Despite Weak Customer Experience, Costco Dominates Satisfaction

2

Rate this Article: (3.9 Stars | 16 Votes)   Thanks for your rating!

Customer experience has become the pinnacle priority for many organizations, and with good reason:  survey after survey, case study after case study, confirms the immense business impact of keeping your customers more satisfied and engaged than your competitors do.

But customer desire for friendliness and responsiveness does not totally eliminate their savvy.  For all the feedback customers give about difficult merchandise return policies, long checkout lines, unfriendly reps and hard-to-navigate storefronts and websites, when push comes to shove, many will be swayed by something far more basic:  value.

In essence, there are some things money can buy.  For everything else, there is the customer experience.

Loyalty, undoubtedly, comes from delivering an experience that makes customers want to spend money with the brand.  It comes from showing that engagement matters and that the feedback and advice they provide during such engagement matters.

But those loyalty factors are not all it takes to lead a happy horse to the water.  In fact, they might not even be the main driver.

INTERESTED IN LEARNING MORE ABOUT THIS TOPIC?
		4th Customer Experience Summit The most important event for customer management professionals this year--leverage your internal resources to act on the voice of the customer and deliver a winning multi-channel customer experience

The newest Consumer Reports study on the retail market, which measures data from 55,108 customer ratings, names Costco the unequivocal winner on “satisfaction with the overall shopping experience.”  Its 84% overall satisfaction score tops 81% for runner-up Kohl’s and significantly bests bottom-dwellers like K-Mart and Wal-Mart, both of which achieved only 71% satisfaction.

Yet when it comes to experiential factors like checkout and service, Costco is the third-worst of the ten major retailers profiled.

“In-store shoppers found a few chinks in Costco’s armor,” notes Consumer Reports.  “The chain’s walk-in stores scored below average for selection, checkout (because of long lines), and service.”

Converted to a 5 point scale, with 1 being the worst and 5 the best, Costco received a 2 for checkout and 2 for service.

Comparatively, Kohl’s (2), JC Penney (3), Target (4), Macy’s (5) and Sears (7) all received 3s for both categories.  Meijer (6) received a 2 for checkout but a 3 for service.  Sam’s Club (8) delivered a 1 for checkout and a 2 for service, while K-Mart (9) matched Costco’s scores and Wal-Mart (10) received a 1 for both categories.

The difference-makers, it appears, were product quality and value.  Costco received a 5 for the former and a 4 for the latter, besting the “product” score of any other establishment.  Its closest competitors were Kohl’s (2), which received a 3 for quality and a 4 for value, and Sam’s Club (8), 4 for quality, 3 for value.

Yes, Costco’s significant advantage over the similarly-valued Sam’s Club proves there is likely some benefit to delivering on customer experience metrics, but at the end of the day, its dominance seems most associated with opinion of the actual goods being offered.  If people believe they can get the best products at the best possible prices, they will be comfortable overlooking a mediocre in-store “experience.”

And “best products at the best possible prices” is an important qualifier.  Even though they are known as discount chains, K-Mart and Wal-Mart did not score well for value.  Despite the impact of economic toughness still weighing on many Americans, today’s customer, it seems, is able to overlook the numerical price in favor of getting a product that maximizes value by minimizing the price to quality ratio.

Given that, it is far from a conclusive fact that brands should start ignoring service and responsiveness on the ground that simply bombarding customers with great prices will be enough to succeed.  The customer experience can absolutely add value to a brand’s offerings, and as customers work to maximize that value, it makes sense to complement great product lines with superior service.

But companies must approach their customer management strategies from a pragmatic perspective.  No matter how Zappos-like one renders his organization’s customer service culture, customers are ultimately interacting with brands for the purpose of acquiring desirable goods at an attractive price point.  If the brand’s product line does not facilitate that goal, quality customer service is unlikely to be a saving grace.

Photo credit: Stu Pendousmat

Contributor:   Brian Cantor

You Should Check Out:

Turning Data Into Profit At Choice Hotels

Turning Data into Profit: Using the Customer Experience to Drive Improvement and Growth at Oracle

Turning VOC into a Strategic Weapon in an Economic Crisis

Report Abuse   sswift 02/14/2012 3:03:52 PM EST As a Costco member for many years and the husband of a professional spender at Costco I could not disagree more. Saturday's at Costco are packed because of the experience. The constantly changing merchandise, the food samples, the brand rep's in the stores- it's truly amazing from a business perspective to see how their retail environment is managed for "sensory excitement." Returning merchandise is a breeze, the staff is kind 100% of the time and the prices are (exposing a secret here) not the best you can get for many brands. The angle of the this article is clear. Replies (2)   Report Abuse   TimMcGinn 02/14/2012 4:24:06 PM EST Sswift, I'm interested in hearing what you mean "The angle of the this (sic) article is clear. "   Report Abuse   bcantor 02/14/2012 3:47:05 PM EST The article puts forth a take on the findings uncovered by the recent Consumer Reports research. The notion that Costco lags on customer service and checkout experience is not something constructed by me or anyone at CMIQ but by the 55,108 customer ratings measured by Consumer Reports. No matter one's own, individual experience with Costco, the Consumer Reports data is clear--it underperforms on customer service and checkout and yet maintains the greatest satisfaction store of any major retail chain. Post a reply Sign in or Sign up to post a comment

Report Abuse   davjac 02/14/2012 10:57:30 AM EST I disagree that Costco are worst for customer experience. The article rightly differentiates between experiential and other factors, such as price/value for money but is wrong to separate them as two different things when they are all integral factors of the customer experience. Only by viewing customer experience holistically can companies understand the trade-offs that customers make when selecting a supplier. We have identified six elements of customer experience, including price (value for money). The mix between the six differ according to industry, customer segment served and stage in a customer journey. Understanding the mix of those factors at each stage of the journey for your chosen customers is the basis of excellence in customer experience. Separating them out as separate factors will make this more difficult. Dave Jackson CEO Clicktools Replies (1)   Report Abuse   bcantor 02/14/2012 11:20:58 AM EST Thanks for the comment, Dave. (Although, in fairness, I never said they were the "worst"--I wrote that the data from Consumer Reports suggests that they are among the weaker retailers on some key experiential factors) You certainly make a good point that "customer experience" refers to a total picture, and it is of course worthwhile to consider that big picture when evaluating a brand's position in the market. That said, I don't necessarily agree that it is futile to evaluate the customer experience for its individual components. In fact, the data here actually suggests there is immense benefit to doing so. Based on the data here, product value trumps customer service and responsiveness for retail shoppers. So, if one wants to maximize customer satisfaction, it makes sense to focus more heavily on price and product quality than friendly service and the checkout process. I also wanted to make sure I spoke the language of contemporary customer management. Even though the customer experience, technically, would include things like pricing strategy, when customer management analysts urge brands to "create a customer experience more like that of Zappos," they are talking about service culture and experiential issues moreso than pricing. And so I wanted to draw attention to a finding that questions how heavily those experiential factors dictate customer satisfaction, at least within the realm of retail. Post a reply Sign in or Sign up to post a comment