Photo by Linzi.
It seems that every day we hear of another retail business suffering from declining sales. Yet at the same time, there are many new and innovative companies that are growing and capturing market share. Our work with many of these struggling retailers and brands has shown a clear trend in why these companies are not winning – they forget to focus on their core consumer.
Through the business planning process during startup, companies are forced to define and intimately learn about their target consumer. This understanding allows them to design products, marketing and a consumer experience that meets their target consumer’s needs.
However, over time and in the rush to grow, many companies lose this focus on their consumer. They either try to be all things to all people, or they miss important trends happening within their consumer target group.
Let’s look at a few examples of retailers that have missed the mark on what their customers want.
Coach: The Fall From Luxury to Mass
Luxury bag brand Coach has experienced steady sales declines, which is odd in a category that has been growing globally as consumers choose designer bags as status symbols. In North America, Coach has been desperately trying to win back consumers with little success. So, what happened?
Coach’s primary target market is men and women aged between 20 and 40 with mid to high levels of disposable income. The brand’s distinctive and easily recognizable logo was a status symbol on luxury bags and shoes that were recognized as being well-made and good value. These consumers were also drawn to the American design and heritage of fine leather goods. The company’s growth was driven through new product launches and licensing agreements, all designed to broaden the brand’s reach. During the mid-1990’s, they chose to try to accelerate their growth through expansion into outlet store malls. Suddenly, everyone was carrying a Coach handbag and the brand lost its status.
For Coach’s original customer, Value came through the status attached to being one of the few who could afford the brand. Like other luxury brands, once Coach went against what they are known for, which is an exclusive club where Coach product owners can meet their need for Connection, Coach needed to find another way to connect with customers. For those outside the target demographic, Coach was an aspirational product and the customers’ drivers for purchase were the same: Discovery, Connection and Value. With the brand becoming conveniently available everywhere, and less expensive, it was seen as common. These consumer purchase drivers were no longer being met, and consumers moved onto other brands that better met their needs.
Subway: Not so Fresh Anymore
Everyone knows the jingle “Subway, eat fresh”, and many have purchased a $5 foot-long sub to satisfy their hunger. It was fresh food and great value that drove Subway’s tremendous growth, and they have continued to add franchises in an effort to get closer to the consumer. And while opening more locations to reach more consumers satisfies the need for Convenience, Subway lost touch with the other equally important consumer drivers that deliver sales: Connection, Value, Discovery and Transparency.
In the 50 years since their launch, consumers’ tastes have changed. “Fresh” no longer means sliced meat pulled off wax paper or cooked bacon reheated in a microwave. Consumers were instead looking for locally sourced, naturally or sustainably grown food, and great value and nutrition for the price. Subway has failed to understand their customers’ evolving tastes and expectations, and failed to stay ahead of the trends.
Other newer chains, like Chipotle, have been better able to satisfy the consumer’s desire for fresh, healthy meals and have seen significant sales growth because they intimately understand their customer. Chipotle satisfies the consumer’s needs for Discovery, Value, Transparency and Connection by allowing consumers to discover other ways to enjoy a fresh healthy meal and providing Connection through the association with others who share their food values.
While Subway’s $5 foot-long sandwiches continue to deliver Value, they have not been meeting the needs of a multi-cultural customer by satisfying their need for Discovery. Subway’s menu has not evolved by introducing new flavours or new products that allow the consumer to discover a broader array of global foods.
Don’t Forget About Your Customer
Global and economic drivers affect the overall market and your customers. Understanding how these trends affect the consumer drivers, which lead to purchase, allows retailers to deliver a strategy that meets consumer needs and drives sales. It is essential to have a customer-centric retailing strategy so you can continue to satisfy your target customer’s changing needs and improve sales.