Due to the constant increase of competition in the retail industry, retail consumers, in developed countries, are no longer motivated to shop in a store based on price alone, today’s retail clientele chooses a retail store based on the entire shopping experience. Wal-Mart’s success in global market is explained by a number o factors including effective marketing strategies, customer loyalty and huge financial investments. Wal-Mart’’s customers spend more money in a retail store that provides them with a comfortable and respectable atmosphere. Today’s retailers need to build lasting relationships with their clientele as customers are more trusting of retailers they have a lasting relationship with and would become more loyal and spend more money as the relationship progresses. The spirit of the technological revolution and, in particular, the World Wide Web has allowed retailer’s a variety of choice in best way to interact and develop relationships with their clientele with highly interactive and customized experiences such as loyalty programs. Organizations today have a better opportunity to create, nurture, and maintain long-term customer relationships.
Wal-Mart achieves competitive advantage by introducing customer loyalty programs and special propositions for developing countries. In global retailing in general, and in the framework of Wal-Mart activity in particular, the role sales personnel play is crucial for shaping relationships that develop between retail consumers and retailers and determine the level of customer satisfaction. Satisfied customers return again and again to the outlets and spend more money than new customers (Ahlstrom et al 2004).
Relationship marketing can also be defined as a business philosophy which aims to develop strong relationship with a range of stake holders, such as suppliers, media, intermediaries and public organizations as with customers (Grennes, 2003). Competitive advantage leads Wal-Mart to high rates of customer retention which in turn has a direct impact on profitability. Past research has also indicated that it can be five times more expensive to obtain a new customer than to retain one. The focus of this paper is on relationship marketing. Thus much impetus has been given on three central principles; which are loyalty & satisfaction, profitability and retention as these principles are very closely related in relationship marketing.
A loyal customer can be a consistent source of revenue for the long term. It will continue until the customers feel that they are not receiving satisfactory services any more. Risk lies anytime when a competitor offers better value or a wider range of value added options and takes away the loyal customer (Grennes, 2003). Loyalty programs have been set up to encourage customers to enter lasting relationships with an organization by rewarding some benefaction. Loyalty schemes ought to be carefully firmed to principles; which are loyalty and satisfaction, profitability and retention as these principles are that loyalty based marketing should not be confused with short term price based promotions. Satisfaction is a necessary but not an adequate condition for loyalty. Wal-Mart customers may be very satisfied with a hotel in which they stay while they travel away from home but they may not necessarily stay in the same hotel when they travel in the same place again. Here the customer’s choice includes price, location and convenience. When the customer makes a commitment to the brand then the loyalty is established. Satisfaction can be achieved without loyalty but it is very hard to get loyalty without satisfaction. A satisfied customer will return while there is no guarantee but it is almost certain that an unsatisfied customer will never return (Ahlstrom et al 2004).
I/O model of Above-Average Returns
In accordance with I/O model of Above-Average Returns, external environments have a profound impact on an organization and its profitability. An industry itself has the greatest impact on the company. In retail industry, successful services convey responsiveness, empathy, guarantee and reliability. Services really are all about relationships. Even in traditional retailing, the relationship behind the transaction influences customer loyalty more than any other aspect, including price. This emotional state includes feeling good and excited in the retail environment (Carmichael and Drummond 2003).
- The global environment determines the strategies and changes. Retention economics’ is promoted as a time-based form of competitive advantage and it suggests that long-term relationships bring long-term advantages. There is a number of accumulating benefits which contribute to revenue and profit growth. In businesses with high turnover of customers and low exit barriers it is suggested that increased revenues from new customers will be largely cancelled by those customers whose purchases decline or even cease over the same period (Mendis, 2005).
- As the global company, Wal-Mart controls certain resources and industry segments. consumer citizens are pressuring business to achieve higher levels of social and ethical responsibility (Mendis, 2005). Part of the answer lies in business concern with the “threat” of more governmental regulation. But part of the reason why business is moving to higher levels of social performance is to be found in consideration of the ethics of the situation. Socially responsible behavior on the part of the firm can be justified by standards of rightness as well as of economics and the law. It may be sound business practice, as well as morally right, for a marketer to attempt to meet socially responsible performance standards (Carmichael and Drummond 2003).
- The third element of I/O model is that company’s resources are highly mobile. Expenditure of time and resources on such issues is still regarded by some managers as wasteful or as time spent on peripheral issues. However, allocating resources to such issues is no longer a matter of option. The questions of brand and furniture names should not be on the periphery of corporate planning, but an inescapable part of corporate planning and concern (Mendis, 2005).
- Wal-Mart’s leaders accept rational decisions and develop competitive strategies. Pressures imply the development of rules and standards by which business actions may be judged as “right” or “wrong”. In other words, ethical decisions under free enterprise are “moral decisions”, impelled by social sanctions, but modified by economics and environmental requirements (Wal-Mart Global Strategy 2008). The growing professionalism in marketing is also stimulating the development and acceptance of pervasive “socially conscious” standards of ethics. Some insights into the changing social and ethical responsibilities of marketing are explored (Carmichael and Drummond 2003).
