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dunnhumby: Menards is Most Customer Centric DIY Chain

October 1, 2013

What is customer centricity?

"We define customer centricity as knowing your customers' expectations and meeting them. This means knowing customers and treating them the way they want to be treated across all touch points that influence the customer experience," Emilie Kroner, head of consumer markets organization engagement for dunnhumbyUSA, told RetailWire. "The most customer-centric retailers put the customer first in every decision that they make or strategy that they create."

Ms. Kroner said dunnhumby has identified seven pillars of customer centricity:

1. Product assortment
2. Price
3. Experience
4. Feedback
5. Promotions
6. Loyalty
7. Communications

In its second Customer Centricity Index (CCI) report, dunnhumby measured home improvement (DIY) retailers and chains selling housewares.

Using its seven pillars assessment, dunnhumby reported that Menards graded higher than larger rivals Home Depot and Lowe's as well as True Value and Ace Hardware among DIY chains for customer centricity.

"Menards' success with customers lies with its strong pricing strategy, as well as promotions that customers saw as meeting their needs," Ms. Kroner told RetailWire.

"Menards' rebate program has really resonated with their current customer base, which helped drive their strong CCI scores. With the rebate program, customers who shop are able to get deeply discounted, or even free, products," Ms. Kroner added. "With customers feeling that the pricing strategy, including rebates, is 'great on everyday items' and offers 'strong prices that cover many of the products that I buy,' the price-to-quality perception is higher than what the competition is offering."

The current housing market not withstanding, Ms. Kroner said price sensitivity is a major issue in the home improvement market. Menards has effectively capitalized on the pricing issue, but will need to focus on "which products are most important to their most loyal customers — and use customer behavioral data to focus their pricing strategy, including rebates and promotions, on those items" going ahead to maintain its customer centric edge.

According to dunnhumby's findings, retailers with higher CCI scores led competitors in comparable sales growth over a three-year period. Retailer scores were determined by a weighted average of results across dunnhumby's seven pillars and consumers' likelihood to recommend a chain.

FINANCIALS:     [NYSE:LOW] [ NYSE:HD] [ ]

Discussion Questions:

How do you define customer centricity? Which of the DIY retailers do you think is most customer centric? Why?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Which of the DIY retailers do you think is most customer centric?

Comments:

First, I would disagree with dunnhumby's characterization of meeting expectations. That's the minimum outcome a consumer is looking for. While often that minimum isn't met by merchants, meeting expectations does not do much (if anything) to delight, inspire, and build true loyalty. Exceeding expectations is the real goal retailers must target.

Going back to our everlasting examples: Apple, Nordstrom, and Trader Joe's, these brands have a reputation for exceeding shoppers expectations, which is what truly makes them standouts.

So while I have no qualms with dunnhumby's seven pillars assessment, I would encourage retailers to look far beyond customer centricity and aim for customer amazement.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

I tend to define it in softer metrics like respect, courtesy, communication and patience. One can have the best product assortment in the world, for example, but if the customer doesn't feel comfortable asking for help, it doesn't matter.

I've seen plenty of employees at most of the DYI chains talk to customers as though they were either (a) idiots or (b) contractors.

Highly technical explanation, for example, are great - but only if you understand what is being said.

The customer is the critical element of a customer-centric strategy and that has precious little to do with product assortment, price and/or promotions.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

It is refreshing to see someone like dunnhumby systematically measuring consumer centricity. What can be measured can be managed and changed.

While the 7 pillars are a starting point, I agree with Ken Lonyai's comment about the consumer experience. It is not enough to just meet expectations on assortment, availability and price. True consumer satisfaction and loyalty comes from experience that exceeds expectations ... service beyond the purchase of the product.

What seems to be missing in the 7 pillars is the rising importance of the omni-channel experience. Even in DIY, the experience begins online. How will DIY integrate online selection with personalization in store?

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Chris Petersen, PhD, President, Integrated Marketing Solutions

Forgive me, but there is just something incredibly hollow about a claim to "customer centricity." Look over the "7 Pillars" and what you see is marketing strategy...it's about doing what you think will bring in more business. Mind you, whether that is profitable business or not is another matter. Of course customers like a rebate program and a good sale. But does that make something "customer centric?" Your kids want a bigger allowance without having to earn it, would giving it make you "child centric?" Customers like a variety of products to choose from - is that a breakthrough in "customer centricity" too? Are you kidding me? For goodness sakes what was your other option, one size and one color?

We can't even find the dock never mind missing the boat on this issue.

There is virtue in selfishness as Ayn Rand proposed. And ancient teachings tell us to love our customers as we love ourselves. And therein lies the issue. In far too many retail situations there is no love within. If there is no love within, you can give your stuff away free and you still wouldn't be customer centric.

I'm sure there are lots of examples but one is Trader Joe's. I think the people in our local one love being there and love what they do. I'll bet they do at Tony O's store too and going there one day is on my bucket list. That is what endears customers to you. It's all about the love.

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Ian Percy, President, The Ian Percy Corporation

I disagree with 7 pillars. In a customer-centric organization there is only one pillar - the consumer. All decisions are made with the consumer in mind; the company is organized around the activities that provide value to the consumer. If the consumer does not like the shopping experience with your company, the consumer will not even come in to know what the assortment is.

