Understanding Customer Behavior

Every retailer spends a good portion of his day trying to figure out how best to serve his customers. But frankly, customers and their motivations can throw even the best retailers for a loop.

By John Lofstock, Editor.

“The customer is always right” is a mantra that convenience store owners hear over and over again. Of course, anyone who has ever worked in retail knows this way of thinking doesn’t always hold water. In fact, sometimes customers are just plain wrong. They misunderstand products, what a store can do, how business is done, what pricing is realistic, and so on.

But, according to retail expert and author Chip Averwater, if you don’t want your retail store to join the estimated 95% of failed ventures, you’d better figure out quickly that even when the customers are wrong, they’re right.

“It’s a retail truth that you simply have to come to terms with if you want a successful store,” said Averwater, author of the new book “Retail Truths: The Unconventional Wisdom of Retailing. “If you show customers they’re wrong or how much they don’t know, you only embarrass them and increase their unhappiness with your organization. It’s almost always more productive to swallow your pride, apologize for the perceived injustice, and make it ‘right.’ Always remember, your win is getting the business and keeping the customer.”

A third generation retailer who has spent 38 years building his own stores and assisting others, Averwater has quite a bit of experience. In “Retail Truths,” he provides a compendium of over 400 lessons for retailers that often have to be learned in the school of hard knocks. The book covers everything from selling to pricing to employee management, and yes, even what to do with your sometimes pesky, often great customers.

“Remember, every shopper chooses one store for their purchase,” Averwater said. “The one they feel offers the best value—not just quality and price but convenience, selection, security, atmosphere, etc. And while customers sometimes come with complaints and other eccentricities, when they choose you and your store, you should feel honored. When you learn to love your customers, warts and all, you and your business will be better for it.”

Building Trust
Retail doesn’t get rave reviews and sometimes the truth hurts. Most shoppers like to complain about things ranging from a crowded store, a busy parking lot or long lines. The list could go on forever. So considering the army of talented business people focused on it, why can’t retail rate better satisfaction?

“One theory is that consumers experience retailing almost daily and become highly discriminating in their standards,” Averwater said. “Also, consumers often see excellent examples of particular aspects of retailing individually, but rarely does any retailer get it all right at once. And finally, retailers who do manage to get it all right are too expensive to be competitive. Whatever the reason, you should accept up front that you’ll get little sympathy from customers. Their patience is thin, their budgets are stretched, and they are ever-conscious of their power to take their business elsewhere.”

Averwater stressed that it is always important to make sure the customer leaves happy, even if you have to give something away at a loss. “Be-backs don’t come back. When rookies hear customers say they will come back to purchase something, they congratulate themselves on a future sale. But a more experienced retailer knows that a sale has just walked out the door, probably for good,” Averwater said.

“I’ll be back” is something customers say to extricate themselves from the situation without disappointing the employees. Even those customers who believe they’ll come back seldom do; they get distracted, lose their motivation, find other options, or simply procrastinate.

“When customers say they will come back, you should ask if you’ve answered all their questions and provided enough information,” Averwater recommended. “If customers are receptive to further discussion, keep asking questions and providing information. And if they are finished with the conversation, offer to send them some additional information via email or a phone call. With persistence, maybe you’ll convince your be-back to come back.”

Happy customers come and go, but unhappy customers accumulate. Except for the small percentage of loyal die-hard customers you might have, Averwater believes happy customers aren’t necessarily customers for life.

“The truth is, satisfied customers might do business with you again since you’ve proven yourself to be a trustworthy source, but you’re still only one of many,” he said. “However, dissatisfied customers have longer memories and look for opportunities to warn others away. They’re expensive enemies to have.”

Dealing With Difficulties
Complaints are signs that your customers want you to do better. No retailer likes to receive complaints, so it’s tempting to write them off as flukes or as feedback from people who are just determined to be unhappy. But here’s the cold, hard truth: When a customer complains, it often means many others feel the same way, but don’t bother to tell us—instead they take their business elsewhere. Consequently, one complaint represents an opportunity to improve service to all of your customers.

“You should welcome those few customers who take the initiative to tell you what needs improvement,” Averwater urged. “It’s information you vitally need, and, although it might not be pleasant to receive it, these customers are going out of their way to help you.”

Another rookie mistake some retailers make is believing that low prices can overcome poor service. Whether consciously or subconsciously, most shoppers recognize the realities of price/service trade-offs—they can have low prices or they can have good service, but not both. After all, great service in retailing isn’t a secret formula—it’s mostly a matter of the quantity and quality of a retailer’s employees.

“I think we can all agree that every retailer would improve service by hiring more and better people…if price competition didn’t constrain expenses,” points out Averwater. “But since we don’t live in a perfect world, retailers must find a balance between service and price that appeals to customers. Sometimes a cheaper price with lower service works out, but often it leads to disappointment and dissatisfaction. So here’s the bottom line: Never believe the rationalization that poor service doesn’t matter if your prices are low enough.”

There is a reason many retailers don’t see their competitors’ happy customers. Inevitably, you’ll encounter a customer who comes to you because she is dissatisfied with the competition. At this point, you’ll be tempted to assume that this customer is representative of everyone who does business with your competitor. However, Averwater said that the complaints heard about the competition aren’t a balanced picture. Only their dissatisfied customers come see you; their satisfied customers have bought, are happy, and have no reason to be in your store.

“Whether the result of mistakes, misunderstandings or unrealistic expectations, even a great store has a few unhappy customers,” Averwater said. “Although sometimes vocal, these disgruntled shoppers are usually not representative of typical business experiences with your competitor.”

Also, storeowners should always remember that while you’re seeing your competitors’ mistakes, they’re seeing yours. Agitating and aggravating are likely to be repaid
in kind.

“Because I truly believe that 99% of retailers want nothing more than to make their customers happy, sometimes the truths about those customers can be the hardest to admit,” Averwater said. “We simply don’t want to think about our customers not liking our stores. But when you admit these truths are out there, you can begin to implement ways to keep your customers happy, keep them coming through your doors, and most importantly, keep them buying from you.”

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