National Retail Federation Convention '08: According to the 97th annual NRF confab, what really matters in today's economy goes far beyond price.
Posted Jan 15, 2008
NEW YORK -- Customers are more diverse and fragmented than ever before, forcing products and services to be increasingly commoditized. So how do businesses turn these apathetic -- even antagonistic -- consumers into brand advocates? During a morning presentation at the National Retail Federation's 97th annual conference here today, Fred Balboni, lead partner of IBM's Global Business Services Application Innovation practice, discussed the top seven factors necessary to attain what he described as "divine loyalty."
Balboni's presentation, "Harness the Chaos in Today's Connected World," was drawn from the findings of a recent IBM study.
Store Experience: After a customer visits your store, whether online or at a brick-and-mortar location, she will be more likely to come back if that previous experience was pleasant, enjoyable, and -- most important -- if it sparked within her an emotional connection to your company, product, or service. Balboni reported that BarnesAndNoble.com ranked the highest in this category, with what he called "amazing kinetics." Among the compelling features to be found on the bookseller's site, Balboni spotlighted high-quality images and displays, interactivity, and media clips. The online store even offers same-day delivery for orders delivered to Manhattan.
Convenience: Factors that fall under this category include store layout, design, merchandise placement, and checkout. Customers want a shopping experience that makes it easy for them to get what they want, without turning it into a treasure hunt. Unfortunately, no retail store really stood out in this category, Balboni said. Even the two retailers that topped the list in this category -- grocery chain Wegmans Food Markets and retailer Nordstroms -- failed to achieve recognizably high levels of customer advocacy on this front.
Range and Assortment: Businesses have to reflect the needs of a disparate consumer base by providing a vast range of products. Customers will come back if you have the right size and right fit for them, Balboni told the audience. As an example, he pointed to the category leader, grocery chain Whole Foods Market, which manages to cater to the needs of many customers by offering seven varieties of apples. Moreover, the national chain tailors each location's products to the needs of the respective local community.
Quality: It's simple enough: Customers want high-quality products. Discount retailer Target topped this list, Balboni said, thanks to a commitment to providing good quality at affordable prices. From hosting private-designer labels to applying an understanding of retail to the sale of food, Target's emphasis on quality has forged a loyalty so deep that shoppers are now the company's de facto salespeople.
Customer Service: "Beyond being friendly, this is about empowering your sales force," Balboni said. The highest advocacy score in this category went to Publix Super Markets, a chain of groceries based in the southeastern United States. Balboni described how, instead of simply telling you a product is in Aisle X, Publix employees will actually take you to the product. They even follow you to your car and help you load your groceries. Similarly, online shoe retailer Zappos posts its customer service number at the top of every page.
Multichannel: The market is fragmented in part because there are so many venues for a consumer to access. The key is bridging all channels to create a symbiotic relationship between them that helps promote the activity of each channel individually. Stores, for example, should drive customers online, and sites should in turn drive traffic to the stores. Despite its high-value merchandise, jewelry store Tiffany's achieved this level of multichannel sophistication with features such as a Web-to-phone service where a customer could input his phone number online and would soon receive a call from a diamond specialist.
Product Availability: Customers are going to be happy if you have what they came looking for. Discount retailer Wal-Mart received an overwhelming score of 91 percent advocacy in this category. With its sense-and-respond supply chain, Wal-Mart knows what any store, at any location, needs -- at any time.
Though no single retailer in the study was ranked number one in all categories, Wegmans came out on top overall, with 53 percent of its consumers claiming they were advocates. On top of a voluminous selection, Wegmans provides services such as child care and has recently decided to discontinue the selling of tobacco in response to customer demands.
What's interesting about IBM's study is that price was far less of a factor than all of the aforementioned qualities were. In fact, Balboni said, price is simply not the prime concern of a loyal customer. "If a shopper is not loyal to you, then they're loyal to price," he told the crowd. The key is to keep customers coming back even if your competitor is offering the same, or even lower, prices. It all comes down to policy, processes, and supporting technology, Balboni said, and while no two businesses are the same, the ones that are successful are the ones who continue to have a commitment to the customer.
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