How understanding customers increases stores revenue
The retailer’s mantra: Giving customer what s/he wants will increase revenue.
Easy enough, until the daily nitty-gritty sets in with product orders and clearing the aisle; cash register bells and a dirty floor calling out for a mop; assigning shifts and making your team happy.
In the middle of all of this you stumble upon one of the hundreds of articles that emphasize the importance of knowing what your customer wants. You think for yourself how you agree with this and will get to it as soon as this latest tax forms are filled.
And you are correct in doing so. I mean, the government won’t say “sure, fill them when you can because you need to concentrate on the customer right now”.
Understanding your customers isn’t about taking one hour or a day off to listen to them. Its about the daily small actions from retail manager to staff, from hello’s to goodbye’s to managing the queue, and everything after that.
Sure, the store won’t cease to exist when the clerk is a bit rude or manager not informed with the latest consumer preferences. The store will continue existing, people will continue to come in and make a purchase. The manager and cashiers and other member of staff will continue to get their paycheck.
Lets think of a typical convenience store that carries a selection of everyday items from groceries to household supplies. On average, the size of the store is small so the selection is sparse. That is OK for the convenience store consumer because s/he is looking for a fast pickup of a general item on the commute from work to home. Due to its smaller size and thus more limited selection, the average prices in convenience store are higher than similar items in supermarkets.
The guests of this store are mainly limited to the neighborhood making the customer base repeat visitors. The main question for the people living couple of streets over is if I should pop by the convenience store down the street for a carton of milk or should I go drive down to the supermarket to get it cheaper and grab some more things as I am there already.
At this point, I can guarantee that when that bloke down the block feels good in the convenience store, he will choose most of the time to go and by there even when overall it would cost him more. When the local store has neglectful staff or displeasing surroundings, he will decide to avoid the place unless it is absolutely necessary.
This is where the convenience store is leaving some serious money on the table.
How customer satisfaction influences sales: a formula
Using simple deductive reasoning, lets construct a formula to make us understand how good customer service effects store’s revenue.
How does customers positive impression influences the likelihood of coming to the store.
The satisfied customer
Coming back to Dave’s experience. Dave is making a cup of coffee while he realizes he’s out of sugar. He often frequents a convenience store three streets over in case of emergencies like this. The clerk there is a nice enough old man and he gets his essentials so without giving it much thought he decides to go there.
The aversive customer
Now the same thing in another neighbourhood happens to Mike. He is making a cup of coffee and realizes his out of sugar. The convenience store in his neighbourhood though is run by a man who hardly notices his customers having Mike had waited in the cash register without serving for what seems eternity. Its annoying to go there. Mike decides to go to the store farther away.
Hereon we can use simple logic to derive how both of these behaviours from Rule 1 and Rule 2 influences revenue.
Rule 1
customer likes = comes = buys things = revenue
Rule 2
customer not like = avoids = doesn’t buy things = lost revenue
