Customer Service and Loyalty at Wal-Mart and Tesco - Essay Example

Introduction The paper analyzes marketing issues related to service and loyalty with application to marketing planning in retail businesses.The paper on the lines of case will analyze businesses of retail giants like Wal-Mart and Tesco. The marketers in the current scenario are more into delighting their customers, though they rarely examine its strategies and their execution. According to Dixon & Freeman (2010), it is consumer’s impulse to punish companies providing bad service and tendency of punishing bad service by consumers is more than the tendency of rewarding good service. In the paper we will analyze how the companies operating in retail businesses are currently managing their customers through marketing with the help of tools like BCG Matrix, Mintzberg intended strategy, 7P/8P analysis and techniques described in the case. The companies operating in retail businesses starve for obtaining customer loyalty. Conventional wisdom of loyalty describes that customers show loyalty towards companies and brands that tend to go above and beyond others. But according to Dixon & Freeman (2010), customers are more loyal to the companies that exceed their expectations in terms of products and services. Many retail companies like Tesco, Wal-Mart and M & S offer a refund or free product or even some other benefit in lieu of that in case the product has undergone expedited shipping. This helps them in retaining loyalty of their customers even in case of delay in product delivery or service. 7P Analysis of Retail Markets The 7P analysis of retail markets and businesses will analyze how companies operating in retail businesses are performing in accordance to every aspect of 7P. This is analyzed as follows: Product: The products of the companies operating in retail format vary from format to format. Whilst companies like Tesco and Wal-Mart have SBU structure and their products have similarity of being a departmental and multipurpose stores whereas the companies like GAP, Zara and French Connection are mainly apparel stores with specialized products. The product of a company is the first phase of generating loyalty from them. A product delivered in acceptable and good condition delights the customer whereas a product which defects and expedited delivery upsets him and tends to reduce his loyalty. Providing service to customer performs an integral part of gaining loyalty from them. According to Dixon & Freeman (2010), bad service by a company has its ripple effects in a way that it even repels perspective customers from a company. The research showed by them highlights that only 25% of the customers say positive about their experience of service with a company whereas almost 65% of them are likely to speak negative about the experience. Out of this around 50% of them pass on the experience of bad services to others. So the companies failing to provide good service suffers in terms of existing as well as perspective customers. Price: The price of a product and service along with its quality are one of the major factors that decide the repeat purchase chances from the customer. For e.g. Carrefour introduced the concept of everyday low pricing in its retail stores to retain and attract more customers. Similarly Wal-Mart is known to offer best price which helps it to maintain a high market share. Loyalty of customers tends to increase if a company continues to offer products at a price lower than that of its competitors. Place: Customer loyalty has some part to play with the culture and demography of the customer. Though place could not be considered as the primary component of customer loyalty but while planning their marketing plans and services, marketers need to re-thing about the culture in which they are operating. For e.g. Carrefour introduced the concept of wet markets when it entered China and this strategy being aligned to their culture generated loyalty for them. Promotion: Promotional techniques like Advertisement and sales promotion are the ones that attract perspective customers to the stores. High advertising budget by companies like GAP, Zara and French Connection are met positively by the customers only if they have a reputation of providing a high quality product and service. Process: The process in which a firm delivers products forms an integral component of customer loyalty. As discussed earlier, the companies having highly efficient product delivery system are likely to succeed in this component. Companies like Wal-Mart and Tesco whereas many other retail chains pay high attention to their supply chain management because of these reasons. According to Dixon & Freeman (2010), minimization of channel switching could be done by companies by increasing the self-service channel “stickiness”. Retail giants have already been successful in shifted many of their customers to self service websites. Physical Environment: Ambience and environment of the place also decides on the fact that how many times a customer will re-visit that place. IKEA is a well known company which used this component for attracting customers to its stores. It could be taken instance from the fact that the company allowed its customers to relax in its western style stores in a view that they could be aspiring customers of IKEA in near future. People: In providing service to customers, the people staff of a company has a front-line responsibility and they form a primary component in deciding the probability of a customer re-visiting the store for buying the service once again. According to Dixon & Freeman (2010), a company should arm its steps towards addressing the emotional side of its interaction with customers. The study researched that around 24% of the repeat calls by customers were due to “emotional disconnects” between the customers and the staff of a company. BCG Matrix Everyone in the industry strives to be a cash cow but most of the companies fail to become due to high percentage of losing customers. In other words it could be said that to become a cash cow customer loyalty becomes an integral component. According to Dixon & Freeman (2010), most customers are likely to encounter loyalty eroding problems whilst their engagement with