Starbucks and Wal-Mart both decided to shake up their consumer engagement strategies. One led to success, and one did not.
Starbucks knows the high-end coffee consumer and has focused on developing a clear brand that its target audience embraces. By understanding their brand, Starbucks has successfully raised prices and continued to thrive.
Wal-Mart took on a different strategy, and seems to be failing. They knew the voice of the customer and the strategy that worked, but decided to take a gamble. Leaving behind the neighborly appeal, they forged ahead with an expansion, adding grocery and pharmaceutical elements to the chain. Their target audience didn't like it, and this approach cost them.
Brand understanding leads to success
Why does Starbucks' customer engagement strategy work? It's simple: Consumers understand the perceived value of the product. The company does not waiver from its core perception. No matter where or how they buy it, consumers know what they'll get from the Starbucks brand -- no matter how much they have to pay for it.
On its consumer engagement strategy, Starbucks CEO Howard Schultz noted, "The success of Starbucks demonstrates the fact we have built an emotional connection with our customers. I think we have a competitive advantage over classic brands in that every day we get to touch and interact with our customers directly."
Schultz went on to discuss the value of the Starbucks brand, "Tell your story, refusing to let others define you. Use authentic experiences to inspire. Stick to your values, they are your foundation."
Where other companies look for ways to reduce prices to lure customers, Starbucks has opened even-higher-priced luxury stores, where customers can get a more rarefied, and expensive, offering of coffees.
Caffeinated consumers have helped the company to achieve record revenues with double-digit percentage gains over the previous year.
Ignoring customer alignment is a gamble
Wal-Mart has always been the "blue light" special company. And, when it stuck to what it is good at, they prospered. Consumers understood the home-spun, low-priced brand and could depend on a selection of bargains when they walked through the door.
But then the "greeters" went away along with the "down home" friendly feel and groceries and pharmacies showed up. And now, the company's strategy is one of transition. It is taking on not only competition in its own retail industry, but also many other industries. In the immediate transition process, this new customer engagement strategy is proving to be an uphill undertaking.
Though Wal-Mart is blaming lower margins in its pharmacy business for a part of its recent troubles, the company has no plans to make change.
When asked about the company's recent decline, CEO Doug McMillon noted that the company is working toward the future. "What we're talking about is how we transform the company. ... We have got to get the company positioned to serve the customer in the long term."
- Consumers have many choices, so they need to believe that your brand understands them and is there to meet their needs.
- If perception of your brand is blurred, targeted messaging is not possible because there is no differentiating value proposition.
- Consumers want their voices heard, and they will pay more for a buying experience they perceive to be specifically built around their "wants."
Generally, you get one chance to make a first impression with consumers. And then subsequent marketing efforts reinforce that perception and cultivate value based on it. Knowing what consumers want from your brand and ensuring that you consistently meet or exceed those expectations pays off handsomely in customer retention and healthy profit margins.
For more check out ERDM Voice of the Customer research.
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