The Price Isn't Right
Pricing isn't as big with consumers as it once was, according to a new report by marketing agency G. A. Wright Marketing. Retailers in all industries can remain competitive by focusing on value-added services and strategies, especially for those smaller retailers looking to compete against the Wal-Marts of the world. "Price is decreasing steadily as the most important decision influencer for retail related purchases," says Gary Wright, CEO and founder of G. A. Wright, and author of the report. "Consumers want experiences, not just purchase transactions. They want memorable events that make them feel appreciated and create a positive emotional experience while getting something of value."
In "Retail Trends 2006," Wright says companies should focus on creating loyalty programs that reward customers for repeat business, and leverage CRM systems and customer databases to create relevant marketing messages as opposed to the generic "sales pitches that many retailers use to communicate with their customers."
Pricing is still important, especially for larger retailers like Wal-Mart, but smaller retailers have done a good job of using customer service and loyalty to their advantage, Wright says. "Nordstrom's is a great example of a retailer that's taken a lead in customer service, and they continue to be a financially sound company because of it." Wright also cites Starbucks as a great example of a company that is selling more than just a product, especially when considering how much a cup of its coffee costs compared to the competition. "One reason why people are willing to pay that much is because they're completely focused on delighting the customer," he says. "They put their employees through extensive customer service training."
Other retailers have picked up on niche markets. By picking up where larger retailers have left off, companies can provide a higher level of quality than the competition in both services and products. Wright says Bed Bath & Beyond is another example of the retailer taking advantage of this strategy.
Besides catering to certain niche markets and improving the quality of services and products offered, Wright also suggests providing better customer service. "Customer service remains of major importance to shoppers. It is critical in order to set your brand apart," Wright says. "Retailers need to interact with customers one to one, make them feel like they're the only customer, and add value through innovative experiences that keep them loyal beyond price discounts they might find elsewhere."
CRM can help, Wright says. For the most part the retail industry has been one of the late adopters of CRM, but for those companies doing it, such as Best Buy and Chico's, they are "leading the pack." Basic contact information to identify customers and build relationships is a good start, followed by personalized marketing, according to the report.
As one example, Starbucks now keeps track of each customer's most common purchase via a database. As a result, Wright says, employees can simply ask customers if they would like their regular order, making them feel important to the company. "Solid customer service is lot more than just saying hello."
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Nordstrom is the gold standard for customer service excellence--and, amazingly, word of mouth is its primary marketing tool.