Understanding Customer Loyalty: Wal-Mart - Case Study Example

Understanding loyalty Table of Contents Table of Contents 2 loyalty 3 loyalty in Wal- Mart 5 Application of multi-channel retailing to increase customer loyalty of Wal-Mart 6 PERVAL dimension in Customer Loyalty 7 Marketing Research Plan 8 Questionnaires 11 Data Collection 12 References 13 Customer loyalty A company`s ability to thrive no longer depends on marketing and sales information simply pushed towards the customers. It depends on the way in which a company allows customers to pull marketing information that they want, when they want so that they can complete the purchase process completely on their terms. Again it depend on the company`s ability on capturing appropriate customer data from multiple points of customer contact such as fax, a call center, email, telephone, kiosk or store, website click stream, direct sales force or a reseller. This data enables the company to individualize its responses to each customer interaction. Satisfaction is not enough to build customer loyalty. A positive correlation exists between customer buying behavior and customer satisfaction scores. The satisfaction level does not necessarily indicate at higher sales and profits. The Juran Institute reported that for more than 70% of the business that they studied price scored first or second feature with which customers were least satisfied. The biggest reason of disparity between loyalty rating and repeat purchase is the measurement of satisfaction alone. In the past efforts to gain customer satisfaction have attempted to influence the attitudes of the customers. A loyal customer will always have specific bias about what to buy and from whom to buy. Loyalty connotes a condition of certain duration and requires that the act of purchase takes place no less than twice. Two important conditions that are associated with loyalty are total share of customer and customer retention. A customer retention rate is the percentage of customers who have met a specified number of repurchases over a finite period of time. It is absolutely a wrong notion that retained customer is automatically a loyal customer. Pursuing market share can go against customer loyalty because a substantial gain in the market share can increase the diversity of the company`s customer base. Thus the company is forced to serve an increasingly heterogeneous customer base with homogeneous set of product and services. This can create a disparity as the services and attention once available to high potential customers are diluted and undercut for catering to an assortment of less promising customers. A company that is interested in building a solid and loyal customer base uses an approach which is different from that of a company which is interested in simply building market share. Loyalty building requires the company to highlight the value of its products or services to show that it is interested in building a relationship with its customers. Today a company recognizes that its business is to build a stable customer base rather than make a single sale. Instead of just focusing on increased services, price breaks or longer hours, it does everything possible to turn first time skiers into loyal customers. Increased loyalty helps in cost savings to a company in the following areas: Reduced marketing costs since customer acquisition costs require more dollars. Lower transaction costs such as order processing and contract negotiations Reduced customer turnover expenses which indicates fewer lost customers to replace or no churning. Increased cross selling success leading to larger share of customers More positive word of mouth Reduced failure costs Reasons for making a first time customer a life time buyer are: Sales go up because the customer buys more. Position in the marketplace is strengthened when customers buys more from a particular store instead of the competitor. Marketing costs go down when money is not spent to attract a repeat customer. In addition, a satisfied customer tells others regarding the store which decreases need to advertise. Better insulation from price competition because a loyal customer is less likely to be lured away by a discount of a few dollars. A happy customer is likely to sample other product lines of the store thus helping to achieve a larger share of customer. When a company spends less to acquire new customers, it can afford to pay employees better. If a company is able to retain good employees, loyalty within the company and outside the company improves. Customer loyalty in Wal- Mart Traditional retail programs included rewarding customers with discounts for increasing customer loyalty. Some retailers would allow customers to loyalty cards on taking advantage of price sales. Some of the retailers would enable accumulation and redemption of points that would carry dollar value. Today customer loyalty program creates a personalized shopping experience that is beyond rewards and points. Loyalty today means commitment and advocacy. Today retail stores aims towards recognizing individual customers, offering special treatment and delivering surprises so that the customers keep coming back. Today the retailers build loyalty programs around the insights learned about customers over the years. This creates a competitive differentiation which enables faster service, consistent and personalized experience across all touch points and better advice. By offering such service, the retailer creates competitive advantage. As increasing number of customers are making online purchases, retailers are offering rich in store experience that cannot be achieved online. For enhancing customer loyalty retailers are understand the