By Anne Mahoney
Walmart’s pricing strategy of everyday low, low, sometimes unbelievably low prices has earned it high points in customer loyalty, according to a new survey. But does this loyalty translate into true affection, or will the retailer lose its golden product retrievers to a new master once pricing is no longer the dominant differentiator?
The very public price war between Walmart and Amazon.com at the end of 2009 was a prime demonstration of the heavyweight’s affect on other retailers. It also demonstrated the tenacity of the “little guys” to match pricing that would barely achieve above-margin revenue. Target entered the ring after Amazon, each squaring off against Walmart by dramatically dropping prices.
What’s the potentially larger problem for all retailers involved? Setting a standard for customer expectations. Walmart’s customers may not be actually loyal to Walmart, the brand. They are loyal to the prices on Walmart’s tags. And now with online shopping price comparison sites and savvier retailer incentive programs, Walmart may need to be more than just the cheapest lemonade stand on the block.
Several strategies for retailers preparing to exit the recession era and compete outside of pricing were offered by DIRECT Magazine. It recommend competing on the best landscape suited to the brand, targeted promotions, strategic use of information and selective pricing.
To add to those recommendations are a few more, compliments of the Medill IMC classroom:
- Personalized Communications & Incentives: The success of grocery retailer Tesco by marketing agent dunnhumby is a much-discussed case at Medill. Retailers who know how to leverage customer data and provide personal attention in the form of promotional offers have the upper hand in achieving real loyalty.
- Experiential Shopping: Quick – what do you think of when you read “Target”? How about “Best Buy”? Now think “Walmart.” It is likely you thought of specific experiences, imagery, products or customer service for the first two. Did you think about cheap prices for Walmart? That’s where brand equity comes in.
- Exclusivity: The economic situation has turned retail into a flea market. Everyone is shopping around for the best price. If retailers can’t compete on price, they can compete with superior product selection and avoidance of substitutability.
Anne Mahoney is Social Media Director at Vitamin IMC and a student in the Masters in Integrated Marketing Communications program at Northwestern University's Medill School. She is smitten by Target’s advertising, to give full disclosure to this article. She can be reached at annemahoney2010@u.northwestern.edu.
