Browsing Tag

Walmart

The Mysteries of Retail: Should You Lower Prices in a Tough Economy?

It’s a tough time to be in the grocery business. Walmart, which derives nearly half of its revenues from grocery sales, recently reported that February 2013 was the worst sales month they’ve had in 7 years — an absolute disaster, according to leaked internal memos. The SymphonyIRI Group, in a report entitled 2012 CPG Year In Review: Finding the New Normal, points out that consumers are shopping fewer grocery stores — 3 rather than 5— and they’re buying less when they’re there. What sales growth there has been is largely attributable to inflation. Customers are very aware that they no longer have the purchasing power they used to.

Given these facts, doesn’t dropping prices seem like a smart strategy? When things cost less, people buy more: it’s not a complex equation here.The answer seems obvious.

Obvious, that is, unless you’re Whole Foods. Whole Foods is facing the same problems as the rest of the grocery industry. Droughts and extreme weather anomalies have negatively impacted the supply chain while transportation costs have increased exponentially at the same time customer confidence in a better tomorrow is lower than a snake’s belly. Nearly 3 out of 4 subjects in the SymphonyIRI report feeling that their financial situation will deteriorate or remain unchanged in the coming year.

And Whole Foods has one problem that’s uniquely their own. Ever hear the phrase “Whole Paycheck”?

Brand Modeling: Who Does Your Customer Think You Are?

Whole Foods, understanding the heightened value customers are placing on value given the current economic situation, has begun dropping their prices. Despite some initial success, the move concerns financial experts, who fear that too significant a price drop will negatively impact the Whole Foods brand identity.  Can Whole Foods continue to offer what makes them unique—namely high-quality,  healthy, organic food—while successfully competing on price? Will the changes that must inevitably come in the wake of lower prices disrupt the Whole Foods experience so significantly that their loyal shoppers will take their business elsewhere, or will the move draw in new customers?

These are some pretty big questions to leave to trial and error. Preserving brand integrity and promoting growth during difficult economic circumstances don’t have to be mutually exclusive goals. Finding the sweet spot that allows you to accomplish both simultaneously requires the use of modeling.

A model for your brand should identify the range of beliefs your best customers have about your store. By determining how important a role each of those beliefs plays in your customer’s relationship with you, it becomes possible to predict the outcome of any operational changes you make. A mathematical analysis of the behaviors and beliefs of your customer base eliminates the need for trial and error. You won’t have to guess how much to lower prices. You’ll know.

In this instance, we’d examine how central Whole Foods’ high prices are to their brand perception. Is paying top dollar an essential of the Whole Foods experience, or is there room for those prices to come down?

What percentage of customers will be alienated by embracing a different pricing strategy? How much new traffic will you attract? An effective Brand Model can provide these answers. Armed with this information, you can weigh the costs and benefits of many different pricing strategies objectively. Choose the option that best meets your company’s needs, with the confidence that every move you make will appeal to your existing customer base.

You can strengthen existing relationships while attracting new business, even in a tough economy. Sometimes that means lowering prices, and sometimes that means keeping your prices high. What strategy is right for your company? We’ll help you figure that out.

March 8, 2013 by

Putting Your Brand Values to Work for You: Walmart’s Promise to Hire Vets

When Walmart  promised, earlier this month, to hire any recently discharged veterans who want a job, it made headlines around the world.  Veterans have had a disproportionately difficult time finding employment after finishing their military service: the Huffington Post reports that unemployment rates among veterans who served in Iraq and Afghanistan was 10.8 in December, compared to a 7.8% general unemployment rate.  Homelessness has become rampant. According to the National Alliance to End Homelessness, nearly 63,000 were homeless on an average night in 2012.

This crisis situation was cited by Walmart as part of their reasoning behind the pledge. CEO Bill Simon also said, “Hiring a veteran can be one of the best business decisions you make. Veterans have a record of performance under pressure. They’re quick learners and team players. They are leaders with discipline, training, and a passion for service. There is a seriousness and sense of purpose that the military instills, and we need it today more than ever.”

These are all good reasons to hire veterans. But it’s hardly a comprehensive list. Other commentators have been quick to point out that Walmart, with its 37% annual employee turnover rate, has a gigantic, ongoing need for new hires. Adding 100,000 veterans over five years to the payroll, incredible as it may seem, doesn’t even make a meaningful dent in the face of that need. At the same time, Walmart will be entitled to specific tax incentive payments for hiring veterans.

Understanding Brand Values: Why Walmart Is Doing The Right Thing

What we’re interested in is what this pledge means for the Walmart brand. Walmart is a polarizing entity. The store has ardent fans; legions of them. There’s just as many critics out there, commenting on Walmart’s problematical sourcing, international bribery scandals and labor practices. One identifiable trend that has emerged over the course of Walmart’s recent history is the values-oriented response: when the critics have gotten too loud, the company responds with a headline grabbing initiative that puts the retailer in the best possible light in the eyes of its best customers.  It hasn’t been long since we’ve heard about Walmart’s efforts to go green and promote sustainable choices. Now we’re seeing Walmart step up and offer employment to the nation’s veterans.

What’s going on here, and why is it working?

As we said in Customers First, there’s a reason that Walmart is among the world’s most successful retail businesses. They have spent a tremendous amount of time, effort, and energy developing a comprehensive understanding of who their customers are. This understanding transcends simple demographics: it is by understanding their customer’s core motivations—the psychological factors that drive all behaviors, including purchasing decisions—and presenting their organization as possessing and in alignment with those motivations that a brand gains a prominent place in a customer’s worldview.

Walmart knows, definitively, that their customers are patriotic. They want to support America, and by extension, her troops. Look at the core of Walmart’s audience. Generally Millenial-aged and older, these customers came up during or shortly after the end of the Viet Nam war. Soldiers returning at that time were not greeted with open arms: the social fallout from this resulted in the codification of a uniquely American value. No matter how ideologically reprehensible a military conflict may be, we hold the actual combatants blameless for their participation in it.

Walmart’s pledge is perfectly in alignment with the values of their best customers, who want to support the troops but heretofore have lacked a meaningful mechanism to do so. Conflating shopping at Walmart with supporting the troops allows shoppers to feel as if they’re making a positive difference while they’re doing something they’d already ordinarily be doing. The positive emotions evoked will strengthen the already strong brand between Walmart and their customer. This was a smart move that came out of understanding their customer’s psyche. Would it work for every brand? That’s an interesting question. We’d love to hear your thoughts.

 

January 22, 2013 by