It’s All About the Customer

Frigid temperatures and equally deep freezes on corporate travel didn’t keep retail executives away from the 98th annual NRF Convention & EXPO, held in New York City Jan. 11-14. Retailers made their way to the show in hopes of garnering some helpful hints about how to operate more effectively in a tight economy. What they learned is that consumer-centric strategies will be key to weathering the storm and emerging successful once the economy gets brighter.

As the economy continues to squeeze shoppers, many consumers are shifting their spending patterns. Gone are discretionary purchases; instead, consumers are setting aside disposable income for necessities. Many are basing their shopping trips on where they can get the most value from their visit, and this transcends mere price.

“Shoppers continue to be cost-conscious, but they also crave recognition of their individuality,” Chris Kneeland, VP, account director, Rapp Collins Worldwide, a New York City-based marketing company, said during the session, “Turning Insight Into Advantage: Best Buy’s Customer-Centric Strategy for Increasing Profitability.” “Thus, retailers should be focusing on how to meet their wants and needs.”

In short, retailers are being urged to implement consumer-centric strategies that center on shopper demand and customer preferences. Insight into these levels primes retailers to deliver merchandise and services to shoppers on a local level. Consumer-centricity may have started as a buzzword at the dawn of this century, but the concept is proving to be one of the top business strategies that could keep retailers relevant to shoppers during this downturn.

“Consumer-centricity is finally at a tipping point,” Alexi Sarnevitz, senior director of retail strategy, global retail practice, SAS, Cary, N.C., said at the show.

During the 1990s, supply chain conversions dominated IT projects, but retailers were unknowingly setting the stage to support consumer-centricity.

“Retailers became equipped to better serve shoppers,” Sarnevitz said. “Today, these revisions, including programs like just-in-time deliveries, are helping retailers support consumer-centric strategies.”

During the keynote session, “Being Consumer-Centric: A Retailer and Manufacturer Update,” approximately 800 attendees packed the room to gain insight into the trend. During the session, a research study on customer-centricity sponsored by Toronto-based Precima and DemandTec, San Carlos, Calif., revealed that 75% of retailers consider consumer-centricity a “Top 3” strategy. And 61% reported they already have programs in place. (The study was based on responses from 120 retail and manufacturer executives.)

Retail winners: Best Buy, Richfield, Minn., has made the concept of retail winners into an art form. Currently, the chain is enhancing this strategy by getting store-level associates in on the game.

“We are relying on our regional managers and associates to understand what makes their store and customer needs different,” Jamey Wojciechowski, director, Best Buy Co., said during “Turning Insight Into Advantage: Best Buy’s Customer-Centric Strategy for Increasing Profitability.” “Then we give them the tools needed to leverage information and take action.”

For Best Buy, this tool is a Web-based portal that helps the chain’s associates, or “Blue Shirts,” create local marketing messages for specific groups of shoppers. The tool can create direct-mail promotions, in-store events, or Web-based campaigns, as well as fliers or point-of-purchase sales materials to support each campaign.

The solution, which was tested in one district 12 months ago, was recently rolled out on a national level. It has eliminated Best Buy’s untargeted mass marketing, and the company now has a way to measure the effectiveness and redemption rates of every campaign.

Best Buy may have a successful track record with consumer-centric programs, but its success rests in effectively understanding local tastes and customer preferences. Once this information is in hand, there are many tools available to help retailers directly connect with shoppers.

Loyalty programs and customer relationship management tools may be the easiest ways to create customer intimacy, especially from a marketing standpoint. However, simply delivering traditional coupons and discounts to build relationships is not going to cut it in this economy.

Philadelphia-based Urban Outfitters, for example, has a customer-loyalty program, “but we do not focus on discounts or points,” Calvin Hollinger, the chain’s CIO, said during the show’s CIO Innovators Forum. “We use it purely as a marketing tool so we can provide an exciting experience each time [the customer] shops with us.”

Similarly, Helzberg Diamonds, North Kansas City, keeps an updated database of shoppers and their personal information. Using this data, the chain is able to conduct “clienteling,” or communication with its best customers, on a more frequent and relevant basis. This is an important practice for a chain that doesn’t have traditional “frequent shoppers,” especially in a down economy.

“Shoppers don’t purchase jewelry the way they shop for groceries,” Butch Jagoda, the chain’s CIO, said during the forum.

That doesn’t keep the jeweler from formulating personal relationships, however. The chain relies on a database filled with personal details of each shopper, from names and addresses to the names of family members.

“This allows us to create direct-mail and e-mail campaigns, clienteling, even contact them with service reminders and recalls at a local level,” he said. “Our store-level associates are the front line to our shoppers. By providing them with the proper information, they can deliver service and value to our shoppers in a timely manner.”