Knowledge Bank Blog, New Product Launches, Pricing & Promotions, Range & Portfolio, Shopper Communication

Abstract vs. Real World

Do you know what a CDO (Collaterised Debt Obligation) is? What about a CDS (Credit Default Swap)?

They were loans (e.g. mortgages) that financial institutions bundled together then sold to other investors. Who then rebundled them and sold them to other investors.

Who then rebundled them… You get the picture.

If you didn’t know what they were, don’t worry. Most of the investors doing the bundling and reselling didn’t know either.

The investors conducted their trades on electronic screens. They used abstract maths. They were completely detached from the real world implications of what they were doing.

What they were doing was triggering the Banking Crisis of 2007-08. Something that affected everyone.

But there were a few people who could see what was going on. One of them was a guy called Michael Burry. He decided to bet against (or “short”) the sub-prime mortgages at the centre of the CDO & CDS boom.

Why? It was sparked by a trip to Florida. He bumped into (as you do…) a pole dancer who had taken out a big mortgage that she could not possibly repay.

The experience of seeing a human at the end of the financial chain made things real. He saw what the investors behind the screens didn’t.

Burry made $750m. His move (along with a few other like-minded people) became known as “The Big Short”.

You may have seen the film. It brings to life the difference between the abstract and the real.

Why are we talking about this? In our industry we often deal in the abstract. Rows of numbers on a spreadsheet. Long strategy presentations in ppt. Vision statements brought to life in tear jerking videos.

In the world of “The Big Short” we are often the investors in front of the screen.

In contrast, shoppers live in the real world. They don’t look at a spreadsheet. They look at your price. They don’t look at your vision. They look at your products and messaging. They don’t look at your creative brief. They see your communication in store.

In the world of “The Big Short”, they are the pole dancers with a mortgage that’s too big.

To win with shoppers you need to spend less time in the abstract world and more time in the real world.

So, how can you do this?

Pricing. Price indices are the abstract. No shopper has ever been asked “what did you pay for product X?” and responded with “a price index of 120”. They don’t do a calculation of the average category price and work out how your price indexes. They look at your product at X price. The competitor product at Y price. Then make a quick value judgement on which to choose.

Prices next to each other on shelf or on the online page are the real world.

New Products. Concept tests are the abstract. A respondent sits down for a few minutes. They read through the carefully crafted description of the product and proposition. They say they would be happy to pay the (often unrealistic) price. Of course they would, they don’t have to part with any money. The results give you confidence the product will succeed. A few months later the product is launched. Then a few weeks later you are fighting to stop it being de-listed. Back in the real world, shoppers aren’t familiar with the product. They don’t have time to understand the proposition. They don’t see why they should pay more.

New product launches. In busy retail environments. With competitors right next to you. That’s the real world.

Communication. Your purpose is the abstract. It sets direction. It helps align people internally. But it is easy to be blinded by purpose. To go too deep. To become wallpaper. Just another brand that says they’re trying to save the planet. Shoppers want to know you’re doing the right thing, but they really want to know you’re doing the most relevant thing. That your product tastes great. Or it’s healthy. Or it works brilliantly. Or it’s convenient.

The one sentence message at shelf is the real world. Shoppers buy you for a purpose not your purpose.

Merchandising & Layouts. Decision trees are the abstract. No shopper has ever stood in front of a shelf and thought “right, is it brand or format first?” Shelf layouts are the real world. Layouts that make it as simple and intuitive as possible for shoppers. We all know how herbs & spices is merchandised, right?

Planograms are the abstract. A perfectly merchandised shelf. Full availability. Every product facing the right way. The shelf at 6pm on a Friday evening is the real world. Not as perfectly merchandised. Depleted stock. Products facing in multiple directions. Merchandising solutions, primary and secondary packaging need to be designed for the world the shopper sees, not just the world we see.

It’s easy to get lost in the abstract. Going from Teams meeting to meeting. From presentation to presentation. To see what is only on the screen.

It’s harder to stay in the real world. To see what shoppers see.

You can’t predict a banking crisis without talking to a few pole dancers.

Feel free to forward. Have a great weekend. Speak to you in fortnight.