IMPACT OF CUSTOMER SATISFACTION ON STORE

SALES
AN ANALYSIS OF RETAIL CHAINS
By:
Dipak Senapati
Gaurav Kala
Karanvir Gupta
Manoranjan
Nishant Prakash
Saket Hawelia
Sonal Barwa
Valavala Sai Sravya
Yash Bharat
INTRODUCTION
Aim: To establish a relationship between the factors that affect customer satisfaction which in turn affects sales in any
retail outlet
Industry Overview
Problem Definition and Objective
Hypothesis Formulation
Literature Review
Work Plan
Methodology
INDUSTRY OVERVIEW
Retailing
Grocery
Retailers
Hypermarkets Supermarkets
Convenience
Stores
Non Grocery
retailers
Department
Stores
Variety Stores
Non Store
Retailing
Internet
Retailing
INDUSTRY OVERVIEW (CONTD.)
Drift in customers from large store formats and competition set to intensify
Hypermarkets and Supermarkets need to be more targeted as markets are becoming mature and local players
making inroads
Need for more compact units with flexible store concepts
Innovation in store format and assortment
Multi Channel Synergies to gain advantage over pure play internet retailers
The largest of retailers in the world have gone down in Customer Satisfaction index thus demanding for a change
in the way they operate
All these factors thus act as a precursor to understand that there is a need to prevent the drift of customers to other retail
formats and take care of parameters that would suffice their satisfaction level
OBJECTIVE, PROBLEM DEFINITION & HYPOTHESES
With growing competition, each and every aspect of a Retailers operation plays an important role
in making sure that it doesnt loose out on its Market Share
As mentioned earlier, Customer Satisfaction is one such important aspect
The research would try to find out:
What are the most important parameters that define how satisfied a customer is while shopping at a retail
store?
How are individual stores performing based on the above parameters?
What impact does Customer Satisfaction have on Store Sales?
The Hypotheses to be tested are:
The individual parameter (eg. Number of check-out counters etc.) affects Customer Satisfaction
Higher Customer Satisfaction Ratings have a positive impact on sales
LITERATURE REVIEW
Similar studies to gauge customer satisfaction have been carried out prior to our
research. To understand the requirements and analyze the basic elements of a
questionnaire we referred to the following documents:
Which Retailers Have the Most Satisfied Customers? (Article published in
Time & Money on Feb 22
nd
2012)
Americancustomersatisfactionindex.com (ACSI reports)
The Best And Worst Companies For Customer Satisfaction (Article
published by Forbes)
Who's right about Wal-Mart's customer satisfaction? (Article published
by MSN Money)
From the documents it was observed that in spite of being the worlds largest
retail chain ,WalMart, it scores low on the Customer Satisfaction Index and faces
threat from upcoming retail chains like Target, JC Penney & Kroger
WORK PLAN
To design the questionnaire it is necessary
to identify the parameters that are
significant and contributes to the store
performance.
In this stage the parameters are to be
analyzed are chosen to design the
questionnaire accordingly
One suggested way is to come up with
an exhaustive list of factors and ask
customers to rate which of them they
consider more important this can be
done using a likert scale
Customers can be attracted by offering
them discounts on their next purchase
Identify factors
Assess store
performance
Relation between
Store Sales &
Customer Satisfaction
The plan of action once the questionnaire
and survey forms are designed are as
follows:
The questionnaire will be circulated in
and around various Walmart stores
The customers are required to rate
the various services at the stores
(based on criterion identified in the
previous stage)
Each store would then have an overall
satisfaction rating based on the
customers average inputs over
sometime
A $1000 lucky draw would be held for
the respondents
Using statistical tools the relation between
Store Sales and Customer Satisfaction is
quantified.
Multi variable regression would be
used
All factors affecting store sales to be
considered
Customer Satisfaction Indices having
maximum contribution would be
selected
Mixed models would be developed
keeping all the parameters except the
above indices constant
DETAILED METHODOLOGY:
STAGE 1
In order to understand customer satisfaction, we first need to identify the parameters that are important to them
For identification of important parameters that affect Customer Satisfaction, the following process would be followed:
1. The internal team would develop a Mutually Exclusive & Collectively Exhaustive list of parameters related to store
operations
2. The above would include factors like Restroom Cleanliness, Number of Check Out Counters, Modular Width and Layout,
Exclusiveness and Availability of desired merchandize, friendliness of store assistants etc.
3. Paper pamphlets carrying these parameters would be handed out to the customers at check-out over a stated week
4. The respondents would be asked to rate the said parameters on a scale of 1-10 based on what is more important to
them
5. A simple numerical (Likert) scale would do the needful
6. The respondents would be offered a 2-3% additional discount on their next purchase upon submission of the filled in
pamphlet
7. Initial screening would be done at a store level to report dodgy entries followed by a Chi-square to check for significance
8. Finally, based on the collective response, a list of significant parameters would be finalized across all stores for further
assessment
DETAILED METHODOLOGY:
STAGE 2
Once the influential store parameters are identified, a questionnaire
would be developed asking respondents to rate the store based on
these Customer Satisfaction Indices, again making use of a Likert
Scale
The ratings would be collected on a regular basis and a monthly Lucky
Draw would be held at a store level to keep the respondents interested
in the survey
This would help keep track of the Customer Satisfaction rating on a
regular basis the exact rating would be a weighted average of the
individual indices based on their relative scores obtained in Stage 1
Individual Stores would then be compared across the retail chain to
identify outliers in specific domains and appropriate action would need
to be taken to rectify the same eg. A store that is consistently scoring
low on an index like Friendliness of the Cashier would have to spend
on HR activities to accordingly train the cashiers
DETAILED METHODOLOGY:
STAGE 3
Once the process is set and adequately tested over a period of 1-2 years, the next
step would be to quantify the impact of individual Customer Satisfaction Indices
(CSIs) on store sales
Once quantified, these parameters would be assessed at an overall Retail Chain
level (across all stores) for more wholesome and long lasting changes similar to
the outliers highlighted in Stage 2
The process to be followed is:
1. Develop a regression model with YoY sales as the dependent variable and YoYs of all the
factors affecting sales (including CSIs) as the independent variables each data point
being a store
2. Identify the CSIs that have the highest contribution to YoY sales
3. Develop a Mixed Model with the identified CSIs as variable and all other independent
variables in point 2 above as fixed neglect individuality of each store in this step
4. The above would help quantify further the exact impact of change in each of the
identified CSIs on Sales at an overall level
5. The company can take steps to then work on improving these parameters to further
improve sales in more definitive terms
THANK YOU