BATAVIA, Ohio (AdAge.com) -- It's marketing's time at Walmart.
It's easy to become complacent when you are a $401 billion company whose shareholder meeting gets teen idol Miley Cyrus out of bed before 8 a.m. to perform for more than 15,000 employees as a warm-up act for American Idol Kris Allen. But Walmart executives know that if the recession abates, they will face a challenge holding onto shoppers who've been introduced, or reintroduced, to the retailer as they've traded down to save money.
And the U.S. Walmart division is seeing rapid deceleration of store expansion. Sales contribution from new stores last quarter was a record low for the once fast-expanding retailer. Only 0.2 points of its 3.8% U.S. sales growth came from new stores, compared with 4.4 points of growth from new stores just a quarter earlier.
All of that is forcing Walmart to become a better marketer and merchandiser, said Chief Marketing Officer Stephen Quinn in an interview the day prior to the company's June 5 shareholder extravaganza. "While it's very exciting to be opening new stores and building your base out that way, it clearly is the kind of game where there has to be some natural plateauing," Mr. Quinn said. Walmart's new reality means "you're going to have to work a lot harder in an existing neighborhood to get them to consider other categories or to build that emotional bond with them."
Mr. Quinn is confident Walmart is doing just that with its "Save money. Live better" campaign from the Martin Agency, Richmond, Va. And anecdotally at least, Mr. Quinn's boss, U.S. CEO Eduardo Castro-Wright, saw that emotional bond firsthand when he visited a supercenter in Fairfax, Va., alongside new Walmart Stores CEO Mike Duke and former Walmart CEO Lee Scott.
Mr. Castro-Wright recounted at the shareholder meeting that he had some trepidation when an elderly woman approached him just as he entered the store. Since they were all in suits, he thought she might be looking for a manager to complain to. Instead, he got a hug. "She said, 'I want to thank Walmart for helping me survive these times.'"
Mr. Quinn is hoping a lot of people feel the same way, and he has more than anecdotes to prove it. The company has invested heavily in market research, polling more than a million customers monthly directed to its website from its stores. "I'm proud of the story here, because I think it's showing how marketing is making a really big difference to a company that maybe didn't take it as seriously as they do today," he said. "I think marketing is at the forefront of championing the customer internally and doing something about it."
Besides its well-known campaign, Walmart has worked extensively to retool its marketing effort, Mr. Quinn said, noting a new customer-segmentation model in recent years, a step up in marketing analytics and building up the talent pool in the marketing department.
All of that has dovetailed with Walmart's "Project Impact," which has aimed at cleaner stores with wider, less-cluttered aisles, better and more easily shopped merchandise and more visible and appealing store branding.
"We were fortunate that this recession came along," Mr. Quinn said. "It played to our positioning really well. But our own insecurity is that all the credit would go to the external environment and none of the work we all did. The kinds of things we were working on anyway when this environment came along are the same things we need to do to keep these so-called new customers and I think continue to build loyalty with our existing base."
Not a garage sale
Quickly disappearing are the days when Walmart piled big, cluttered displays of merchandise, particularly in its storefront "Action Alley," he said. "We've cleaned that up significantly. While some customers may miss that almost garage-sale kind of feel, for a lot more customers, it makes it faster, easier, cleaner for them. And with the time pressure on people still being such a huge dimension of their lives, just that efficiency of shopping is really important."
Marketing clearly has assumed a more important role at Walmart under Mr. Quinn, a veteran of PepsiCo's Frito-Lay. "Certainly it's not a marketing-led company in the way a lot of package-goods companies would consider themselves to be," he said. "So I have to be careful not to overstep what it really is. But I do think marketing has a seat at the table. ... This company had a strong merchant and operations culture, and now we've added this third leg of the stool."
Part of that influence, too, has included marketing people assuming key roles on the merchandising side, with Steve Bratspies and Greg Hall, both once marketers under Mr. Quinn, having gone on to head dry grocery and entertainment merchandising, respectively. A third former marketer, Paul Hunt, now runs the Better Homes and Gardens exclusive brand at Walmart.
Walmart really doesn't need to attract a different customer to succeed, Mr. Quinn said -- just do a better job of selling to and maintaining the loyalty of its existing customers.
That, rather than a desire to chase margins amid slowing growth, is the impetus behind its focus on improving its private-label offerings, most recently Great Value, he said. But Mr. Quinn couldn't resist a joke. He mugged as if for the camera as he drank from his can of Walmart "Diet Thunder" and said: "I will not get caught endorsing only private-label products." If his colleagues at PepsiCo saw that, he said, "they would just croak -- I'd be getting calls from [CEO] Indra Nooyi."
In the end, however, Walmart still differentiates itself through low prices on national brands and it still relies on those brands for ideas and strong marketing programs, he said. "That being said, and I think CPG companies know this too, there are segments of customers that either want or frankly need to have private brands. And where I think we have fallen down in the past" is by not bringing enough marketing talent to bear on private label. "Just because we're focused on the national brands," he said, "doesn't mean we have to do a poor job on the private brands."