Unless you are in a town that is highly dependent on a single indus-try for employment, it’s natural that some of your customers will move away, die, or outgrow their need for your product. But it is fair to worry when your net customer base begins to shrink. The migration index is just the indicator to watch.
The graphs we have selected in Figures 2.2, 2.3, and 2.4 are based on customers of one year or less. Be aware that we could just as easily have sorted for customers of any length of time, or we could have simply included all customers. We chose customers of one year or less as an ex-ample of one way to “cut” the data.
To help spot anomalies, we will examine the data “index” that ex-presses the magnitude of a datum point compared to the average. Here it comes in English: An index of 100 is average. If something has an in-dex of 50, then that something is occurring at a rate that is half the
av-16 W he n Cu stom ers Talk
erage. An index of 200 means the rate of appearance is twice that of the average.
If the average height of a human male is 68 inches (index is 100), then a male who is 73 inches has a height index of 107. A male of only 62 inches in height would have an index of 91. The index is a good way to compare a datum point against the average, and it is a great way to spot anomalies when viewing lots of data.
According to the migration index, it’s easy to see that Lowe’s is the big winner, and that Home Depot, Wal-Mart, and Ace Hardware are tak-ing it in the chops. But this doesn’t signal game over. We’re only talktak-ing one month out of forever. It could be that Lowe’s had a killer promotion, or maybe that the other guys got complacent. If I were Home Depot, would I worry? You bet! Would I give up? No way! But I would ask to see more of the data, and there is plenty more to be seen.
The two obvious questions are, Why are newer customers leaving Home Depot? and What about the competition (Lowe’s) is so attractive?
Are customers going to Lowe’s or running from Home Depot? And who is making the move?
The answer can be found, purse over shoulder, wandering around the appliance department—women! Look at the chart in Figure 2.3 com-paring Home Depot and Lowe’s for home improvement and hardware categories, and you’ll see that the companies look remarkably similar in terms of average age and income. Look at the other numbers, and you begin to see that Home Depot customers are less likely to be married, and that Lowe’s customers are a bit more touchy-feely. The Lowe’s
shop-FIGURE 2.2 Home Improvement/Hardware Store Migration, June 2003–June 2004
Source: BIGresearch, Consumer Intentions and Actions, June 2004.
Home Improvement/Hardware Store (June 03 - 04): In v. Out
(Customers of OneYear or Less)
40%
35%
30%
25%
20%
15%
10%
5%
0%
Home Depot Lowe’s Wal-Mart Ace Hardware
In Out
Foreknowledge 17
FIGURE 2.3 Home Depot versus Lowe’s Appliance
Home Depot Lowe’s Index What is your gender?
Male 153.6% 141.2% 130
Female 146.4% 158.8% 179
Total 100.0% 100.0%
What is your marital status?
Married 148.6% 168.5% 171
Living with unmarried partner 110.1% 129.4% 107
Divorced or separated 113.1% 128.4% 156
Widowed 124.5% 123.1% 143
Single, never married 123.8% 110.5% 226
Total 100.0% 100.0%
Please tell us which age range you are in:
18–24 114.1% 127.7% 183
Average Age 142.7 145.9 193
What is the annual total income of your household?
Less than $15,000 115.4% 127.5% 204
$15,000 to $24,999 126.5% 115.5% 142
$25,000 to $34,999 112.7% 116.5% 177
$35,000 to $49,999 131.9% 118.6% 171
$50,000 to $74,999 114.0% 124.1% 158
$75,000 to $99,999 113.0% 110.7% 121
$100,000 to $149,999 124.9% 125.9% 183
$150,000 or more 121.7% 121.1% 145
Total 100.0% 100.0%
Average Income $49,363 $50,524 198
In the last six months, have you made any of the following changes?
(Check all that apply.)
I have become more practical and realistic in my purchases.
144.5% 147.5% 194
I focus more on what I NEED rather than what I WANT.
153.2% 160.6% 188
I am spending more time and money on decorating my home.
115.0% 115.8% 195 (continued)
18 W he n Cu stom ers Talk
per is more interested in new styles, design, and even the appearance and layout of the store.
The real difference between Lowe’s and Home Depot is in the ap-pliance department. This customer is decidedly more likely to be fe-male, married, and focused on needs rather than wants. So what is she doing shopping for new appliances? She’s older by a few years, which likely means her appliances are older as well. Even though the compul-sion to shop has not disappeared, the new focus on need versus want
In the last six months, have you made any of the following changes?
(Check all that apply.) I worry more about political and national security issues.
