Kroger CEO Walks the Talk

Discussion
Nov 15, 2010
Tom Ryan

By Tom Ryan

With the help of dunnhumby, Kroger Co. believes it has more sophisticated
data on its consumers than any of its competitors. But chairman and CEO David
Dillon also frequently does "shopalongs" alongside core customers,
goes incognito on store visits, visits stores unannounced and even visits consumers
in their homes to inspect their cabinets.

He told The Associated Press that
other key Kroger executives follow much of the same routine.

"The data only tells you so much," Mr. Dillon told the AP. "Dunnhumby
tells me what to look for and I go in and see."

Through its joint-venture
with dunnhumby, Kroger gleans shopping behavior data from its loyalty card
holders, and also some 50,000 surveys with customers exploring four areas:
people, prices, products and services. Associates also partake in similar surveys
under its Customer 1st strategy.

"During the first half of 2010, our customers have told us, we continue
to make steady progress in each of the four key areas we target," Rodney
McMullen, president and COO, said on Kroger’s second quarter conference call. "We
continue to seek feedback from our customers and incorporate what they tell
us in our business plans."

Mr. Dillon told the AP that the combination
of the data along with the real-time view of store and home visits guides marketing
and merchandising decisions.

"We can use our own intuition, our own eyeballs, our own sense of how
the store should work, but that can be hugely enhanced by applying real data," he
said.

For example, dunnhumby’s analysis indicated that shoppers’ use of food
stamps had doubled during the recession. Further visits to stores, however,
showed that first-time users often couldn’t figure out which items were valid
under the government’s guidelines. After himself witnessing one man struggling
with food stamps, Mr. Dillon pushed to add more informational signage to stores
and better train store employees to help clear up the issue for customers.

Discussion
Questions: What insight do retailers gain from visiting stores or customer’s
homes that they can’t get from customer data? What is the most efficient
way to gain such honest input from customers? What are the pros and cons
of the methods mentioned in the article?

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18 Comments on "Kroger CEO Walks the Talk"


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Ben Sprecher
Guest
Ben Sprecher
10 years 5 months ago
Shopper loyalty data is fabulous for telling you *what* is happening in the stores and with particular shoppers, but it can’t always tell you *why*. One common example surrounds in-store displays. Often, a retailer will see less lift than expected from an in-store event that involves displays. If you only look at the chain-level data, it is impossible to understand why. If you look down at the store-level data, you will often see some stores doing far better than others, which may indicate that some stores failed to set up the displays. Drilling down further to shopper-level data can help you understand *which* shoppers are buying at the problem stores, which can further diagnose the potential problem. But only by actually visiting the store can you tell if the display is poorly placed, depleted of product, or still in a flat pack in the back room. So, chains should be leveraging their shopper data to detect potential problems, but they should get eyeballs in the store to pinpoint the root causes and develop the right… Read more »
David Biernbaum
Guest
10 years 5 months ago

David Dillon, CEO at Kroger, has the right idea and approach with analyzing his customer base in person at their homes, in the stores, etc. I believe what Mr. Dillon will find is that the supermarket industry has gone too far with SKU rationalization.

Gene Hoffman
Guest
Gene Hoffman
10 years 5 months ago
Kroger has always worked hard to stay in touch with the inner feelings of its customers and the real “reasons why” they do what they do. Regular store visits by key personnel, particularly the CEO, allows Kroger not only to see what customers pick from the shelves and cases it also brings them in immediate contact with the emotions of the purchase or its rejections. Visiting customers homes is a wonderful way to bond with customers and potential customers. Back in my Kroger era we once had a fleet of 1909 Oldsmobiles, open aired, lever driven and sitting high on the road, and we would visit customers at their homes with free groceries, particularly before a new store opening. It was a great success for bonding with our customers and it got lots of media attention and “word on mouth” support. As for the cons, we had to stop because local authorities were nervous about such “slow and potentially dangerous” vehicles roaming the streets. But “Kroger Calls” was innovative and a success. Today Kroger continues… Read more »
Art Williams
Guest
Art Williams
10 years 5 months ago

This is awesome when I hear of a corner office executive getting out and seeing and talking to customers! If more executives would do that we would all be so much better off. Too many top managers are afraid to talk to their customers for fear of what they might say. Totally invigorates my respect for Kroger and Mr. Dillon.

