everyday conversations with B2B innovators, I have found a renewed focus on modern rewards programs that leverage data and connectivity to create powerful, laser-sharp outcomes. Doug Press, CEO of The Incentive Group, offers this state-of-the-art advice for distributors:

B2B Loyalty Programs are well known for the superior incremental revenue and margin growth they achieve.  When properly designed, they also use a pay-for-performance model, where payouts are incurred only if and after desired results occur. This is distinctly different from other forms of fixed-cost demand generation—for example, B2B advertising, where you make the entire investment upfront and keep your fingers crossed for future results. Specific to distributors, Loyalty Programs are effectively utilized to sell the full line, accelerate private-label product sales, increase customer account share, stay top-of-mind, and align profitable buying behaviors around e-commerce or a new distributor store model. [Emphasis added.]

Digging into Press’ insights, the key is to align rewards with specific desired outcomes, intentionally. Brown’s article offers three variables for designing a rewards program based on the work of Michael Schrage:

• Nudges. A nudge is an encouragement that alters people’s behavior in desired ways, without forcing a change. 

• Winks. Winks are moments that create shared intimacy or solidarity. They are ways to connect with people and suggest what you want or be helpful.

• Smiles. Smiles are moments when customers express happiness. Distributors must seek out smiles, then monitor and measure their occurrence.

Nudges, winks, and smiles, combined with Press’ advice, open the door to creative new rewards offered in stores as part of the customer experience. Importantly, these rewards are offered independent of purchases because the value created by a customer in a distributor’s store is about the customer’s experience, not product acquisition. They tie to all of the ideas above, especially the examples discussed under relevance, resources, and rewards. In this context, rewards are about memorializing (and measuring) the creation of value for customers as humans in a real-world store. They are the experience itself, as well as outcomes created by the experience.

Don’t rely on discounting

Many of the new ideas and examples discussed here are over and above a store’s traditional purpose: to help customers purchase and receive products and services. Following Brown’s advice, offering discounts to drive store traffic should be avoided. Instead, the approach is to clearly position the store as an essential step on the customer’s journey—before the sale, at the transaction, and after a purchase is made. When a store is absolutely required, it should be designed to deliver the value necessary at that moment. For example, distributors may copy Starbucks and allow a customer to place orders on the way to the store for convenient pick up in the store. Or, distributors may anticipate customer needs and provide easy access for solutions related to extreme weather, labor shortages, and supply chain disruptions. In both cases, and more yet to be determined, distributors offer incremental added value in their stores.

Instead of offering a reduced price, distributors might offer increased power. In a long-ago conversation, a distributor leader explained that gaining incremental discounts is an exercise of power as a business buyer for business customers. Unlike consumers, business buyers expect to leverage their purchasing power in relationships with suppliers. More than that, they will choose sources based on the suppliers’ willingness to grant power to the customer. So, a distributor may give customers control over the new customer experience provided in a store rather than offering a discounted price.

Examples of giving buyers power over a distributor’s customer experience may involve letting the customers determine a physical store’s hours of operations--so that people and resources are scheduled to meet those customers’ needs. Or, it may be about disclosing data on price and performance from the distributor’s business systems for the customer’s use. Or, it may be about giving customers the ability to request events with outside experts and to define how those events are conducted.

For distributors, granting power may increase costs or the timing of when costs are incurred. But by giving them power, they are engaging customers as part of the physical store’s customer experience. In many ways, that is the exact opposite of a buy-box experience granted by online marketplaces like Amazon Business. By giving power to customers, distributors may enhance their power to defeat disruption!

Join the journey (by asking questions)

In keeping with my last edition, I am again morphing my usual “ideas for innovating B2B” to questions and including them as part of joining our journey. This edition suggests five fundamental questions for all B2B innovators:

• Can you reimagine physical stores (and other real-world spaces) as creating new value for business customers? By doing so, can B2B innovators open a new front in the war against disruptors?

• Can you develop (and share!) ideas or examples for creating human-first value in physical stores by leveraging the concepts of relevance, resources, and relationships—and thereby create new reasons for visiting a store?

• Can you invite people beyond traditional users and buyers to include people from across the customer’s organization and from local and professional communities that are important to customers?

• As physical stores are an essential step on every customer’s journey, can B2B innovators provide in-kind (for example, non-price) rewards to draw attention to newly created value and measure and monitor world-class execution?

• Can you imagine “power to the customer!” as a mantra for encouraging collaboration with customers, engaging them in the experience offered for them, and for defeating the power of disruptors?

I encourage all of my readers to read Sara Brown’s article, and share your suggestions for innovating B2B stores, with the goal of not just surviving in the digital age, but setting new standards, designing new methods, and most of all, winning! Don’t be a stranger. Share your thoughts in the comments section below. If you prefer, reach out directly at mark.dancer@n4bi.com.