There isn’t a presentation that I do or a discussion that I am involved with in this retail marketing and branding world which doesn’t come down to a discussion about low prices being the key to getting today’s consumer. No doubt about it. Every consumer market research study that I have ever seen ranks price as number one in importance in selecting a place to shop. I always point out that this is no surprise and that price just gets you on the playing field and it’s all the other branding and marketing activities that a store does which make up the customer’s mind as to where he or she is going to spend their dollars. It inevitably comes down to a discussion about value. After all, if it really was all about price, we’d all be driving Dodge Neon’s and doing all our shopping at Wal-mart.
That’s why it was interesting to see the news reports last week about Neiman Marcus’ 4th Quarter performance, which showed record-breaking results:
“Apparel and accessories retailer The Neiman Marcus Group Inc has enjoyed fourth-quarter and full-year profit increases, encouraged by full-price sales and expense control.
Fourth-quarter net earnings leapt 67 per cent to $34 million compared to $21m in the same period last year. Net sales totaled $851m compared to $784m the year before, while same-store sales grew 9.6 per cent.” Just-Style.com, 9/7/05
Wait a minute. Did that say “full-price sales” helped earnings increase 67%? Now, granted N-M has never been known as a place for great discounts. But if the consumer is so conservative and looking only for a good price at all levels of income, this just doesn’t seem to make sense. (Especially, when you read that Saks sales were down 0.3% for the month)
I didn’t have to wait long for an explanation. The day after reading this report, I was talking with a colleague of mine from the National Speakers Association and we were discussing my presentation focus and the importance of people in the branding strategy and execution. She indicated that she was a regular shopper at Nieman’s—not a really big spender, but a loyal customer. She said it was all about the way she was treated and that even though she didn’t consider herself a major customer, the store treated her as if she was one of the late Stanley Marcus’ dear friends. She said she regularly received mailings and personal phone calls advising her of new merchandise that matched her past purchases and tastes. More importantly, she said, “was the way she was treated when she walked into the store. “People actually called to me by name and welcomed me back. They made me feel like I was the most important customer in the department. And my friends, who sometimes accompanied me, were really impressed.”
Well, if it works at Nieman’s, it certainly works at the local grocer, the corner drugstore and the big box at the local Town Center. Give the customer personalized and interested service and they will come back and drive up your profitability. A few years ago, Yankelovich and Partners, did research which showed that over half (53%) of customers will pay as much as 10% more to get good service. So why don’t stores make sure that the people in the store understand this and perform to customers’ expectations. Unfortunately, it’s because management is too obsessed with the next great sale circular or full-page ad or major promotion. Loyalty is the key—both from customers and from employees—to driving up record sales and profitability. Stanley Marcus understood this a long time ago. It’s time for today’s merchants and marketers to get with it too. It’s a people business after all.
Let us know what you think.
Ken
4 comments:
It’s also important that companies really know their business. They sell more than merchandise. Staff need to know what they’re doing.
Examples (and I could cite dozens): (1) A running shoes store will have a service advantage if the people selling shoes are runners who are trained in the construction and features of all of the shoes they sell, and know about feet, foot strike, toe off, etc. They can help a customer select a shoe that works best for his feet, his running style, and so forth.
(2) The soccer specialty store with staff who know what’s going on with all of the big soccer clubs in the area has an advantage. It’s a source of news and a place to share and pass along information to other customers who go there for the same reasons.
Also, customers need to have confidence that a store will have an adequate selection of the merchandise they want to buy. A smaller inventory can help keep costs and prices down, but it doesn’t provide the same shopping opportunities for the customer.
You’re absolutely on target in focusing on the need for customer service as a magnet to draw customers for repeat business. Businesses need to keep other systems in place too.
A comment about employees remembering customers: I can think of a three local stores (both chains, two are big stores, one small) where I’m frequently greeted by the same employees, but they’ve forgotten why they’re there. The employees are chronic complainers about everything, some even complaining to me how bad the company is to work for. I’ve sometimes avoided those stores simply because I didn’t have the energy to listen to those employees. Service is about the customer, not about the employees.
I couldn't agree more. My former employer actually designed the InCircle program for Neiman Marcus, and I worked closely with the head of marketing who implemented it. Obviously, Neiman's has a somewhat unique client base that is more than happy to pay full price if they get good, personalized service, but I've always believed that was true everywhere. Take for example Expo's recent ascention over Home Depot based on creating a better customer experience. It seems to be a true that success comes from finding that 10 - 20% of your customers who are willing to pay for differentiated service, providing it, and charging them for it.
The key is knowing your customers, what they need, and what their scarce commodity is. "Price shoppers" tend to be people for whom the scarce commodity is money and who have plenty of time to shop. Accordingly, they will spend hours perusing the internet and various stores to save the extra 2% on price. For them, it's very difficult to create a highly profitable scenario beyond the dollar store or mass discounter.
For people for whom the scarce commodity is time, though, they look for places they know they can trust, where they can get quick service that helps them evaluate their options, and where they know if we have a problem the company will help them out. They are the people who believe that "you get what you pay for." For them, creating a differentiated and highly profitable experience is possible.
Neiman's again presents itself. In addition to the high quality service your friend got, Neiman's In Circle Program does a number of things to be a part of people's lives. In Dallas, the In Circle annual invitation-only party has historically been THE social event of the year. The InCircle program has aspirational rewards for their top shoppers that go beyond discounts to events people wouldn't have access to elsewhere (family portrait by famous artist, dinner party with world-famous chef, etc...) In this way, Neiman's brand becomes associated with your lifestyle and not just your shopping patterns. It's not lifestyle advertising in the sense of trying to convince shoppers that your brand fits in with their lifestyle, but actually takes it to the level of becoming an integral part of that lifestyle.
So few marketers really get that nowadays. Even the "loyalty" people have been overrun by the advertisers and discounters who think that if you just continually throw discounts at people, that will make them loyal. Branding has also, in my opinion been overrun by the advertisers who think that slapping your name on everything and inundating people with it in images that appeal to them will help enhance recall, and thus affinity for the brand. While it may enhance recall, if what you recall is annoying ads you can't escape, a brand that is always discounting itself, or worse, a shopping experience that didn't live up to the promise, a marketer shouldn't want that recall at all.
Thanks for the comments. Let me know who "anonymous" is so I can answer personally if you'd like.
It all comes down to the persoanlized service that brings people back. One of the reasons chain drug stores still flourish while discounters and food stores offer the same rx at often lower prices. The reason? The relationship with the pharmacists. It's the people who build trust.
Right on.
Ken
Personalized service, knowing the customer; comparable to going to the "doc in the box clinic" v.s. the healthcare provider that you and your family has had a long standing relationship with for the past 10 years. Pricing is important but I agree customer service is worth paying a little bit more.
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