ED HAYES

Many of my friends and colleagues know I am a huge proponent of Wal-Mart’s and their Every Day Low Prices.  I frequently have lively discussions about my love for Wal-Mart and their low prices.  In mid December, I came across an article that discussed Chicagoland’s grocery chains and their battle for shoppers.  The article got me thinking about how powerful Wal-Mart’s “Every Day Low Price” strategy is.  Two lessons can be learned from the Every Day Low Price strategy: consumers don’t shop where they are unhappy, and innovative companies are profitable.

Pricing Strategies

Grocery stores primarily use one of two different pricing strategies: High-Low, or Every Day Low Prices (EDLPs).

Stores with “high-low” pricing strategies price some products at low prices, while having other products at higher prices.   These stores use promotional sales to lure shoppers into the store in order to persuade them to buy other high priced high margin items by utilizing other marketing techniques.

The competing grocery pricing strategy is “Every Day Low Prices”, or what I like to call, EDLPs.  Wal-Mart popularized this strategy and uses it to this day.  Prices are set low, and stay low.  The only time a price changes is when supply or demand changes, or when the retailer forces the supplier to innovate.  Furthermore, if prices do change, they usually go down.  Remember Wal-Mart’s “falling prices” marketing campaign? EDLPs have helped Wal-Mart become the world’s largest retailer.

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Grocery retailers frequently use promotional sales to lure customers into stores.  Retailers hope customers will purchase higher margin products while they shop for the promoted items.  Chicago grocers Jewel-Osco, subsidiary of SUPERVALU, and Dominick’s, subsidiary of Safeway, both follow use this marketing strategy, changing promotions twice a week.  The promotional sales may increase customer traffic, but they may also lead to the demise of the store.  I suspect, retailers that use promotional sales, on every day products sold year round, increase the cost of doing business and decrease supply chain efficiency.

Used by many grocers, promotional sales are the activities, materials, devices, and techniques used in the advertising and marketing of products.  I separated their cost into two different categories; direct costs and indirect costs.  I see the money spent on the processes and material to implement the promotional sale as direct costs, and the money lost due of the effects of the promotional sales are considered indirect costs.  From my point of view, both of these costs are significantly high, high enough to possibly outweigh any benefit of the promotional sales.  If I were managing a retail grocery operation, these are the items I would consider when deciding whether or not to continue utilizing promotional sales.

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One of my client’s computers recently got infected by several viruses.  She attempted to solve the problem by installing Norton Antivirus 2010.  After the instillation, her computer would not allow her to logon, so she gave me a call.  After doing some research, being unable to solve the problem, which was likely caused by the instillation of Norton Antivirus, I called Norton to receive the “Free Support” that came with the software.   The phone support reminded me of my recent post on foreign call centers; Norton’s support was unbelievable and unacceptable.  Explaining my interactions with Norton’s support team will illustrate how Norton’s “low cost” foreign call centers destroy consumer trust, damage Norton’s brand, and ultimately reduced the company’s profitability.

Before I elaborate on Norton’s phone support, I want to point you to how I solved the problem.  You can see the solution on how to fix a logon logoff loop on a previous post of mine.

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© H3C Technologies Co., Limited

Last month, I spent a significant amount of time talking with representatives at two different RCN call centers; one in the Philippines, and one in the United States.  I was trying to get their new invalid URL request hijacking service, also known as PoxFire, removed from my account.  The situation spurred me to analyze why call centers are located in foreign countries.  I also wanted to review the factors that should be considered when making the decision to export a domestic call center.  After coming up with a structure that can be used to determine if a call center could successfully be exported, I applied my theory to RCN’s business model.  Finally, I determined if my interactions with RCN supported my theory.

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Late last week, I was having a problem with RCN hijacking my mistyped URLs.  I was finally able to get them fixed!  This post has two different distinct topics; the situation and how the problem was solved.  In the near future I will post a new entry analyzing RCN’s business practices.

*Update – December 31st 2009*
I added a symptoms section and two guaranteed solutions at the bottom of this post.

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The problem with health costs is that the majority of consumers do not directly bare any of the financial burden of their health care.

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