Sears is an iconic American brand that was spent years at the top of the retail food chain. So, why did the company file for bankruptcy after more than a century in business?
The answer may surprise you: According to Inc.com contributor Thomas Koulopoulos, Sears failed because it was too loyal to its loyal customers.
"Providing only what your existing customers, or members, want, while your business is failing, is like offering cabin upgrades, instead of lifeboats, to passengers aboard the Titanic," Koulopoulos says. "Sears had built brand loyalty that spanned a century and five generations. If you're a boomer, you undoubtedly have fond memories of the Sears catalog, which often occupied a place of reverence as the largest and most in-demand book in most homes. Ultimately, that brand loyalty turned into an immutable set of expectations about what Sears was. And it held Sears hostage to its legacy. It insulated Sears from threats that should have been obvious. It cocooned it in the expectations of the past."
It started in the early 1990s, when Walmart began its ascendance. "When a company starts to sense its market potential slow, it instinctively attempts to hold onto its best customers," Koulopoulos continues. "In many ways the company will start doing what any good company should do: develop a closer bond with its most loyal customers. Sears did this by putting in place a loyalty program called Shop Your Way."
The loyalty program was a huge success. "Shop Your Way accounted for over 75 percent of Sears' sales," Koulopoulos reports. "And that was precisely the problem; your most loyal customers will anchor you to what your brand was at its most successful."
The lesson: If you want to avoid becoming a dinosaur, like Sears did, stop trying to hold onto what made you successful yesterday and try to anticipate what will make you successful tomorrow.
"We value most those companies and people who invest the time and energy to think ahead and deliver products or services before we ask for it," Koulopoulos concludes. "Ultimately, nothing creates a greater bond of loyalty than knowing the customer at that level."
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