Customer Comparison - Kohls versus Home Depot - Case Study Example

Customer Comparison - Kohl’s vs. Home Depot The level of customer service and service quality has a crucial impact on company’s profitability and market position. Kohl’s and Home Depot are giant retailers operating in fierce market conditions and influenced by strong competition. Customer service therefore plays a pivotal role in relation­ship marketing and successful organizational performance in both companies. Getting this role right, and to a standard of expertise that is superior to that of competitors and sustainable in the longer term, requires an in-depth understanding of the nature and nuance of customer service. Both companies build customer value by offering customers both a wider range of channels, and more personalized treatment through the integration of channels. Recent years, US retailers have maintained high-speed growth through continuous optimization of its product/service mix and technological innovation. It has also realized rapid expansion through capital injections. The changes are closely connected with Internet facilities and WWW which opens international markets for these companies. Be in one of the most highly rated industries for stability and success, Home Depot and Kohl’s offer an opportunity to everyone who wants to change his home and personal style. Home Depot is a US based company. It is a leader in home improvement retail market. Today, Home Depot relies chiefly on an efficient technology innovation system and supply chain. Home Depot is “the second largest retailer operating over 1,700 stores in North America. The company operates Home Depot stores, Expo Design Centers, Home Depot Supply Stores, Home Depot Landscape Supply Stores, and Home Depot Floor Stores” (Speight, 2004). Kohl’s is a national retailer proposing a wide range of products for the whole family: “our stores are stocked with everything you need for yourself and your home - apparel, shoes & accessories for women, children and men, plus home products like small electrics, bedding, luggage and more” (www.kohlcorporation.com). Target market of Home Depot involves professional users and non-professional users from middle classes. Home Depot “offers products and services primarily to builders, contractors, municipalities, industrial customers and maintenance professionals” (Hall, 2007). Kohl’s target audience also involves middle class consumers looking for high product quality and good service. Customers within the segment are similar to each other and dissimilar to other groups of customers in other segments. Today, Home Depot orients on the particular geographic area, Northern America while Kohl’s orients on all American states. For both companies, the US market represents an individual geographic market that offers great opportunities. Increasingly market researchers are turning to lifestyle analysis as a means of generating a clearer picture of their customers' behavior and thus their tendency to purchase different types of product. Kohl’s and Home Depot have different long-tern strategies which influence their current performance and service concepts. “The Home Depot's strategy is to enhance the Core, extend the business, and expand the market. To Expand the Market, The Home Depot is focused on better servicing its professional customers, outside its current retail channels, through Home Depot Supply” (Hall 2007). Recent years, critics admit that Home Depot lost earnings due to decreased customer service. In the past three years, Home Service policy has been based on increasing market operations rather than improvement of service quality. Service concepts should include improvement of communication, and the environment composed of all the individual services used for implementation of the group communication primitives. “Inefficiencies in merchandising and distribution leading to stock-outs” (Speight, 2004) weakened the company position, and create a threat for further growth. Home Depot is known for its patchy supply chain and bungling circulation processes, has the latent to improve efficiency, inventory, audit control and to diminish infrastructure and operation costs. The weakness of Home Depot is lack of promotion campaigns aimed to attract new customers, and absence of competitive advantage. For instance, one customer reports: “the worst part is if you have to go to Home Depot and god-forbid you have to ask fro help at the customer service desk, the people that are up there are so very rude, now not everyone that works there is rude or unwilling to help but the majority of them are” (Home Depot - Casa Grande, Arizona, 2007). In contrast, Kohl’s proposes exceptional service quality to its customers. This helps Kohl’s to sustain a competitive position on the US market. The brand develops lines of services to satisfy the needs of wide audience, low-cost of the services. In contrast to Home Depot, Kohl’s has maintained high-speed growth through continuous optimization of its service mix and constant technological innovation (on-line services). “We not only offer the best merchandise at the best prices, but we're always working to make your shopping experience enjoyable” (www.kohlcorporation.com). Similar to Kohl’s, Home Depot creates “online design center aimed to provides a customers with “a visual platform on which they can experiment and develop their design preferences” (The Home Depot: Helping Customers Dreams, n.d.). The opportunity of Home Depot is that it orients on diverse target market attracting low and high-income customer group. In contrast to Home Depot, quality control is of vital importance to Kohl’s especially as competi­tion is intense and consumers become more discriminating. For Kohl’s, quality control can be