Walmart’s Pay Increase Will Probably Lower Costs

Walmart recently announced that it plans to raise wages for more than 100,000 of its managers and employees in specialized departments. Why would the “everyday low prices” retailer add a ton of new costs to its ongoing operations?

I want to explore a hypothesis that this move will actually lower Walmart’s long-term costs. I know it sounds counter-intuitive; how do you lower costs by spending more? The answer comes from understanding the Employee Engagement Virtuous Cycle.

As you can see, a more engaged workforce can drive even better financial results. One of the reasons is that engaged employees are much more productive, they’re willing to work harder. While compensation is not the key motivator for engaging employees, it’s hard to engage employees who don’t believe that they are being fairly compensated.

As you can see below, 59% of employees who believe they are appropriately compensated are highly likely to do something good for the company even if it’s not expected of them, compared with 45% of employees who do not believe they are appropriately compensated.

This move by Walmart will certainly get a lot more employees to believe that they are appropriately compensated. Think about how much value (and cost savings) those employees can create by doing good things for Walmart. I’d bet that it will more than cover the costs of the pay raises.

The bottom line: Sometimes you can save money by paying your employees more.

Report: Evaluating Mobile eGift Card Purchasing Experiences

We published a Temkin Group report, Evaluating Mobile eGift Card Purchasing Experiences. The report uses Temkin Group’s SLICE-B experience review methodology to assess the mobile sites of 10 retailers. Here’s the executive summary:

Although smartphones are a convenient interaction channel, their small screens pose serious design challenges for companies. To evaluate the customer experience of mobile websites, we used Temkin Group’s SLICE-B experience review methodology to assess the experience of buying an eGift Card from ten large retailers: Home Depot, Lowe’s, Walmart, Target, Walgreens, CVS, Starbucks, Dunkin’ Donuts, Best Buy, and RadioShack. Home Depot earned the top score for its functionality and minimalist processes, while the user could not complete the full purchasing goal at Lowe’s, Walmart, Target, Walgreens, CVS, Best Buy, or RadioShack.

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The report includes the scores for all 10 companies across each of the six SLICE-B categories, strengths and weaknesses of each retailer, and some best practices across all of the mobile sites. Here is a description of the user and her overall goal that we tested:

Our user was a middle-aged woman looking to send her niece a $25 electronic gift card to help her get settled into her new apartment. While she is reasonably proficient at operating a smartphone, she finds entering a lot of information to be difficult on the small keyboard. She has an iPhone 4s. She does not have an app for any of the companies being evaluated and does not know whether they sell $25 eGift Cards.

Here are the overall results:

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The bottom line: Gift cards should be easier to buy via mobile phones.

Improve the Experience for Gift Card Recipients

In a recent research report we used Temkin Group’s SLICE-B experience review methodology to evaluate the experience of buying a gift card online from Amazon.com, Barnes & Noble, CVS, Dunkin’ Donuts, Starbucks, Target, Walgreens, and Walmart. But those journeys don’t end when the gift card is sent; there’s an important person on the other side of those gifts—the recipient. So, to analyze the entire end-to-end gift-card experience provided by each retailer, we took a look at the experience from the viewpoint of the person who received the gift cards.

You can download a free copy of our Insight Snapshot: Gift Card Receiving Experience (.pdf) that includes screen shots of the best practices.

Here are some of the best practices that we found:

Best Buy Delivers Highest TV Satisfaction

We’re entering into the busiest season for retail sales in the U.S.with Black Friday this week and Cyber Monday next week. One of the key categories during the holiday season is TVs. Retailers plan to sell a lot of them between now and Christmas. So I decided to look into our consumer benchmark data to see which retailers provided the best experience for TV buyers.

I examined data for more than 1,300 consumers who had recently purchased TVs. The analysis compared satisfaction across multiple steps in the process for Best Buy, Walmart, Amazon.com, and other retailers. As you can see in the chart below, Best Buy delivers the best experience across just about every element of the new TV experience.

Interestingly, Best Buy’s largest advantage is in customer service (+10 percentage points), which is the area that has the lowest satisfaction level across all retailers.

