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This post is the third in a three part series on ideas that will shape restaurant performance in 2011.

Part Three: Marketing

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This post is the second in a three part series on ideas that will shape restaurant performance in 2011. Part three will follow next week.

Part Two: Expansion, Investments & Operations

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A New Take On An Old Game: Fuel Pricing

January 25th, 2011 | Posted by Dan Schreff in Retail - (Comments Off on A New Take On An Old Game: Fuel Pricing)

Washington D.C. – Auto fuel has always been the economic poster-child of price transparency, efficient markets, and easy menu-changing. But any gas station owner will tell you that there’s still some money to be made at the pump. Yet given the razor thin margins on fuel, the game has, of course, moved away from the pump and into the store.

This shift has profoundly changed the make-up of where the gas game is played – very few pure refueling stations exist anymore and new entrants are looking to use zero-margin fuel as a traffic driver: grocer Stop & Shop recently announced that it will be ramping up their fuel service offering, opening their first location in Quincy, MA. (more…)

A New Take On An Old Game: Fuel Pricing

January 25th, 2011 | Posted by Dan Schreff in Retail - (Comments Off on A New Take On An Old Game: Fuel Pricing)

Washington D.C. – Auto fuel has always been the economic poster-child of price transparency, efficient markets, and easy menu-changing. But any gas station owner will tell you that there’s still some money to be made at the pump. Yet given the razor thin margins on fuel, the game has, of course, moved away from the pump and into the store.

This shift has profoundly changed the make-up of where the gas game is played – very few pure refueling stations exist anymore and new entrants are looking to use zero-margin fuel as a traffic driver: grocer Stop & Shop recently announced that it will be ramping up their fuel service offering, opening their first location in Quincy, MA. (more…)

Strategic Testing Nearly Doubled at Leading Banks in 2010

January 24th, 2011 | Posted by Jatin Atre in Financial Services | Uncategorized - (Comments Off on Strategic Testing Nearly Doubled at Leading Banks in 2010)

WASHINGTON, D.C. & NEW YORK – January 24, 2011 – Applied Predictive Technologies (APT) announced today that 2010 saw significant increases in scientific testing aimed at understanding the impact of various strategic and tactical initiatives at leading North American banks. APT’s study reveals that testing at larger banks (those with more than 2000 branches) increased by 23% from 2009 to 2010, while banks with over $20B in assets increased testing by 85% in the past year. These leading banks are testing new ideas in nearly all functional areas, including staffing, pricing, customer retention programs, ATM surcharges, new product introduction and marketing, among others.

Over 38% of tests focused on media and marketing programs. Banks increasingly want to measure the ROI of numerous media channels (TV, radio, online) and a variety of campaigns focusing on different products and messages. Banks have also been increasing testing in other areas, including a 261% increasing in testing of pricing changes and actions related to mergers and acquisitions. Cross-channel servicing, relationship management programs, and branch remodels have also been areas of increased focus. Using sophisticated analytical tools, banks are increasingly able to answer nuanced questions, such as which elements of a remodel program help increase ROI, how changing staffing mix between part-time and full-time tellers impacts customer satisfaction and profits, and the optimal strategy for each branch after an acquisition.

Despite the significant uptick in testing, there still remains an untapped opportunity to increase scientific testing to identify the right strategies to respond to regulatory changes, further optimize deposit and loan pricing, and understand the best ways to improve customer retention and cross sell. While some banks are already doing this, many are leaving money on the table by not making the most of scientific testing to fuel innovation. “The banking environment continues to evolve very rapidly,” said Patrick O’Reilly, APT’s President. “Testing ideas before rolling them out is the most powerful way to de-risk key decisions. Some leading banks have pushed scientific testing to new levels. Their experiences hold important lessons for all banks.”

Top Banks Cut Staff – Effective Cost Reduction or Growth Killer?

January 22nd, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on Top Banks Cut Staff – Effective Cost Reduction or Growth Killer?)

The Wall Street Journal reported that many top banks, including PNC, Fifth Third, and Wells Fargo, are planning significant staff cuts.  In recent years, efficiency ratios have skyrocketed due to loan write-offs and lack of growth.  The challenge highlighted by the Wall Street Journal is that loan demand remains weak, and fee income is under pressure with regulation.  This leaves some banks with no choice other than to cut staff.

While staff reduction may be unavoidable, banks need to be extremely cautious in how they go about this.  Cutting staff in the wrong places could further reduce growth, increase attrition, and ultimately not end up improving efficiency ratios.

Banks need to determine precisely where staff can be cut with minimal impact to KPIs.  This means understanding optimal staffing by channel, by position, and by location (for example, which specific branches are currently overstaffed).

