Adapt to survive--three key elements

One of the greatest casualties of the recession has been customer loyalty. That’s not to say that loyalty no longer matters. It does, but in this climate, differentiating loyal customers from disloyal customers is a false categorisation. With so much competition for their attention and wallet, shoppers are only as loyal as the last experience enjoyed (or not) with you. Therefore you need to fight harder and more persistently to ensure that customers are loyal to you.

Retailers should approach every customer engagement as a first date. In a market where customers have less money to spend, loyalty comes from the complete offer, not just from the brand.

So how can you make your business more robust and better able to thrive in a world where loyalty is only skin-deep? The answer lies in crafting an offer that combines great products, attractively priced, with an alluring environment to create a memorable customer experience.

The changes needed to adapt to the new order and compete in today’s market may seem daunting. You can address them more easily, however, by asking three key questions:
1) Where do we really stand in the market in terms of the segments in which we operate and compete?
2) To what extent do we represent an experience that will encourage customer visits and spend?
3) How agile are we when it comes to shaping our offer to the emerging retail environment?

The market
A pragmatic, robust assessment of your strategic position to realistically show your strengths and weaknesses in relation to market segments and competition is the starting point. This is not a new concept but one that has been proven and adapted by successful business for many years. Strategic position looks at market attractiveness (is there opportunity for profitable growth in this market? how big is the market?) and your competitive position (how well do we compete in terms of our offer and operational effectiveness?).

Top tips:
1) Be brutally honest about the market you are in and your ability to compete. Don’t just rely on gut instincts and perception. Analyse the facts to prove or disprove where you think you are.
2) Don’t be afraid of change. If the market cannot deliver growth and profit, don’t fudge the issue. Face up to it and look at all of your options.
3) Don’t assume that you understand your competition. Shop with your competitors and compare what they do to your own business.
4) Don’t assume that your entire management team has the same view on life. Bring your management team together to go through this process and involve your employees and suppliers.

The customer experience
What is it about your offer that attracts customers and leads them to spend? Define the type of experience you want your customers to have. Look to examples of retailers that offer very distinctive customer experiences, such as bargain (TK Maxx), entertainment (Build-a-Bear Workshop, Hamleys), expertise (Apple, ELC), hedonism (Godiva Chocolatier, Agent Provocateur), and design (Prada). Each can be equally memorable.

Top tips:
1) Think about business models that you can aspire to: not necessarily your competitors, just retailers that have done something that resonates with you. Visit their stores and websites, thinking about the experience you are having and why. What is it about such concepts that evoke a response, and what learnings can you apply to your business?
2) Experience your business through the eyes of a customer – not just through formal market research. Use staff to visit stores they don’t work in, get friends and family to give honest feedback, get comments from social-networking sites.
3) Run brainstorm workshops with managers and employees to define your desired customer experience. Their firsthand experience, whilst not a substitute for your vision, brings a practical perspective. Translate that experience into a customer service programme and the culture, skills, and behaviours you need to have within the business

An agile business
This is about ensuring that processes are efficient, costs are minimised, and hard measures are in place to keep the business on track. Assessment of the market and customer experience will identify the critical processes and highlight priority areas for improvement within the internal operations of the business.

Top tips:
1) Carry out a high-level key performance indicator (KPI) analysis to identify areas of the value chain that are not performing to requirements.
2) Drill down to those areas to understand what needs to be improved. Talk to people, and test those perceptions against reality by looking at performance data.
3) Summarise the key issues that are causing the majority of your pain, and carry out a root-cause analysis on them. Keep asking until you get to the bottom of the problem.
4) Look at how different functions work together. Are they collaborating? Do they share goals?
5) Structure a simple, hard-hitting, and focused programme of activities for improvement. Be sure that the programme has dedicated resources with clear terms of reference and can deliver improvements quickly. Immediate benefits should certainly be achievable within three or four months.

These three elements constitute the key facets of a business, and must be in balance. Each is needed and is only part of the picture.

More than ever before, retailers need to get the fundamentals right, and the rest will flow from that. Call it business basics, reality, or the roots of retailing. This recession and whatever economic climate succeeds it may just reconnect us with what it takes to make and grow a successful retail business.

Nik Davis is director of consultancy services at solutions provider Retail Assist.  

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• How to prosper in uncertain times