Changing Strategy Without Losing Your Customers - Three Vital Steps to Refining Your Strategy

American Eagle Outfitters and Wet Seal Stores have issued statements about company turnarounds needed to cut sales loses. This kind of story occurs far too often: a business disconnects from their customers because the company either wants to sell to a larger customer base or they want to upgrade to a more prestigious look.

The Strategy:

The strategy may seem initially correct. Here are some examples:

==> Three years ago American Eagle decided to shift from its targeted customer, the high school teen, to the college student body by offering more sophisticated styles. Their intent was to grow up with their customers.

==> Wet Seal felt they had to react when competitor Forever 21 started to offer more trendy items. Wet Seal decided to distinguish itself by upgrading the quality of the products.

==> In an attempt to end a downturn in market share, McDonald's decided to upgrade their menu selections. They introduced higher priced specialties, super sizes, and upped prices on their traditional favorites.

==> Remember when Farmer Jack closed their stores for several days to go to everyday low pricing? It was their attempt to recapture the value-minded customers they had lost to Wal-Mart and Meijer. At the same time, Kroger, which was always positioned on quality and variety, was upscaling to compete with Whole Foods Market and other specialty chains.

==> Unlike Wal-Mart where Sam Walton and his company leaders understood the low-price business, Kmart executives moved into the posh suburbs of Detroit. While Sam continued to relate to his customers, even driving his own ancient pick-up truck, Kmart's CEO had a driver behind the wheel of his luxury car. It is no wonder he became uncomfortable running a discount store chain and wanted to impress his upper-class friends by upscaling the stores.

The Mistakes:

Each of the these five organizations made a fundamental mistake in changing their strategy.

==> American Eagle overlooked the fact that as youth grow into adulthood, they want to leave behind the things of youth. Although a favorite among adolescents, the college customer wants to move from high school and show they have grown up. American Eagle is one of those things they want to leave behind. American Eagle needed to concentrate on building their high school business.

==> Wet Seal was disconnected from their customer. When they differentiated from Forever 21 with higher quality and prices, they forgot that their customer base was more disposable. They wanted new swimsuits through the season, not one suit that will last a couple of years, especially because the trend cycle is shorter.

==> McDonald's decision to upscale ignored their marketposition as a low-cost fast food retailer. They struggled until they developed the dollar menu, which has brought back their base customer. Keeping the upscale menu items, the chain is able to address the desires of a changing national diet while retaining the customers that made them strong.

==> Although Farmer Jack's move was probably the right thing to do, the corporate executives at parent A&P did not understand the margin structure for everyday low pricing, raising prices to the previous high-low strategy. By abandoning ELP, Farmer Jack returned to poor results, sealing the death of the chain. However the Kroger strategy worked because it did not change the customer base.

==> Kmart's move was a disaster at the check-out. To further kill the company, the executive was replaced by a new CEO. This CEO was from an exclusive suburb of New York City and owned upscale "The Museum Company". Although financially astute, there was no chance he would relate to the Kmart base customer that craved Big Red chewing gum instead of Altoids. The company entered a downward spiral that would end in bankruptcy.

Underlying Principle

Let's shift for a moment to corporate culture. The number one problem with changing a corporate culture is that the current corporate leaders see the culture as a comfort zone. The existing culture is what made them successful, therefore it works (at least in their minds). The idea of changing a corporate culture, even for improved productivity or bottom-line results, takes the executives out of their comfort zone - therefore they do not embrace a changed culture. In fact, most will undermine or be outright hostile to a change in corporate culture.

To prove the point, how many executives do you know that have taken their company to casual attire yet still wear a tie? If you know of even one you know too many. Although they may make great sounding excuses as to why they need to wear the tie, the reality is that they have not bought into the changed culture.

The Core Problem

Back to the idea of knowing your company roots, these same "culture-change-fearing" executives will quickly embrace an upscale strategy that ignores the existing customer base. Why? The new strategy is in some way close to their comfort zone. The customer perspective becomes unimportant as the comfort-zone factor kicks in.

This is what the unsuccessful companies above did. In one form or another, they tried to change their customer base. Executives will make this product or service change because these high-paid executives are attempting to take their customers to a place more in line with their own shopping desires or where their acquaintances will give them the most admiration.