Mel Kleiman
Guest
10 years 5 months ago

It is not what people tell you they do. It is what the actually feel and do that makes the difference.

The numbers are important but more important is the action behind the numbers.

Steve Montgomery
Guest
10 years 5 months ago
Unfortunately, those at the top of retail organizations seldom get a real world view of their stores. The minute a field trip is conceived those around then get work to ensure management sees what they hope to see and not the reality the customer faces in their locations. This includes adding labor before the visit to prep the store (and sometimes during the visit so they can demonstrate a level of customers service that doesn’t normally exist) additional inventory, a thorough cleaning, stock faced and fronted, etc. By making unannounced store visits, top management gets to see a more realistic view of the operation. Naturally, after the first unannounced store stop in a market the phone rings at every other location and efforts get underway to “fix” whatever they can before they too are visited. The benefits of combined a real-world view of what is occurring at their stores and information gather from various data tools provide top management a far better understanding of what is occurring. The data collection tells them what. Store visits… Read more »
James Tenser
Guest
10 years 5 months ago
I believe Mr. Dillon is acting on good instinct. As Kroger’s lead merchant, he should allocate a certain amount of time to be in the stores, observing and interacting with shoppers. He should require the same of his lieutenants. Doing so is likely to help focus corporate leadership on the shopper experience. Executive store visits should help to counter what I call the “outpost effect” that occurs as chains grow large and the physical and psychic distance between headquarters and the stores widens. I would caution him (and any other retail CEO) to be cognizant of the kinds of observational error that may come with such visits, however. Like so many other phenomena worth studying, shopper behaviors are subject to response bias. As others here have observed, a forewarned store is also likely to take steps to pass the white glove test, which can also alter the picture significantly. Suit-and-tie visits, in other words, are likely to reveal a compromised picture of the shopper experience. In stores, as in most other realms of human endeavor,… Read more »
John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
10 years 5 months ago
For over 13 years I worked with technology that analyzed data in the CPG industry. I described each data point as a “point of truth,” but not the “whole truth.” The more data points you added to your analysis the closer to the “whole truth” you came. Two weeks ago, I did a store audit with a client and toured over 20 stores from Delaware to Connecticut. These audits were unannounced for a reason. We wanted to understand how well the store had complied with the program and also how the shoppers were responding to the program. The only way to do this is through announced visits. Looking at the data for the stores we visited, we were pleased with the program lifts (data point 1), but also some strange outcomes. When we tied the data together with images (data point 2) from the store as well as notes including store condition (data point 3) and signage/display compliance (data point 4) it started to make more sense. For example, one store had the display up,… Read more »
Bill Bittner
Guest
Bill Bittner
10 years 5 months ago
I think the store visits are a great idea if they are handled correctly. It is seldom a complete surprise when the CEO of a geographically disperse company visits a store. Although locals may not know which one, the fact the CEO is in town means someone will get a visit. In fact, I would be more concerned if the organization’s informal lines of communication didn’t get the word out to the field that the boss was coming. Having said that, I have followed the CEO into stores and experienced the results of a bad visit. In this case, the district manager was at conflict with the opinions of the CEO and the poor store manager was left out to dry. The specifics were the use of in-aisle displays, which were apparently the favorite of the DM and despised by the CEO. When the CEO walked the store he literally dumped the displays on floor. Needless to say, this was not a morale builder. There were a lot of things wrong with this visit, but… Read more »
Ed Rosenbaum
Guest
10 years 5 months ago

Mel Kleiman voiced it well with “The numbers are important but more important is the action behind the numbers.” Why do the numbers tell you what they are? What is the reason things happen? The only real way for top Execs to know what happens in their “real world” is to get out of the “ivory towers” and get in the stores. See what happens both from the customer’s viewpoint as well as the store manager’s and clerk’s. The Execs don’t always know what is happening in the real world. The people in the stores having direct interaction with customers do.

