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Ignore the customer experience, lose a billion dollars (Walmart case study)
You're with Walmart. It's 2009, and you want to do something new, something transformative, to out-innovate rival Target. You have a sense that Target is cleaner, better designed, less cluttered. Walmart aisles are crammed, packed, an infinite jumble of product.
So you're thinking of launching an uncluttering project. Strategic. Huge. Millions of dollars. But before you make any changes, you want to float the idea by customers.
So you conduct a survey, asking customers: would you like Walmart aisles to be less cluttered? And they say, "Yes, now that you ask, yes, that would be nice." And you check the box by "customer input" and report back, hey everyone, good news, yes, customers like the idea.
Walmart spends hundreds of millions of dollars uncluttering their stores, removing 15% of inventory, shortening shelves, clearing aisles. Yes, it's expensive and time-consuming, but this is what customers said they wanted, so you barrel through it.
You'll never guess what happens now. (Actually, you've probably already guessed, but it sounded better to say you'll never guess.)
Sales went down. Way down. I mean waaaaaay down. I'm talking, from the beginning of that project until today, Walmart has lost over a billion dollars in sales. (Yes, billion with a "b".) It's actually closer to two billion dollars of sales they missed out on, and maybe more.
Needless to say, the executives in charge of the project have been fired, and Walmart is spending yet more money to return to its original, time-tested strategy of offering a huge (albeit cluttered) inventory at low prices.
But wait. Before the lost sales, the fired executives, the mad scramble, before all that: what was the billion-dollar mistake that caused this mess in the first place? You'll never guess.
The mistake was a lack of customer focus. I know, I know: "They ran a survey! Customers loved the idea!" But that's exactly the problem. Walmart didn't pursue the question of what customers wanted. Instead, Walmart came up with the answer first, then asked customers to agree to it. That's exactly the wrong thing to do, because it ignores customers while attempting to fool stakeholders into thinking that the strategy is customer-centered.
Put another way, Walmart based this incredibly expensive misadventure on what customers said, rather than what they did. And the customer experience is all about what customers do. In real life. No hypotheticals. Walmart acted without considering the customer experience, and that was a big mistake. (Maybe the biggest mistake a business can make, if you ask me.)
The lesson: ignoring the customer experience is an expensive mistake. Be sure to listen to customers the right way, so that you get a strategy that actually works. (And let me know if Creative Good can help. Maybe we can save you a billion dollars. That's always fun.)
P.S. For more on this story, read Phil Terry's Daily Artifacts post, which includes lots of numbers and links to press coverage. Thanks to Phil for pointing out the story.
Wow. Talk about a slap in the face. I guess that's what you get for asking a question with no "no" answer.
Awesome post - wish you had the usual social media share buttons for FB and Twitter! :)
Are they sure the new uncluttered format was the reason for the drop in revenue? Because I've been avoiding Walmart simply because of all the bad press they have gotten over their hiring practices and employee relations. I can see your point about the closed-end question, but there may be other factors at work here.
Nothing controversial in my comment here- I completely agree with your position on this.
But I'm curious. I've read every one of your newsletters for 10 years (Yes, I don't think that is an exaggeration) and yet I don't recall reading anything about the Agile framework and its close association to your philosophy and practice at Creative Good.
In the Walmart example had they simply employed the agile tenet of quick iterations, delivering minimal viable products and then testing the customer reaction, they would have found the reduced sales numbers, tried a couple more variations and then shelved the concept entirely- all for maybe only a few million dollars (cheap testing at Walmart's scale)
What are your feelings about Agile and Lean practices? Perhaps you've already adopted them but not written about it? I ask because, a) they seem to align well with your POV and b) I drank the Kool-Aid big time and have seemed incredible benefits.
@Jerome - it's just about the same amount of effort to highlight the URL, click CTRL-C, go to your FB/Twitter page or plugin, CTRL-V, and share.
That said, Mark: I don't know why it hadn't occurred to me before, but is the lack of link clutter* intentional?
*See what I did there? I asked a question with the answer already there :-)
@brian mccarthy The problem with Agile by itself is that it won't help you know why something works--just that it does (or doesn't) work. Nothing against Agile--it's necessary but not sufficient. You still need good techniques for uncovering the user experience.