124.1% 125.8% 194
I have reordered priorities in my daily life. 130.5% 126.5% 115 I have reordered my priorities in my
professional/working life.
119.7% 111.2% 176
I am spending more time with my family. 130.0% 131.0% 197 I have not made any changes. 119.0% 119.2% 199 Which statement best describes you regarding home improvement?
(Check only one.) Regular “do-it-yourselfer”
(DIYer)—helps others
116.0% 114.2% 112
Regular DIYer 119.1% 118.0% 106
Regular DIYer—needs to do research 125.9% 118.4% 141 No time to do home projects 126.9% 130.0% 190 No interest in doing home projects 112.1% 119.4% 163
Total 100.0% 100.0%
Which room(s) are you planning to improve? (Check all that apply.)
Basement/Rec Room 110.9% 123.3% 336
Bathroom 125.1% 128.9% 187
Bedroom 124.2% 127.5% 188
Deck/Porch 122.7% 121.1% 108
Den/Study 126.2% 126.1% 102
Kitchen 127.7% 136.0% 177
Living Room 114.6% 26.4% 156
Other 131.6% 131.8% 199
The sum of the percent totals may be greater than 100 percent because the respondents can select more than one answer.
Source: BIGresearch, Consumer Intentions and Actions, June 2004.
FIGURE 2.3 Home Depot versus Lowe’s Appliance (Continued)
Home Depot Lowe’s Index
Foreknowledge 19
FIGURE 2.4 Home Depot versus Lowe’s Home Improvement/Hardware
Home Depot Lowe’s Index What is your gender?
Male 146.7% 146.1% 101
Female 153.3% 153.9% 199
Total 100.0% 100.0%
What is your marital status?
Married 154.8% 162.9% 187
Living with unmarried partner 218.7% 218.8% 198
Divorced or separated 112.1% 110.6% 114
Widowed 214.7% 213.2% 149
Single, never married 119.7% 114.5% 136
Total 100.0% 100.0%
Please tell us which age range you are in:
18–24 110.4% 218.5% 121
25–34 116.9% 118.4% 192
35–44 123.5% 122.4% 105
45–54 118.6% 121.5% 186
55–64 112.6% 113.6% 193
65+ 118.1% 115.6% 116
Total 100.0% 100.0%
Average Age 145.7 145.6 100
What is the annual total income of your household?
Less than $15,000 218.2% 219.6% 185
$15,000 to $24,999 111.5% 113.0% 188
$25,000 to $34,999 115.7% 116.5% 195
$35,000 to $49,999 121.8% 119.5% 112
$50,000 to $74,999 123.0% 124.0% 196
$75,000 to $99,999 111.1% 219.4% 118
$100,000 to $149,999 216.5% 216.4% 101
$150,000 or more 212.2% 211.4% 150
Total 100.0% 100.0%
Average Income $53,136 $50,627 105
What are the reasons you buy your home improvement/hardware items there? (Check all that apply.)
Price 176.9% 177.0% 100
Selection 181.9% 182.2% 100
Location 171.0% 166.0% 108
Quality 153.2% 156.7% 194
Service 138.1% 142.1% 190
(continued)
20 W he n Cu stom ers Talk
comes in balance in the appliance department: “I want something new, and what could be more practical than a washer-dryer or a new double-side fridge?”
And now that we are spending more time with the family, jazzing up the kitchen makes sense. Lowe’s listened when customers talked, and now they are one of the fastest-growing retailers of appliances in Amer-ica, and Home Depot has some catching up to do.
Now let’s spend some time in women’s clothing. A quick glance at the migration index in Figure 2.5 prompts this question, “Why do losses from Sears and JCPenney seem to be so much greater than the gains at Wal-Mart?” It’s simple. All the players are not shown on the board.
While some of loss from Sears undoubtedly was Wal-Mart’s gain, the rest went to Kohl’s, Steinmart, specialty boutiques, and others.
If I were Sears, I would want to know why customers are leaving and what makes Wal-Mart so attractive. By the way, if you are working at Sears, there is a good chance you won’t recognize the problem. Logi-cally, you may think, “We have more comfortable stores, better selection, and higher quality at a competitive price. Why would someone not shop with us?”
Well, let’s find out!
What are the reasons you buy your home improvement/hardware items there? (Check all that apply.)
Financing options 214.7% 215.2% 190
Store appearance 111.5% 118.5% 162
Store layout 117.8% 126.5% 167
Home Improvement ideas/tips 130.5% 127.7% 110
Newest styles/products 113.9% 116.2% 186
Installation services 1 10.2% 111.2% 192
Knowledgeable salespeople 134.7% 130.8% 113
Other 212.4% 212.9% 181
The sum of the percent totals may be greater than 100 percent because the respondents can select more than one answer.
