The article “No Comfort In Comfort Foods During Tough Economic Times” describes consumer behavior during times of crisis and difficult financial situation. The author underlines that the long-term value strategy is built on creating strong relationships with customers and anticipating their requirements. A significant new challenge is emerging with regard to value. Companies must now strategize with respect to both the physical product and the “virtual” product, such as information. Overlaps in physical and virtual product occur in many industries, particularly those where a tangible product, such as an automobile, and an intangible product, such as service advice or computer-based information support, coexists. For many individuals and households, demands on time because of longer work days and work weeks, the necessity of having multi-income earners, and the complexibility and choices offered to families in general have increased the value of speed. Speed is what drives services as varied as photo processing, car rental check-in, package and mail delivery, pizza delivery, and eyeglasses. Cars, computers, radar detectors, mortgage loans–the list of products and services is lengthy–have all had product development or delivery times slashed. Increasingly, speed is becoming a value differentiator in business-to-business and other consumer services.
Whether it is restaurants, brands of toilet tissue, training seminars, office products, insurance policies, computers, or automobiles, choice is available for virtually every product and service. “When people are in a state of upheaval, they’re more likely to choose an unfamiliar food such as “camembert-and-plum crisps” from Britain rather than good old Lay’s potato chips” (“No Comfort In Comfort Foods During Tough Economic Times” 2009). With deregulation, choice is also a current or near-term reality in telecommunications, home entertainment, and utilities. Choice represents tremendous strategic opportunity, but also tremendous challenge, because, while companies are offering value to their customers, so are competitors. Rather than one-up competitors with options (which customers may not want), one approach some companies have taken is, as previously discussed, “mass customization,” where they can deliver products or services precisely to customers’ specifications. Motorola does this with pagers, Levi Strauss with blue jeans, Andersen with Windows, and Datavision with video tapes. Being ahead of the curve on strategic choice issues also means in-depth and continuing awareness of customer needs, problems, expectations, and complaints. Tucker cites the example of all-suites hotels, a choice opportunity that has had rather limited success because relatively few travelers needed the extra room (or thought it was worth the cost) and because amenities such as full restaurants or round-the-clock room service wasn’t always available from these hotels. Anticipating a choice consolidation trend among financial customers for combining their insurance, banking, and brokerage services, Merrill Lynch offered a choice that few other institutions could replicate (Quester et al 2007).
The article shows that customer trends, like choice issues of food, require constant attention from companies. It means genuine closeness to customers. Home Depot has, until recently, led the resurgence of home improvement and redecorating and must be vigilant about customer needs and wants. Phil Knight of Nike has led the lifestyle trend for fitness and health consciousness. Lifestyle is particularly related to consumer products and services, although, like the domino effect, it can impact business-to-business as well (Saxen et al 2002). Companies are advised to set up “Future Scan Systems,” methods of seeing themselves, their customers, and their environment in fresh perspectives and in ways that will alert them to both threats and opportunities (Valadkhani, 2006). Similar research found that “the estimated temporary “goods and services tax” effect ranged from a minimum of 1.3 per cent (food) to a maximum of 8 per cent (clothing and footwear). In seven out of 11 groups (i.e. food; alcohol and tobacco; clothing and footwear; housing; household furnishings, supplies and services; communication and recreation), the one-off goods and services tax effect was significant” (Valadkhani, 2006, p. 104).
