Creating Consistency and Comfort
Performance management is a key component to achieving a positive customer experience.
By Jeff Walters
The life of the U.S. retailer has seen better days. Consumers are cautious, expenses are high and margins are tight. Achieving customer loyalty — while maintaining operating efficiencies — has never been more important as retailers scramble for a bigger share of scarce consumer spending. But before loyalty can be achieved, it’s crucial to understand the components behind it.
Customer loyalty is driven by three key components: perceived value, store flexibility and customer experience. While value (the price and quality of goods) may be what brings people in the door, the overall customer experience keeps them coming back. For instance, does the business have a convenient merchandise return policy? Is it clean? Simply put: a retailer has to work to gain this customer loyalty.
According to the Quality Digest, May 2007 Annual Retailer Survey, customer experience (53%) is far and away the biggest contributor toward customer loyalty to a retailer compared with value (33%) and flexibility (14%).
Consistent shopping environment is everything
Retailers of all types and sizes have adapted store environments to alter their customers’ shopping experiences. These include experimenting with store layout, product placement and other physical factors such as aisle width.
As consumer feedback has revealed, the majority of customer experiences are impacted by two variables. First, the human interaction based on the knowledge and service level of store employees leaves an immediate impression on shoppers. And secondly, and often more importantly, overall facility attributes, including building temperature, lighting conditions and store cleanliness leave a non-verbal impression on consumers that can make or break future visits. In fact, store cleanliness consistently ranks as the most important of all factors of importance to customers.
Retailers have found that establishing a threshold of acceptable standards is critical to producing a consistent shopping experience — and repeat customer visits. Consumers take notice when facility attributes fall below the standards they have come to associate with the outlet. And if not maintained, a significant drop in standards will prompt shoppers to take their dollars elsewhere, while damaging, if not destroying, the retailer’s reputation and opportunities for repeat sales.
Yet retailers also need to realize that they may not be rewarded for exceeding a store’s standards. In fact, customers may not even recognize, or respond to, an improved store environment despite the higher costs entailed. But the cost of losing customers over the lifetime of their shopping experience due to poor conditions significantly outweighs the investment in top-quality facilities.
A balancing act
Maintaining a positive customer experience — including the look, comfort, feel and cleanliness of every store — is a critical factor in attaining repeat business. For large retail businesses, it’s a challenge to maintain a consistently positive experience across multiple locations at all times.
Retailers who can manage to this performance scale are rewarded by loyalty. But those who allow store conditions to drop below or slip above the accepted range are punished with either decreasing sales or unnecessarily higher expenses.
Needless to say, the larger and more diverse the store portfolio, the greater the challenge becomes to stay within the customer accepted range of standards.
In recent years, many retailers have developed solutions in which store maintenance services, including cleaning and overall facility management, are managed by trusted, third-party vendors. This centralized arrangement helps assure that consistent, measurable standards are attained at each location while carefully controlling expenses. This system also frees retailers to focus on their core business and build their brand by consistently delivering a positive customer experience.
In addition, the outsourcing arrangement transfers risk to the third-party vendor, providing stronger measurement standards at each location, while also allowing the retail outlets the flexibility to scale up or down, depending on individual store needs.
Centralized performance management
In this model, the third-party national vendor conducts all facilities management activities from cleaning to security to snow removal. This solution provides the retailer with access to the best in class processes and proven technology without making a direct investment. The vendor manages all process changes and equipment, including training, throughout the organization rather than through individual employees.
The vendor uses a national network of suppliers to efficiently deliver materials — from cleaning supplies to light bulbs — at a greatly reduced cost.
The retailer remains in control because an audit arrangement between the vendor and the retailer ensures that agreed-upon standards are met and maintained.
Key benefits of centralized performance management include a high-quality skilled labor force; established standards and processes, which are often adapted to meet regional conditions (a store in Phoenix has different weather-related needs versus a store in Buffalo, New York); use of technology and automation, and consistent reporting and measurement systems.
The JC Penney story
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Energy Star recognized JCPenney its efforts to introduce energy efficient enhancements to facilities around the country. The retailer was able to enhance overall efficiencies and operations throughout more than 1,400 stores in the U.S. and Puerto Rico.
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JCPenney is a proven example of how a centralized approach to facility management can positively impact overall customer experience and improve operational efficiencies throughout a large organization. JCPenney, based in Plano, Texas, is one of the larger retailers in the United States, operating more than 1,200 stores throughout the U.S. and Puerto Rico. Its complex portfolio of locations provides a challenging scenario to deliver a consistent customer experience across all stores.
JCPenney realized that their efforts to manage facility operations internally led to regional inconsistencies and enormous costs associated with additional employees and equipment. Eight years ago, the company turned to one company to manage daily store operations, including heating/cooling, plumbing, lighting and cleaning services. The company also maintains and manages all invoicing and vendor management throughout the entire JCPenney system, providing an efficient, centralized operation. This partnership has enabled JCPenney to improve its customer experience while trimming more than $8 million in operational expenses.
For example, JCPenney learned through its “Customer First” survey that the shopping experience was often influenced by the cleanliness of restrooms and fitting rooms. After adjusting standards to focus on these areas, the retail giant saw an increase in sales and has consistently maintained the highest level of cleanliness, based on customer feedback.
JCPenney also uses the partnership to respond to its customers’ growing concern over energy efficiency. They rolled out a stringent Energy Star program that included a range of acceptable lighting and building comfort limits to deliver optimal use of heating and cooling systems and overall energy while still providing a quality customer experience.
For its commitment to Energy Star, JCPenney has consistently been recognized by the U.S. Department of Energy with a number of honors, including twice being named the Energy Star Partner of the Year for its continued commitment to energy enhancements. The improved energy efficiency has already resulted in lower operating costs across all stores.
The vendor partnership has enabled JCPenney to establish meaningful standards for customer experience while employing the finest in facility technology and resources, all without removing individual store managers and employees from focusing on their core responsibility of selling. JCPenney can now drive change throughout its entire store portfolio and see real-time results.
Some closing advice
This is just one example of the benefits that retailers can reap from partnering with a trusted, third-party vendor for facility management. Maintaining a consistent customer experience is key to achieving customer loyalty. But it can’t be done without following these steps:
• Listen to what the customer wants and expects.
• Establish measurable standards of store appearance, customer comfort, cleanliness and security.
• Employ a solution — such as centralized performance management — to meet these standards within an acceptable range.
• Monitor performance, inspect results and constantly test the limits to optimize the efficiency of your standards.
Retailers have so many challenges on their plates in today’s environment. They must focus on margin control and the constant challenge of reinforcing their commitment to current, future and former customers. This challenge is and will continue to be the most important for retail executives. Yet it’s increasingly important to realize the value that facility conditions have on customer interaction, and how retailers can improve their bottom line through efficient facility management partners. It’s a detail that all retailers — large and small — should not overlook.
Jeff Walters is the vice president and general manager of the Retail & Distributed Portfolio Sector for Johnson Controls Global WorkPlace Solutions, the world’s largest global real estate and facilities management business offering a single source for real estate portfolio management, design and project management, integrated technologies, strategic consulting, and energy and facilities management services. |