The best way to do this is to look back at prior changes in staffing and learn from those changes.  For a variety of reasons, there are constantly changes in both staffing levels and staffing mix.  Measuring the impact of those changes can inform where staff should be reduced in the future.  The challenge is to measure only the impact of the staffing change and minimize noise from economic factors, competitor actions, and anything else that affects performance.  This requires finding a comparable set of control branches that are similar in all ways except for the staffing change.  Comparing to this control group isolates the impact from the change in staff level of mix.

Too few banks learn from the impact of past staffing changes.  Well executed analysis of those changes can inform staffing decisions going forward and minimize risk and maximize efficiency gains from those decisions.

Will New Payment Technologies Actually Increase Profits?

January 21st, 2011 | Posted by retailblogadmin in Labor & Operations - (Comments Off on Will New Payment Technologies Actually Increase Profits?)

UPDATE: During their earnings call earlier this week, Starbucks announced that over 3 million payments were received via mobile phones. That makes Starbucks the largest mobile payments system in the world…

Starbucks recent announcement of an iPhone app that can be used to pay at the register has received a lot of press this week. As did McDonald’s announcement in the UK of its contactless card payment system. From a technology standpoint, this app is one of a number of new systems that have recently come into the market – we discuss some of the other options available to retailers here. We’ll keep our readers updated as to which systems gain traction following in-market testing.

When Is In-Store Sampling Profitable?

January 19th, 2011 | Posted by Dan Schreff in Retail - (Comments Off on When Is In-Store Sampling Profitable?)

Washington D.C. – American Public Media’s Marketplace ran an interesting segment on in-store food sampling at Costco, with a quote that struck us:  “There’s just a high correlation with successfully run supermarkets and sampling.” Supermarket analyst David Livingston highlights that expanding grocery heavy-weights including Whole Foods and Trader Joe’s (as well as Costco) view sampling as core to their offering. Harris Teeter Chief Executive Fred Morganthall’s philosophy is clear, “Samples are there for a reason… the more you eat, the more you buy.”

Yet sampling doesn’t work for everyone, Livingston notes, as grocers have to be “certain that shoppers will like the food they’re eating.” We’d think that Mr. Livingston would give the ‘average grocer’ a bit more credit – even if consumers love the food they are eating, the economics of sampling vary wildly by chain.

More importantly, and far less discussed, even within a given supermarket chain the economics of sampling vary widely by store. (more…)

Are you ready for the demise of Regulation Q?

January 18th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on Are you ready for the demise of Regulation Q?)

The repeal of Regulation Q goes into effect on July 21st, 2011 under the Dodd-Frank Act.  Banking Strategies recently published an article about the impact the repeal will have now that “banks will be able to offer interest on demand deposit commercial checking accounts for the first time in more than 75 years.”

So far, “experts predict the vast majority of banks will play wait-and-see.”  However, Joshua Siegel of StoneCastle Partners believes that smaller, regional banks will start offering interest as a way to steal business accounts from larger rivals.

Reacting to competition is not the right strategy for any bank, large or small.  By the time you respond to a competitor offering interest, you’ll likely have already lost business accounts that will be difficult to gain back.  At the same time, offering interest too broadly will erode net interest margin more than is necessary.

As soon as Regulation Q is repealed, banks should immediately try different interest offers with a small number of business accounts.  Testing will allow banks to measure the actual response to offering interest and will provide insight into the optimal interest rate as well as which types of business accounts respond best to design a more targeted approach.

Banks also do not need to wait until July 21st to start testing.  While accounts cannot offer interest until that date, there are hybrid approaches that can currently be used.  Banking Strategies describes how banks currently get around Regulation Q by offering an “earned credit rate.”  Banks can apply fees and charges against the ECR, which ends up being similar to paying interest on the account.

In advance of Regulation Q’s repeal, banks can try different ECR tactics to start building knowledge on how businesses may respond to offering interest on checking accounts.

As with any change in regulation, the key is to get out ahead of it, test different strategies, and quickly develop the best approach.  This maximizes potential gains, minimizes losses, and provides a leg up on the competition.  Start acting now to come out of this Regulation Q change as a winner.

Click to read more about the Test & Learn Approach.

 

The Non-Paradox of Choice

January 18th, 2011 | Posted by Guru Raj in Uncategorized - (1 Comments)

Washington D.C. – Note: In this month’s guest entry, APT’s founder and current chairman, Jim Manzi, revisits the famous jam experiment and the (non) paradox of choice.

The jam experiment

Over the past decade, some academics have claimed to show scientifically that humans tend to become paralyzed by too many choices. This is often called the “paradox of choice. Probably the best-known piece of evidence is the “jam experiment,” in which shoppers bought more jam when presented with fewer flavors than when confronted with many flavors.

But what if one of the crucial experiments at the foundation of this mountain of inference showed no such thing?

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