In-Store Marketing: Can John Lewis teach Tesco about loyalty?

A cooking demonstration: a nice piece of customer entertainment undoubtedly, but not the most obvious or seemingly strong way to build your reputation as a retailer. However, it's this type of in-store marketing - along with customer-friendly store design and strong displays - that has helped John Lewis top Verdict Research's recent Customer Satisfaction Index (CSI), knocking Ikea off the number one spot.

Some 6,000 customers were asked to rate their favourite stores in terms of their range, price, convenience, quality, service, ambience, facilities and layout. The survey of 67 retailers revealed shoppers love the detailed product knowledge and advice available in John Lewis, and the findings confirmed the store commands a high level of trust among consumers of which most retailers can only dream. The presence of SP and product demonstrations definitely affected how consumers rated the retailer, according to the report's author, Verdict senior retail analyst Nick Gladding. "John Lewis scores highly on quality in all areas, and investment in these kinds of in-store demonstrations is certainly noticed and appreciated by shoppers."

It also forms part of a successful business model: while the British Retail Consortium was complaining that retail sales in January had hit at an 11-year low, John Lewis was reporting that trading to 28 January was up by 7.5 per cent.

The Verdict study was good news all round for the John Lewis Partnership (JLP), with stable mate Waitrose at number two, up from 20 last year.

Roger Godfrey, marketing development manager at REL field marketing, which works for John Lewis and Waitrose, believes their in-store experiential activity is the benchmark for the retail industry. "Customers do not want to run the gauntlet of over-zealous demonstrators pressurising them into product trial which can create no-go zones in stores. There is a huge difference between face-to-face and in-your-face marketing, and Waitrose and John Lewis get it right," he says.

REL employs sales advisers who can discuss with shoppers how products can be used to solve particular household problems. "With the growth in niche products, differentiating between items is a challenge for consumers," says Godfrey. "Brand owners must look to the consumer educational aspect of experiential marketing to ensure brands deliver their promise at the point of use. It is no longer enough to assume consumers will read the instructions on the label."

Of course not every product, retailer or shopper has the luxury of being able to hold or attend in-depth product demonstrations, but the universal truths are the same, according to Simon Hathaway, managing director of Saatchi & Saatchi X. "Consumers may have time to be entertained by a celebrity chef in John Lewis, but they are likely to be up against the clock when shopping for the weekly groceries in a supermarket. In-store marketing is all about turning shoppers into consumers, and brands need to learn from surveys such as Verdict's and adapt their activity to suit the mindset people are in when they visit a particular retailer."

The retailers that tend to do well in customer satisfaction studies usually have the in-store marketing balance right between what the retailer will allow, what the brand is trying to achieve and what consumers are likely to respond to.

That certainly appears to be the case at homeware and clothing chain Matalan, which came in at number four in the Verdict report. It has invested heavily in improving the ambience of its outlets and the fact its shoppers must join a membership scheme means it can devise relevant and popular in-store promotions and support them with well-targeted direct mail campaigns.

"The shopping environment in Matalan may for some people be quite poor compared with the likes of John Lewis, but its product range, pricing and marketing strategy clearly satisfies its customers," says Mike Staines, director of shopper marketing at Publicis Dialog.

With all this talk about customer satisfaction, where does the UK's biggest retailer Tesco feature in the debate? The Verdict survey lists it back at 33 - could this be early evidence that a backlash is starting against the supermarket giant? Certainly a separate brand equity study by market researchers Millward Brown confirms that although Tesco remains the most popular supermarket in terms of trade, its level of customer loyalty is on the decline. Millward Brown says Tesco's brand equity has fallen in terms of emotional affinity, popularity and price as consumers react negatively to the chain's market dominance.

Strategy review

So is more and, arguably, better in-store marketing the key to Tesco winning back consumer loyalty and satisfaction? The supermarket is looking again at its much heralded Tesco TV project - which has not appealed to advertisers as much as the grocer would have liked - and is now considering packaging the concept with other in-store marketing opportunities such as six-sheet posters, gondola ends and floor advertising.

Tesco could also decide to review the clear aisle policy it adopted to reduce the amount of marketing clutter in its stores. This would mean an increase in the number of in-store sampling and demonstrations it sanctions.

According to Tanya Sergant, managing director of Arc's experiential arm Lime, the agency that oversees all field marketing activity within Tesco, this is already happening. "Last year the number of product demonstrations increased by 10 per cent and research has shown consumers would welcome more, but Tesco has to balance this with keeping congestion to a minimum," she says.

Martin Hayward, director of customer strategy at Dunn Humby, the company that developed and operates Tesco's hugely successful Clubcard loyalty scheme, is more cautious. He says the chain's aim has always been to earn the lifetime loyalty of shoppers. "Promotional activity in-store has a short-term effect on sales and Tesco wanted to reduce noise so that if customers do see a product demonstration they know it is worth stopping to see," he says.

However, even this marks a significant shift compared with Tesco's militant stance on in-store promotions in recent years. And Hayward adds that Dunn Humby is currently being proactive in sharing the information from 12 million Clubcard holders with suppliers to help them create more engaging sales promotions. "There has had to be a lot of growing up in this market, with in-store marketers having to realise they must do things in collaboration with shoppers and not simply bombard them," he says.

Obviously there is no one-size-fits-all method of satisfying shoppers, and while the JLP model obviously works for its customers, Tesco would undoubtedly argue that its ongoing success is testament to its popularity. However, consumer tastes can change extremely quickly and not every store group can rely on the hold the grocer has over its market. A consumer-hostile in-store experience may not just disappoint in the short-term, ultimately it could lead to longer-lasting economic problems.

VERDICT TOP 10 RETAILERS Customer satisfaction index 2006 2005 Store 1 2 John Lewis 2 20 Waitrose 3 4 TK Maxx 4 10 Matalan 5 1 Ikea 6 14 Amazon 7 39 Savers 8 31 Schuh 9 23 Wilkinson 10 7 B&Q Source: Verdict Research

This article was first published on Promotions & Incentives

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