needs of their customers and also identifying the value proposition that they can provide. Wal-Mart Stores have received the highest scores in a study of shopper loyalty conducted by Colloquy. In 2010 Colloquy Retail Loyalty Index showed that customers claimed the highest loyalty to Wal-Mart in many of personal care and grocery categories thus reflecting the importance of low prices in the recession period. In the survey, 3,500 U.S. consumers from five regions were questioned. Respondents were surveyed across four retail categories that included personal care, grocery, mass merchants and department stores. Wal-Mart garnered the first-place in consumer loyalty ratings in the grocery category for in the Northwest and Northeast and third-place in the Southeast, Midwest and the Southwest. This is because Wal- Mart had adopted a customer-centric focus and used a customer loyalty program through the recession. Application of multi-channel retailing to increase customer loyalty of Wal-Mart Wal-Mart is not only the leader in the retail industry; it is also leader of the development of multi-channel retail. As a retailer it operates on multi-channel and has a positive direct effect on customer loyalty Retail business has become more complex due to increasing customer demands, especially in the youth relies more on computer and internet. They prefer to shop not only in the physical store but also on internet. An “American Customer Satisfaction Index” found that customers satisfaction rate with the web retailers is 83 out of 100 that was higher than store-based retailers that only rates 75. For this reason a retailer needs to expand their sales channel to interact with their customers, to meet customer needs and satisfy them. According to the survey conducted by Multi-Channel “Merchant and Sterling Commerce” a retailer will eliminate and lag behind if they perform without multi-channel operations. So the successful global retailer, Wal-Mart provides a unique shopping experience that keeps their customers satisfied and loyal towards their store through expansion and integration of sales channel. Wal-Mart has set up Wal-Mart.com, an online store on January 2010. After it added various channels for customer to choose and access their preferences, its customer satisfaction rate became 78. The ranking was high and it reflected that the customer can be satisfied if they can cross-channel shop with the retailer. The Shop.org indicated that the shoppers who use multi-channel would spend more and is more loyal to the store. The survey laid down that cross-channel shoppers spend 50% more and visit the retailers store 70% more frequently than the shoppers who shop only in one channel. The cross-channel customers are very precious to Wal-Mart to gain and sustain profits. Therefore multi-channel retail can attract new customers and gain loyalty. PERVAL dimension in Customer Loyalty Customer perceived value measurement scale seeks to examine value as a linear process where value is taken to be pre in and past service consumption phrase. It also examines how same type of experience of products and services influence customer perceived value. Uni-dimensional measures of the customers perceived value does not take into account social aspects of service consumption such as social image, identification, social self concept, expression of personality and pursuits of social class memberships. PERVAL was introduced by Sweeney and Soutar in 2001. It examines the value judgment which evaluates the benefits and sacrifices of using a service and a product which is also based on the perception of previous experiences or price quality ratio. PERVAL mostly focuses on post use evaluation of products and services without explicitly taking into account how the use of services, products or other imaginary experiences can affect customer value judgment. PERVAL questionnaires are typically filled during or after a specific service. Deductive measurement of any pre defined value is useful because PERVAL is used to estimate the effects of customer perceived value on contracts such as purchase intentions and customer loyalty. Sweeney and Soutar revealed a stable dimension which is social value, emotional value, price or value for money and value for performance and quality. There are two approaches to PERVAL. The first approach consists of two divisions. The first one is of the social, economical and relational benefits received and the second one is the multi faceted construct which vary with different characters. Marketing Research Plan Marketing research plan conducted on the survey of the customers of retail includes:- Updating the customers on various product offerings or pricing options. For this marketers often ask questions like: what changes would most improve new product? What do you like most about other competing products that are available from other companies? Sending an online product feedback survey to customers helps in gaining insights that drive customer satisfaction, product improvements and ultimately sales. Social media strategies and campaigns are important for the increasing importance of social media in the brand experience and the marketing mix. Some customers use online surveys to find out they need to pay attention to which social media channels. Marketing survey URLS on Face book or Twitter helps to survey customers for gauging interest in different product categories. Company updates are sent out through blogs, LinkedIn, or Face book Marketing budget is probably one of the businesss largest expenses. Before earmarking funds for any marketing initiatives or plans, it is absolutely critical to know the strategies for success. A market research survey can help