Archive for the ‘Innovation’ Tag

The only important thing is…..

“The only important thing is that we make the children happy”.  It’s one of the most memorable lines from the 1947 classic, “Miracle on 34th Street”.  Replace “children” with “customers”, it is also an idea that has unfortunately faded from the fabric of American retail.  In the film, the Macy’s Store Santa makes that important point to an incredulous mom after telling her that she could get the fire engine her son wanted at a competitor.  Mom couldn’t believe that Macy’s would send customers to another store.

Fast forward to today and imagine Macy’s or just about any other retailer helping a customer find the thing they are looking for by pointing to a competitor.  It might occasionally happen, but it’s certainly not Standard Operating Procedure.  To do so would reflect badly on the store’s merchants and send business to the enemy, right?  The retail would much rather send a customer away unhappy than send them to a competitor.  But perhaps the retailer’s perspective is different from the customer’s?  Perhaps in the customer’s eyes, helping them find what they were looking for, at a competitor no less,  was an unexpected “surprise and delight“.  Might that not earn a few loyalty points?

A few years ago, a major consumer electronics retailer was testing various innovation ideas in the Boston area.  One of those ideas was to place a “concierge” near the store entrance with the objective of improving close rate.  The job had two roles:

  1. Greet people coming in and direct them to destinations in the store.  This wasn’t just directing customer to “go to Aisle 5”.  The concierge was trained to engage the customer to learn why they had come to the store.  If  “assisted selling” was involved (e.g. HDTVs, digital services), they would escort the customer to that part of the store and introduce them to a salesperson.
  2. Engage people on the way out.  If they had made a purchase, thank them.  If not, ask to assist in locating the item.  The concierge desk had a couple of internet terminals and the concierge would help the customer find the product they wanted on the retailer’s website.  They were also instructed to help the customer search for other retailers who might carry the product if they didn’t carry it!

The concierge idea was only tested for couple of months and in that time, the close rate improved, but not enough to offset the cost of the position.  With that being the company’s determining success metric, the idea wass killed.  The test also included a survey of customers to get their feedback on the experience and the results were impressive.  Roughly 85% of the 1200 customers surveyed felt that the concierge improved their shopping experience and, more importantly, The same percentage said they were likely to recommend the retailer to friends based on their interaction with the concierge.

While the test did not generate the targeted close rate numbers during the 60 days it was operational, customers really liked it.  If the company had run the test for 6 months or a year, would the close rate improved?  Who knows, but I’d argue that the improved customer experience in those stores would have resulted in higher traffic over time and that’s every bit as important as close rate.

So why are retailers so focused on the transaction and not the experience?  Because it’s the fastest thing they can measure.  Unfortunately, a change in the experience may not lead to improved business in a 60 day time frame and most retailers don’t have the patience or the confidence to invest in an improved experience for the long haul.   Paradoxically, failure to make customer experience improvements may prove to be the downfall of a many retailers in the next few years.

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Winning Against the Big Guys: Ukrops

Ukrop’s is a 28 store, family-owned grocery chain based in Richmond, VA.  All of their stores are located in central Virginia, mostly in Richmond, so you’ve probably not ever heard of them.  That’s too bad because Ukrop’s is a very unique retailer.  Over the last four decades, Ukrop’s has steadily grown to dominate the central VA grocery marketplace, competing easily against much larger regional and national chains.  Instead of taking the “lowest price” approach, Ukrop’s has always focused on delivering a great customer experience.  Ever since Joe Ukrop opened the first store in 1937, the operating philosophy has always been “treat customers, associates and suppliers as they personally want to be treated.” That attention to the customer experience coupled with a history of innovation and community engagement has built incredibly strong brand loyalty.  In this post, I’m going to share some of things Ukrop’s has done to build their brand.

