Advertising Age: In the last year or so, more than a dozen major retailers have hired new CEOs, repositioned themselves, launched new branding efforts, hired new chief marketing officers or switched advertising agencies. What is behind this unprecedented flurry of change?
Paul Higham: Retailers are really worried about making sure they are still relevent. Things really have changed in the marketplace in total. People are busier; they're feeling more stressed out. Probably, all their life habits have changed. It's always the challenge for all retailers to question their processes and to make sure they are in a state of constantly updating them.
AA: Is the Internet a catalyst?
Mr. Higham: My gut says, "I don't think so." I think the Internet is really significant, but it's [not] yielding enough volume yet to really take a huge chunk of the business away from brick-and-mortar retailers. The Internet has extraordinary potential.
AA: What strategies should retailers be considering to integrate bricks and clicks successfully?
Mr. Higham: What we are dealing with here is another medium or another way to transact or to share information. There was a time we didn't advertise on FM radio. It seemed impractical. Eventually, every car radio had an FM button. At some point in time, it became a successful medium. [Just as it was in the case of extending advertising to the FM radio] if you already have a brand image, it makes sense to extend that brand image onto the Internet.
AA: With high fuel prices dampening consumer spending, and retailers anticipating a very promotional holiday, how will Wal-Mart fare?
Mr. Higham: Good times are great for retailers. In the hard times, you have to work harder and be more relevant to your customers. We keep expenses low so you can afford to sell for less.
AA: What is your philosophy about marketing?
Mr. Higham: Your focus always has to be on your customer. The truth is, customers make choices every day as to where they are going to shop. And as retailers, it's incumbent on us to really know and understand how people behave, what they want and to simply provide it for them to the best of our ability. I know that sounds simplistic, but the truth is, you have to be worthy of being chosen. You have to do what the customers want. And that's the key to market share too.
AA: What has Wal-Mart done for shoppers to be "worthy of being chosen"?
Mr. Higham: We study the customers intensely and constantly. We have a number of formal marketing studies we do. We're in the field every day. We do thousands of customer interviews every month. [On the media side] we really work hard to see where customers are spending their time. We let the media help us with their research and we do our customer research. We study the situation, and that's where we spend our dollars. There's not that many, so they have to work real hard.
AA: Yes, Wal-Mart, the world's largest retailer, has one of the smallest ad budgets of a major retailer, well below the industry norm of 4% of sales. How do you do it?
Mr. Higham: Staying focused. Staying on message. Giving the customer everything they want. The truth is, the best advertising in the world never made a bad store good. But great stores make the marketing great.
AA: So, the secret of Wal-Mart's marketing success is?
Mr. Higham: Running really good stores, a customer at a time, a day at a time.