Regaining Relevance

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=110 BGCOLOR="#666699" TEXT="#080000" bgproperties="fixed" background="04900840erlcjm.png"> <div> <B> <TABLE BORDER="0" CELLPADDING="1" CELLSPACING="1" WIDTH="600" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="LEFT" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 103 ><NOBR><div> <A HREF="index.htm" TARGET="_top" TITLE="Hoytnet Home"><U><B><IMG SRC="063775a0.jpg" border=0 width="119" height="90" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></U></A></div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> <B>Hoyt & Company</B></div> <div> <A HREF="services.htm" TARGET="_top" TITLE="What We Do"><U>What We Do</U></A> | <A HREF="who.htm" TARGET="_top" TITLE="Who We Are"><U>Who We Are</U></A> | <A HREF="articles.htm" TARGET="_top" TITLE="How We Think"><U>How We Think</U></A> |<A HREF="contact.htm" TARGET="_top" TITLE="Contact Us"><U> Contact Us</U></A></div> </NOBR></tD> </tR> </TABLE></B></div> <bR> <div> </div> </td> </tr><tr> <td valign="top" width=165 BGCOLOR="#CCCCFF" TEXT="#080000" background="04311c00egdysm.png"> <div> <A HREF="articles69.htm" TARGET="_top" TITLE="Chris Hoyt Articles"><U><B>Back to:  Articles</B></U></A></div> <bR> </td> <td valign="top" height=370 BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <I><B>Beverage Aisle - 06/03</B></I></div> <bR> <div> <I><B>Regaining Relevance</B></I></div> <bR> <div> BY<B>: Chris Hoyt</B></div> <bR> <bR> <div> <B>If you are a Supermarket executive or a supplier whose business is still primarily dependent upon supermarkets, here's some food for thought for your next meeting:</B></div> <bR> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Supermarkets can no longer compete on a sustainable price-only basis with value discount format retailers - defined as Supercenters, Clubs and Dollar Stores.  The fact is that Wal-Mart, Costco, Sam's and Dollar Stores <I>do get</I> lower pricing from manufacturers, not because of their size or clout or importance to the supplier but because their business models - which include the way they buy - are fundamentally different from supermarkets.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Supermarkets can no longer rely on location proximity as one of their primary advantages.  Based on the <I>2003 Nielsen Channel Blurring Study</I>, between 1996 and 2002, Supermarkets lost an astounding 2.3 <I>billion</I> trips to non-food trade outlets which consumers had to drive past Supermarkets to get to.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The basic Supermarket business model - based on a “Build it and they will come” philosophy and subsidized by supplier trade promotion dollars, analytical expertise and labor contributions - has been gradually undermined and obsoleted by alternate channels who have built their businesses by focusing on satisfying consumer needs and aspirations.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">As long as Supermarkets continue to fixate on price as the solution to their problems, nothing meaningful in this industry will change.  Despite the fact that there have been literally millions of words written about “Branding the Store” over the past decade, most consumers still think supermarkets are all alike.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Supermarket executives either do not understand these things or do not accept them - or both.  Listen to any quarterly conference call between leading supermarket chain executives and Wall Street analysts and this will become painfully obvious.</div> <div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">It is precisely the willingness of Supermarket executives to accept these facts and move beyond them that is the key to unlocking new strategies and approaches that will enable Supermarkets to again become relevant to the 21<FONT SIZE="1" COLOR="#000000" FACE="Arial" >st</FONT> Century consumer.</div> <bR> <div> So what does one do if one is a Supermarket executive and finally accepts the fact that one is disadvantaged on price and must now provide customers with a value proposition of which price is only - albeit important - part of the equation?  </div> <bR> <div> Answer:  Re-engineer every aspect of one's operations to create an emotional bond with as many customers as possible.</div> <bR> <div> Because of the way in which competitive channels define value, the challenge for Supermarkets is no longer to ensure that customers are merely “Satisfied” or even “Extremely Satisfied.”  This challenge has now escalated to one of how to engage one's customers in ways that establish and nurture a sustainable emotional connection.</div> <bR> <div> The value of doing this is clearly quantified in a recent Gallup study which tracked customer trip frequencies and expenditures in a leading supermarket chain.  Customers who reported less than “extremely satisfied” with the shopping experience visited the chain in question 4.3 times per month and spent an average of $166 during that month.  Customers who reported being “extremely satisfied” but who did not also have a strong emotional connection to the chain actually visited the store less often and spent less - 4.1 times per month and $144.  In this case, extreme customer satisfaction represented no added value to the store.  ON the other hand, customers who were both “extremely satisfied” and “emotionally connected” to the store visited the store 5.4 times per month and spent an average of $210 that month.</div> <bR> <div> The net of this is that those customers with strong emotional connections visited this grocery chain 32% more often and spent 46% more money than those who were “extremely satisfied” but lacked an emotional bond.  Gallup's conclusion:  “Without a strong emotional bond, satisfaction is a Trivial Pursuit.”</div> <bR> <div> We do not think for a moment that the path that large public supermarkets must take to engage their customers and achieve this level of bonding is either clear-cut or short-term.  We do think, however, that it is the answer and that - given the present state of affairs - Supermarkets must waste no time in beginning now to take the first step to walk this path.  For those to whom this recommendation may seem like an insurmountable barrier, here's a roadmap or checklist of things you can begin to do now that will - hopefully and eventually - lead to unconditional customer love:</div> <div> <U>Make your customers satisfied</U>: Charge your store managers with talking to customers to find out what they like and don't like about each store and empower your store managers to fix what they can.  Consider planogramming by store demographics instead of store size. </div> <div> <U>Find out what you're good at</U>:  Talk to your customers and find out what brings them into your store.  If it's assortment, then identify the categories where assortment matters and make sure you've got the broadest selection.  If it's produce, make your Produce Department a showcase.  If it's your bakery, then highlight your cakes in your advertising.  If it's service, then train your people to provide it.</div> <div> <U>Talk to people who know how to build a brand</U>:  If all your customers cared about was price, then all you would be selling is private label.  Your suppliers have people who know how to sell <I>value</I> rather than just price.  Once you understand what you're good at, enlist their help to communicate it to your customers.</div> <div> <U>Communicate your message clearly and consistently</U>:  Let your current customers and would-be customers know more about you than your prices.  This week's hot prices draw this week's traffic - they do not build long-term loyalty or profitability.</div> <div> <U>Think outside of the box</U>:  Be more than just a supermarket to your customers.  Be a part of their lives.  Bring surprises into the store to make it fun - photos of local school events, exhibits of local artists, even nametags on employees that identify where they go to school or what town they're from.</div> <div> <U>Stick with it</U>:  Resist the temptation to react to immediate competitive threats if it takes you off-strategy.  Build your customers' “trust” in the shopping experience in your stores with consistency and quality.  Building a “brand” doesn't happen overnight.</div> <div> <U>Hand the Wall Street analysts a copy of the Gallup Study results</U>:  Explain how you are building a brand that can compete with the value discounters by providing a unique value to your unique consumers and ask them to give you the time to show them it works</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <FONT SIZE="3" COLOR="#000000" FACE="Arial" >                                                                                           </FONT><FONT SIZE="1" COLOR="#000000" FACE="Symbol" >ã</FONT> Copyright 2003, <FONT SIZE="1" COLOR="#3333CC" FACE="Arial" ><A HREF="contact.htm" TARGET="_top" TITLE="Contact Us"><U>Hoyt & Company, LLC.</U></A></FONT> All Rights Reserved</div> <bR> </td> </tr></table></body>