explained an attitude of mind. “One of the major tech accomplishments touted by the company has been the installation of self-checkout stations, designed not only to hasten checkout time for the customer but also to redirect associates from customer checkout to the sales floor” (Hajewski, 2006). Some qualities cannot be directly measured, these are called 'attributes'; measurable qualities are called Variables'. Quality determines the direction or objective: control is the statistical ele­ment which measures product quality. Quality begins and ends with marketing; once customer requirements are defined, a quick reporting process is needed, which should be maintained throughout design, specification, manufacture and inspection. Poor quality control is the main drawback of Home Depot, and the main areas which requires improvements and strong control of managers. The main problems faced by Home Depot are that managers are unable clearly identify the goals of the corporation and find appropriate solutions to improve quality. They do not possess the vision of the problems the company has. To improve Home Depot performance they should take into account the following aspects. The first is identification of a task and the quality of its fulfillment. The group exists to achieve a common purpose or task, and the leader's actions in one area affect both the others; thus successful achievement of the task is essential if the group is to be held together and its members motivated to give their best effort to the job. In contrast, Kohl’s maintains exceptional customer service quality and quality control which helps to ensure long-term success and customers’ loyalty. Performance and development reviews provide those involved with the opportunity to reflect on past performance as a basis for making development and improvement plans. Obtaining historical perspective through analysis is a necessary part of the review but reaching agreement about what should be done in the future is what it is all about. “Kohl's really is a winner on value," VanAmburg said. "Their pricing is very competitive, combined with quality and service" (Hajewski, 2006). The performance review should take the form of a dialogue, not a top-down interview or 'appraisal'. There is no a great different in management processes used by Kohl’s and Hone Depot. Managers take full partic­ipation in reaching a decision which leads to commitment to the organiza­tion's goals. There is a good communication with productivity and low absenteeism and labor turnover. If there is a falling away in commitment, a slackness that creeps in, with deadlines or meetings missed, or hair-splitting or carping, don't avoid the issue — tell the team that they exist to support one another in getting the job done. Thus, Kohl’s pays more attention to technological innovations and improvements while Home Depot relies on traditional channels of communication. The advantage is that Kohl’s meets the requirement of wide audience marketing stylish pieces of furniture. The high quality of products is the main criterion for the company. Taking into account company’s policies, it is possible to say that it does not reduce costs of production as it can worsen quality of their products. These marketing principles and marketing approach indicate economic health and growth of the company which become increasingly dependent upon sales as an engine of growth. Buyer behavior has a direct impact on marketing activities provided by Kohl’s personal. Promotion and communication is tied intimately to consumer and buyer behavior. “Kohl's long-term strategy announcement comes at a time when the industry is a swirl of mergers and acquisitions” (Hawjeski, 2005). Kohl’s’s marketing activities are aimed to appeal to rational choice of consumers and address emotional choice. In general, Home Depot is well-positioned to take on this important leadership role in the USA. It has the resources and certainly has the technological capability. Clearly, some companies in the same industry are more successful than others, lending support to the view that competitive advantage is largely internally developed. Equally, however, there is a danger of ignoring the environment, as customers and their needs, competitors, changes in technology, etc., can play an important role in determining competitive success. Home Depot competes on both a price and a non-price basis. The strength of the company is that it is an expert and leader in the market. Its marketing challenge is to position service offerings as the high quality, high value-add alternative. “Kohl's had increased the number of new store openings each year until this fiscal year, which ends in January; it held to 95 stores in 2004 and plans the same in 2005” (Hajewski 2005). Kohl’s follows differentiation strategy while Hone Depot uses cost leadership. Cost leadership however, is a sustainable source of competitive advantage for Home Depot. In an era of increasing technological improvements in manufacturing, manufacturers con­stantly leapfrog over one another in pursuit of lower costs. At one time, for example, Home Depot enjoyed the low-cost advantage in the production, then other retailers took the same strategy and, after reducing production costs and improving product reliability, gained the low-cost advantage. Both companies, Kohl’s and Home Depot, use non-price competition which helps them to sustain market position and create long-term relations with the consumers. It takes form: branding, advertising, promotion, and additional services to customers and product innovation. Cost and non-cost differentiation helps to create loyalty of local the customers. These “tools” will include: - temporary price reductions; - extra value offers, including offers relating to future