September 26, 2008 Keep Them Happy

Volume 4 | Issue 3

Customer satisfaction is the key to growth in a competitive marketplace.

Quality, variety, convenience, and price are all factors in a consumer’s decision of where to buy groceries. One thing often lacking at large supermarket chains is good customer service. With the recent increase in food prices affecting supermarkets, grocers, restaurants and consumers alike, customer service is becoming a deciding factor in a consumer’s choice of where to shop.

Conventional wisdom has always held that the smaller the store, the better the customer service. The larger the operation, the more difficult it is to maintain the customized feel of your neighborhood corner grocer. This belief rings especially true in the supermarket industry, as smaller grocers base their brand on providing excellent customer service.

Two companies come to mind that separate themselves from the pack. Privately held Trader Joe’s and Publix Super Markets focus on the customer experience to achieve high satisfaction which in turn engenders buyer loyalty. One thing they have in common is a satisfied customer.

Publix is one of the top-performing companies in the American Customer Satisfaction Index for more than a decade. It is family friendly, offers personalized service, and is employee-owned.

Trader Joe’s has been able to maintain its “small feel” even as it grows. When the local Whole Foods in my hometown of Ann Arbor moved into larger facilities about a mile away, Trader Joe’s took over the old store. Self-described as “your unique grocery store,” Trader Joes offers a good example of the kinds of things groceries and supermarkets can do to attract and keep customers in a competitive marketplace.

In my book, The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference, I describe how Trader Joe’s customer service has helped propel this mid-sized grocer into a billion-dollar company. Here are a few observations from the book that provide a window into the company’s success with its most important asset: its customers.

A WAY TO DIFFERENTIATE

Wal-Mart differentiates on price, but quality is wanting, according to ACSI data. Whole Foods, on the other hand, is best in quality but last in value. Somewhere in between is a happy medium that best satisfies today’s finicky customers.

The range of merchandise offered at Trader Joe’s is not as broad as a typical supermarket. The actual size of one of its stores is comparable to other specialty grocers – a fraction of a Safeway or Winn Dixie. Like large grocers, Trader Joe’s provides a variety of frozen foods, gourmet and organic products, and other types of dry goods, more than 70 percent of which carry the store’s own brand name, at relatively low prices. Trader Joe’s is obviously not unique in offering a slew of company branded products. What makes it stand out among supermarkets is its emphasis on customer service.

EXCELLING AT SERVICE

What do customers want from a neighborhood grocery store? Most would say friendly employees who go out of their way to help. TJ’s Web site touts “Customers are king!” That’s what many companies say, of course. The difference is that Trader Joe’s means it.

The first thing that strikes a visitor at Trader Joe’s is the employee dress code. All employees wear khakis and Hawaiian shirts in bold colors. At large grocery stores, finding an employee to help locate an item is often harder than finding the item itself. Not at Trader Joe’s: their conspicuous dress is easy to spot across the smaller-than-average grocery store.

Trader Joe’s offers above-and-beyond customer service that is often hard to find in the supermarket industry. Employees are required to show customers the exact location of an item, rather than just letting them know the aisle number.

Another Trader Joe’s approach to customer service: its return policy. Customers expect to be able to return damaged or spoiled merchandise for replacement or full refund, no surprise there, but how about food that you have tried and just didn’t care for? Don’t worry, at Trader Joe’s, you can return that too. Trader Joe’s business model encourages customers to try a broad sampling of its products with the idea that most shoppers will find something they like and come back for more. Trader Joe’s turns dissatisfaction with product trials into opportunities for strengthening customer loyalty.

A PROVEN METHOD

Trader Joe’s efforts in customer service have paid off handsomely. As the company increased its number of stores fivefold over the past decade, profits grew tenfold. Dedicated customers have even created fan Web sites for the grocer, and Web forums abound with customers explaining how they have been drawn in by hype but won over by a great experience.

In my book, I analyze different tactics for retaining customers, and in just about every case study I found that customer satisfaction is the strongest driver of customer retention and corporate growth. Grocers who want to attract more consumers can learn from Trader Joe’s: provide an excellent customer experience and you will be rewarded with greater customer retention and higher profits.

Claes Fornell is Donald C. Cook Professor of Business Administration, and Director of the National Quality Research Center at the Ross School of Business, University of Michigan. He is author of The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference and founder of the American Customer Satisfaction Index (ACSI). For information visit www.bus.umich.edu.

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