CRM - May 2008 - (Page 20)

MARKET FOCUS: RETAIL/CONSUMER PACKAGED GOODS Price Check, Aisle 5 Everyone’s talking about “the R word”—Recession!—and for the first time in a long time, price is competing head-to-head with service A fter months of whispers and rebounds. Moreover, he adds, even if the sotto voce chatter, the word is rest of the economy starts to climb back, finally being uttered out retail is traditionally slow to follow suit. loud: Recession. While some Consumers continue to remain cautious retailers are claiming immunity, the with their money, especially if employindustry overall is undoubtedly feeling ment opportunities aren’t expanding. But this latest economic belt-tightening the pinch. Economic spending has declined and consumer behaviors are may be generating an all-new response. clearly exhibiting the symptoms of a For the first time in the 15 years of its recession. Experts anticipate this reces- annual Consumer Sentiment Index, consion will have an impact lasting at least sulting firm AlixPartners found that cusnine months to a year, easily rolling into tomers ranked getting “the lowest price available”as the most impora two-year phenomenon. tant factor contributing to SpendingPulse, provided their shopping decisions. by MasterCard Advisors, the Furthermore, the research professional services arm of unveiled three other major MasterCard Worldwide, is a trends in shopper behavior: macroeconomic indicator of Consumers are trading the national activity of retail down; consumers are shifting sales. (This research is not from specialty stores to mulindicative of MasterCard’s tiproduct department stores; own corporate results.) According to results based Though customers seem and consumers are increasingly accepting of store on aggregate sales activity in more price-sensitive, brands, such as JCPenney. the MasterCard payments Most shoppers are movnetwork and estimates for service continues to be ing down the retail value other payment forms, in- an important factor. chain—Bergdorf shoppers cluding cash and check, retail is displaying growth rates that align with are going to Nordstrom, to JCPenney, historical patterns indicative of a recession, and to Wal-Mart. And yet pockets of the says Kamalesh Rao, director of economic retail sector—high-end, ultra-luxury goods—are less susceptible to the recesresearch at MasterCard Advisors. After factoring out the spend on gaso- sion. Consumers attracted to these prodline, and controlling for this year’s extra ucts “may be cognizant of price, but they day in February, Rao reports that retail’s will not make their decisions based on year-over-year growth from February price,” says Fred Crawford, a managing 2007 to 2008 was 1.2 percent. In 1991, director with AlixPartners. For those conduring a recession, the year-over-year fig- sumers, it’s always been about brand ure was 1.4 percent—which Rao says is a image and the personal perceptions and sign that “retail spending may have actu- sentiment attached to it. This is not to suggest that retailers ally dropped to the level we expect to see.” While Rao says he understands that should resort to competition solely based retail is a relatively more volatile indus- on price. Service continues to be an importry, he expects to see the sector continue tant factor and maintaining close relationat this pace without any significant ships with your customers—figuring CUSTOMER RELATIONSHIP MANAGEMENT | MAY 2008 out their purchasing rationales and tendencies—is absolutely critical. Retail has always been comforted by a robust cash flow, but Crawford is doubtful that companies that don’t adjust their business models accordingly will be able to ride out this two-year period. “Cash flow exists, but it’s short-term,” he warns. “You have to evaluate your cost structure, take the right risks, and get out quickly.” Instead, companies should focus on making the most of what they have. “Business analytics thrives during economic downturns,” says Jim Davis, chief marketing officer of SAS. Apparel retailers, for example, can benefit from size optimization—quantities of small, medium, and large—based on selling history, requesting just the right amount of inventory to avoid excess. Successful companies understand their marketplace and their consumers— and build the necessary infrastructure to support the entire ecosystem, Crawford says. Retailers need to be realistic about the market conditions, and Crawford has the following suggestions for preparing for potential headwind: “Stay the course, control your inventory, be prepared to mitigate risks, take your markdowns early, and complete your decisions,” he says. In other words, now is not the time to be testing new strategies. In rough economic times, the keys to survival are the abilities to make quick decisions and to remain flexible to the whims of the market. “You don’t want to make the runway short and guardrails tight,” Crawford says; otherwise, you’ll find yourself stripped of any real options. In the end, it all comes down to restructuring the business in order to provide customers with the best value. The success stories of this era, Crawford says, will come from those that “understand their strategy, understand how they’re different, and respect the decision and dynamics of the customer.” —Jessica Tsai RETAIL/CONSUMER PACKAGED GOODS Infor SAS Institute VENDORS VAI Modules in SAP and Oracle Source: Cathy Hotka & Associates TOP 20 www.destinationCRM.com http://www.destinationCRM.com

Table of Contents Feed for the Digital Edition of CRM - May 2008

CRM - May 2008 Contents Front Office Feedback Reality Check Customer Centricity The Tipping Point Is CRM Too Hard for Microsoft Vendors Go Virtual For Feedback Sense-sational Marketing How UGC Can Benefit CRM DestinationCRM Dashboard Price Check, Aisle 5 Required Reading The Moving Target The Excellence Myth Seven Steps to SOA Success And They're Off! Are You Ready to Party? Skin in the Game The Right Numbers Secret of My Success Re: Tooling Connect Pint of View

CRM - May 2008

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