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Business Journal

How Saks Welcomes New Customers

by Susan Suffes

The luxury retailer is tackling the challenge of remaining exclusive -- without excluding casual shoppers

Picture yourself standing in front of an upscale store so well-known, its brand name transcends borders. People who have never even set foot in one of its stores know of the quality merchandise and plush atmosphere that its name evokes.

You ventured inside once before but didn’t return -- because something about the experience didn’t feel quite right. But more than a few times since, you imagined yourself joining the store’s prosperous-looking and self-assured shoppers -- in spite of hints from some of your friends that the store is "not for us," that it caters to an older clientele, and that the clothes and accessories that it carries are beyond your reach.

Privately, however, you feel that you do belong in such a posh atmosphere. So today, you decide to give the store a try again. Walking through the doors, you discover, to your delight, that you are valued.

Welcome to Saks Fifth Avenue.

Managing the "soft side" of the business

Long recognized for the elegance and beauty of its stores and merchandise, Saks set a high standard for luxury goods when it was founded in 1924. Today, 10,000 employees and 60-plus stores continue the tradition.

Offering individualized service to long-term customers is a recognized Saks tradition, and the one-on-one policy pays off. When one or more employees build a relationship with a customer, that client feels very positive emotions about her shopping experience; she feels engaged. Not surprisingly, these customers have continually expressed their high degree of satisfaction.

But three-and-a-half years ago, Saks realized that it faced a serious challenge in attracting and welcoming new customers.

When it came to the numbers side of its business, Saks did an effective job of tracking what was selling and what wasn’t, as well as the productivity of individual employees. But those numbers, Saks management discovered, didn’t reveal what the company could achieve if it fostered a work environment that changed the way all customers were treated. The difficulty would be to manage the "soft side" of the business -- that is, what customers and employees felt.

Saks management recognized this reality when their qualitative research revealed that a significant number of casual shoppers did not perceive the same level of service that long-standing customers enjoyed.

Many of its casual shoppers reported feeling that they somehow didn’t "belong" in Saks; some were the children of long-time Saks customers. Younger customers assumed that the store didn’t carry the merchandise they liked. They felt that its appeal was geared to older, wealthier customers. And even when the stores stocked the kind of apparel they often sought, this potentially large customer base stayed away.

Engaging this potentially lucrative customer segment meant that Saks would have to overcome two challenges: How could the store develop and keep new customers and grow without sacrificing its traditions -- or its traditional customer base? And how could Saks remain exclusive without excluding anyone?

Saks determined that the answer was to give every customer who walked through its doors the most inviting luxury experience in the world.

"Most customers are exposed to all kinds of awful service in their daily lives, and they’ve become acclimated to it," says John Woodward, Saks’ executive vice president for human resources. "What customers want from us is a positive, personalized experience."

Taking action

To address its customer engagement challenge, first Saks tackled the inconsistent behavior of its sales associates. From talking to its own employees, Saks knew that many associates didn’t treat all customers the same way. Anonymous customers received different service than those with whom the associates enjoyed one-on-one relationships. Some associates checked out what customers wore to help determine their style, so they could then direct customers to the appropriate racks or aisles. Other associates left browsers alone until they asked for help. Still others declared that some customers looked like they knew what they wanted and didn’t require any help.

The rapport and warmth experienced by regular clients wasn’t being extended to casual shoppers. Many of these customers felt that they were being judged, rather than accepted -- and found this disappointing.

After Saks better understood these associates’ behaviors, the company began working with Gallup to address two basic questions:

  • What happened between sales associates and their return customers that resulted in high levels of engagement?
  • How could that experience be replicated in every customer interaction so that all customers could become engaged?

To answer the first question, Gallup developed a one-time survey to identify customer priorities, according to Thomas Hartley, a Gallup managing consultant. This survey, which covered many aspects of the service experience, the shopping environment, and the merchandise, was given to a large cross section of customers. Gallup researchers analyzed the answers and isolated 15 questions that showed the strongest linkages to customer engagement.

Next, Saks needed to replicate positive customer experiences across a range of stores and among sales associates. Gallup recommended a key addition to Saks’ performance management system: a quarterly measurement of associates’ interactions with customers from the point of view of both long-standing customers and the casual shoppers Saks was beginning to court.

"Gallup began interviewing seventy-five randomly selected customers per store, using this fifteen-item questionnaire," Hartley says. "Store managers then received store-level scorecards each quarter, summarizing the responses. These scorecards helped managers focus on where changes were needed. The scorecards -- and the action plans that come from them -- have driven the variance reduction that Saks wants."

Saks management used baseline scores to create a set of standards. For the first time, the performance appraisals of managers and associates would include their customers’ ratings of the service they received. Accountability would play a critical role in getting stores to drive customer engagement aggressively.

Store by store, managers were encouraged to create their own programs to engage customers. To help that happen, "A best practices advisory team comprised of managers from the stores with the highest engagement scores was formed," says Jay Redman, vice president of service, selling, and training at Saks. "The idea was to try different things and see what worked."

Redman notes that one innovation was to team managers whose customers gave their stores low marks with mentors -- managers with the best customer service scores. In this mentoring/coaching environment, the exchange was "What should I be doing?" and "Here’s what I’m doing."

