Learning from Wal-Mart’s mistakes

Even industry giants make errors when it comes to looking at the customer. Here are nine ways to make sure your firm doesn’t make the same mistakes.

The retail harvest of Thanksgiving week 2004 was less than bountiful for Wal-Mart. While other retailers were upbeat, Wal-Mart’s sales were “disappointing” the last week of November and traffic was “low” on infamous Black Friday.

Uncharacteristically candid, the company quickly acknowledged it had dropped its deep discount strategy the day after Thanksgiving. Reacting predictably, value-minded customers headed straight to the arms of the competition where low pricing prevailed.

In “Clued In,” Lou Carbone writes, “With modern management fixated almost solely on the bottom line, the value proposition of far too many businesses has become increasingly one-sided; lots of emphasis on the company but little on enhancing customer value.” And then he adds an ominous warning - “As a consequence, I believe today’s organizations have become extraordinarily vulnerable.”

The day after Thanksgiving 2004, consumers saw Wal-Mart in a new light - the king of retail is vulnerable. What followed was dropping prices on a couple of dozen bellwether items, along with an unprecedented print and TV ad blitz. It’s almost as if the giant stumbled. They didn’t anticipate the competition taking a page from the Wal-Mart game book. They abandoned, just for a moment, their winning strategy of delivering the lowest prices on customer-pulling products.

While Wal-Mart will not make that mistake again, what lingers is the unavoidable fact that even the biggest company in the nation can stumble when it abandons, even for a day, its customer-focused strategy.

If it can happen to Wal-Mart, it can happen to any company. To avoid the problem, here are nine steps to help you improve your marketing strategy.

Get the right information. Evidently, Wal-Mart assumed that its competitors would behave the day after Thanksgiving as they had in the past.

Most businesses make a crucial marketing mistake - they listen to themselves. They convince themselves they’re right. Krispy Kreme is another example. The company’s enviable success seemed unstoppable, then sales hit a wall. The company blamed the low-carb craze, even though the slide started at least a year before the Atkins diet became popular.

Did Krispy Kreme believe it had an unbeatable recipe for success? Did the company try to analyze what was driving it? Did lines a block long outside their new stores tell them everything they wanted to know? Even today, does the company understand what customers value? Without solid information, even a hot donut cools off.

Always think brand. Brand has less to do with look and logos than it does with the way a customer experiences a company, product, or service. If Federal Express means one thing, it’s certainty. Disney says it’s great to be a kid, no matter how old you are.

But as Joseph Benson points out, “We all know, buy, and experience brands that have a great heritage. For some of us, it’s Mercedes, Philips, or Disney. For others, it is McDonalds, Heineken, or Gucci. What makes these brands great, what they all have in common, is that they have had the time to build a meaningful and relevant past -- a heritage.”

How much do we care about taking all the tiny, seemingly insignificant, and bothersome steps to painstakingly create a heritage that establishes value and builds customer confidence?

Value identification. It’s time to put features and benefits behind us. They’re the past. A product may appear to be benefit-rich, but what if the customer isn’t interested or doesn’t care? Are they still benefits?

For example, a marketing research project for a large dry cleaning chain revealed that customers at certain stores value coupons, while those in other stores don’t. Where’s the benefit of coupons for those who don’t want them?

“Becoming the customer is different from listening to customers,” says Michael J. Lanning in “Delivering Profitable Value.” All that’s important is what happens when the customer experiences a company’s “products, services, and actions.”

Get service right. One visit to the service department of Quirk Ford in Quincy, Mass., makes it clear they don’t ever want to hear a customer say, “You didn’t fix it right when I brought in the car.” For the Quirk Ford team, repairs must be perfect.

That’s not all. The service department is open six days a week, starting at 7 a.m. and there’s a free shuttle service. You speak to a service counselor in an office, not a repair facility.

The result is confidence in the service and satisfaction at having a dealership that thinks like a customer.

Renovate rather than innovate. Cox Communications has embraced renovation, and it’s doing it by thinking like its customers.

Getting broadband service to a home is only half the job. Rather than leaving it up to the customer to figure out how to connect to a computer, Cox offers wireless network installations as one of several other computer-related services. By building on its existing capabilities, Cox figured out how to deliver more of what the customer wants.

Instead of innovators, Sergio Zyman says the need is for renovators - companies that keep looking for ways to engage the customer more fully. He learned the lesson the hard way at Coca-Cola where he was part of the management team that introduced an ill-conceived product, “the new Coke.”

Plan for disaster. Wal-Mart evidently wasn’t prepared for the Friday after Thanksgiving. No one thought of asking, “What happens if our competitors do something different this year?” Doubters aren’t viewed as “team players.”

Yet, look at what happened to the insurance industry in the aftermath of New York attorney general’s charges and indictments. One of the world’s largest -- and most necessary -- industries was caught off guard and thrown on the defensive.

The worst part has nothing to do with the illegal activity or even the highly questionable sales practices. The blow to the insurance business was the breach of trust, the cornerstone of the industry.

Asking a “what if” question is far from an empty exercise. It may be the most pressing issue business faces today.

Be helpful. “E-marketing is about substance over show, logic over emotion, text over graphics,” writes Web site content expert Gerry McGovern. “In fact, good Web marketers follow the Google motto - Be useful.”

The words apply to all marketing. Certainly, if you want to know how a company sees itself, visit its Web site. If the focus is on the company and what it sells and how proud it is of everything, you can be sure it’s totally inward directed. It’s sending the message that it doesn’t want to engage customers, just sell them.

Visit www.palm.com/us/ and see firsthand what it means when a company takes “useful” seriously. Palm owners experience a company that thinks their thoughts.

“Useful” should drive everything a company does including marketing, sales, and service.

Make everything yours. There’s one thought companies never want entering a customer’s mind - “Why do we really need them?”

Apple Computers learned early on that manufacturing computer components wasn’t its business. This article is being written on a Powerbook with parts from Toshiba, Mashita, LastDash, and others. What makes it a Mac is its user-friendly operating system.

And what makes amazon.com unique is not what it sells but how it sells it. It’s the unique amazon.com experience that brings customers back time after time.

We need to ask ourselves, “Are our customers just using us to buy what they need, or have they made the conscious decision to want to do business with us?” The difference is the experience.

Get out of your skin. The major hurdle companies face is getting outside of themselves. Citizens Bank has risen from its humble Rhode Island roots to its current position as one of the fastest growing financial institutions in the nation, made possible by the enormous resources of its parent, the Royal Bank of Scotland. Through it all, Citizens works to position itself as a local bank.

However, the Royal Bank of Scotland decided it wanted more visibility for itself. To help accomplish this objective, Royal Bank of Scotland’s four inward pointing arrows are replacing the Citizens’ “C.”

The change sends an interesting, but perhaps, unnoticed message. If local means looking at the needs of the community, an inward directed logo sends a conflicting message.

Summary
These nine strategies are interrelated, each one leaning on the other eight. Each is a keystone; remove any one and the strategy collapses. The power is in their unity.