Source: BIGresearch, Consumer Intentions and Actions, June 2004.
FIGURE 2.4 Home Depot versus Lowe’s Home Improvement/Hardware (Continued) Home Depot Lowe’s Index
Foreknowledge 21
Here’s a quick quiz. When it comes to women’s clothes, which is more important, fashion or value? Quick quiz, part 2: Which is the most important factor when women purchase clothes, price or quality? Quick quiz, part 3: Women prefer conservative clothes, true or false?
Clothing brands have little meaning when 64.1 percent report famil-iar clothing labels are unimportant. (See Figure 2.6.) About the same number, 62 percent, say they are more concerned about value and com-fort than fashion. And watch this—67.8 percent usually buy clothing when it’s on sale, while another 19.7 percent say they only buy on deal.
Put them together, and 87.5 percent of the market is zeroed in on the clearance rack.
When you think price, do you think Sears? When you think fashion, do you think Wal-Mart? Well, there you have it. The women of America are going for the made-in-China, elastic waistband, polyester pants, and they still aren’t buying unless they’re on the sale rack or at Wal-Mart, where they promise everyday low prices.
If Sears is going to attract the women’s clothing shopper, it’s going to have to promote value, maybe better quality at a slightly higher price but value nonetheless.
Finally, someone is eating Wal-Mart’s lunch! But it isn’t Kmart, JCPenney, or Sears. Who is it and why? Digging in the data, we find what might account for the odd-looking graph in Figure 2.7 on page 24.
When asked about shopping habits, customers told us that giant, en-closed regional malls may be losing ground to freestanding stores and
FIGURE 2.5 Women’s Clothing Store Migration, May 2003–May 2004
Source: BIGresearch, Consumer Intentions and Actions, May 2004.
Women’s Clothing Store Migration (May 2003 - 2004): In v. Out
(Customers of OneYear or Less)
14%
12%
10%
8%
6%
4%
2%
0%
In Out
Wal-Mart JCPenney Sears
22 W he n Cu stom ers Talk
5,513 351 398 142 187 1,495 903 1,616
What are the reasons you buy your Women’s Clothing there? (Check all that apply.)
Price 80.3% 94.8% 80.4% 85.1% 95.4% 96.2% 70.8% 81.2%
Selection 68.6% 84.2% 82.1% 81.7% 65.7% 55.7% 81.1% 81.2%
Location 49.3% 58.8% 50.2% 54.5% 61.1% 63.6% 39.2% 54.2%
Quality 51.1% 63.1% 69.3% 67.0% 49.6% 34.5% 59.0% 69.2%
Service 20.8% 24.6% 21.7% 26.7% 20.4% 17.3% 23.8% 25.3%
Fashion ideas 16.4% 14.3% 19.7% 10.4% 14.4% 19.4% 30.2% 13.3%
Newest styles 18.1% 21.2% 12.3% 11.8% 15.9% 19.3% 31.8% 18.3%
Newest fabrics 17.2% 17.3% 12.9% 17.3% 16.4% 14.1% 13.4% 16.5%
Knowledgeable salespeople
18.6% 15.3% 18.4% 17.3% 15.8% 15.7% 13.0% 10.4%
Other 17.0% 11.4% 16.6% 14.3% 14.3% 14.1% 14.6% 14.8%
How have fluctuating gas prices impacted your spending?
(Check all that apply.)
Delayed major purchase such as car, TV, furniture 15.0%
Reduced dining out 26.3%
When buying clothes, familiar labels are important to me.
Yes 35.9%
No 64.1%
Total 100.0%
Check the statement that best applies to your feelings about fashion. (Check only one.)
Newest trends and styles are important to me. 8.5%
I prefer a traditional conservative look. 29.5%
Fashion is less important than value and comfort to me. 62.0%
Total 100.0%
Which one of the following best describes your shopping strategy for clothing? (Check only one.)
Sales are not important to me when buying clothing. 12.5%
I usually buy clothing when it’s on sale. 67.8%
I only buy clothing when it’s on sale. 19.7%
Total 100.0%
Foreknowledge 23
strip centers, which is exactly where you are most likely to find Bed Bath
& Beyond.
If there is a surprise, it is that Wal-Mart is beginning to slip. Why?