Much more than reducing prices, discounting changes the customer’s complete perception of value. Food retail companies which puts customers directly in contact with producers for electronic and other goods, at a price substantially below retailers and catalog operators, has altered the price equation. Shopper’s Advantage operates more like a dating service than a marketer. They keep no inventory and pass this savings to customers. The office products industry, which saw little or no discounting through the mid1980s, is now dominated by stores such as Staples, Office Max, and Office Depot and direct marketers like Quill, Reliable, and Viking. A lifestyle trend that feeds into discounting is the do-it-yourself customer. The home improvement market, now with close to $100 billion in annual sales, is populated with customers who either do their own work or have contractors do it, but bypass traditional retailer mark-up on such materials. Furniture discounter IKEA has benefitted from this trend, offering discounted prices in exchange for customer self-delivery and self-construction. “That’s when people might be drawn naturally to different choices – not when things are status quo, but when things are already in a state of flux,” says Wood, an expert in how consumers respond to change” (“No Comfort In Comfort Foods During Tough Economic Times” 2009). These are the extra, equity-building services or product enhancements that help distinguish one company from the other. For manufacturers, these could be customizing, faster turn-around, electronic ordering and order status updates, warehousing, and shipping services. For retailers, they could be product demos or free samples, information or help desks, or future visit discount coupons. For services, they could be toll-free numbers, extended service hours, follow-up appreciation calls or visits, or free phone consultation. Here again, adding value is largely a matter of determining, or anticipating, what customers consider of worth. Companies need to generate information from internal customers, current and former external customers, prospective/competitor’s customers, and also scout the competition (Quester et al 2007). “During the problem searching phase, goals are broken down into a sub-goal network; searching then proceeds by traversing the network and testing hypotheses at each node. At each sub-goal node data are read into short-term memory, evaluated and then stored back into long-term memory as searching progresses to the next sub-goal” (Saxen et al 2002, p. 403).
The example of food stores and comfort food suggests that companies can use customer service to add value, overcome negative price differential, and negate a competitor’s size advantage. It also impacts relationships and lasting impressions, greatly influencing whether companies keep, or lose, customers (Valadkhani, 2006). Proactive, equity-building customer service is one of the keys to differentiating Nordstrom’s from other department stores, L.L. Bean from other clothing and outdoor products catalog operations, MBNA from other credit card issuers, British Airways from other airlines, Home Depot from other home products retailers, and Dell from other computer makers. Customer service is a strategy, but it is also one of those areas of performance that impact other elements of the Seven-S Framework, which should also be in place. Senior management sets the example, staff are cross-functional, team actions are practiced and rewarded, and there is ongoing measurement of loyalty effect for improvement (Kozup et al 2008).
Companies typically have five scarce resources: people, facilities, time, money, and technology. Technology is a driving strategic force. If the salesperson from one company has a hand-held computer to check his customer’s inventory and can immediately fax or modern an order for replenishment-and a competitor can’t–who has the advantage? Technology impacts speed, customization, service, quality, design, and availability and use of information. Quality is defined by customers according to how well a product or service performs relative to their requirements. Because customer requirements change over time, so do perceptions of quality. Deployment may require more training, reducing product defect rates, increasing performance longevity, better designs, and the like. As with several of the other value drivers, quality requires careful attention to customer needs; however, it also requires that customers be included or consulted early on when products or services are being created (Quester et al 2007).
In sum, the economic and cultural benefits of keying on customer loyalty and value cannot, ultimately, be achieved unless shared values and overarching goals are the hub of the company’s wheel of enterprise. Shared values, they are the significant meanings that an organization communicates and imbues in its members. Companies seeking to focus on customers can no longer afford traditional hierarchies and bureaucracies. Fiefdoms and decision-making control or information hoarding inhibit communication and cross-functionalism and create barriers to listening and cooperating, taking energy away from attention to customers. There also may be bias by the sender or receiver, information omission or distortion, overload or lack of clarity or immediacy.
References
- Quester, P. G., Neal, C. M., Pettigrew, S., Grimmer, M., David, T. and Hawkins, D. (2007). Consumer behaviour: Implications for marketing strategy (5th Edition). Sydney: McGraw-Hill Irwin.
- No Comfort In Comfort Foods During Tough Economic Times, Study Finds (2009). GEN.
- Kozup, J., Howlett, E. Pagano, M. (2008). The Effects of Summary Information on Consumer Perceptions of Mutual Fund Characteristics. Journal of Consumer Affairs, 42 (1), 37.
- Saxen, A. et al. (2002). Understanding Consumer Navigation Behaviour. Journal of Educational Multimedia and Hypermedia, 11 (1), 403.
- Valadkhani, A. (2006). Goods and Services Tax Effects on Goods and Services Included in the Consumer Price Index Basket. Economic Record, 81 (253-1), 104.