Why do I suspect the drop in sales had more to do with the recession than anything else?
Great example of the importance of good customer insight, Mark. I loved your point that Wal-mart's mistake was to listen to what customers *said* rather than what they *did.*
A student taking my Digital Marketing Strategy class at Columbia B-School mentioned this case to me; I'll share your write-up with the group!
thanks,
David
@Brian - my thoughts on Agile rate a separate post. The short answer is, I think it's a good thing for teams to be efficient and flexible.. the danger is if the process starts focusing on "being able to change quickly" rather than thoughtfully building a strategy around the customer. Subtle difference with enormously different outcomes.
@Frank - not sure why you'd suspect that, as their chief competitor Amazon has enjoyed significant growth in the same recessionary environment.
@David - thanks, appreciate you sharing it! tell those MBA students to sign up for the newsletter, too :)
Floor design is very important to retailers. If Walmart did not perform a floor design analysis, then I agree that they neglected their job. Did you see this shared work: http://www.90percentofeverything.com/2011/04/10/alan-penn-on-shop-floor-plan-design-ikea-and-dark-patterns/
An interesting side note.
Walmart hired a design research firm to figure out what size their shopping carts should be, thinking that bigger would be better.
Instead, research indicated that smaller carts were better in two ways: they made it easier to get through the narrow, cluttered aisles, and customers felt that they had gotten more goods--if they used one cart it was filled up more, and if they had to use two carts to get everything they wanted, well that just emphasized how much they were getting for their money.
Wow - this is the best email I've gotten from you yet, Mark. What an illustration.
I think all too often as marketing professionals, we are tempted to try to solve the problem on our own, and then ask our constituents to agree that it is the right solution.
But when we neglect to consider them first, and their behavior, it's still just our solution and we risk having them never adopt it.
Good stuff.
I've worked on a couple of "Agile" projects, and all I can say is no Agile at all is better than Agile done wrong.
Agile as a panacea is toxic. Most organizations aren't ready for it.
This post commits the same error that it complains about. The fact that sales in Walmart (and Target) go down during a period where sales at Amazon go up suggests a very different story than, "Walmart cleaned up its aisles, making sales go down." To me it suggests more about the changing on-line shopping habits of American consumers.
In short, the author wanted to arrive a conclusion and chose some data that appeared to support his conclusion (but actually didn't). Which is exactly his larger complaint with Walmart.
@William - for completeness, you should also forward your complaint to Ad Age, AOL, and the New York Times - all of which reported the same case study and drew the same conclusion (see Daily Artifacts post for helpful links).
I was just subjected to a survey from Fiat about my new 500. They committed exactly the same errors, providing questions that led answers, and became annoyed when I pointed out that the survey likely wasn't accomplishing anything. The survey administrator told me several times when I complained about my experience with Fiat, "Well, this survey is designed to measure the experience that you had at the dealer - we're sorry for your pre-delivery experience, but we want to hear about the delivery."
Other people make the same complaint in the Daily Artifacts commentary. This is junk science.
What a great story and what a great example of the user agenda at play.
We are all familiar with the "don't ask users, watch them" addage, but so often business thinks that what users say they want to do ensures the outcome.
In fact, there are a myriad of expectations, priorities, assumptions, resistance and preferences that are likely to be subconsciously associated with the task in the user's mind.
I call that set of conscious and subconscious drivers, the user agenda, and always liken it to an iceberg. If decisions and designs are based on the iceberg they see, they must expect the same fate as the Titanic.
A lack of customer focus per se does not seem to be the main mistake in this case. I think it was the lack of BASIC systems thinking. For example, knowing that decreased clutter (obviously a "good factor") would be accompanied by reduced inventory (obviously a "bad factor"), they should've estimated the overall impact of this change and see that it'd rather hurt them than benefit them. With an annual revenue of about $400 billion, reduction of inventory by 15% alone looks like a very very dubious proposition (even if it's done in 10% of the stores only). Besides, this "decluttering" campaign was just one of the several parts of the bigger WalMart's initiative, Project Impact. For instance, another part of Project Impact was to "home in on categories where the competition can be killed". Reshaping of the inventory profile seems to be a much more likely possible source of a big revenue loss than just "decluttering" of stores.
