It is difficult to argue that Walmart offers ideal customer service (Forrester’s 2011 Customer Experience Index report rated Walmart near the bottom of 30 retail stores). Nonetheless, Walmart is leading a customer service renaissance through its sustainability initiative.
How? Walmart is providing healthier food options to its customers. Who would claim that better health is bad for customers? For Walmart, however, sustainability and better health are about growth and profitability.
There are only a handful of fundamental ways to increase sales revenues:
- Enter new markets
- Develop new products
- Increase spending per transaction
- Increase the number of transactions
The sustainability initiative addresses #4 by lengthening the buying lifetime of its customers. By providing healthy food to consumers, all other things being equal, customers should live longer. The longer they live, the more trips they’ll make to Walmart, and so on. This example is analogous to churn rates (the percentage of customers who defect from your products/services to another option). The difference is that the “other option” is death.
Some back of the envelope numbers to illustrate:
- $405,000,000,000 annual revenue (last 12 months ending January 2010)
- 140,000,000 people shop each week
- A person spends $55 on average each trip
- The global population growth rate is 1.133% (2009 CIA estimate)
Now the if(s):
- IF a consumer’s average spend/trip doesn’t change and
- IF Walmart’s actions result in improved health so that the mortality rates fall and the growth rates increase by only 0.001%
- THEN revenue will increase by $4,000,000
These numbers/assumptions are admittedly loose, but they help demonstrate the concept. We can be sure the smart folks at Walmart (number one on the Fortune 100 list and definitely not operating a charity) know the numbers and that they offer an attractive ROI.
Another potential benefit…
- IF consumers who normally don’t shop at Walmart start to because they believe the food is healthier
- THEN Walmart reaps a benefit on #1 above by opening a channel into a new market. (Have you seen the prices at Whole Foods?)
Whether the sustainability initiative was borne out of altruism or greed, the net result is the same — increased revenue. The pivot point is that by making strategic investments in the long term viability (i.e. life) of their customers, Walmart simultaneously serves shareholders, employees, and the community.
Which other companies do you know that “get it” and are focused on solving customer problems?