The bottom line: Best Buy is the best bet for TVs

Will Retailers Deliver Holiday CX Cheer?

Earlier this year, we published the 2011 Temkin Experience Ratings (TER) that evaluates the customer experience (CX) of 143 large US organizations based on consumer ratings across three elements of experience: functional, accessible, and emotional.

Since many consumers are flocking to retailers at this time of year, I decided to share some details of the 27 retailers in the 2011 TER. The chart below shows the overall TER (across all 143 companies) as well as where the retailers rank compared to each other in the functional, accessible, and emotional elements of experience.

As you can see, Amazon.com, Kohl’s and Costco are on top while RadioShack, Gap, and Toys ‘R’ Us are at the bottom of the overall TER. It’s also interesting to look at the difference across components of the TER. Here are the retailers with the largest inconsistency across their rankings:

• OfficeMax: functional (#15) and emotional (#24)
• eBay: functional (#17) and accessible (#24)
• Best Buy: accessible (#18) and functional (#25)
• BJs Wholesale: emotional (#3) and accessible (#9)
• WalMart: functional (#8) and accessible, emotional (#14)
• Macy’s: accessible (#9) and emotional (#15)

The bottom line: Hopefully, ’tis the season to be CX jolly!

Best Buy Delivers Best TV Buying Experience

As consumers flock to stores to scratch names off of their holiday gift lists, we decided to look at which retailer delivers the best TV buying experience. In a consumer survey we launched earlier this year, we asked a series of question to 788 consumers that had recently purchased a TV. We had enough responses from Walmart and Best Buy customers to examine those retailers directly.

It turns out that Best Buy customers tend to be more satisfied with their TVs and the service they receive in the stores. Walmart customers are less satisfied with the service, but are looking more for price than service when they make their purchase.

The bottom line: Go to Best Buy for service, Walmart for price

Report: Locating A Store On The Phone Is Not Always Easy

We just published a new Temkin Group report, Locating A Store On The Phone Is Not Always Easy.

The report examines the experience of using phone self-service applications to find a nearby store or branch.

Here’s the executive summary:

When traveling in an unfamiliar area, calling a store’s toll-free number can be a convenient way to locate the closest branch or store location. How user-friendly are these phone-based store locators? We used Temkin Group’s SLICE-B methodology to evaluate the experiences at five large banks (Bank of America, Chase, Citibank, USBank, and Wells Fargo) and five large retailers (Home Depot, Kroger, Target, Walgreens, and Walmart). Target was the only store to receive an “Excellent” overall rating, with 23 out of a possible 24 points. Citibank and Walgreens, on the other hand, scored in the “Poor” range. Stores lost points for offering voice-activated search without touch-tone support and for accepting only one criteria to search by, usually a zip code.

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Here’s one of the figures that shows the overall results:

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The bottom line: What’s it like when your customers call you?

Even Walmart Needs To Reassert Its Brand

Walmart recently decided that it couldn’t allow dollar stores like Dollar General and Family Dollar to erode the giant retailer’s low-price positioning. While Walmart was focussing on competing with Target, these dollar stores were building up share with low income consumers. So Walmart is reasserting its “Everyday Low Price” mantra and pushing suppliers for even lower price points in every product category.

My take: This is a great example of “Compelling Brand Values” which is one of the four customer experience core competencies. As an introduction to this competency, I like to share this “edited” quote from Howard Shultz:

Great companies not only stand for something, but they operate in a manner in which their employees consistently deliver on their brand promises. At a high level, this requires three things:

1. A clear definition of your brand and its promises
2. A shared understanding of your brand across your employees
3. An operating model that supports and reinforces the fulfilling of your brand promises

As this Walmart case demonstrates, it’s very easy to lose sight of your brand. While Walmart would never be mistaken as a high-priced retailer, its focus on competing with Target allowed it to stray away from its goal of being the low-price leader.

A small drift in your brand can cause myriads of inconsistent decisions within your company and create opportunities for competitors to takeover your previously controlled market position.