customer service. Loyalty among customers is generated by finding solutions to their problems in an easy and quick way. This is done by many retailing companies which are current cash cows in the market. Retail business should be considered as the cash cow as it had been distribution quality from past so many years constantly along with extra services for its customers. The companies operating in the market has always come equipped with new and innovative products and services for its customers. Following the same streak Tesco, Wal-Mart and Carrefour could also be considered as a star as it had put in a lot of efforts for increasing the level of awareness of its customers and providing them the benefits of e-commerce and retailing. As discussed above how IKEA allowed people to rest in their western style stores for generating perspective customers list. IKEA used a mix of low cost and differentiation strategies as a part of its hybrid strategy. They used innovative means for attracting customers and people who can become there prospective customers in near future. The company tried to create differentiation in the retailing industry it operated in. Similarly retailing giants like Wal-Mart, Carrefour and Tesco have been operating as a cash cow in the industry. The production emphasis of products in focused differentiation strategy followed by these companies depends on customization meeting the tastes and requirements of targeted customers. The marketing emphasis of this strategy is towards communicating that how the product offers all the requirements in meeting buyers’ expectation in target market. Commitment in serving to niche markets better than rivals remains the key of sustaining the strategy. Mintzberg Model of Intended and Realized Strategy The word strategy is used in many different ways even though traditionally it was defined in only one way. Mintzberg has given 5 definitions of strategy, which are: Plan: Strategy is considered as a plan, it is dome sort of an intended line of action, set of guidelines for dealing with different situations. Marketers tend to plan their analysis for building a strategy towards maintaining loyalty among customers. Discount coupons on repeat purchase as well loyalty bonus forms the basis of these plans. Apparel companies like GAP and Prada whereas retail giant Tesco follows this strategy very effectively. Ploy: The next stage of this model is ploy a strategy on the basis of specific plan discussed above with a view to outrage competition. To generate customer loyalty many companies use customer satisfaction surveys as a way to plot strategy. Pattern: The intended strategies by the marketers to generate loyalty could also be realized in many ways. . It means that it is not sufficient for defining a strategy only as a plan; it needs to be defined in a way encompassing the resultant behavior. A stream of actions like generating customer satisfaction score forms an important part of pattern by the marketers. Position: Strategy is also considered as the position and a means for location of a firm within an environment. According to this meaning, strategy is a mediating force in between the firm and its environment i.e. between the internal and external environments. Consider the position of Wal-Mart in the environment it is operating. The position of the company is the result of strategic implementation for acquiring more customers. Perspective: The key importance of the strategy to an organization is the perspective shared by all the members of the company. The firms working in the right perspective are the ones that are likely to benefit from it. Introducing the Customer Effort Score According to Dixon & Freeman (2010), “the customer loyalty is defined at the customer’s intention to keep doing business with the company”. Dixon & Freeman (2010) evaluated 3 matrices for judging its predictive power namely, “customer satisfaction (CSAT), the Net Promoter Score (NPS) and customer effort score (CES)”. According to Dixon & Freeman (2010), CSAT proved out to be a poor indicator compare to other 2 indicators whereas CES proved out to be a best indicator. Customer effort score tend to outperform both CSAT and NPS. The measure of CES is taken by asking a single question i.e. “How much effort did you personally have to put forth for handling your request?” (Dixon & Freeman 2010). The use of customer effort score still in the initial stages though it is speculated that the usage will increase manifold in the coming few years with the retailing companies becoming more aware of how to generate loyalty factors. The use of customer effort score outperforms other techniques because it has the ability of capturing impressions of the customers at the transaction level and secondly due to its ability of capturing both negative and positive events observed by the customers. Apparel retailing companies like Zara, GAP and Prada are moving towards using customer effort score for regaining loyalty among customers. Conclusion As discussed in the paper it can be concluded that customer service, product orientation and customer loyalty forms an integral part of business in retail industry. Same has been proved in the paper with the help of examples of two retail giants Tesco and Wal-Mart. It can be concluded that for meeting the expectations of the customers, the companies should anticipate loyalty, address customer issues, strive to provide better customer service and focus on problem solving as primary and speed as secondary. It could be said after the analysis of the case that the companies should stop trying too hard in their way to delighting their customers by using unrealistic strategies. The companies need to focus of regaining customer loyalty through aspects like resolving customer issues, having staff and representatives that are well versed with handling emotional aspects of customers, switching the customers to the self service modes in the websites and reducing customer efforts by obtaining continuous feedback from the customers. References Dixon, M. & Freeman, K, 2010, Stop Trying to Delight Your Customers. Harvard Business School Publishing Corporation Hoyer, W. D. & MacInnis, D. J., 2001, Consumer Behavior. 2nd ed., Boston, Houghton Mifflin Company. Read More