Business Journal

Wal-Mart’s Onetime CMO: Win Customers’ Hearts

A Q&A with Paul Higham, former chief marketing officer at Wal-Mart

Why creating emotional attachments with buyers is more crucial than obsessing over your rivals

Most companies are obsessed with their competition. Paul Higham, a leader in the successful expansion of Wal-Mart in the 1990s, thinks this is the wrong emphasis. Instead of focusing so intensely on beating their rivals, businesses should work to achieve something more basic and, apparently, more difficult: building strong emotional attachments with their customers.

During Higham's 13-year tenure as Wal-Mart's chief marketing officer, sales skyrocketed from approximately $20 billion to $220 billion, making Wal-Mart the largest company in the world. Higham, who now runs his own consulting firm, h-factor, recently shared some of his marketing experience with Gallup's Gabriel Gonzalez-Molina, Ph.D., coauthor of Follow This Path (Warner Books, 2002).

QUOTE: Before lowering prices, companies must have a clear definition of what keeps their customers coming back.

Gabriel Gonzalez-Molina: It seems that the growing pressure to lower costs and prices is commonly viewed as the only way to succeed and grow market share in our intensely competitive marketplace. You think that this is the wrong path. Why?

Paul Higham: It's the wrong path because low prices are not a customer's only reason for buying. More important reasons for buying are the merchandise and the experience that your company offers its customers, which become strong sources of attachment.

Low prices are important as a reason for selection when customers are choosing between two almost identical offerings at two significantly different levels of price. But price is clearly not the only reason for purchase.

Before jumping on the path to lower prices, companies must have a crystal-clear definition of what keeps their customers coming back. Then, and only then, should their focus be on lowering prices.

Gonzalez-Molina: The temptation is almost always to try to legislate what a customer's experience should be. I am thinking of a typical example in which a company dictates that customers should be greeted by name, as a corporate-wide mandate, to give the impression of friendliness.

Higham: We, as human beings and as customers, are predisposed to feel the impact of human interactions. The problem is that companies don't allow -- in fact, in many cases, they prohibit -- employees to use their natural talents to connect with customers and create strong relationships. The typical process is upside-down: Businesses give employees a script -- a predetermined format for interacting with customers -- to give the illusion of a real interaction. But customers realize it's faked.

Great companies work with a different agenda: They actually encourage each employee to use his or her natural talents to forge strong relationships with customers. Many companies promote that their employees "treat our customers as if they were our friends." Of course, the trick is having a system that allows employees to build relationships one customer and one employee at a time.

Gonzalez-Molina: Do companies focus too much attention on the least common denominator when it comes to measuring customer satisfaction?

Higham: Absolutely! Most customer satisfaction measures are too primitive. They basically refer to a common denominator of mediocrity. What companies really need to measure is emotional attachment -- their real bond with customers.

The problem I've always had with customer satisfaction measures is that they bear almost no relationship to financial performance. Take two companies with diametrically opposed financial results: one that is doing really well and another that is doing really badly. When you compare their customer satisfaction measures, they often look basically the same -- they both have high satisfaction scores. This underlines the primitive nature of this metric.

Gonzalez-Molina: Based on your experience, how should companies create attachment with their customers via their employees?

QUOTE: Most customer satisfaction measures are too primitive. Companies need to measure their real bond with customers.

Higham: The first step is to create an environment in which employees feel it is OK to start natural relationships with customers -- in fact, an environment that promotes this. This is the responsibility of both the company and the local manager. If companies or managers prevent employees from establishing genuine relationships with customers, it hurts your business.

Second, you must identify and develop the natural talents of every employee to help them connect with each of your customers. It's not about learning or using customers' names (many companies get obsessed with this). Instead, it's about creating an environment where customers feel they are accepted, welcomed, and recognized by the employees who work there.

Gonzalez-Molina: You have an intriguing idea that companies should direct part of their advertising to employees, not customers. Please explain that.

Higham: We must keep in mind that a brand is a collection of the multiple experiences that customers have with the company. This includes the experiences with the products, processes, and the human aspects of business performance -- the employees.

Creating advertising for and about employees is good for three reasons: First, employees are more sensitive to these ads than customers are. Second, employees want to feel like they are a part of a company that produces valuable products and services for others. And third, employees want to feel like they make a personal contribution toward the company they work for.

Gonzalez-Molina: How would you summarize your experience with all of this in one sentence?

Higham: Always remember that you are not in the business of beating your competitors, but in the business of winning the hearts and minds of your customers.
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