YOU CAN’T CUT YOUR WAY TO SUCCESS.
View the 40 second video first. Last week, my former employer, Circuit City, announced a new wave of cost cutting efforts where by 3,400 employees would be fired and replaced by lower-paid workers in order to become more competitive with other electronics retailers. However, being competitive doesn’t necessarily mean that you have to have the lowest cost efficiencies and lower sale prices,. To me, this is just another step in becoming less of a factor in their category and a guarantee that the market share will continue to erode.
Back in the mid-90’s, Circuit City was the number one choice by American consumers for their electronics and appliance purchases. At that time, we conducted over 3000 interviews with consumers and determined that, in fact, most of them preferred the CC format in providing knowledgeable salespeople and helpful service while maintaining competitive pricing. Just a couple years ago, while working in that category again on the agency side, I consistently read a lot of research indicating that customers, especially females (who now have a say in over 80% of electronics purchases), still had a lot of questions when it came to making technology purchases and would appreciate someone more than a cashier when deciding on what to buy.
The discontinuance of commission salespeople accelerated CC’s move toward self-service and the latest move should put them right there with Wal-Mart who doesn’t promise to be anything more than a low price source. I can’t help but think of The Container Store where they have not only one of the most loyal employee groups, but also one of the highest paid. Consistently rated one of the best places to work in the country, The Container Store has made selling basic “stuff” exciting and it all happens at the store level. I recall hearing the companies’ founders, Kip Tindell and Garrett Boone, say that the key was keeping and paying the best employees. They insisted that a great employee could do more work than three so-so employees and they could pay them twice as much and still be cost effective.
Branding is much more than just a low price. It starts with a great strategy and then having people in the store (who are the brand to the customer) who are motivated and excited about the store and the merchandise they sell. With this latest move, I’m sure that the quality of service at a store that used to promote it was “where service is state of the art” will become not only non-existent, but also a detriment to future share growth. No wonder more electronics buyers (note I did not say “shoppers”) are going on-line or to the warehouse stores to get what they want.
It forecasts a continuance of Circuit City’s lagging sales and diminished market share trends, and I don’t think even having Jim Nantz (who, by the way, did the play by play of the Florida Gators’ championship win) in their commercials will motivate the customers to come back or the employees to do a great job.
Over the past several days, there has been a lot of conversation about this year’s round of Super Bowl Commercials and whether they were worth the $2.4 Million price tag for the mere thirty seconds of air time. Frankly, I thought that this year’s crop fared better than the past couple years and actually were much better in terms of excitement and surprise than the game itself (I’m sure there are some Steelers fans who would disagree).
One of the things that struck me, however, was seeing the Ford Field signs throughout the coverage over the two weeks leading up to the game. I’m sure Ford must have felt proud that they spend the mega-millions in stadium naming fees when they saw all of the coverage. Just as they do when they watched Phil Mickelson in the FBR Open from Phoenix as he sported the Ford logo on his shirt even if he didn’t fare so well on the final 18 holes. I’m sure that GM must be proud of its title sponsorship of the Buick Opens (how many are there, anyway?)
You can’t help but wonder if these “product placements” could offset the recent bad news out of Detroit for both of these major car companies. Both announced major cutbacks and plant closing to “revitalize” these companies and their automotive brands. Do they really need the heightened awareness of seeing their names at these sporting events when Toyota has now taken over the lead as America’s most popular car brand?
Recent Comments