So, when Walmart and their competitors have squeezed every last ounce out of their suppliers and are to within small fractions of U.S. cents of each others’ pricing, where will they turn next for competitive advantage? There is a natural end to how low things can go, particularly with escalating fuel prices adding an unpredictable variable to manufacturing costs.
A question that will become increasingly pertinent over the next few years came to mind as I was working through a proposal we’re preparing for one of Canada’s largest retailers: If you’ve been putting all of your eggs into the low price basket, where to next?
How about – shockhorror – customer service?
The challenge, of course, is that customer service is expensive. Call centres and properly trained staff cost a lot of money, and ultimately they’re bandaids – people only call the 1-800 number when they are frustrated, annoyed or utterly confused and unable to find help elsewhere, meaning that the problems they have tend to require intensive and delicate solutions.
However, offering multiple alternate online channels, many of which help connect consumers with each other as well as product and service experts within your organization, is both less expensive and far more beneficial (just think of the intelligence gathered and goodwill spread. Can a call center or magazine ad deliver that?).
Once we move beyond the price wars (which is inevitable) it will be about the experience, and that doesn’t mean the colours you paint your retail location. Experience refers to how people feel when they deal with you, and if they feel like you are listening, like you want a relationship in order to make their experience more positive, you will do very well indeed.
Your blog post got me thinking about how I mostly experience the worst customer service when I deal with our ISP. Typically, its client service rep is located offshore and, however, pleasant, I rarely feel satisfied with the outcome of my call. In fact, I typically end up calling this independent “computer rescue” guy who we pay to come over to our house and clean up the mess made by our Sympatico rep.
While I’m not sure that customer service will be the winner I do agree that experience is where differentiation will happen.
The problem with customer service is it’s dependant on training which is heavily influenced by turn-over which is driven by pay levels. And at least for the mid-term wages cannot rise much because while price will be less of a promotional focus it will remain a competitive reality.
As customers get drawn into the experience stores can test price elasticity across the product line – and then become develop customer service programs that recognize the uniqueness of both people and situations.
I expect that we’ll see procedural and programmatic experiences first – because they’re relatively inexpensive to institute, scale easily and work within the staff constraints of the stores. Also expect the stores to lean on their suppliers to direct some of their general advertising budgets to in-store experiences that augment the stores brand transition.
It seems that mass marketing, mass retailers and mass media all have the same problems: fewer and fewer people who see what they do as relevant. The trend to “mass customization” has been growing for years and that’s most likely where the long-range future is.
Currently the high-end specialty stores seem to do fine and the low-end Wal-Marts have captured the no frills market. It’s that middle ground that’s unloved and losing population all the time. Beer, cars, cell phones, clothes, coffee…you name it.
So-so, isn’t good enough anymore. The law of good/fast/cheap (we can only have two at any one time i.e. you can have it good and fast, but not cheap, etc.) is playing itself out in the way people spend their money. The days of companies getting away with you can have it of OK quality/somewhat quickly/reasonably priced motivates exactly nobody anymore.
I see a future for retail that mirrors the airline industry. Service and experience for those who want to pay for it and just the basics for those that don’t. The basic airlines (Westjet) are doing basic well. The middle-of-the-road airlines (Air Canada) are stuck trying to be everything to everyone and failing pretty badly.
The problem with large organisations is the cost of the transaction; and service is one that seems less important i.e. the transactional element of filling a shelf can be measured and costed. X people fill X shelves with Y products that sell fof $$$$, no product no sales. Service, hmmm, product is what they want most.
Of course, some examples of social networks show how the crowd can provide that service transaction sometimes at zero cost. And the value, they will see it in sales as we know. If they don’t get this service concept, Amazon will just get bigger and better as more people are forced to spend online due to ever increasing travel, parking and congestion charges incurred when venturing into the shopping centres.