Customer Focus Differentiators

Ukrop’s does things for their customers that I’ve never seen at any other grocery chain.  They’re little things, but as I’ve said before, it’s the little things that differentiate you from your competition.  Things like:

  • Ukrop’s employees carry your groceries out to your car and load them for you.  By the way, don’t bother tipping them.  They won’t accept it.
  • If you get to the checkout counter and realize you have forgotten your wallet, don’t worry.  In most cases, Ukrop’s says to take the groceries and pay them next time you come in.
  • Ukrop’s provides in-store “Tot Spots” in their larger stores.  Parents can leave their child at the “Tot Spot” while they shop.
  • Ukrop’s listens and responds to individual customers.  Each store has a Customer Requests board prominently displayed at the front of each store.  Have feedback or want the store to carry a new product?  Simply write down your request and put it up on the board using a refrigerator magnet.  Each note is read and replied to within a week.  The next time you come into the store, check the board for your note and the reply.  I once asked for a specific flavor of ice cream.  The product was in the freezer the very next week.

Marketplace Innovator

Ukrop’s has a history of grocery industry innovations that have allowed them to differentiate their brand.

  • Like most Americans, you probably carry around some kind of supermarket discount card, but I bet you didn’t know that the very first supermarket card program in the US was launched in 1985 at Ukrop’s as part of a Citicorp Point-of-Sale initiative.  Ukrop’s saw huge potential in being able to identify their customers by name and understanding purchase behavior of it’s best customers.
  • Research conducted during the mid-1980s revealed that changing consumer demographics and lifestyles indicated a growing demand for convenient, restaurant-quality food. Demonstrating their “sense and respond” competency, Ukrop’s decided to tap into the demand and further differentiate themselves from competitors. The result was one of the grocery industry’s most lauded success stories of the late 20th century.  Ukrop’s already had experience with a central bakery, having purchased a well known local bakery to supply bakery items to to their stores.  The bakery gave them some experience with manufacturing and logistics.  Leveraging that experience, Ukrop’s decided to create a 10,000 sq-ft “central kitchen” to package chilled prepared food, which consumers could then re-heat.  On Halloween 1989, the company’s prepared foods line debuted, featuring ten items that included twice-baked potatoes, lasagna, and macaroni and cheese. By 1994, the roster of prepared foods had swelled to a rotating list of 125 items. Ukrop’s foray into prepared foods became the talk of the industry, accounting for nearly 15 percent of the chain’s total sales and adding further incentive to shop at Ukrop’s.
  • Don’t feel like cooking? Ukrop’s added an in-store grill to their larger stores in the late 1990’s.  The grill serves everything from sandwiches to stir fried Asian dishes to steaks.  Of course, the ingredients for all the menu items are available in the store.
  • Ukrops’ latest innovation is a partnership with a local gas station operator called Fuelperks.  Capitalizing on the concern over rapidly rising gasoline prices, the program rewards Valued Customer Cardholders with a 10 cent per gallon discount (up to 20 gallons) for every $50 spent.

The Other Bottom Line

Ukrop’s is perhaps best known for their community involvement.  Each year they commit to giving at least 10% of their pretax profits back to the communities they serve. They sponsor many local events including the Monument Avenue 10K and the upcoming Richmond Folk Festival, but perhaps their biggest community program is the Golden Gift.  Started in 1987, the program allows customers to designate a local non-profit organization.  It might me a charity or perhaps your kid’s school. Each year, Ukrop’s allocates an amount to the Golden Gift fund.  This year it was $400,000.  During February and March, Ukrop’s awards each customer with a Golden Gift point for each dollar spent.  At the end of March, the fund is allocated to the customer’s designee based on points accumulated.  The customer then receives a certificate that they can give to their non-profit which can bee redeemed for cash.  Since inception, the program has given back $11.6 million!

These are just a few of the many things that have helps build the Ukrop’s brand.  By putting customers and community first and through innovative ideas that have redefined the grocery store, they have been able to stand the test of time.

Do you own or work for a local or regional retailer?  Having a hard time competing against the big guys?  Perhaps you can take some lessons from Ukrop’s.

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