JTTP: Consumer-Centric Strategies Imperative for Retailers and Suppliers
Through a special arrangement, presented here for discussion is an excerpt of a current article from The Journal of Trading Partner Practices (JTPP), the official online publication of the Vendor Compliance Federation (VCF), the Trade Promotion Management Associates (TPMA), and the Federation of Credit and Financial Professionals (FCFP).
Between rising unemployment rates and diving home values, consumers' discretionary spending is evolving as much more selective, more informed, and more scarce, creating significant competitive challenges for retailers and suppliers alike. The ability of retailers to attract and maintain a loyal customer following requires customer-centric strategies in collaboration with suppliers.
Speaking at the recent Trade Promotion Management Associates' (TPMA) Workshop, in the three-dimensional, virtual world of Second Life (www.secondlife.com), Jim Nadler, vp of marketing and business development at afterBOT, said that customer centricity has many components, and is best described as a strategy where "every decision that a retailer makes is done with the customer in mind, even if it means it is at the expense of short term profit initiatives. If we do the right thing for the consumer, it will be the right thing for the retailer, and in the end, it will be the right thing for the supplier community."
Becoming a customer-centric retailer requires extensive collaboration with suppliers, making effective use of technology an imperative. While many retailers have focused on predictive models, today's economy truly has no predecessor, so the very basis of the models must be questioned. According to Mr. Nadler, "While predictive modeling makes us better, we have to implement real-time solutions so we can react quicker to what's happening at the store level." Predictive modeling alone cannot stop out-of-stocks, so trading partners must be able to capture and share real-time data to gauge consumer behavior and adjust marketing, sourcing and supply chain decisions to ensure the right products are on the store shelves when needed.
Customer-centric retailers must re-evaluate traditional strategies designed to boost sales, but may be viewed as a turn-off to shoppers. Mr. Nadler asked, "Should you put candy at the check-out? In the short term, that may seem like a good way to gain a few extra nickels. But, if having candy near the check-out counter irritates moms with children, it's not a customer-centric initiative."
He provided additional strategies that appeal to shoppers in subtle ways. In a customer-centric supermarket, perishable items are at the rear of the store rather than at the front. This prevents scenarios where shoppers pick up their eggs first and place them at the bottom of the cart and then crush them later when heavier items, such as canned goods, are added. Retailers should also look to tap into the sustainability movement by offering and marketing environmentally-friendly items. Shoppers will pay more for these items if it makes them feel good about themselves, which boosts retailer margins.
Discussion Questions: What common practices will retailers have to change in order to become truly customer-centric? What's required from vendors? Can you think of any other typical situations in which short-term sales gains are ultimately negative for long-term customer centricity?