purchase; premium offers (incentives), including free mail-in premiums, self-liquidating premiums (McDonald, Christopher, 2003).A focus to a brand and price reduction measures can be achieved through the following marketing mix: direct response advertisements; personal (direct) selling; Catalogue selling. Approaches, aimed to meet high service standards, are based on customers - environment interaction and changes affected both of them. Knowing customers means closing the loop between the messages sent to them and the messages they send back. Developments in IT have led to interactive communication tools such as the telephone and the Internet being used to complement less interactive mechan­isms such as mail or media advertisements. Competition is the major threat for home Depot. The market is very fragmented in terms of supply, with a large number of smaller operators being characteristic. The majority of businesses offer products to a relatively small geographical area, particularly in the retail segment. Consolidation is an ongoing process in the sector. Financial results of both companies show that Kohl’s obtains a stable position on the market in contrast to Home Depot experiencing profit loss. In contrast, Kohl’s “reported earnings per diluted share for the quarter ended October 28, 2006 of $0.68 versus $0.45 a year ago, a 51 percent increase. Net sales for the quarter increased 16.6 percent to $3.6 billion from $3.1 billion a year ago while comparable store sales increased 8.5 percent” (www.kohlcorporation.com). These results demonstrate that the main drawback of Home Depot is a lack of strategic vision and inability to respond effectively to changing environment. They need to maintain high standards of service as a key opportunity to maximizing customers’ satisfaction. The purpose of maintenance of high standards is to attempt to maximize the performance of service by ensuring that it performs regularly and efficiently. Service, however complex or simple, however cheap or expensive, is liable to breakdown. The effective operation of Home Depot is dependent on the maintenance of all parts of the system. Wal-Mart and Target are two global merchandise retailers. Similar to Hone Depot, Wal-Mart is accused in poor customer service and poor communication. For instance, poor performance management in Germany led to poor communication and organizational failure. This may mean identi­fying integrating practices such as the use of competency-based HR processes which impacts on recruitment, training, performance management and reward, and performance management which affect personal development and reward. In contrast to Home Depot and Kohl’s, Wal-Mart and Target are both low price retailers. Target Corporation follows strategies similar to Kohl’s trying to implement long-term service plans and introduce technological innovations. For Wal-Mart and Target performance management processes is a prime source of information about individual learning and development needs. The performance management approach to learning concentrates on the preparation of performance improvement programs and learning contracts or personal develop­ment plans, which are related to jointly determined action plans. The emphasis should be made on continuous development. Although reviewing past performance is an integral part of the appraisal system, it is even more impor­tant to concentrate attention on the changes required to bring about an improvement in future performance. Wal-Mart uses technology in leading processes to create and take advantage of new business opportunities by penetrating new geographical and product and service markets in every sector of the economy. On the one hand, technology provides workers with greater freedom and autonomy. It provides Wal-Mart with much greater freedom and flexibility in how they organize and structure their activities and operations, but, it binds the company to new structures and organizational forms that are just emerging. Most low-income families are not able to buy high quality products and prefer buy low-priced goods. To attract wider target market, Home Depot and Kohl’s creates a separate low cost offer for low-income firms based on their purchasing potential. During the first quarter of 2007, Home Depot experienced significant decrease in sales caused by poor customer service. “Sales in the retail segment fell 4.3%, and same store sales decreased 7.6%” (Fuhrmann 2007). Taking into account present day situation, it is possible to say that central planning and negotiating influence profitability and sales of Home Depot and Kohl’s. The companies should be comforted with its old routine which prevents it from rapid growth. Lack of strategic vision and inability to implement changes can result in low productivity level and decrease in profit. The strength of Kohl’s approach is that the company has the ability, based on long-term plans and inspiration, to induce subordinates to work towards group goals with confidence and keen­ness, and improve customer service. Works Cited 1. “Five secrets from the world’s best retailers”, Strategic Direction 19 (2003): 26-28. 2. Hall, K. This is the home of Home Depot on squidoo. 2007. 3. Home Depot - Casa Grande, Arizona. 2007. http://www.complaintsboard.com/complaints/home-depot-casa-grande-arizona-c13573.html 4. Hajewski, D. Kohl's, Northwestern have happy customers; Consumer satisfaction. The Milwaukee Journal Sentinel Feb 21 2006: 45-46. 5. Hajewski, D. Kohl's has big plans to expand. April 2005. 6. Fuhrmann, R. Haunting Results at Home Depot. 15 May 2007. 24 June 2007. 7. McIntyre, D. A Warning for Wal-Mart. 2007. 8. Speight, Ch. Home Depot. (NYSE: HD). Krause Fund Research, 2004. 2007. 9. www.kohlscorporation.com 10. www.walmart.com Read More