Everybody knows the old adage about the three L’s and retail—but it’s not just location, location, location that can greatly impact your store’s growth potential. Knowing your trade area as well as knowing and meeting your customer’s needs share equally in the success equation. What your customers really think could surprise you if you are not keeping your finger on the pulse.
“The retail food business holds a very tenuous grip on its customer base,” said Pete Davis, location research consultant with CDS. “Given today’s competitive environment, with its blurred lines between conventional and natural food stores, it is becoming more difficult to protect and keep your loyal customers, especially as more and more conventional stores now sell natural foods. For example, if you have a customer who buys 20 percent of their food at the natural foods co-op but the remainder at conventional food stores, it will be much more convenient for them to buy natural foods at a conventional store if the products are there. There need to be unique reasons to keep such customers from going elsewhere.” Or how about this familiar scenario? “Anytime your sales go over $1,000 per square foot you start to abuse your customers. The customer may continue to shop, but now you have sown the seeds for dissatisfaction. It’s plausible they may jump ship,” said Davis.
Davis pointed out a co-op retailer may be losing precious momentum, or losing out on potential new members by ignoring a segment of their consumers with unmet needs for convenience, merchandise mix or operational characteristics. “The non-customer represents your greatest opportunity for attracting new members,” said Davis. “You have to be competitive to earn their business.”
Davis has over 35 years experience in market research of all kinds (customer and consumer surveys, focus groups, market studies, site and location analysis) and has developed an analog database for co-ops that can be used to help them analyze their current market position and give them a competitive edge. By comparing the sales performance of stores around the country with similar site, location, competitive and market characteristics, Davis can evaluate a store’s present or potential sales performance and establish a basis for sales forecasts. Another component of the analog database is that an individual store’s trade area is established by combining customer transactions with information about where they live.
Armed with this information about trade area and sales potential, a retailer can identify additional sales opportunities, an important consideration anytime, but especially when considering a remodel, expansion or relocation. “Any store can do this on a regular basis,” said Davis, “But I’d do it anytime there’s a major change in the marketplace, be it competition or changes in your own operation. A customer survey and its resulting analog represent the most the most comprehensive and one of the cheapest types of research a store can do—and it should be done on a fairly regular basis.”
Making the right decision about a move involves getting real data, said Jeanie Wells, general manager of Community Mercantile in Lawrence, Kan., about their recent move a few blocks from their old location. Even though the new location was relatively close to the old one, the management and board knew opinions and assumptions weren’t a good decision-making tool for such a large project.
“It was eye-opening. We really didn’t know anything statistically about our customers. We learned from Pete what we needed to do to succeed by matching up the neighborhood demographics with what we could provide,” said Wells.
From what they learned about their new neighborhood demographic characteristics and current shoppers, they were able to tailor their relocation operations to further meet customer needs by adding a community education room, offering cooking classes and giving customers more information on products. Wells said, “It raised the bar on our educational materials. It got us thinking about how to get people who stop in to buy bread and milk—people who treat us more like a convenience store—to think about why they’d want and need organic food. It got us to think through the eyes and ears of those shoppers.”
The benefits of doing this kind of research are multi-fold. “When you’re looking at prospective customers, it’s important to identify parts of your trade area where you are strong, and parts where you are weak,” said Davis. “Any part of your trade area where you’re not strong begs the question of whether it is realistic to get more business from that area. It may be something as simple as lack of awareness. If there are no other barriers (real or imagined), then the marketing department can develop a campaign to increase business. In other words, a customer survey can be used to evaluate present performance as well as in forecasting sales for remodels, expansions or relocations.”
Enter Peg Nolan, a membership development consultant specializing in membership and customer service surveys. Davis and Nolan act as a tag-team for helping stores get a read on the large and small areas of market research, giving stores solid assistance in identifying problems that hinder their potential. Once a store’s trade area is defined, a customer service survey can be that much more refined and the results more meaningful.
Nolan pointed out a good survey can help a co-op identify which specific areas they need to improve in a weak trade area, or focus on a particular issue (service, product selection). On the other hand, a misleading survey can stymie co-op leadership or raise customer expectations for certain outcomes (i.e. expansions). “There’s a natural human tendency to jump to conclusions without knowing the question you are answering, or stepping back to get info you need to know,” said Nolan. “Basic facts can tell you a lot more than perception.”
A customer service survey done by Nolan through CDS for the typical food co-op involves surveying members and nonmembers alike—and stores have a wide array of survey assistance and expertise through CDS to choose from (survey design, processing, tabulating and analysis of results). “A customer survey should be one part of how a store assesses its performance. The customer survey, CoCoFiSt, and site analysis give you an idea of “what is.” It can be a helpful format for decision-making and understanding customers on a more sophisticated level,” said Nolan.
“I can’t imagine doing my job without a survey,” said Lisa Malmarowski, marketing director at Outpost Natural Foods in Milwaukee, Wisc. In the last 10 years, they have surveyed their customers seven times. Malmarowski noted that things they survey for have not dramatically changed over the years, and the consistency of the questions has helped because, “It is very helpful to track trends, to check out our service level, to know whether things are working.”
Even though Outpost opened a second store two years ago, they did not survey customers specifically about doing a second store. Although surveying members about expansions is common among food co-ops, Malmarowski believes doing that may not be an effective use of resources. “Don’t ask, ‘do you want another store’ because everyone either says yes or absolutely not.” Based on that question, a store is really no closer to knowing whether a new store would actually succeed. “We took the data we got from our surveys as a jumping off point. We did market studies and held shareholders meetings too.”
Malmarowski also finds regular surveys to be very cost-effective. “It’s an important marketing expense and we budget for it. Marketing requires planning, not a knee-jerk reaction to something. It helps us double-check on services and assess our readiness for competition.”
Clearly proper assessment is one tool a co-op can use for thoughtful planning. “One thing I run into regularly,” said Nolan, “is that people don’t look for information soon enough before forming opinions.” She added, “Part of the good health of an organization is assessment. It allows you to identify areas of improvement or opportunities that would otherwise be lost.”