Here are some important questions to ask: do we make it easy for consumers to gather information about our products and prices? Do we have the products or services our valuable consumers want? Do we make shopping and purchasing our products easy for the consumer on whatever channel they prefer? Do we make sure the consumers are delighted when using the products or services they purchase? Do we maintain a relationship with our most valuable consumers? If you do these things and constantly upgrade them according to what consumers want, then you are consumer-centric.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

I don't agree with the ranking of the 7 pillars, with price and promotion taking up two spots. I also don't agree with only meeting your customer expectations "We define customer centricity as knowing your customers' expectations and meeting them." That is just the entry point

You need to provide the customer a unified experience from in-store to online and that starts, in my opinion, with the purchase path from researching what you need, how to do it, and what to buy. From my experience, Lowe's wins on this front. They do a great job on the "ideas" section on the website. The in-store experience from signing and merchandising seems above average. The associate interaction is hit or miss, but that as always is the most difficult for any retailer.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

Menard's focus on "Made in America" advertising makes them No.1 in my book. I believe we have to support American-made products at all times!

Kate Blake, Social Media Manager, Take Five with Kate Blake

I would define "customer centricity" as asking the question "will this decision make it better (cheaper, faster, more choice, friendlier) for our customer?" Too many retailers still talk the talk, but don't walk it.

I am not sure how DH weighted their survey, but from my experience, Ace clearly outdistances the big box stores for customer centricity.

'vgallese'

The seven pillars of customer centricity don't look very customer-ish, but if each were executed from the customer's perspective vs. marketing strategy...to bring in more business, then that's a potentially interesting benchmark.

Every one of those pillars could be designed and executed to create a "wow, how did they know to do that?" feeling, and I think that's the business dunnhumby is in, namely, finding or creating the nuanced 'wow' in the usual set of retail business attributes. Something was lost in how this was written, methinks.

I like Ace Hardware because their staff is very smart, they are quick to help, they have team ethic, the staff has been there for as long as I've gone there, I see the staff around town, 99% of the time they have what I need, they carry best-in-class products in a few categories, I don't have to suffer through the big-box nightmare during a weekend project...so I suppose in total, this means when I think of Ace, I think another box checked on the to-do list without squandering a weekend.

Vahe Katros, Consultant, Plan B

Not going to get into the methodology here, but they have identified one of my favorite retailers. If you are not in the core Midwest market, you should check them out when in market.

I am the core DIY customer now on my fourth renovation, and Menards never fails to deliver on the pillars above. Assortment size, diversity, and quality are simply far better than other DIY big boxes. It's nice to see them receive some credit for it.

And simply meeting customer expectations IS a huge hurdle in the DIY segment. My feeling is that Lowe's and The Home Depot fall short.

Charles Billups, Dir New Product Development, In-Store Marketing Institute

The missing eighth pillar in dunnhumby's otherwise workmanlike framework is heart. I reckon that's why today's RW poll favors locally owned and operated Ace stores over the big boxes.

Using these seven pillars to help identify, define and measure core practices is a valid way to begin being customer-centric. Structure is helpful - it enables the team to succeed and shows shoppers the system is rigged to take decent care of them.

In the home center business, there is no customer-centric value that ranks as highly as having the part, tool or supply on hand when I need it. A bit of learned counsel on how to choose and use the item goes a long way too. Finally, get me supplied quickly enough on Saturday morning so I can finish my project without blowing the whole weekend. (Notice I didn't say "low price" yet.)

The real customer-centric experience that matters doesn't take place in the store. It takes place at the job site (the yard, workshop or garage). The homeowner's success is the retailer's success. "Heart" is where the home is.

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James Tenser, Principal, VSN Strategies

I agree with Ken Lonyai. "Good" and "Meet" are no longer sustainable models. Consumers expect more and thanks to technology and better data, Retailers and brands should be striving for nothing less than "Great" or "Outstanding."

With true loyalty data, retailers should be able to deliver the right offer to the right person at the right time. Retailers also need to move away from "shop our way" and allow consumers to shop "their way" whether it's the internet, snail mail or in-store.

The home improvements vertical has a ways to go to "Great." I have plenty of home improvement needs and none of the retailers mentioned have picked up on any of those needs.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

These look a bit more like traits that a consultant would use to sell a strategy to a retailer. They don't look much like a list of items that customers would use to define a retailer that is "customer centric."

One might think the definition would come from the customer's point of view!

Menards is definitely exceptional at the customer experience. However, beware! When you ask for help from one of their associates, you are going to get it. You will also buy more. Oh, wait! That's the idea!

I continue to have great experiences with Menards time after time.

Home Depot has also made huge leaps in this area.

'Scanner'

I would be surprised to hear any merchant say they're not Consumer Centric!

Retailers within all verticals are doing all they can to drive value to their customers by providing merchandise at aggressive price points while also focused on providing customers a pleasant and hopefully unique in-store experience as well as additional eCommerce methods to purchase and engage their customers. I believe these are basic table stakes in retail today!

In addition, a number of retailers are attempting to "connect" with their customers via numerous methods including direct mail, email, text, auto-voice, in-store WiFi applications, mobile apps, receipt solutions, gift cards, et al. Once again, each one of these delivery agents is a separate and disparate effort that requires individual attention by the consumer! Not exactly "consumer centric" from the consumer's point of view.

But, what if enrollment and engagement was made simple and every single customer was fully enrolled in most all of their favorite merchant programs.....and the customer was actually excited to participate? Under this approach, the merchant would get greater consumer participation with full engagement, accurate information and the customer gets what they want... simplicity? Isn't this a better definition of "customer centricity" in that it comes from the consumer?

Chuck Furedy, Chief Sales Officer, LOC Enterprises

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