Reminds me of Southwest Airlines' experience with asking the wrong question. http://jnd.org/dn.mss/why_is_37signals_so_arrogant.html (Bottom half of article)
This hits the nail on the head as to why I hate those surveys. They just reinforce preconceived notions about what customers want or what the organization is actually prepared to do, which is usually along he lines of ensuring that Reps are courteous, identify themselves, and maybe evoke confidence that they will handle the problem, howver this last one only works if the problem is straightforward.
I recently had negative experiences with two large organizations (a transportation and a retail operation). In the scheme of things the annoyances themselves were petty, but had a huge impact on my overall experience interacting with their so called customer (dis)service units, to the point that I wrote the respective chief executives.
In the one case, the person responding not only failed to address my problem, he also did not respond to the issues I raised in my letter. Instead he merely, repeated (or lectured) to me the same useless information provided by everyone else up to that point, and which prompted me to write. In the second case, the person at least addressed what I wrote and offered a solution to my particular problem. However **both**, totally missed the opportunities to address customer experience!
Problems are inevitable. While they need to be addressed, what is more important is to examine and address the underlying processes and policies that lead to the problems in the first place. This is more likely to happen if one focuses on the customer experience and than seeks to solve the problem within that context.
I don't know about anyone else, but what I really want when I deal with a company is to have a good or better experience with their Customer Service when trying to resolve something. In both of my recent experiences, the frontline Customer Service Reps lacked the basic information to address my issue, which than caused me to have to make multiple contacts in order to seek a resolution. In both cases the Reps should have had the information I ultimately received from someone higher up, only after much time an effort.
@Paul in Chicago
Do you know the name of the design research firm or have an article you could share that goes more in-depth. Just interested...
@Mark, Agreed. And I would love to read a post from you focused on Agile. When implemented properly I am a huge fan and feel it supports a great customer experience.
As for poor implementations, it reminds me of the quote attributed to Mohandas Gandhi, "I like your Christ, I do not like your Christians. Your Christians are so unlike your Christ."
It's all about execution.
wow Hard to believe a huge name such as Walmart didn't attend to Statistics class 101. I'm hardly an expert (barely passed my Statistics course required for my engineering graduation), but haven't they ever heard of addicted sample or tendentious survey? geez... ¬¬
I hate when the answer to all problems of low sells is too hight prices. Some of the clothing lines that Walmart now sells is so thin ( Men's Pants) that the ones I purchased shrank one size after washing the first time. I have vowed to not purchase my clothing there any more
Did anyone think that maybe sales fell because of the Chinese factor?
also the drop could be from the unsustainable roll back program that they have recently done away with.
I'm now a Target shopper. Wal-mart speedy check out is a nightmare. All the time. Target has there moments too but I get to Wal-mart parking lot and I always change my mind and go to Target. Get your managers and supervisors to step up there game. Get Costco standards and get your guests out quick.
An excellent example of why testing ideas in a live environment is better than asking in a survey. If they had just cleaned up one store to see what happens....
OK, after digging through the actual source articles, what I am getting out of the data is that this is an extremely complex move, involving an explicit decisions to emphasize customer loyalty vs. short term revenue. They saw that as the economy worsened, they picked up customers from Target who were changing their choice to emphasize cost over shopping experience (look at the third quarter of Target's sales vs. Walmart's in the chart of percent change in revenue by quarter for the period covered), and were concerned that they would lose lose customers as the economy improved. They made the changes, and customers reported really liking the changed stores, even though they were spending less. Walmart decided that this was a desirable tradeoff, because they wanted to hang on to customers as the economy improved. That gamble might not have paid off, but it was a conscious decision.
This is a very different picture than, "Walmart didn't pay attention to their customers' behavior." They paid attention.
To me, this looks like the classic war inside companies - those who want to emphasize only the current quarters' profits, versus the people who want to cultivate the customer over an extended period.
I have found 4Q Survey to be invaluable.
Q1: Why did you come here?
Q2: Did you achieve this goal?
If Y then What did you value?
If N then Why not?
Understand and measure task completition and the real roadblocks: priceless. I'll take that over a survey, focus group or committee ANY day.
