Tuesday, September 11, 2012 | Edited by Daniel Moores
||Can Retailers Wean Shoppers Off Bargains?
Joelle Daddino is making it difficult for stores to make money.
Like many Americans who've grown accustomed to deep discounts, Daddino has become so obsessed with sales that she refuses to shop any place that isn't having one.
"If I don't have a coupon or it's not on sale, I just won't buy it,” says the Yaphank, N.Y., resident.
During the recession, retailers had more sales to lure cash-strapped Americans into stores. Now, that strategy has backfired. It has bred a group of deal junkies that won't shop unless they see "70 percent" signs or yellow clearance stickers. They're a thorn in the side of most retailers because the discounts it takes to get them into stores eats away at profits. In fact, retailers' annual profit growth was cut in half between 2006 and last year, according to a survey of 122 merchants by Retail Metrics, a research firm.
So, big chains like J.C. Penney and Lowe's are trying to wean sale-addicted customers off of sales in favor of everyday low pricing. It's the biggest shift in pricing in decades, but retailers have a long way to go to convince shoppers that predictable pricing is better than the temporary promotions that they've grown to love.
In fact, early this year, nearly three-quarters of 1,000 shoppers surveyed by consumer research firm America's Research Group said it would take discounts of at least 50 percent to get them to buy a given item. That's up from 52 percent in 2005.
Paco Underhill, whose company Envirosell studies consumer behavior, says retailers are to blame for the increase. He says their discounting during the downturn created shoppers who think everyday pricing "takes some fun out of" shopping. To help break the vicious cycle of discounting, Underhill says merchants have to think of ways to attract shoppers that can be just as intoxicating as two-hour sales or coupons. That could mean top-notch service or exclusive merchandise, for instance.
"Sales are just like heroin," he says.
Now, retailers are trying to replicate the success of Wal-Mart Stores Inc., the world's largest retailer that was founded 50 years ago on "everyday low" prices. Experts say Wal-Mart's strategy has worked because it built its reputation on being able to offer customers the lowest prices every day.
In fact, the company's revenue at stores opened at least a year in its U.S. namesake business fell for two years when it veered away from the strategy in favor of temporary price cuts. The company has since been able to turn around its business in part by renewing its commitment to everyday low prices.
Penney executives say they considered Wal-Mart's model when they decided to change the retailer's pricing strategy. It was part of an attempt to turn around the Plano, Tex-based chain, which has had annual sales declines in four of the past five years.
In February, J.C. Penney Co. eliminated coupons and the nearly 600 sales it used to have annually. It lowered prices in its stores permanently by 40 percent. The company's three-tier price strategy also included monthly sales on select items and clearance sales every other Friday.
"Wal-Mart taught us all in the '80s when you get a steady sales process, what happens? You can manage the business better," Penney’s CEO and former Apple executive Ron Johnson says. "All good happened from a predictable sales pattern."
But Penney, which has 1,000 stores, has learned that it's not so easy to duplicate Wal-Mart's magic. Customers have not embraced the new pricing: Penney recently reported its second consecutive quarter of big losses due to severe sales drops. And its stock has lost over 40 percent of its value since early February.
Now, Penney is changing its pricing -- again -- to add back more sales. Among other changes, the company began eliminating last month its monthlong sales and instead is increasing its clearance sales to every Friday. Johnson acknowledged that Penney made some mistakes, but he's vowing to stick to the everyday pricing plan.
"Withdrawing from our promotional model to a more everyday model has been harder than we anticipated," Johnson told investors in August. "But it doesn't change our conviction that the promotional model had run its course, and we have a far better path forward."
Wendy Ruud, a former Penney's customer, isn't waiting around to see if Penney executives are right. The Boca Raton, Fla. resident hasn't been back to Penney since the new pricing plan was implemented earlier this year. Instead, she's gone to Macy's Inc. and Sears, Roebuck and Co. for clothing.
"When you have a sale, you really feel you are getting a better deal or a bargain," Ruud, 49, said.
Penney isn't the only retailer finding that everyday pricing is a tough sale to shoppers. Even merchants who are returning to their roots of offering permanently low prices are finding it tricky.
Like Wal-Mart, Lowe's, the nation's second largest home improvement chain, built its business around "everyday" low pricing. But then the company strayed away from that and started offering more sales when the housing market tanked in 2006. Shortly after, the company's performance began to lag behind its bigger rival Home Depot, which never veered away from its everyday pricing strategy.
Since last summer, Lowe's flip-flopped. It has been permanently cutting prices on a wide variety of items to better compete with Home Depot. But the strategy hasn't worked. Lowe's posted a 10-percent drop in net income amid a 0.4 percent decline in revenue at stores opened at least a year in the second quarter.
