Photo by Ingrid Pintucci
As someone who gets excited when leaders successfully use customer experience as an operating strategy to drive performance, I had pure fun reading Fortune’s recent article “Inside Trader Joe’s.”
Trader Joe’s seems well on its way to the top tier of organizations who consistently demonstrate the link between the right target customer experience and financial performance. (Who’s in the top tier? I watch Disney, Southwest Airlines, Zappos, and Cleveland Clinic to name a few.) The company’s sales last year were about $8 billion, and while profits fell from 2008 to 2009, the chain still achieved profits of five percent when others struggled in the tough economy to break even. It is No. 314 on the Fortune 500 list.
Who, me?
First, I have to say this is the best description of a target customer I’ve seen for a long time:
“A Volvo-driving professor who could be CEO of a Fortune 100 company if he could get over his capitalist angst.”
It’s often difficult for leaders to get truly clear about who their “target” customers are. These are the customers who will drive growth and sustainable profits. Trader Joe’s understands and acts on this. Demographics, behaviors, motivations. The description above is SPECIFIC. Can’t you just SEE this man or woman?
How about the need or desire these angst-ridden customers will trade money to solve?
“The genius of Trader Joe’s is staying a step ahead of Americans’ increasingly adventurous palates with interesting new items that shoppers will collectively buy in big volumes.”
Whether fixed income seniors or younger globally connected Millennials, this description provides great context and brings a lot sense to the operating choices Trader Joe’s makes.
Matching daily decisions to a target experience.
Company leaders are uber-private. Fortune did two months of research to open the curtain for us to see the operating decisions behind the experience we have as consumers. I see operating decisions – made by marketing, merchandising, buyers, operations folks – largely in alignment with the target customer experience the company says it’s after. Check out these examples:
- They offer only ten SKUs of the RIGHT peanut butter, as opposed to the 40 SKUs found in most supermarkets
- They sell produce by the unit rather than charging by the weight, making for quicker checkout
- All employees work all aspects of the store giving them firsthand knowledge not just of product placement, but what it tastes like too
- Products are purchased directly from the manufacturers, which then ship their wares straight to Trader Joe’s distribution centers – which means fewer handoffs, fresher products and lower costs
I also see a company fearless at the evolve step – the sixth step common to any customer experience. That’s when customers’ needs evolve and the leader’s goal is to anticipate changing needs to find new veins of demand. From the article:
“A former senior executive told me that Trader Joe’s biggest R&D expense is travel for those product-finding missions. Trade shows that feature the flavor of the moment “are for rookies,” a former buyer said. Trader Joe’s doesn’t pick up on trends — it sets them.”
A fork in the road?
With all this going for them, it will be interesting to see if Trader Joe’s strong experience and strong financial performance scales, and if so how far? With size comes challenge to scale, and some feel the store is losing some of the quirky cool emotional tones in its experience. Outside the Fortune article, you may have seen criticism like this article outlining concerns with the company’s fish sourcing practices on sustainability grounds.
I think if a larger team of people can stay focused on the same end and remain sharp at anticipating the evolving needs of their target customers they’ll scale just fine.
What do you think?
