Change for the Better
For even longer than Kroger has employed its customer first strategy, it has printed the following sentence on each of its employee paychecks: A satisfied customer made this paycheck possible. After a century and a quarter of building itself up and tearing itself down, of rethinking its tactics again and again, Kroger has arguably reached a point where it is satisfying customers better than it ever
February 11, 2008
MARK HAMSTRA
For even longer than Kroger has employed its “customer first” strategy, it has printed the following sentence on each of its employee paychecks: “A satisfied customer made this paycheck possible.”
After a century and a quarter of building itself up and tearing itself down, of rethinking its tactics again and again, Kroger has arguably reached a point where it is satisfying customers better than it ever has. Its estimated $69 billion in 2007 sales leads all conventional supermarket companies, and its sharp pricing and highly customized merchandising strategy are propelling those sales at a rapid pace.
Achieving this position in the market has required a series of transformations over the generations that Kroger has been in existence, said David Dillon, chairman and chief executive officer, in an interview with SN.
“The importance of 125 years isn't so much the longevity, but the fact that nothing can exist unchanged for 125 years, and Kroger has gone through a metamorphosis several times in its history,” he said.
He considers Kroger to have undergone two major metamorphoses in his 25 years with the company. The first was in 1988, when the company undertook a leveraged recapitalization, and the second began about five years ago when the company launched “customer first,” the strategy that has helped drive same-store sales through a customer-oriented approach to what the company sees as four key areas: product, price, people and the store experience.
The current effort is no less transformative than the changes the company has undertaken in the past, including the strategic overhaul in the post-World War II era when it went from operating about 5,000 relatively small corner grocery stores around the country to its current network of 2,500 mostly traditional supermarkets from California to Virginia, with a strong stable of alternative formats supplementing its bread-and-butter food-and-drug combo stores.
“Somebody decided that we needed larger stores, the population became more mobile, and in responding to the customers we had a make a rather radical change,” Dillon explained of the shift in the middle of the last century. “Kroger as an organization rose to meet that challenge and made that change, just as we did in 1988, and just as we are doing now.