Lowe's Cos. acknowledged that the pricing shift has been a problem. The company says it experienced light traffic over Memorial Day weekend in appliances, flooring, cabinets and countertops because of its reduced discount offerings. So executives say the retailer overcompensated by increasing promotions too much afterward, which hurt profit margins.
Lowe's is still sticking to its everyday price plan, but it's re-evaluating to find the right balance between everyday low prices and temporary promotions.
"We knew it was going to be difficult," CEO Robert Niblock says. "But we may have been overly optimistic."
Not every retailer is finding it hard to convince shoppers that everyday low pricing is better than fleeting sales. Clothing chain Stein Mart has had some bumps, but it's starting to see positive results from its pricing shift.
At the end of last year, Stein Mart started cutting back on coupons, which it had relied on for two years. It's now concentrating on what made the chain successful: offering permanent discounts of up to 60 percent on major brands such as Lucky and Nine West that department stores carry at full price. The company permanently cut prices up to 8 percent on select items, though it declined to offer details.
The 260-store chain, based in Jacksonville, Fla., says it changed its pricing after it found out that coupon purchases accounted for almost a third of sales in recent years, up from just around 5 percent from 2004 through 2006. Its goal is to cut coupon use by 50 percent this year.
Stein Mart says its pricing shift has been successful in part because it has simultaneously focused on boosting its offerings of trendy, brightly-colored merchandise in stores. It says that has helped to offset any backlash from cutting back on coupons.
In the latest quarter, Stein Mart's net income dropped 44 percent, dragged down by expenses related to software-related costs. But revenue at stores opened at least a year rose 1.6 percent. It's a modest increase, but it's significant because it reversed four straight quarters of sales declines.
"Our strategy is working very well for us," the retailer's interim CEO Jay Stein, the grandson of founder Sam Stein, told investors last month. "We're getting back to our old self, a successful specialty-store environment at discount prices."
(Source: The Associated Press, 09/02/12)
||Hospital Patient Satisfaction Influenced More by Staff Than Facilities
In an era in when hospitals compete for patients by boasting the latest clinical technology, the most prestigious physicians and impressive amenities, patient satisfaction is most influenced by human factors, especially superior service-related communication skills between hospital staff and patients, according to a new study by J.D. Power and Associates.
The study measures patient satisfaction across all areas of the inpatient and outpatient hospital experience, including: interactions with healthcare professionals; tests and procedures; admission and discharge; and facility environment.
The report finds that recently-hospitalized patients have high levels of overall satisfaction. Overall patient satisfaction with their inpatient hospitalization averages 825 index points on a 1,000-point scale, similar to that of guests at luxury hotels, among whom satisfaction averages 822.1 In outpatient settings, overall patient satisfaction is higher, averaging 863. However, patient satisfaction dips to 788 for emergency department visits.
"Hospitals may attempt to attract patients and staff by adding equipment or sprucing up their facilities," said Rick Millard, senior director of the healthcare practice at J.D. Power and Associates. "From the perspective of patients, it might be more worthwhile to invest in finding and keeping staff with superior interpersonal skills."
Investments in staff can be overlooked, as Millard notes many hospitals have spent a lot of money in recent years to make their facilities look and feel more like hotels. Yet, facility characteristics are more important for hotels than for hospitals. For upscale hotels, the facility accounts for nearly one-half (48 percent) of guests' overall satisfaction, while in an inpatient setting the hospital facility represents just 19 percent of patients' overall satisfaction.
"Having an appealing hospital facility matters, but an experienced and socially skilled staff has a greater impact on patient satisfaction," said Millard. "Personal interactions with the staff have a profound impact in both inpatient and outpatient settings."
Doctors and nurses account for 34 percent of the overall experience ratings for inpatients, and their influence is even higher (43%) among patients in emergency settings. Among outpatients, doctors and other healthcare professionals represent 50 percent of their overall experience.
Solid interpersonal skills are especially necessary for handling the types of problems that may arise during hospitalization. When problems do occur, they may jeopardize patient satisfaction. According to the study, staff service and staff attitude are the most common types of problems that patients experience. Patients who say they had any problem with their room or hospital staff rate their overall experience a 5.3 a 10-point scale, compared with 8.7 among patients that did experience any problems.
"When problems occur, they produce opportunities to demonstrate a genuine interest in the patient's needs," said Millard. "Resolving problems is clearly associated with higher ratings by patients. This has become more important as hospital reimbursement is now linked to patient satisfaction as measured by the government through the HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) survey."
Millard notes that one area where hospitals can learn from hotels is how transitions occur. The admission and discharge process in hospitals is analogous to check-in and check-out in the hotel industry. Among inpatients, 35 percent of the overall patient experience is predicted by the admission and discharge process; yet the impact is much less in emergency and outpatient settings, where it is 19 percent and 12 percent, respectively.
