At the height of the recession an acquaintance and his wife were shopping for a new car. Central Indiana auto dealerships could not have been more accommodating. A salesman for one dealership drove a new car to the wife’s workplace for her to take it out for a test drive. Another dealership let the couple keep two different models overnight (on separate nights) to see how the cars would fit into their lifestyles.
Great customer service or the sign of an ailing auto industry’s desperate need to sell cars when the economy is poor and dealerships are closing? Probably both. But here’s the kicker: When the economy turns around and car sales improve, that couple will continue to expect that same level of enhanced attention and service from those dealerships. Once you’ve let that genie out of the bottle, you can’t force it back in.
The recession may have permanently changed some buying attitudes and behaviors. How can retailers satisfy consumers’ expectations in a post-recession environment and still make money?
First, let’s look at how consumers have responded to the downturn:
1) They limited their spending. Less eating out, less impulse buying, less recreational shopping. The era of “aspirational shopping,” with consumers buying high-end or luxury products as a way of emulating the lifestyles of the rich and famous, may be over for good. When times are tough and people are losing their jobs, luxury automobiles, $800 Bugaboo strollers and $700 Manolo Blahnik shoes seem embarrassingly excessive.
2) They sought deals. This includes clipping coupons, buying private labels (“store brands”), reading ads and circulars, pre-shopping on line to find the best price. Private labels are selling like crazy. Safeway’s private label has proven so popular that it will be sold in other grocery chains internationally.
3) They traded down. The Bloomingdale’s shopper (high-end) has traded down to Macy’s. The Macy’s shopper has traded down to J.C. Penney’s, the J.C. Penney’s shopper down to Wal-Mart. Even Wal-Mart has been affected, with its shoppers trading down to the dollar stores. Wal-Mart has responded by devoting a section of its stores to “a dollar spot,” in an effort to win those customers back.
Sure, we’d all like this scenario when the recession ends: customers rushing back into businesses with wads of money in hand and the song “Happy Days Are Here Again” on their lips. In reality, businesses will likely need to work harder to keep customers happy:
1) Be ready to welcome your core customers back. When the recession hit your core customers in the wallet, there was an immediate effect in your wallet. They stopped buying from you. You must be prepared to bring those people back through special promotions, events, merchandizing or finance terms. It’s like wooing your spouse after a fight; you have to work a little to get the relationship back on track.
2) Improve your customer service. Since reducing labor costs is the fastest way to improve the bottom line, many retailers cut customer service representatives during this recession. But signs indicate consumers are more willing to put up with less inventory and choice if they can benefit from the expertise of a knowledgeable salesperson. When we are parting with our hard-earned dollars, we need a sense of comfort and reassurance that we’re buying the right thing. We need the help of a good salesperson.
3) Recognize that you must offer something unique — you can’t win on price. Sure, you’ve had to be more promotional and slice prices during this downturn, but for long-term survival and prosperity you must offer a differentiated product or service. The recession has weeded out the “me toos.” Did we really need Circuit City and Best Buy when there was no discernible difference in products or approach? To lure customers, offer something unique that represents value and meets their needs.
4) Be prepared to meet elevated consumer expectations. As the car shopping story illustrates, that extra effort in service and pricing you made during the recession to attract and keep your customers is now the standard in their minds.
Keep working hard for customers in a post-recession retailing environment, and happy days may indeed be here again for your business.
Kathryn King, marketing lecture for Butler University’s College of Business, contributed to this article.
Chuck Williams is dean of the College of Business at Butler University. For more information on the College and its “real life, real business” approach to business education, visit www.butler.edu/cob or e-mail Chuck at firstname.lastname@example.org.
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