That’s why every company should reassess its brand every 18-24 months. This effort should assess the following questions:

• What does the executive team think the brand currently stands for?
• What does the executive team think the brand should stand for?
• What do employees think the brand stands for?
• To what degree have employees embraced the brand?
• What do customers think the brand stands for?
• To what degree does the brand resonate with customers?

The bottom line: Never take your brand for granted

Report: Evaluating Online Store Locators

We just published a new report, Online Store Locators Miss A Key Part Of The Experience.

The report evaluated the online experience of five large retailers (Home Depot, Kroger, Target, Walgreens, and Walmart) and five large banks (Bank of America, Citibank, Chase, US Bancorp, and Wells Fargo) using our SLICE-B experience review methodology. The report has 12 figures which provide details of the reviews and highlights several best practices that we found.

Here’s the executive summary:

Just about every bank and retailer provides a store or branch locator on its site. But how user-friendly are the experiences? Mostly mediocre. Temkin Group evaluated 10 large retailers and banks using its SLICE-B experience review methodology. Wells Fargo ended with the only “excellent” rating and Target was alone at the bottom with a “poor” rating. All of the sites struggle to support user’s goals after they find the nearby stores.

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Here are the overall results from the evaluations:

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The bottom line: Are you doing a good enough job helping people find your locations?

Walmart’s Experience Redesign Makes Sense

What do you get when you combine Walmart’s low prices with smart merchandising and good service? Trouble for competitors. And Walmart’s Project Impact is aimed at doing just that.

According to Walmart’s Northeast general manager:

We’ve listened to our customers, and they want an easier shopping experience. We’ve brightened up the stores and opened things up to make it more navigable.

Here’s an example of Walmart’s new store experience:

Source: BNET

My take: There’s no reason for companies to make trade-offs between low prices and good in-store experiences (or good experiences in other channels like the Web and the phone). That’s the core premise of the post My Manifesto: Great Customer Experience Is Free. 

When companies focus on their target customers, it becomes very clear that customer experience is not an optional ingredient. But that doesn’t mean that Walmart or any other retailer should replicate the experience model of Nordstrom’s or even Michael’s Crafts. The key is to understand what your customers’ need and want.

Employees are also a critical component of customer experience. As I’ve discuss in my eBook The 6 Laws Of Customer Experience: Unengaged employees don’t create engaged customers. That’s why every one-tenth-of-a-point increase in employee engagement at a Best Buy store increases it profits by $100,000 a year.

Is there a blueprint for getting this right? Yes. Experience-Based Differentiation.

The bottom line: Customers notice when you neglect their experience.

Lessons From Jay-Z, MySpace, And iTunes

A number of recent announcements in the music industry caught my attention:

• iTunes surpassed WalMart as America’s number 1 music retailer.
• MySpace is creating an online music store with three major music labels.
• Jay-Z signed a $150 million deal with Live Nation and left his longtime label, Def Jam.

My take: That’s quite a bit of news for one week. The music industry is clearly going through some significant changes. Here’s what I think we can learn from these moves:

• Convenience matters. Why is iTunes so popular? It’s terribly convenient. Most people don’t have a desire to unwrap shrink-wrap, open a plastic case, and caress a metal CD. They want to hear music. iTunes provides the easiest way to fulfill that desire. Universal, Sony, and Warner are teaming up with MySpace because they recognize they they need to create an equally convenient option in order to dampen the growing power of Apple’s music retailing empire.
• Money matters. MySpace may be a “Web 2.0” company that grew up fostering connectivity across its members, but it still lives in a “Finance 1.0” world where revenues and profits are really important. Especially when you are a part of a big conglomerate like News Corporation. And Jay-Z had no problem walking away from Def Jam (where he had been president) for some more, a LOT MORE, money.
• Experience matters. Why on earth did Live Nation give Jay Z a $150 million deal when his record sales are declining? (His album from last year, “American Gangster,” sold one million copies in the US compared with “The Black Album” from 2003 that sold more than three million.) Because the concert industry is booming. While people may buy fewer CD’s, the concert industry grew 8% last year to nearly $4 billion. Digital distribution hasn’t dampen people’s desires to have a memorable concert experience. And this opens up even more revenue streams.

The bottom line: Music might become a loss leader in the music industry.