Cathy Hotka
Guest
10 years 5 months ago

Customer data is deeply flawed. It will tell retailers what sold, but not what would have sold if the customer could find it, and not what frustrates consumers. (Safeway still insists that I tear out tiny coupons from a flyer while in store…even though I will be using a loyalty card.) There is no substitute for walking around stores and observing the ways that customers interact with your brand.

Camille P. Schuster, PhD.
Guest
10 years 5 months ago

Observing consumers while they are making real time decisions reveals indecision, confusion, and habits more effectively than POS data. Asking consumers questions after observing their behavior is a great opportunity for in-depth understanding. This information can lead to important consumer insights and should be part of a company’s research program.

Dennis Serbu
Guest
Dennis Serbu
10 years 5 months ago

Stories like this make my day and make me want to run out and buy Kroger stock. As organizations get larger they distance themselves from their customers and core purpose of being. The relationship between the customer and the retailer is estranged as a result. A fairly recent study indicates that 70% of customers are openly antagonistic concerning the grocery store where they shop.

David Dillon is a Grocer first, as is most of his management team. That is why Kroger is Kroger. Tom Peters would be proud.

While “Reality” shows like Undercover Boss are scripted and contrived to a large extent, they still convey the delta between Management and field operations. MBWA (Management by wandering around) has never been a bad idea. Doing so anonymously is even better.

George Whalin
Guest
George Whalin
10 years 5 months ago

Technology tools have proven to be very valuable for retailers when it comes to gaining insight into consumer buying habits and merchandise movement. But technology will never truly take the place of seeing firs-hand how customers shop. When done along with a customer management has the opportunity to see how the customer shops the store as well as what areas they avoid. Management also sees how the customer makes choices for what they are going to buy and what they decide not to buy.

Some of this can be done by a consumer research firm like Envirosell. Such research can also be augmented by having management do regular undercover store visits. All of these tolls help retailers gain insight into how they sell to and serve their customers.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
10 years 5 months ago
Stay out of their homes. Did they buy the cornmeal to consume or to use as cat litter? Who cares what they do with it when they get it home? Mayo for samiches or for coating Silverbrite Salmon on the grill, as we at Kroger used to recommend in our recipe accompanying our annual salmon sale? I grew up in Kansas shopping at Dillon stores, and I managed Kroger’s national advertising campaign for a while. I spent time in Wichita at Dillon HQ facilitating the merger in a small way. I would never, ever suggest a disfocus (new word) on David Dillon’s part. (Hey! “dissfocus” could also be a word with other meanings: Combining “focus” with dissociative, dismissive, distracting, disssssrespecting, etc. But I digress . . . again.) Thus, there must be something else to the home visits. One of my old bosses, Gene Hoffman, refers favorably today to the “Kroger Calls” program, which I’ve detailed previously in these spaces. But that’s not the same as stalking customers to find out how they actually use… Read more »
Susan Rider
Guest
Susan Rider
10 years 5 months ago

Kudos to David; how many other CEOs wouldn’t dare do this? What a fabulous way to stay connected to the street and find out firsthand what is really happening. Shopping stores unannounced is a great way to judge manager capabilities and community needs!

Jerry Gelsomino
Guest
10 years 5 months ago

Store strategies and applied tactics ‘creep’, get lost in translation, and often get ignored when you are so far away from corporate office. The best way to see what’s really going on in stores is to visit them like a customer. Executives can learn a lot by experiencing the store as the consumer does, not as a visiting executive.

Phil Rubin
Guest
10 years 5 months ago

Kroger and its CEO, David Dillon, are doing a lot of things right. The reality is that it takes leveraging data and also interpreting the analysis of that data. There is no substitute for walking the aisles in stores and talking to store-level employees and customers.

They key is keeping the store visits from being ceremonial or orchestrated as opposed to more spontaneous and realistic. And it’s not just the CEO who needs to get out to the stores, all of the key executives, especially those concerned with customers and merchandise.

Too often senior executive visits to stores are analogous to seagulls: they drop in and dump on the stores, only to then fly off again.

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