"The first and last impressions are very important for a patient, much like they are for hotel guests," said Millard. "Getting a patient into a room quickly at the start of their hospital stay, and ensuring a smooth process during discharge, along with a follow-up call once the patient gets home to make sure they're doing okay, goes a long way toward achieving high satisfaction."
The J.D. Power survey is based on responses gathered between December 2011 and March 2012 from more than 10,275 patients who received care in inpatient, emergency or outpatient facilities in the United States.
(Source: J.D. Power and Associates, 09/04/12)
||Mobile Users Lack Loyalty
Mobile phone users are likely to become vocal and active detractors if they have a negative customer experience, according to a global study by the Chief Marketing Officer (CMO) Council.
Carriers should expect more visible complaints -- including defections -- from consumers made about bad experiences, hidden fees and poor service quality, says the Palo Alto, Calif.- based CMO Council.
Only 34 percent of 1,660 mobile subscribers surveyed around the globe in the second quarter of 2012 are loyal to their carriers and have stayed with their current communications service provider for more than five years.
According to the Ricoh-sponsored study, dubbed "What's Critical in the Telecommunications Vertical," 41% of mobile phone subscribers say they will lodge a complaint about a poor experience, 36% will cancel their service, and 29% will tell everyone they know about the incident.
Only 29% of those polled across all age groups characterized themselves as loyalists. In contrast, a total of 41% of respondents said they were either apathetic, on the fence, or just about gone when it comes to the relationship with their mobile service operator.
High service plan costs contributed to 48% of departures, a better deal with more all-inclusive options seduced 26% of defectors, and poor quality of service -- such as dropped calls or bad reception -- eroded another 23% of subscribers.
Consumers are seeking fast, reliable, and predictable access to services and experiences they initiate using their mobile devices, said Liz Miller, vice president of marketing programs for the CMO Council, which represents 6,000 senior marketers controlling some $300 billion in aggregated annual spend.
"While they can't live without their mobile devices, they certainly aren't hesitant to vocalize their dissatisfactions and express their freedom of choice in selecting another service provider," Miller said in a release.
Hidden fees (21%), bad service or network speed (17%), and high data or text costs (17%) topped the list of complaints. A surprising 56% of respondents fail to see equitable value to cost or are unsure of the fees they pay in proportion to the service they receive.
Service providers seem to be leaving money on the table, as 41% of consumers had issues regarding how well they were notified or informed about other products or services. While 36% of consumers say they will cancel their service after a negative experience, 29% believe their carriers simply won't care about their defection.
"Consumers are looking for assurance that their longstanding loyalty will be repaid with service and relevant communications instead of paying high fees to receive enhanced Web services," Miller said.
As part of its joint study with Ricoh, the CMO Council also surveyed 147 marketers at communications service providers (CSPs) worldwide.
Most appear to be focused on better segmenting, targeting, communicating, and delivering service to their customers. There is a keen awareness among those surveyed for the report that their subscribers want lower-fee plans with higher-touch, personalized service, yet a majority of marketers in these organizations still feel that technology innovation and advancement will satisfy subscribers and grow loyalty.
Ironically, only 13% of consumers described themselves as technology fiends, eagerly awaiting new innovations to secure their loyalty.
(Source: Marketing Daily, 8/30/12)
Daily Sales Tip: The No. 1 Factor in Customer Loyalty -- You!
It is devastating when you lose a long-term customer to a competitor. It's even worse when you have been there for them, consistently providing top-notch service for years. You feel betrayed by their lack of loyalty.
Plus, you're ticked off at your company. You did everything possible, but they didn't give you a good enough price to compete effectively. Or, your offering just wasn't quite as good as your competitors.
Here's the deal. You may be seriously deluding yourself about the reasons you lost the business. Recently the Corporate Executive Board did an in-depth analysis of customer loyalty drivers. Here are the primary factors they uncovered and the percentage of their contribution to loyalty.
19% -– Company/brand impact
19% -– Product and service delivery
9% -– Value-to-price ratio
53% -– Sales experience
Stunning, isn't it? You are the biggest factor of all. Your personal impact during the sales experience is greater than all the other factors combined.
Clients stay with your firm because of what it's like to work with you. But it's much more than just having a "great relationship" with them or taking care of all their problems.
Your customers want you to be an invaluable resource to them all the time. Specifically, that means they want you to:
* Bring them ideas, insights, and information to help them achieve their business objectives.
* Guide them about how to make a good decision, as well as who needs to be involved and the next steps.
* Keep them up to date about any changes that could impact them -- positively or negatively.
* Challenge their thinking and provide them with fresh perspectives.
Are you doing that with your best clients? If you're focused on just your relationship, it's simply not enough. You may be at serious risk of losing them if a competitor comes in and provides the value they're looking for.
Don't let it happen to you.
Source: Sales consultant/author Jill Konrath