Three Vital Steps to Refining Your Strategy

There are three vital steps to take if you want to successfully change your stategy to add more value to your customer. To receive these steps, request the FREE PDF file at www.getmaximpact.com/RequestArticle-Strategy.html.

Rick Weaver is President of Max Impact, a national leadership and organization development company based in Rochester Hills, Michigan. Rick is an accomplished business executive with experience in retail, market analysis, supply chain and project management, team building, and process improvement. He has worked with hundreds of companies to improve sales, processes, and bottom-line results. MaxImpact offers leadership and organizational development services along with employee assessments and background checks. Contact Rick at 248-802-6138 or via email, rick@getmaximpact.com. MaxImpact is on the web at http://www.getmaximpact.com

---

Dayton, OH; Why your Company needs to expand there

In Ohio: besides the 3-Cs you should look at Akron,... Read More

Business Plan Long Term Goals

Writing a business plan is not an easy endeavor, nor... Read More

10 Critical Facts to Put On the Cover of Your Business Plan...

In most business plans, no matter how striking the idea,... Read More

Art of Succession Planning

Succession planning, like any business acumen, is both an art... Read More

How to Grow Your Business by Clearing the Way to Growth

Is your business growing as fast and effectively as it... Read More

Business Planning and the ?Bozo? Factor

"Bozo" ? A clown with a forlorn look, always finding... Read More

Hunters and Gatherers - Are You Serving Both Their Needs?

The University of Exeter in the United Kingdom recently published... Read More

Microsoft Great Plains Implementation: Placement/Recruiting Agency example ? overview for consultant

Microsoft Great Plains does wonderful ERP job for horizontal markets... Read More

How to Develop a Successful Board of Advisors (...and Why You Should!)

In today's rapidly changing and highly competitive markets, many privately... Read More

Succession Planning: Problems Getting Started

A survey released by the American Institute of Certified Public... Read More

Vendor Relations Strategies Sample Outline

One of the quintessential parts to any business is your... Read More

Dotcom Business Plans Archive Project

One of the most important initiatives in the domain of... Read More

Titanic Precautions

Many movies have been made about the tragic story of... Read More

Break-Even Analysis

A significant advantage of some business ideas is that the... Read More

Site Selection and Demographic Tips for Establishing Outlets

Many cities have home pages on the Internet. Many of... Read More

Top Reasons To Form A Strategic Business Alliance

A strategic alliance is when two or more businesses join... Read More

Why Do a Business Plan?

To Grow (Catapult) Your Business That's Why.When it's in your... Read More

Business Ideas: 3 Smart Ways To Generate Profitable Business Ideas Anytime

Creativity is one of the greatest tools for success in... Read More

Why You Need a Business Planning System NOT a Business Plan

When someone mentions business planning we have been conditioned to... Read More

Clearing the Path: 4 Ways Fear Wreaks Havoc on Your Dream and What to Do About It

Please take a moment before you read any further and... Read More

Creating a Vision That Achieves Results

How important is a vision statement to your company or... Read More

Microsoft Great Plains in Agriculture ? implementation highlights

In this small article we'll concentrate on farmers associations and... Read More

More Uses for Your Business Plan

You have invested a lot of time and energy on... Read More

Nine Succession Planning Mistakes Small Businesses Should Avoid

1. Attempt Succession Planning Without Other Strategic Plans. Succession plans... Read More

City of Cortez and South Western Colorado Market Survey

We have been spending many hours surveying the market for... Read More

Mining Market Data

With a heightened awareness of opportunity, ideas can often be... Read More

Elite Positioning Brings Higher Profits

Imagine spending the same amount of money on marketing and... Read More

The Best Entity to Hold Real Estate

Possibly THE most frequently asked question of me is "What... Read More

Strategic Planning Fundamentals

Strategic planning is vital while starting a new business or... Read More

Three Easy Ways To Know Thy Competitor

"Did you hear what your competitor is doing?" This question... Read More

Financing Business Expansion for Your Small Company

How you finance the expansion of your business is important.... Read More

Water Conservation and Water Issues for Mobile Car Washers and Auto Detailers

Obviously, there will never be an actual water shortage since... Read More

The Six Sigma Method and Design of Experiments

Six Sigma is becoming a proven approach for businesses and... Read More