to analyze the potential market size for the products and services that are to be offered, the prime location for any retail store or the optimal price of any product and service. The effort expended on a market study is rewarded with higher chance of success. Gaining insights into customer demographics is essential for identifying potential customers in a new area. Survey on age, gender, location, income, where the target customers shop, what they do for fun, how many children they have can be very helpful for targeting the message that one wants to convey and campaigns to spread awareness among the customers. It also helps in concentrating time and resources on things that matters the most. Market segmentation means segmenting the customers on the basis of common attributes such as lifestyle, product usage, demographics, and geography and brand affinity. For gaining competitive advantage many marketers send online surveys. For example, a health club owner can segment the market based on facility or service used like spa, daycare, nutrition classes and cardio equipment, while a consumer packaged goods company can segment the market based on lifestyle of people like people who are health-conscious, people who prefer low-cal, people who prefer vegetarian diet etc. This can help in developing finely-tuned marketing programs that target the needs of one or more segments in order to increase membership sign ups. Decision to launch creative campaign depends on questions like would the customer base respond to an online re-marketing banner ad or a billboard on the freeway that is close to home? Which email subject line would make the customer click to go to the product detail page? Is it necessary to test a new ad format? Online marketing surveys is an essential tool in strategy toolkit, helping to prioritize spend and resources. Measuring customer awareness, usage and satisfaction over time helps in the sustenance of the retail store. Companies use marketing survey process to test the overall effectiveness of a rewards program and also its impact on customer loyalty. Surveys can provide insight on retention, sales and customer acquisition. Branding, positioning and naming testing answers why some companies get all the love, why loyal customers do not get wooed by lower price tags and choose to stick to their favorite brands. The most preferred brands listen to their customers and tailor their marketing strategies according to their target audience. Surveying customers to test branding and naming concepts helps in understanding the attitudes motivations and preferences of their customers especially in relation to the competitors. Marketing survey can help to boost conversions, increase traffic and grow sales. Website feedback template contains questions like: why did one visit a particular site? Did one find the things that they are looking at? Questionnaires The questionnaire follows below: 1. How likely are you to repurchase? 2. How likely are you to tell someone else about your experience? 3. How many times have you purchased the same product or service in the past 6 months (or some other period of time that can reflect on purchase frequency for a product or service category)? 4. How many others have you told others about your experience with the particular product or service in the past 6 months? 5. Out of people whom you have told in the past 6 months about a particular product or service have also purchased the particular product or service? 6. How many times have you offered suggestions or constructive criticism for product or service improvements over the past 6 months? 7. How likely you to make are repurchases if the price increases 10%? 8. How likely are you to repurchase a product or service if the competitor has a price that is 10% lower? 9. How vital is the competitive advantage that any product provides? 10. What percentage of your spending on this product category is actually spent with us? 11. When shopping for this product category, how often do you purchase from Wal-Mart instead of from other retail store? 12. How likely are you to continue purchasing the same products/services from Wal-Mart? 13. How likely are you to purchase different products/services from us? 14. How likely are you to increase the frequency of purchasing from us? 15. How likely are you to switch to a different provider? 16. How reluctant are you to switch your business to a competitor? Data Collection The data collected are from interviews of the customers and documentation. These are mostly the primary sources of data. The interview is a face to face interview performed with the potential customers that are coming to the retail store. The interview guide is used as a guideline to give the potential respondents a chance to affect the interviews. The idea of adopting this technique is that interview should be conducted as a regular conversation to make the respondents feel more relaxed and not nervous. Documentation consists of secondary data that give the perspective of other people that is not possible to get from interview. Documentation consists of web pages, annual report and articles. References Wal- Mart Annual Report. (2012). [Available at] [Assessed on March 25, 2013] McBrearty, R. (2011). The Future of Retail Customer Loyalty RFID Enables Breakthrough Shopping Experiences. [Available at] [Assessed on 25 March, 2013] http://www.itcinfotech.com/Uploads/GUI/knowledgecentre/Driving_Retail_Loyalty.pdf Lundson, E. (2011). Customer Loyalty. [Available on ] [Assessed on 25 March 2013] Griffin, J. (2011). Customer Loyalty. [Available on] [Assessed on 25 March 2013] Reinartz, W & V. Kumar. ( 2012). The Mismanagement of Customer Loyalty. [Availabvle on] Read More