Aligning the Labor Model with the Customer Experience

Transcription

1 WHITE PAPER Aligning the Labor Model with the Customer Experience Part 1 of a 3-Part Series: Measuring the Success of a Retail Labor Model Stephen Strohecker, Kronos Retail Strategic Advisor See the other white papers in this series, Part 2: How Traditional Methods for Gauging the Customer Experience Fall Short and Part 3: Best Practices for Measuring the Customer Experience and Success of the Labor Model.

2 UNDERSTANDING THE RETAIL CUSTOMER EXPERIENCE Retailers know that a key driver of customer loyalty is their ability to deliver a unique, compelling customer experience. It s the success or failure of this experience that differentiates retailers from the competition. The influence of customer experience on retail success is not new. You could argue that the importance of the retail customer experience dates to the origins of retail itself. And over the past 100 years, the customer experience has evolved significantly. Retail innovators like Clarence Saunders, Bernard Kroger, Sam Walton, Arthur Blank, and Bernie Marcus have changed how customers shop for products and services, and built successful retail enterprises by driving loyalty through the experience. Take grocery as an example. Clarence Saunders, the founder of Piggly Wiggly grocery stores, is credited with creating the first self-service grocery store in Prior to selfservice, customers wrote out a shopping list and handed it to their grocer, who then picked all the items on the list for the customer. Self-service changed the industry by allowing customers to experience the store, walk the store floor, and self-select items like produce, meat, and deli. Today, grocery, like all retail, continues to innovate and challenge the traditional shopping experience. Grocers use promotions, merchandising displays, in-store signage, decor, aromas, and other techniques to lure customers into the store and drive more items into the basket. Retailers like Stew Leonard s and IKEA provide shoppers with an experience unmatched by competitors. These stores are destinations, and many customers plan their trips days in advance. Costco, the second-largest U.S. retailer, attracts customers from miles away because shoppers know they will experience a warehouse feel while buying everyday items in bulk at reduced prices. Entire families climb into minivans to head to Costco to taste samples, push oversized shopping carts, fight crowds, and grab a $1 hot dog on their way out. You could argue that these customers are more interested in the value of the experience of buying goods than they are in the value of the goods themselves. The shopping experience is so powerful that it can even override potentially negative aspects. In a Costco warehouse, customers might have to stand in line at checkout, yet they never complain because their perception tells them that the value of the experience is worth the wait time. Conversely, in the local grocery down the road, customers may balk at waiting because they perceive the delay as an interruption in their day. Retailers succeed and fail on their ability to deliver a relevant, competitive customer experience. SUCCESS AND FAILURE ARE TIED TO THE CUSTOMER EXPERIENCE Retailers succeed and fail on their ability to deliver a relevant, competitive customer experience. In daily business journals, we read the stories of long-standing retailers struggling to drive traffic into stores. In 2016 and 2017, a number of major retailers closed all of their stores while others reported a significant number of closings. These retailers had all been successful at one point in time; some were billion-dollar organizations. But faced with declining foot traffic, pricing pressure, online competition, product mix, and other challenging store conditions, they eventually closed. While there can be many reasons for the exodus of customers, if a retailer is unable to offer a compelling, loyaltydriven customer experience, it will always struggle. 1 Piggly Wiggly, Where It Began, found at 2

3 While some retailers fail, others continue to thrive, grow, and introduce new retail innovations. Wegmans, a destination for grocery and made-to-order items, is a long-standing retailer that continues to grow and innovate in order to stay relevant and drive traffic. And despite the rise of retailer bankruptcies, we still see retailers like Five Below and Harbor Freight expanding rapidly and creating successful formats for delivering arguably the same products as other, failing retailers. Retailers realize that the customer experience is key to success. And more retailers are recognizing that the customer experience is one differentiator that can help protect them against competition from traditional and online retailers. The focus has become so important that many retailer organizations have added Customer Experience as a dedicated business support function structure led by a C-,E-, or VP-level executive within the organization....customer experience refers to the day in the life of a customer who enters a store or an online shopping site. It represents the sensory perception a customer feels as they navigate the shopping environment. DEFINING THE CUSTOMER EXPERIENCE So what is the customer experience? We hear the term frequently in the retail industry. Used in both traditional and online forms of retail, customer experience refers to the day in the life of a customer who enters a store or an online shopping site. It represents the sensory perception a customer feels as they navigate the shopping environment. Let s walk through a typical grocery shopping example. Jill, our example shopper, pulls into the parking lot of her favorite grocery store and is pleased to find a wide-open parking lot, free from all the previously used shopping carts and cleared of snow and debris from last night s snowstorm. Jill parks her car and walks to the front entrance, which is treated with deicer for her protection, and selects a shopping cart that is dry and free of snow and ice. She enters the store and grabs the weekly flyer and is driven to hunger by the smell of rotisserie chicken coming from the deli in the back of the store. She puts the flyer in her cart and turns to walk through the produce section where she finds apples and oranges piled high in neatly formed pyramids, with all the apple stems pointing in the same direction. She walks through the produce section without slipping and falling because the produce clerk just finished picking up loose debris from grapes that were dropped by another customer. She stops at the blueberries and puts two containers in her cart because the signage informs her of a buy one, get one free promotion. She then goes to the deli and orders one rotisserie chicken, one pound of deli ham, and one pound of cheese. The deli clerk slices a piece of ham and presents it to Jill for her approval on the thickness. The clerk then slices the cheese and adds a layer of cellophane between each slice to prevent the cheese slices from sticking together. Jill finishes her shopping by stopping in the dairy department to pick up milk and yogurt. She finds her favorite yogurt is out of stock on the shelf, but lucky for her, a dairy clerk is nearby to walk to the back room to bring out a new case for her. 3