Stakeholder Groups and Market Position
The three stakeholder groups are employees, local customers and the local community. People in all paces around the world responded the same way to this problem as Wal-Mart’s unethical behavior diminished cultural importance and unique identity of a nation. The starting point for socio-industrial progress analysis is not to be found in corporate traditions or corporate history or even industrial history. The starting point is to relate social progress of the corporation to national goals and to the social indicators being developed to evaluate the attainment of these goals. This approach sounds like socialism to some. It is not. Social progress was once considered to be a national by-product of economic progress (Wal-Mart Global Strategy 2008).Society believed that social progress was achieved through continued economic growth and progress. The accumulation of material wealth and affluence is no longer automatically equated with social progress by a growing number of influential Americans. Public policy sees social progress as a goal to be achieved in itself and not necessarily the same as economic progress. With the new parity between social progress and economic progress, social progress is seen as a goal to be deliberately sought–by business and other social groups.
Local community provides the retailer with a great deal of information about individual customers. This information can be used in targeting with relevant offers via direct marketing mechanisms, at point of sale or later at home. Before going into a detailed discussion of my empirical research project, it is necessary to devote some attention to the issue of retailer loyalty programs and their characteristics in Nigerian superstores. A brief historical overview shows that loyalty programs as we know them today have existed for a relatively short period of time, a little over twenty years (Carmichael and Drummond 2003).
Wal-Mart pays attention to cultural differences and unique needs of local employees. Globalization creates new business environment and imposes new demands on global companies like Wal-Mart. So, business programs should be evaluated and tested in terms of societal impact as well as traditional balance sheets and profit and loss statements. Products are defined as socio-business products, not just as economic goods. Analysis of socio-business product policies considers the social effects on the individuals within the corporate system–in larger systems within which the firm operates and with customers (Wal-Mart Global Strategy 2008).The firm should be aware of its role as a molder of social values for both employees and consumer-citizens. Organizational structure, with its system of checks and balances and built-in auditing functions, becomes a less effective control device as you move up the ladder of responsibility. Like personal conscience and personal standards, and like the law and corporate policy, it is an important, but not totally adequate, source of ethical control for the corporate manager (Carmichael and Drummond 2003).
Wal-Mart’s international goals have business relevance as citizens move toward a social industrial complex. In a social industrial society national goals are increasingly relevant to business policy. Specialists concerned with social indicators are now developing tools and measures to appraise progress towards such goals. Social indicators are tools to be used to measure progress in quality of life areas. A social indicator is a describable trait/characteristic/attitude which either is applicable to a substantial segment of the population or has shown evidence of recent change in magnitude or intensity. In order to meet changing social and economic requirements, Wal-Mart’ should adopt a new concept called socio-business. Some chief executives think that the issue is whether or not business should give a little more or less money to solving some non-business social problems or hiring more hard-core minorities. Adoption of a socio-business concept is no longer a matter of option for our major enterprises if the business is to be relevant to the new social progress concerns and social value changes. The socio-business concept offers a conceptual framework for integrating the firm’s relationship to its ultimate environment. The socio-business concept is an extension of traditional management and marketing concepts with redefinitions of mission, service, consumer, product, and profit. The corporate mission is defined in social system terms of longrun profitable service to the consumer-citizen. Socio-business issues are seen as critical and urgent, impacting not only on profits but also being relevant to the survival of the enterprise in society (Carmichael and Drummond 2003). Price competition involves businesses trying to undercut each other’s prices; this will be dependent upon their capability to reduce their costs of production. Brand equity represents the added value that accrues to a product as a result of prior investments in the marketing. Brand equity is thought of as an asset representing the value created by the relationship between the brand and customers over time.
To compensate for the costs of localization, Wal-Mart try to confirm certain aspects of managing a retail business to a uniform standard in order to remain profitable. These aspects include main business operations such as pricing, sourcing, wages, loyalty programs, as well as other management functions. Apart from that, such retailers also take steps to standardize information technology infrastructure worldwide. The quality of life issue is the major problem confronting business now. Meeting the issue will require management commitment and time, will be costly, and frustrating, but necessary. Management’s new task is to balance traditional profit and rate of returns on investment criteria with new definitions of social costs, social purpose, and social conscience.
Ahlstrom, D. et al (2004). High Technology and Globalization Challenges Facing Overseas Chinese Entrepreneurs. SAM Advanced Management Journal, 69 (23), 41.
Carmichael S., Drummond J. (2008). Good business: A guide to corporate responsibility and business ethics. Hutchinson, London.
Grennes, Th. (2003). Creative Destruction and Globalization. The Cato Journal, 22 (1), 65.
Mendis, P.(2005). Americanization of Globalization. The Public Manager, 34 (2), 54.
Wal-Mart Global Strategy. (2008). Book Online. Web.