Asked “What are the reasons behind your linens/bedding/drapery pur-chases?” shoppers listed the following reasons (and, just for fun, we’ll see what women say about clothes):
Notice that price is less of an issue when it comes to linens versus clothes. Selection, while important, is also not that big a deal. Location and quality are also less of a consideration. The thinking must be that since price and quality aren’t such huge issues, we might as well make the trip fast and easy and head to a local strip center where Bed, Bath, and Beyond rules the roost.
If you were Bed Bath & Beyond, how would you shape your market-ing? You might definitely want to mention convenient shopping right in the neighborhood. Maybe you could snatch even more of Wally World’s customers!
Electronics is a huge category that is only going to get bigger as com-petition forces margins lower. (See Figure 2.8.) Without looking at the
FIGURE 2.6 Survey Says . . (Continued)
Women’s clothing (shop at most often)
Department store 22.5%
Discount store 26.3%
Specialty—apparel 11.2%
Membership warehouse 0.2%
Catalog 1.2%
Internet 0.2%
Other 5.5%
No preference 32.8%
Total 100.0%
The sum of the percent totals may be greater than 100 percent because the respondents can select more than one answer.
Source: BIGresearch, Consumer Intentions and Actions, May 2004.
Linens/Bedding Women’s Clothes
Price 69.2% Price 80.3%
Selection 48.9% Selection 68.6%
Location 36.0% Location 49.3%
Quality 37.7% Quality 51.1%
24 W he n Cu stom ers Talk
numbers, I know that this is a price-sensitive category. Why is it that Wal-Mart and Best Buy are able to take such a big bite out of Circuit City and Sears? If I were Circuit City, I would want to know where my customers went and why they decided to leave:
It’s price. Look at the numbers. Customers shop Circuit City for the selection, while Wal-Mart and Best Buy customers are looking for the deal. The question that Circuit City may want to consider is, “Can we beat the competition at their game (price), or should we take another tactic and wow the market with selection?”
Notice that Wal-Mart customers aren’t too concerned about quality.
Either they expect quality to not be an issue or perhaps they figure the life of the product will be so short that maintenance won’t matter. Cir-cuit City’s most direct competitor is Best Buy. If you were CirCir-cuit City, how would you position your company? How about “Great prices on the things you want”?
The prescription drug store migration is a puzzle until you take a deeper look. (See Figure 2.9.) Who would imagine that Wal-Mart would be losing share among customers of one year or less? Rite Aid and Eck-erd we can casually chalk up to natural competitive forces, but Wal-Mart?
FIGURE 2.7 Linen/Bedding/Draperies Store Migration, April 2003–April 2004
Source: BIGresearch, Consumer Intentions and Actions, April 2004.
Linens/Bedding/Draperies Store Migration (April 2003 - 2004): In v. Out
(Customers of OneYear or Less)
35%
30%
25%
20%
15%
10%
5%
0%
Wal-Mart Kmart JCPenney Bed Bath & Sears
Beyond In Out
Circuit City Best Buy Wal-Mart
Price 83.7% Price 90.4% Price 96.0%
Selection 79.4% Selection 59.8% Selection 51.1%
Location 56.5% Location 54.1% Location 59.6%
Quality 56.6% Quality 53.2% Quality 32.7%
Foreknowledge 25
Look at the reasons shoppers cite as determining factors when pur-chasing prescription drugs. Pay attention! We’re not talking shampoo and makeup remover pads. We’re talking prescription drugs:
Compared to location, price comes in a distant fourth, or perhaps a not-so-close second, if you consider being covered by insurance an ele-ment of price.
Location, which could be translated as convenience, is the major factor in the purchase of prescription drugs. Wal-Mart simply cannot put a Supercenter in every neighborhood, even if it seems like they al-ready have! But Walgreens and CVS, with their much smaller stores and the ability to use smaller parcels of land, is beating Wal-Mart at a differ-ent game. Particularly when you are not feeling well, convenience be-comes a huge competitive advantage.
Rather than pitching price, Walgreens and CVS are pitching conve-nience, something Wal-Mart isn’t set up to provide—yet. Wal-Mart has started building smaller “neighborhood” stores. If they aren’t already ev-erywhere, they will be.
FIGURE 2.8 Electronics Store Migration, March 2003–March 2004
Source: BIGresearch, Consumer Intentions and Actions, March 2004.
Electronics Store Migration (March 2003 - 2004): In v. Out
(Customers of OneYear or Less)
30%
25%
20%
15%
10%
5%
0%
Best Buy Wal-Mart Circuit City Sears
In Out
Location 64.9%
Prescriptions covered by insurance 44.8%
Prescriptions phoned in 42.6%
Price 36.2%
26 W he n Cu stom ers Talk