This is why suppliers dislike selling to them. Walmart drives suppliers very hard to deliver extremely high quality at low prices because their product strategy must support their strategic marketing direction and unique value proposition. Walmart is really in the price and quality expectations management business. To reduce them to price warrior in the retailer industry is to miss the point. If this was the case then every one of their psychographic segments would be completely loyal and that is far from the truth. Marketers must shape consumer wants and needs even when price, the most powerful market mix factor there is, is being used as part of the positioning and unique value proposition (Foxall, 1994). This becomes clear after completing an analysis of the psychographic segments that WalMart relies on for its revenue. Using the last decade's worth of filings with the U./S. Securities and Exchange (SEC) in conjunction with their annual reports, an assessment of their market segmentation has been created. Figure 1, WalMart Psychographic Market Segmentation shows the profile of the market segments that WalMart has defined through their attitudinal and consumer research (WalMart Investor Relations, 2013). Just 16% of their customer base is loyal, and this segment is appropriately called the Price Value Shopper in their filings and annual reports. Marketing shapes these customers' needs and wants to make them loyal to Walmart; they have a myriad of options of where to shop and choose Walmart because the company lives by its unique value proposition.
Figure 1: WalMart Psychographic Market Segmentation
Source: (WalMart Investor Relations, 2013)
If consumers were entirely driven by price elasticity and entirely rational in how they made purchasing decisions, then the entire segment map would be to the left. Instead the major of consumers are less loyal to WalMart. This underscores how difficult it is for marketing to shape consumer needs and wants. Just 16% of all consumers who visit WalMart are loyal, which shows how marketing shapes these consumer's wants and needs over time.
Implicit in how marketing shapes consumer needs is how WalMart has designed their value chain to be highly efficient at selling to consumers while maintaining internal process and pricing efficiencies (WalMart Investor Relations, 2013). For marketing...
Figure 2, shows the WalMart value chain and how it is aligned to the goal of deliberately setting price and quality expectations with customers and then exceeding them. This is the nuance that many analysts and pundits completely miss when they consider how Walmart markets.
Figure 2: WalMart Value Chain
Source: (WalMart Investor Relations, 2013)
Conclusion
An essential part of any business is how it aligns all of its resources to set and exceed customer expectations. Walmart relies on marketing to shape consumer needs and wants through the use of price as a component of their value proposition, supporting their empathy for their most loyal segment the Price Value Shopper (WalMart Investor Relations, 2013). The bottom line is that marketing shapes consumer wants and needs, and even for global corporations like Walmart, all must be aligned to winning customers over by exceeding their expectations. Marketing is the catalyst that drives these behaviors in customers.
References
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Foxall, G.R. (1994). Behavior analysis and consumer psychology. Journal of Economic Psychology, 15(1), 5-5.
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WalMart Investor Relations (2013). Investor Relations. Retrieved May 11, 2013, from Wal-Mart Investor Relations and Filings with the SEC:
http://investors.walmartstores.com/phoenix.zhtml?c=112761&p=irol-estimates
