- June 10th, 2016
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What Penney’s Appliances Can Teach Macy’s, Others, About Customer Spin Cycles
Some may see J.C. Penney’s addition of appliances as the latest effort by a troubled chain to rekindle customer relationships. But examined in the broader scope of retail marketing, it underscores the immediate need by chains to identify when a customer may be leaving.
J.C. Penney’s expansion into home appliances may be less about hard goods and more about a hard fact when it comes to retailing basics: If customer engagement is lax, it will not always come out in the wash.
Penney’s move is likely designed to win back lost shoppers and attract new ones, but it also is a reminder of how crucial it is to re-engage and excite, to keep customer relationships alive in order to attract the new and prevent the loss.
It is a lesson other department store brands, including Macy’s, are struggling with today, and one Penney has learned the hard way. The 114-year-old chain has had a long struggle to re-engage customers after launching a disastrous pricing strategy in 2011 that took the emphasis off promotions and contributed to a 25 percent decline in sales.
Now Penney is expanding its inventory to include not only apparel, but also the machines in which it is cleaned. On May 9 Penney announced it would expand into home appliances, including washers, dryers and ovens, following a successful test of the products in 22 stores over the winter. The showrooms will be both online and in stores.
“The response has been outstanding,” Marvin Ellison, Penney CEO, said in a statement. “The pilot confirmed that we should not limit our business to apparel and soft home in order to achieve significant revenue growth.”
Retail DIY: Ask Why
The former leadership team at Penney’s did not foresee the mass abandonment it experienced in 2011, but its own model (and that of many chains) should have been a tip-off.
The ways through which retailers have trained customers to seek out value – through a regular diet of offers, for example – pretty much ensure shoppers will want to try new things. This conditioning is requiring that retailers be increasingly more adept at adjusting their assortments and at knowing how to bring a customer back. The culprit may be price, it might be service, it might be store layout, and it might be competition.
Regardless of the reason for customer drop-offs, retailers should be able to spot those early forewarnings, to understand the ”why” behind “what” that their shopper data is revealing.
For example, did the customer simply get bored? Did the merchant remove a product that shoppers were coming to buy exclusively at its locations? Did the shopper have a negative service experience? Perhaps it has nothing to do with the retail experience at all but is rooted in a change in her economic circumstances.
Analytics can help identify some of these shifts but not all – that takes a combination of data analysis and talking to the customer, or simply asking outright what has changed. The alternative is for a retailer to test its hypothesis by making changes to its offerings and seeing what sticks.
Identifying Warning Signs In 4 Ways
Penney’s entry into appliances could be the result of both these approaches.
After testing appliances in market, Penney in early July plans to add a dedicated showroom online and to to nearly 500 locations. It also plans to assign an additional 25 percent of floor space to window coverings and test a furniture line from Ashley Furniture in select locations.
If shoppers take to the new format it could place Penney at an advantage just as other major department store chains are struggling to recapture sales. For those others, here are a few warning signs to indicate whether shoppers are about to walk away.
Lower spending: No reason to ignore old standbys, such as when a regular shopper’s spending on a branded credit card (or as identified through a loyalty program) begins to wane. There may be many reasons, and narrowing them down can be achieved through one-to-one promotions, such as “We Miss You“ bonus offers or retroactive “We Owe You” loyalty rewards.
New competitors (virtual and otherwise): A new kid on the block is almost guaranteed to cost a retailer some sales, even among loyal (but curious) customers. By working with third parties, such as co-branded credit card partners or loyalty program partners, retailers can offer their customers richer incentives to shop with them before, during and after the rival arrives, and thereby reduce potential lost sales.
A drop in conversion rate: If regular online customers are beginning to abandon their shopping trips midway, it is probably because something has changed to make the online experience less seamless, or something occurred in their lives that increased their need for ease. Either way, it signals the necessity to examine the login and navigation processes, and possibly to contact those customers and ask straight out why they are leaving (with a thank you gift for their time).
Lack of response: If response rates are dropping, then there may be a problem with the messaging. Retailers should make sure the content they are sending, especially via smartphone, includes the needed contextualization to be relevant (for more on that, see my last item in Forbes). By offering better-than-usual incentives that are relevant because they are shaped by customer context, retailers have a better-than-average chance of encouraging shoppers to fill out surveys that help illuminate what is falling in and out of favor.
These four indicators are not new, but the evolving technologies of today certainly enable us to more quickly and effectively tackle them and apply the solutions to preventing customer loss. For Penney, the answer very well may be in washing machines. It at least beats the kitchen sink.
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.