Customer relationship management and business strategy

Customer Relationships

Nordstrom, Inc. has long enjoyed a reputation for providing superior customer service. This paper examines Nordstrom strategies that the retailer employs to build customer relationships and promote customer loyalty.

Nordstrom is one of the nation's leading fashion specialty retailers, with 204 stores that are located in 28 states. It was founded in 1901 as a shoe store in Seattle, and today operates 115 full-line stores, 86 Nordstrom Racks, two Jeffrey boutiques, and one clearance store. Nordstrom also serves its customers through its website and through its catalogs (Gonzales, 2).

Nordstrom's business strategy has been called "greed through love" (deFelice). The 110-year-old retailer owes its success to customer-friendly policies that are well-known, widely admired, and frequently imitated in the U.S. retail industry. Nordstrom employees work to form customer relationships, and the company is known to have one of the most customer friendly merchandise return policies in the global retail industry (Farfan, 1).

In addition to its generous return policies, Nordstrom customer relationship strategy includes other tactics. According to deFelice, Nordstrom is willing to take risks and do unusual and often expensive favors for shoppers, even accepting returns on items not even purchased there. But such big risks often yield big gains. Word starts to spread that Nordstrom is doing crazy things for its customers, and they tell their friends. Pretty soon, this word of mouth or viral marketing lures new people into the store. That method of marketing is statistically shown to provide better results than basic brand advertising (deFelice, 1).

One of Nordstrom's former top salesmen, now retired Patrick McCarthy, described his efforts to build customer relationships. To help keep track of his 12,000 customers, McCarthy kept a personal customer book, some of it on paper, some of it in his head. Now however, employees keep records electronically. Salespeople can be alerted when unusual sizes and shipments will be coming in, and they can be reminded to call customers when alterations are ready. Nordstrom's relationship management system also tracks inventory electronically, so that salespeople can quickly determine which nearby stores may have a particular item that they don't have, all without having to call several numbers on a list (deFelice, 1).

McCarthy also enthusiastically describes a Nordstrom culture of empowerment. According to Robert Spector, McCarthy's co-author of The Nordstrom Way, Nordstrom gives their people on the frontline the ability to make decisions, and then gives managers the ability to back them up. Spector also claims that Nordstrom has but one rule: use your good judgment in all situations. Spector explains that Nordstrom management believes that the more rules you have, the farther you get from the customer. As Spector reports "Nordstrom has a consistency of purpose. That's key. It comes down to hiring the right people and then truly empowering them to take care of the customer" (deFelice, 1).

Spector sums up eight management principles that Nordstrom employs to make it what can arguably be considered America's number one customer service company:

1. Provide your customer with choices

2. Create an inviting place for your customers

3. Hire nice, motivated people

4. Sell the relationship: service your customers through the products and services you sell

5. Empower employees to take ownership

6. Dump the rules: tear down barriers to customer service

7. Encourage internal competition

8. Commit 100% to customer service

As Spector describes it, Nordstrom employees don't outsmart the competition, they outservice them (Brzozowski, 1).

Other features of Nordstrom customer loyalty programs include a 2009 rollout of a tiered rewards program that gives shoppers a chance to earn perks such as free shipping, specially packaged trips to places like San Francisco and Miami, and access to "red carpet" events and store openings, if they spent enough on their Nordstrom card at the store. Prior to that, Nordstrom rewarded customers only with points toward less glamorous spending credits known as Nordstrom Notes (Wallstreet, 1).

Recommendations to improve Nordstrom's customer loyalty program should include features that broaden the appeal of the program. Possibilities include refinements that would create a Nordstrom version of competitors programs, such as: