Wal-Mart's (Latest) Identity Crisis
by Steve McKee
Wal-Mart is a study in contrasts.
Its low prices are awesome. Its shopping experience, not so much. Its positioning is terrific, but its advertising leaves something to be desired. It serves well its paycheck-to-paycheck customers, but panders too much to the politically correct.
Wal-Mart has a rock-solid heritage in founder Sam Walton, but too often loses sight of what makes it special. The latest example came in the form of an announcement last week that the company was cutting prices on some 10,000 items. With any other retailer that would be cause for celebration, but with Wal-Mart it's just disappointing.
Wal-Mart = Low Prices. Period. Not margins. Not promotions. Not rollbacks. If prices are always as low as possible - as Wal-Mart has worked so hard for so long to convince us of - how then can they be cut, especially across such a wide swath of products? In one of its "rollback" TV commercials, Mike the truck driver says, "just by driving smarter routes and making sure our trailers are packed fuller, we save millions of dollars on fuel costs." Does the world's leanest company expect us to believe that it just figured that one out?
In an April 9 story about the price cuts, the Wall Street Journal's Miguel Bustillo and Timothy W. Martin cited a J.P. Morgan analyst whose regular Wal-Mart price survey resulted in a bill 2.3% higher than it was in the previous month. That's a pretty big jump. While it's any company's prerogative to raise or lower its prices, Bustillo and Martin wondered "...whether Wal-Mart is committed to pushing the envelope on pricing as it did in the days of its late founder, Sam Walton, or is it merely hyping promotions as it pursues a more margin-driven approach?"
Judging from what Wal-Mart CMO Stephen Quinn said of the cuts, it appears to be the latter: "We felt we needed to increase the intensity and excitement with our customer, especially the feeling that Wal-Mart has great deals."
Yuck. "Great deals," "hyping promotions" and "a more margin-driven approach" are what you'd expect from Kroger or Macy's, not Wal-Mart. I don't know about you, but I expect the "great deals" at Wal-Mart to be baked into its everyday low prices, not used as underpinnings of a grand promotion.
Like many companies trying to cope with slowing sales, Wal-Mart can be its own worst enemy. Instead of fiddling with margins and flirting with upscale customers, Wal-Mart should aggressively tout its all-the-time, every-day, low-low-lowest prices. Always. It's the one company with the credibility to do so, and promotions like this threaten that very crediblity. Wal-Mart needs its customers to believe that it always - always - gives them the lowest prices it can.
That's what made Wal-Mart, Wal-Mart. It shouldn't mess with success.
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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.
Wal-Mart is a study in contrasts.Its low prices are awesome. Its shopping experience, not so much. Its positioning is terrific, but its advertising leaves something to be desired. It serves well its paycheck-to-paycheck customers, but panders too much to the politically correct.
Wal-Mart has a rock-solid heritage in founder Sam Walton, but too often loses sight of what makes it special. The latest example came in the form of an announcement last week that the company was cutting prices on some 10,000 items. With any other retailer that would be cause for celebration, but with Wal-Mart it's just disappointing.
Wal-Mart = Low Prices. Period. Not margins. Not promotions. Not rollbacks. If prices are always as low as possible - as Wal-Mart has worked so hard for so long to convince us of - how then can they be cut, especially across such a wide swath of products? In one of its "rollback" TV commercials, Mike the truck driver says, "just by driving smarter routes and making sure our trailers are packed fuller, we save millions of dollars on fuel costs." Does the world's leanest company expect us to believe that it just figured that one out?
In an April 9 story about the price cuts, the Wall Street Journal's Miguel Bustillo and Timothy W. Martin cited a J.P. Morgan analyst whose regular Wal-Mart price survey resulted in a bill 2.3% higher than it was in the previous month. That's a pretty big jump. While it's any company's prerogative to raise or lower its prices, Bustillo and Martin wondered "...whether Wal-Mart is committed to pushing the envelope on pricing as it did in the days of its late founder, Sam Walton, or is it merely hyping promotions as it pursues a more margin-driven approach?"
Judging from what Wal-Mart CMO Stephen Quinn said of the cuts, it appears to be the latter: "We felt we needed to increase the intensity and excitement with our customer, especially the feeling that Wal-Mart has great deals."
Yuck. "Great deals," "hyping promotions" and "a more margin-driven approach" are what you'd expect from Kroger or Macy's, not Wal-Mart. I don't know about you, but I expect the "great deals" at Wal-Mart to be baked into its everyday low prices, not used as underpinnings of a grand promotion.
Like many companies trying to cope with slowing sales, Wal-Mart can be its own worst enemy. Instead of fiddling with margins and flirting with upscale customers, Wal-Mart should aggressively tout its all-the-time, every-day, low-low-lowest prices. Always. It's the one company with the credibility to do so, and promotions like this threaten that very crediblity. Wal-Mart needs its customers to believe that it always - always - gives them the lowest prices it can.
That's what made Wal-Mart, Wal-Mart. It shouldn't mess with success.
Don't miss an article - Subscribe to our RSS feed and join our Continuous Innovation group!
Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.Labels: Leadership, marketing, Steve McKee, Strategy
posted by Blogging Innovation at 12:05 AM
1 Comments:
It has always appeared to me that Walmart manages their price mix based both on margin and local/national competitive pressures. It's just that on average they are better at it than other retailers. While high profile items are always cheeper, items with less pricing awareness creep upwards.
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