Retail positioning strategies for target market differentiation and customer service

Retailers

Nordstrom has done a number of things to help differentiate itself from other retailers. The first is with respect to the product mix. The company has made a point to put higher value brands in the Nordstrom store as part of its differentiation strategy. Nordstrom's approach has therefore been essential in building brand loyalty, by cultivating the middle class and upper middle class. It is worth noting that a brand extension, Nordstrom Rack, is catering more squarely to the middle class, and this differentiation not only enforces the difference of the Nordstrom brand but also highlights that the regular Nordstrom brand is positioned well away from the mainstream retailers like Target (Berman, 2010)..

Further, Nordstrom uses pricing and service as points of differentiation. It uses lower pricing in Rack, and higher pricing in the regular store, in order to attract different audiences to the two brands. There is little crossover between Nordstrom and Target, especially with respect to fashion, because of the differences in merchandise and pricing. A Nordstrom shopper might go to Target for some other product category -- toiletries or food or something -- but is unlikely to go to Target as a substitute for something they would buy at Nordstrom because there are significant differences between the two in terms of quality and pricing.

Another point of differentiation that Nordstrom emphasizes is service. The company employs a customer relationship management system in order to learn about its customers, then use that to offer them a much higher rate of service than would normally be offered by other retailers This helps Nordstrom to differentiate itself even from otherwise close competitors like Macy's (Anderson, 2009).

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Nordstrom has engaged in these positioning strategies for a couple of reasons. The first is that Nordstrom believes it can cultivate a competitive advantage by outperforming the competition on key elements such as service. The underlying theory is that customers appreciate high levels of service and are willing to pay a premium for it. High levels of service should, according to the strategy, also cultivate a high level of brand loyalty. Thus, the company will attract customers and a loyal customer is going to be less price sensitive than a customer that simply chases the low prices. Thus, Nordstrom is pursuing a demographic that values service over price with its strategy.

The distinctness of the competitive advantage comes when Nordstrom becomes recognized as offering the best customer service in its class. There might be store with better service -- high end stores for example -- but Nordstrom wants to win its segment. Porter explains that by being the best at something -- a differentiated player -- a company can win the segment of the market that values that thing more than other offerings (QuickMBA, 2010). Nordstrom believes that it will win a plurality of customers in retail shopping if it offers better service and brands than its competitors. To some extent, this was true during the high growth period of the past.