4 Although many factors have contributed to the customer experience, there is one element that is common to all store labor hours. Jill then goes to the checkout where she finds all lanes are open and only one customer is waiting at each register. She chooses a lane and places her items on the conveyor and waits. Soon, she is greeted pleasantly by the cashier, who asks her for a loyalty card, reminds her about a charitable program that she can donate to during the payment process, and begins scanning items. As the cashier scans, the bagger steps to the end of the checkout and begins bagging Jill s items. Jill pays, is thanked for shopping at the store and heads back to her car. She is greeted at the sidewalk by a lot attendant who asks if she needs help loading her purchases into her car. She declines the offer of help and finishes her trip. In this example, we see that many factors contribute to Jill s shopping experience. The retailer has set standards for operations, merchandising, in-store signage, and customer service that, when executed consistently, provide Jill with an experience that she enjoys and that captures her loyalty. Although many factors have contributed to the customer experience, there is one element that is common to all store labor hours. Associates in the store are responsible for ensuring that the parking lot is free of stray shopping carts, the sidewalk is deiced, and shopping carts are clean and usable. Associates set out the weekly flyer, put up the signage, cook the chicken to create the aroma, and slice the deli meat to the proper thickness. Without coverage in the dairy department, Jill might have walked away without making a yogurt purchase. And with fewer checkouts opened, Jill might have been irritated by the wait and motivated to try a competitor next time. DEFINING A SUCCESSFUL CUSTOMER EXPERIENCE Successful retailers have well-documented operating, merchandising, marketing, and customer service standards. Store managers and associates are trained on these standards and aware that they need to execute best practices and procedures. Many retailers define metrics and manage performance to these metrics to ensure that the customer experience is executed in a standardized manner across all stores. Examples of these metrics include: Total Sales, Total Sales vs. Last Year Total Units, Total Units vs. Last Year Speed of Checkout or Queue Length In-Stock Position (Inventory Management and On Shelf) Task Execution (Operations, Merchandising, Marketing) Conversion Sales per Shopper Average Item Retail Items per Basket CSAT Scores Mystery Shopping Scores 4

5 Successful retailers are those that have a consistent set of expectations for the customer experience that are understood and acted upon by all stores. Too often, retailers create unnecessary complexity that can confuse field operations when expectations are continuously changed from period to period or quarter to quarter. Stores lose focus on the company mission and start providing the experience that they believe will allow them to be most successful, resulting in inconsistencies that can damage brand identity. THE ROLE OF THE RETAIL LABOR MODEL The retail labor model is a tool used by the retail operations support team or the labor workforce management team to determine the number and cost of labor hours required to operate each individual store within the retail enterprise. A retail labor model is used to build the annual labor budget, build weekly and period labor forecasts, and determine actual labor performance. In addition to financial and operational planning, the model serves a useful purpose in estimating the impact of store process change. A properly designed labor model is founded on industrial engineered labor standards, using either pre-determined time methods or work measurement methods. Labor standards provide a professionally measured estimate for the units of time required to complete all tasking, selling, and customer service in the store. RELYING ON A DEFINED CUSTOMER EXPERIENCE Building a labor model requires a business to first fully define and document the customer experience in the form of operational, merchandising, marketing, customer service, and selling standard procedures. All labor models should be designed to achieve a customer experience expectation that is approved at the highest levels of the organization and fully communicated to all business support and field operations teams. Labor engineers rely on documented standard procedures for measuring time standards and use these procedures to ensure that what is being measured is what is expected by the business. Using documented procedures, labor engineers design a work measurement plan and use the procedures to ensure that the final labor model provides enough time to accomplish everything that is expected. Customer experience expectations and associated documented procedures require executive-level approval. All labor models should be designed to achieve a customer experience expectation that is approved at the highest levels of the organization and fully communicated to all business support and field operations teams. MODIFYING THE LABOR MODEL AS EXPECTATIONS CHANGE The labor model must change as business customer experience expectations change. When a standard changes, labor engineers must estimate the impact and update the labor model accordingly. Updating and auditing the labor model are key to the success of labor workforce management, making labor engineering an ongoing effort that requires fulltime retail operational resources or an annual budget for utilizing third-party engineers. 5

6 MEASURING THE SUCCESS OF THE LABOR MODEL The labor model is one of the main drivers for enabling the customer experience at the store level. Retailers should view customer experience success as one of the key success criteria of the labor model. The labor model arguably serves two purposes: enabling the customer experience and enabling the financial goals of the organization. While financial performance is simple to measure on the P&L, measuring customer experience is much more complex. Retailers need to build and execute a method for determining whether the labor model is successfully enabling the customer experience. Many traditional methods exist for gauging the customer experience. Retailers utilize data and analytics, in-store technology, consumer feedback and research, and field management feedback. However, most retailers fail to utilize a more exacting approach for measuring the customer experience the use of in-store observation and sampling techniques. To learn more about aligning labor models with customer experience, read the next white paper in this series, Part 2: How Traditional Methods for Gauging the Customer Experience Fall Short. Bio Steve Strohecker, retail strategic advisor, has been working in retail for 13 years. Steve was the director of labor and workforce management for two Fortune 500 retailers and has consulted on labor and workforce management both in the U.S. and abroad. He holds a B.S. in industrial engineering and an MBA in corporate finance and investment management from Penn State University Kronos Incorporated. Kronos and the Kronos logo are registered trademarks and Workforce Innovation That Works is a trademark of Kronos Incorporated or a related company. For a full list of Kronos trademarks, please visit the trademarks page at All other trademarks, if any, are property of their respective owners. All specifications are subject to change. All rights reserved. SV0247-USv1