It’s mid-November, and that means retailers’ annual holiday promotions are reaching a fever pitch.
Discount department store Kohl’s will kick off Black Friday at 5 p.m. on Thanksgiving day. It plans to encourage spending by offering deep discounts and making it easier for shoppers to see how much they’ll save. Sears, Kmart, Best Buy and Amazon have all also launched aggressive price-cutting campaigns.
I like a good deal as much as anyone, but as a customer experience consultant I’ve always thought these frenzied holiday sales were penny wise and pound foolish. Retailers drop their prices to bring more shoppers into their stores. And while the strategy can work in the short term, it’s no way to generate loyal customers in the long run.
I’m happy to see that some retailers seem to be pursuing customer experience initiatives this year that go beyond traditional price slashing. Walmart is throwing holiday parties in its stores on three different dates. It has beefed up the number of sales associates, who will be decked in holiday attire. Target has put sales personnel in select departments, and it is debuting eight new store brands.
The Problem with Price Slashing
Retailers like Walmart are realizing that you can only get so far by cutting prices. Low prices bring in bargain hunters. These are the folks who will leave the Thanksgiving table early to stand in line for three hours to snag a big discount on a TV. They don’t care whether they buy the TV at Walmart or Best Buy or someplace else. They care that it’s cheap.
To rope in these shoppers, retailers have to compete with each other on price, leading to a race to the bottom. But this strategy does nothing to build customer loyalty. Shoppers will happily make their next purchases somewhere else, if it means they can save money. This means that retailers who sell lots of products at a loss during the holiday haven’t built any value or customer goodwill for the coming year.
Struggling department store chain Macy’s, for example, is constantly running discounts. But it turns out that just 10 percent of its shoppers account for half of its sales! It is responding this holiday season by rolling out a new rewards program that aims to give these loyal shoppers special benefits and perks.
Why It’s Better to Focus on Experience
Walmart still focuses on low prices (it wouldn’t be Walmart otherwise!), but it is increasingly paying attention to the customer’s experience. The holiday parties in its supercenters are part of this, including toy demos, shopping assistance and visits with Santa. Walmart’s ‘Rock this Christmas’ campaign will also increase the assortment of items for sale, offer exclusive gifts, and pepper its stores with festively attired ‘holiday helpers’.
Potentially, then, a trip to Walmart on a party day becomes something more than a race to get the last of the video game consoles on sale. Families can go and check out the new toys together. The kids can talk to Santa and the adults can get help with their shopping lists. This makes for a memorable day, and positive memories build loyalty and long-term value. If it’s done right, Walmart’s holiday initiatives could lead to increased business all year long.
The same is true at Target, which stands to benefit from more sales personnel on the floor to ask questions and help shoppers choose products. This kind of personal touch gives customers a reason to come into the store instead of shopping online.
By contrast, when a company focuses primarily on discounts, it often neglects the experience a customer has in the store. Stores are crowded with merchandise, there are few sales associates on the floor, and lines can be absurdly long. Customers might get extra discounts at the cash register, but they feel frustration, confusion and other negative emotions along the way. These emotions far outweigh the rational rewards of a bargain when it comes to building (or destroying) loyalty and value.
The last time I shopped a big holiday sale, I stood in line for 45 minutes. I vowed never to do it again. However, if big retailers start to change the way they deliver the holiday shopping experience, they might just win me back!
Are holiday sales worth it? Tell me what you think in the comments box below.