Posted on February 21st, 2012 in Customer Experience, Data-driven marketing, Marketing by Mark Price

Several weeks ago, I was asked by RetailWire if retailing had improved in the past 10 years, given the dramatic increase skill at leveraging that information. Logically, you would assume so.Several weeks ago, I was asked by RetailWire if retailing had improved in the past 10 years, given the dramatic increase in available customer data and marketers’ improved skill at leveraging that information.

Logically, you would assume so – the availability of customer information provides retailers  (and other marketers) with the ability to personalize email, direct mail, web sites and customer service at lower cost with shorter lead times than ever before.  You would imagine that customers would be delighted with the attentive customer service, effortlessly finding their needs met and questions answered.

And reality could not be farther from the truth.

If you take nothing else from this post, remember this one thing:  no amount of marketing can replace a poor in-person customer experience.

Frequently, I find myself seeking out a salesperson in a store, just trying to pay for my items.  Forget about seeking help – you are clearly on your own.  My daughter spent 15 minutes seeking out an associate to buy a pair of Toms shoes, at Nordstrom’s, long considered to be the “gold standard” of customer service (at least before the Apple store).  I have wandered around stores such as Macy’s, the Home Depot, Buckle, Verizon, just trying to give them my money.  When I finally find an associate, she seems more interested in talking to co-workers about her weekend plans than my purchase. I feel like an imposition, rather than one who contributes to her company’s profitability and her job. 

Research supports this trend – the American Customer Satisfaction Index shows little improvement in specialty retailing over the past ten years.

Why is customer satisfaction stagnant when the data to improve personalization and service is so much more available?

Based on my experiences with our clients and other retailers, the retail industry as a whole tended to maintain profitability during reducing labor costs during the recession’s declining sales. It makes sense; labor is one of the few variable expenses in retail.  So, while transactions declined, a strange phenomena occurred at the same time – satisfaction with those fewer sales declined.  When you reduce customer satisfaction and dramatically increase couponing, as we saw in the past 3 years, you end up with increased commoditization – consumers see retailers as interchangeable and price as the only differentiator between alternatives.

While this challenge affects retail overall, JC Penney has shown signs of addressing this issue by reducing discounting and focusing on customer experience.  While the final results have yet to be seen, the early signs are positive.

So, if you are a retail marketer, and worried that you are driving more and more consumers into your stores, only to have them have a poor customer service experience, what can you do?

1. Make the poor experience visceral.  Videotape customers leaving your store and ask them about their experience.  Let their words speak to your management, rather than your own.  Executives will discount their employees’ feedback, but will tend to listen to “real” customers.

2. Quantify the gap.  Conduct customer surveys to identify gaps that must be filled for customers to be loyal to your store.  Highlight the gaps between expectations and what your store delivers, and between your store and the competition.  Ask customers how much more they would spend in a store they could “trust.”

3. Do the math.  Using the survey information, model out how much revenue is lost every year due to poor customer satisfaction.  By showing the impact in dollars, you tie the results to overall revenue growth, one of the metrics that matters to executives (and to their bonuses).

This post does address how to get management to agree that a customer experience problem does exist, and to quantify the incremental revenue that could be driven if the company makes a conscientious, consistent effort to address that problem.  After all, if you cannot gain agreement that experience is an issue, there is no way you can muster the forces to fix the problem.

Admitting you have a problem is the first step to fixing it.

My next post will discuss approaches to improving customer experience once everyone has agreed it is an issue.

Mark Price is Managing Partner of M Squared Group, a consulting firm focused on turning customer data into insights that yield profitable actions, and the author of the blog “Cultivating Your Customers,” where he writes about practical approaches to improve customer retention and overall customer value.