When the economy was hit hard in 2008, many retailers in the United States adopted strategies for cutting costs. For many companies, there seemed to be very few options as far keeping costs down and the first place that they looked for savings was in their labour costs. This had a definite impact that is still being felt by consumers.
One of the most popular cost saving methods in the United States was (and often still is) downsizing, or, as many prefer to call it, rightsizing. But this trend has led to major impacts as far as customer retention. Saving profits by cutting the cost of employee overhead can mean gains short term, but what about long term?
A recent Ernst and Young report, Cutting Costs Not Customers, relayed some important things that need to be considered with regard to staff reductions and their impact on customer retention:
1. Retailer’s cost-saving initiatives are likely to reduce the support offered to core customers, thereby reducing customer loyalty.
2.Customers are likely to see staff cost cutting changes, such as staff reductions, as making their lives more difficult.
These two major conclusions say a great deal about the difference in trends between how U.S. and Canadian retailers handle customer retention. If layoffs mean fewer employees in-store, customers are likely to notice these reductions, thereby feeling a decrease in customer loyalty and customer retention.
How do staff reductions impact customer retention? Think about it this way, if line ups at one retailer seem to be long every time a customer shops, the decision to shop there may be compromised. What about if product is not stocked, or can’t be found, and there are no employees around to ask for assistance. Profits will inevitably begin to decrease if a customer finds very little satisfaction in their shopping experience.
In Canada however, the trend seems to be very different. One of the main differences, especially more recently, is the fact that Canadian CPG companies are recognizing that layoffs are not the way to go, especially when focusing on customer retention. Instead, Canadian companies tend to focus more on long term goals and how to achieve them. Since sales, realistically, depend solely on consumers, it is common sense to remain focused on them.
So how, then, do Canadian companies focus on customer retention? A strong merchandising plan that accomplishes things like promotional experiential marketing or relies on in-store people support at peak times makes sure that customer experience does not suffer. Although some staff reductions may be called for, they are not the only solution, and are used in a balanced approach.
When you focus on customer retention, layoffs should be the farthest things from your mind. After all, cutting costs now can lead to major losses because of a dwindling customer service experience. For more information about how a Canadian merchandising company can help you keep costs down while ramping up customer retention, please contact Storesupport by calling 1-877-421-5081 or visit www.storesupport.ca.