Progressive Grocer - January 2011 - (Page 103)

Progressive Voices Industry experts offer solutions Retailers’ Value Equation = Customer-benefit Costing The author of a new book identifies leading retailers whose common denominator is their value-based strategies. By Barry Berman, Ph.D. I Let’s look at each of the four components of value: results, process quality, price and customer access costs. Elements of results include a product’s overall quality (including warranties), product convenience (pre-washed, pre-cut, heat-andeat), product health (low salt, low fat, low cholesterol, product safety), and presentation. The concept of results extends beyond the product to focus on solutions, not individual components. I chose these firms based on their consistent financial perforA supermarket can extend the results mance (for example, Trader Joe’s and Stew Leonard’s sales per portion of value through bundling the ingredients for a soup with square foot have been estimated at $1,750 and $3,750, respec- a recipe, through selling products that are grown by local farmers, tively), as well as their high employee and customer satisfaction and/or through focusing on an individual’s special dietary needs. scores on accepted measures. These retailers share major ele- One of the ways that Aldi, Costco and Trader Joe’s add to the rements with respect to their value-based strategies. sults element of value is through extensive product testing. Process quality includes positive customer services (high levels Diagramming Value-based Strategies of customer support, high quality of salesperson interactions), Value-based strategies seek to combine product quality, differ- successful service recovery efforts (what the store will do when things go wrong), ease of finding items, entiated goods and the customer service short waiting lines, high in-stock posiexperience with relatively low prices. Actions for advertised specials, a “fun” incording to a study by The Nielsen ComFood retailers should store experience, and adequate parking. pany, “good value for money” is the most understand that the elements According to a research study sponimportant factor U.S. and global conwithin the value equation are sored by Cadbury Adams USA, almost sumers use when deciding where to shop constantly changing. one-half of the 300 grocer respondents for groceries. Sixty percent of U.S. conviewed the front end checkout experisumers ranked “good value for money” as the most important factor in choosing a grocery store. Among ence (a process quality attribute) as very important in customer U.S. respondents, the second most important factor in choosing a decisions to visit their stores. Process quality is assessed by most grocery store was its selection of high-quality brands and products consumers on the basis of their expectations on these service (listed among 28 percent of the respondents). The third most criti- components. These expectations may significantly differ decal factor was closeness (cited by 23 percent of the respondents). pending upon the store format. Thus, waiting lines are expected One way to better understand this is to study the components to be short in convenience stores relative to warehouse clubs or of value using the value profit chain model developed by a group supercenters. Price is the final purchase cost, including such elements as deof Harvard Business School professors: livery charges and credit terms. Aldi, Costco and Trader Joe’s are benchmark retailers with low prices relative to their competitors. Value = Results + Process Quality Low-cost operations and heavily edited selections (relatively few Price + Customer Access Costs SKUs) of merchandise contribute to their ability to out-price (See the related sidebar on page 104) A H E A D O F W H AT ’ S N E X T Progressive Grocer • January 2011 • recently studied the retail strategies of 10 world-class retailers to identify shared strategies that every retailer can use to drive performance improvement. The firms I identified include six food-based retailers: an extreme-value merchant (Aldi), two specialty food retailers (Trader Joe’s and Whole Foods) and three traditional supermarkets (Publix, Stew Leonard’s and Wegmans), as well as a warehouse club (Costco) with significant food sales 103

Table of Contents for the Digital Edition of Progressive Grocer - January 2011

Progressive Grocer - January 2011
Table of Contents
Nielsen’s Shelf Stoppers/ Spotlight: Medications and Remedies/antacids
Mintel Global New Products: Salty Snacks, Meat Snacks and Popcorn, Q2-Q3 2010
Best Practices: Are We There Yet?
Store of the Month Special Edition: My H-E-B
Marketing: Circular Paradox
Gma President’s Note: United We Stand
Pg Special Events: Pg Honors 2010 Top Women, Green Grocers at Gala Event
Retailer Spotlight: Winn-Dixie’s Awakening
Category Management: Mutual Benefi Ts
Special Section: Progressive Grocer Independent: For Retailers, by Retailers
Condiments: A Matter of Taste
Butter/margarine: Promise for the Future
Desserts: Sweet Solutions
Energy Drinks/shots: Energy Drinks Get a Jolt
Winter Produce: Season of Plenty
Meat Merchandising Study: Meat to Meals
Candles/Air Fresheners: Beyond Common Scents
Front End: The Front End Checkout: A Microeconomic Model of the Store
Cough and Cold: A Tissue Please?
Whole Health: Feeling Good in 2011
Futuretech: It’s a Mad, Mobile World
Progressive Voices: Retailers’ Value Equation = Customer-Benefit Costing
Ovens and Rotisseries: Heating Up
What’s Next: Editors’ Picks for Innovative Products

Progressive Grocer - January 2011