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Is Walmart losing customer trust?

February 22, 2012 by Dale Furtwengler — President, Furtwengler & Associates, P.C.

In her Entrepreneur.com article "Seven Ways to Avoid Competing on Price," Carol Tice cites a WSL/Strategic Retail study that shows that "86 percent of customers no longer believe that Walmart has the lowest prices." What implications does that have for Walmart's future? How can you use this information to your advantage?

Regardless of how successful you've been with a low-price strategy, the day ultimately comes when the investment in further cost reductions outweighs the cost savings. At that point you'll have to begin raising prices. It's inevitable. That's what Walmart is experiencing.

If your value proposition, your brand promise, has always been low prices and you stray from that promise, you'll lose the trust of your customers. When you lose your customers' trust, you lose sales. Could this explain Walmart's nine consecutive quarters of flat or declining revenues in the U.S.? It could.

To gain some insights into what happens, let's look at how buyers react to violated trust. They:

• Begin looking for alternative sources for what they want.
• Reevaluate the value they're getting for their dollar.
• Place greater value on convenience.
• Make fewer trips to your store.
• Are less likely to embrace new offerings from your company.

Let's explore each of these in more detail.

Alternative Sources
You don't have to trust me on this, you're a consumer. If a company fails to deliver on its brand promise, you go elsewhere. So if I've promised you the lowest prices and you find a lower price elsewhere you're going to strongly consider that alternative.

In essence, assuming I'm Walmart, I'll have converted a previously automatic decision "I'll go to Walmart" to a question "I wonder where I'll get the best price?" In answering this question your mind will cycle through the other options available to you.

As you sift through the alternatives, you begin to reconsider the value you're getting from each of these alternatives.

Reevaluating Value
When considering your alternatives you're subconsciously, if not consciously, evaluating quality, store ambiance, friendliness, store layout, attractiveness of displays and a whole host of other aspects of my shopping experience. As you become more conscious of the differences between Walmart, and other alternatives, you'll come to the one difference that will cause you to go elsewhere, convenience.

Convenience
If you don't know that you're going to get the lowest price from Walmart, why go there? You could go online and see what Walmart's price is versus it's competitor's prices, but that requires additional work. More importantly, it takes time. If you're like most people today, time is at a premium. So what do you do? You opt for the most convenient option and accept the fact that your time is worth more than the few cents, if any, you'll save at Walmart.

Fewer Trips
Between the fact that you no longer automatically go to Walmart and that you're choosing more convenient alternatives, you're making fewer trips to Walmart. Fewer trips mean fewer impulse buying opportunities which translates into fewer sales.

Disdain New Offerings
If Walmart does come out with new offerings, what's the likelihood that you'll rush to try them. A recent news piece said that Walmart is planning to aggressively pursue the healthcare market. The goal, ostensibly, is to make health care more affordable than traditional doctor's visits for the more mundane health issues faced. How likely are you to make a change to Walmart when you suspect that eventually the price will go up for these services as well?

These are the challenges you'll face when you lose your customers' trust. You'll inevitably face these challenges if you employ a low-price strategy. But they'll be just as real if you violate your brand promise, regardless of what that brand promise is.

About Dale Furtwengler

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