LAS VEGAS -- Romancing customers, and making sure they fall in love with you, may be the key to building sales and profits in the future, Roger M. Laverty 3rd, president and chief executive officer of Smart & Final, Vernon, Calif., told the California Grocers Association last week in a keynote address at the CGA's annual convention here.
"We need to move from a culture focused solely on operational efficiency to one that reveres information, people and customer intimacy. We need to move from share-of-market objectives to share-of-customer objectives.
"We need to fall in love," Laverty said.
"We don't have to accept the belief that growth will come only through scale, from being the biggest, baddest dude on the block. It can also come from being nimble, using technology to generate information as well as operations efficiencies, and focusing like a laser beam on customers that bring the most value to our businesses.
"And when we know who they are, it's love at first sight. It's ultimately restructuring everything we do to woo them, please them and develop a bond that will stand the test of time.
"We have the means today to become intimately acquainted with each and every customer -- to know who they are, what they buy, how to influence their behavior and how to make them fall in love with us.
"The real key to a share-of-customer strategy is to give them good reasons to fall in love." According to Laverty, the historic rule of thumb in the industry is that 20% of customers provide 50% of sales and 65% of profits, "and now that we can identify the 20% at the top, we know who to court, who to fall in love with.
"We want to get to know them better, shower them with gifts, secure ever greater amounts of loyalty and ultimately enter into a long-term relationship."
Using information technology, retailers need to look at that customer segment, Laverty said
-- "to browse their kitchens; understand their quirks, preferences, likes and dislikes; and continually find new and better ways to please them.
"This information could result in pricing by customer cluster, assortment changes based on customer segment need, specialized services and ultimately changes in store design. And the result can be a greater share-of-customers, leading to dynamic growth in both sales and profits." The flip-side to the equation is using information to know when to break up with a customer or customer segment, Laverty said.
"Using today's technology, we were able to get inside their shopping carts and take a look around, and there wasn't anything else in there. So we fell out of love with these customers instantly, which meant no more flowers, no more candy and no more volume discounts at the same level."