I got a job at Walmart through this wacky misguided plan. A major remodeling project that was carried out by people who had no clue how to do anything. This lead to injuries, fights, mayhem. The store looked good afterward but it was even more of a death trap with the cut rate wiring. It even ran 2 months over schedule due to unskilled labor trying to figure out basic refrigerator installation. The ones in charge were cast off assistant managers who had even less of a clue that anyone, while i personally liked a few they were basically ordered to ride us like slaves 'faster, faster, hurry up' especially when the project heads came through to check on things.
All of this was hell on customers too. Every day was a potential lawsuit due to untrained people handling equipment they have no business using. Yes me included, I'm an artist by trade and this was just to make the ends meet. I'm not someone who builds things regularly.
After I was offered a regular job there being one of the few left over when the remodel ended. Which was really dehumanizing. The only good part of the job was educating people on the new tech and helping people make informed decisions on new electronics. I was never a sell sell sell guy. I was about building a rep and not bullshitting people into buying garbage. This led to regular customers and heaps of praise, that pissed off upper management that promptly figured out a way to get rid of me.
An assistant manager scheduled me at my usual times, never entered them admittedly on purpose. So when I go to clock in it comes up that i'm not on said schedule. When asked he swore to the manager that I 'didn't bother showing up' and said I abandoned my job. Blocking my unemployment and threatening to sue me if i even thought of fighting it.
I've been unemployed for over a year now with the antimatter of references. Not knowing what my next move is.
Apparently Walmart has a system that after they fire you, you can come back after 6 months if you reapply, ask for forgiveness (they don't call it that) and write something to that effect stating how you will never do it again. Essentially begging for poverty wages (in New York) and shitty treatment.
So lets just say i'm a tad bitter, seeing as I was screwed.
Not listening to customers is the least of their problems. They really have zero clue about anything. Its a beast with a reptile brain of feed mate kill. They spent millions and hired a lot of people who were way under qualified. Hell I still have the healed wrong injured shoulder from the 55 inch plasma that the guys I worked with dropped on my shoulder. They refused to get me help that day and told me not to report it or its drug tests and suspension.
Sorry for the ramble, I'm half asleep but I saw this and had to get it off my chest. I dig the post, You do good work.
I really enjoyed reading your (very well written!) article - not just because hearing about billion dollar mistakes is entertaining, but because trying to understand the customer experience is becoming an increasingly popular activity at the moment amongst small business owners.
I think this recent trend has a lot to do with the increased visibility that survey tools and email marketing services have online at the moment. I really hope that the small business owner/DIY marketeer doesn't make similarly novice-like mistakes while trying to learn more about their customers!
No facebook like button?
Fail.
Is this the exact question that was asked, or more like a summary?
"Would you like Walmart aisles to be less cluttered?"
Wow. To think you can lose a company a BILLION dollars, and just get away with being fired.
This is a good lesson for life really, to not throw an answer in someone's face, but ask an open-ended question to hopefully get a truer picture.
On a related note, I used to fill out the web-linked surveys on store receipts in the vain hope of winning a gift card. Wal-Mart's survey was not only the worst designed survey of all the stores I had tried, it may have been one of the worst I've ever seen.
Remember coke classic... new coke miss... same kind of problem... management should feel costumer... if feel only marketing huge losses arise...
It was mixing what they really wanted to do or their goals with there purpose, to make more money. It was an expensive mistake. They put the research aside to frame the conclusion, which was not what they really wanted.
Someone made an interesting point - was it really because of the uncluttering that sales fell, or it could be something else, like the Great Recession. Hopefully they did their homework...
Very interesting. As a customer I was overjoyed when they reduced the obnoxious clutter down the middle of the main store aisles. Like seriously happy. I noticed them bringing it all back over the last 6 months or so and once again I hate shopping at Walmart and go to Target whenever possible. Target is clean, neat, bright and spacious. Unfortunately my local Target does not carry food.
I think it sounds a little short sighted to assume they lost money because of non-cluttered aisles.
I pay more for everyday items at Target just so I can avoid Walmart BECAUSE of their dirty store, unfriendly employees and clutterd space. Maybe they should do a little more investigating?