Another program, piloted in the Houston and New Orleans stores in 2002, aimed to increase the "Wow" factor. This time, the focus was on the customer at the point of sale, where sales associates would surprise a customer who was known to shop infrequently with a small gift. The idea was to surprise the customer with a token of Saks’ appreciation. The customers loved it, and the associates did too. At the same time, this program helped to grow the stores’ business by enriching the emotional experience of casual shoppers -- and transforming them into regular customers.

"We owe the customer who shops at Saks once or twice a year the same delightful and meaningful experience that we give the customer who shops with us 50 times a year," Woodward says. "The Saks brand promise is to provide the most inviting and luxurious shopping experience possible to everyone."

An additional initiative started in Las Vegas, which opened the first Saks concierge desk in 2002. Shoppers -- and especially tourists -- found the service appealing because the concierge would help with problems that went far beyond shopping, such as printing a boarding pass or getting a flat tire fixed.

In order to assess the impact of store innovations on customers regularly -- and to continue reducing variance across stores and increasing engagement levels among Saks’ customers -- Gallup continues to regularly survey 75 randomly selected customers per store. Year over year, Saks continues to raise its standards for customer service. New programs are developed, and those that garner excellent responses from customers are rolled out to other stores.

With these programs and others now in place, customer engagement continues to grow. The graph below, which tracks this measurement from 2000 through the beginning of 2003, shows how Saks has improved, even during the economic downturn of the past few years. Since mid-2000, Saks has found itself in a race against two highly competent competitors. Managing the customer experience in a structured and disciplined way has enabled Saks to stay ahead of its competitors in the race for customer loyalty and engagement. "Over these same years," says Hartley, "there are plenty of companies whose customer loyalty has not increased. By moving quickly, Saks has preserved its leading position, despite facing competitors who have had some accomplishments of their own."

CHART: Keeping Ahead of the Competition

Engaged employees sell more

To help each store’s managers improve customer service, Saks implemented another program that showed strong results: Gallup’s process for managing employee engagement. At the core of this process is the Q12, a 12-question survey that measures aspects of employee engagement that managers can influence. These questions are used in a training and action-planning process that generates results-oriented dialogue between employees and managers.

From 2000 to 2002, as employee engagement rose, so did customer engagement. The steady increase in both measurements was reflected in rising financial performance. On average, Saks stores that showed consistent improvement in Q12 scores increased their sales per square foot by $1.83. Sales at stores that consistently improved their customer engagement scores increased by $3.27 per square foot, while stores that consistently improved performance on both measures increased their sales per square foot by more than $4. This growth in sales is especially impressive when compared with the negative sales figures experienced by stores that showed no improvement.

At the average store that improved on both measures, total sales grew by $1.2 million per year more than the other stores. This is a truly impressive performance, especially because it was achieved within a two-year time frame.

What’s more, as employee and customer engagement grows, the amount by which stores with improved employee engagement and customer engagement numbers -- or "optimized" stores -- outshine their nonoptimized counterparts will increase still more dramatically.

CHART: Boosting Financial Performance

Saks administers the Q12 survey and conducts manager action-planning annually, and employee engagement has improved every year.

For the last three years, the customer and employee engagement numbers have been part of the performance review process for both management and sales associates -- so it’s in every employee’s best interest to make Saks a great place to work and to make the customer’s experience as warm, pleasant, and comfortable as possible.

Getting to know all about them

In the future, Saks will continue to focus on engaging customers. A more sophisticated and systemized approach to service is the next step. In a project that began in 2002, Saks began to use information about each customer to customize the interactions with them. For instance, knowing that a particular woman is a frequent shoe buyer who doesn’t buy handbags as often, an associate could make this kind of suggestion: "Since you bought a new pair of shoes, maybe you’d like a handbag to go with them. It’s so much easier to match accessories when you can hold them against each other. If you like, I’ll take you over to my friend Betty in that department. I know she will show you some terrific handbags to go with your shoes."

Unlike traditional customer resource management (CRM) initiatives, the Saks program will not churn out typical bland CRM incentives that could be perceived as mechanistic, unexciting, or simply wrong by the customer. Instead, Saks employees will be empowered to provide that "something extra" that they think customers will like most. To help Saks track this program, Gallup will gauge the emotional impact of each initiative to ensure they are delivered in the most effective way possible and prevent them from becoming stale.

In the meantime, sales associates at Saks realize that their obligation is to make shopping as hassle-free as possible. That includes breaking "rules" if necessary. Return policies, in many non-Saks stores, are etched in stone. But at Saks, accommodating the customer always comes first. For example, returning an item after 90 days without proof of purchase is not a problem. A credit for the amount the item is currently selling for will be issued. If a customer returns a gift that went on sale after it was purchased, she can ask for, and receive, the full amount. If an associate is concerned about breaking a "rule," all he has to do is go to a manager. Saks understands that punishing policies alienate customers. Accommodating actions, however, engage customers.

By making the shopping experience as personalized as possible, Saks is building on the best of its customer service traditions -- and finding even more engaging ways to meet customer needs, one customer at a time.

Gallup


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