Nordstrom: A Marketing Analysis “Does the Company’s Marketing match its Mission?”
Justin King Brittany Culver Michael Jorgensen
Brief of Contents
Executive Summary Introduction Part 1 Swot Analysis
1. Internal Strengths and Weaknesses History Nature of Firm/Current Situation Resources of Firm Policies and Objectives 2. External Opprotunities and Threats Social Demographic Economic Competition Technological
3 5 0 0
0 0 0 0 0 0 0 0 0 0 0
Part 2 Marketing Strategy
3. Target Market 4. Marketing Mix Product Place/Distribution Promotion Price
0 0 0 0 0
Part 3 Charts
1. Porter’s Five Forces Model 2. Porter’s Value Chain 3. List of Nordstrom Employee Benefits
0 0 0
Nordstrom was founded in 1901 by John W. Nordstrom and Carl Wallin. From the companies beginning, the business philosophy of Nordstrom has been to provide the best possible service, selection, quality and value to its customers. This philosophy has remained unchanged for over 100 years. Today the mission of Nordstrom is still the exact same. Over the years Nordstrom has created individual departments that focus on the individual lifestyles of the customers. The company nor only provides its customers with a wardrobe, but also a countless line of accessories, cosmetics, and fragrance. Over the past few years, the company has added new brands to its product line to satisfy its customer needs. In order to give the best possible service to the customer, the company plans on continuing to update the product line as new customer desires evolve. The employees are extremely focused on creating an environment of customer service within the store as well. The employees are not only focused on meeting the company standards, they are also focused on reaching the standards they have set within their own department as well. Each employee is trusted by the store managers to make good decisions and represent the company well. This trust has built confidence in the employee and enables them to focus all of the energy toward the customer. The atmosphere of the store also shows evidence of the company mission. The store is easy to navigate through, specific soothing colors are well placed throughout the store, and there is always a piano that can be heard playing in the background. These three things create a soothing and comfortable atmosphere for the customer.
4 Nordstrom‟s mission of providing customer service, quality, selection and value to its customers is carried out in every aspect of the company. The company employees, store atmosphere, and product line all display extraordinary qualities of service. The Mission Statement of Nordstrom is definitely evident in its day to day operations.
Situation Analysis (SWOT Analysis)
Internal Strengths and Weaknesses History (Sales, Profits, Organizational Philosophies) Nordstrom was co founded 1901 by a 30 year old man named John W Nordstrom and his partner Carl Wallin. At age 16, John W of Sweden left his home and moved to Alaska where he struck gold. While in Alaska, he met a man named Carl Wallin, “who owned a shoe repair shop in downtown Seattle” (Nordstrom Employee, 2006). The two decided form a partnership and open a shoe store entitled Wallin & Nordstrom. Right form the start, the business philosophy was “based on exceptional customer service, selection, quality and value” (Nordstrom Employee, 2006). Focusing on this philosophy helped Nordstrom develop a competitive advantage in the shoe market. Due to their success, the company opened a new store in 1923. The company was soon taken over by John W‟s sons. Under their management it “grew to become the largest independent shoe chain in the United States. By the 1960‟s the current market had started to reach maturity and the company began to look “for new ways to spread its wings” (Nordstrom Employee, 2006). In an attempt to diversify itself, and gain greater market penetration, Nordstrom took on a new name, “Nordstrom Best”, and ventured into the clothing market. Now, upon entering a Nordstrom store, “customers were greeted with a selection of both shoes and fine apparel” (Nordstrom Employee, 2006). Now for the first time in history, Nordstrom offered a diverse product mix, something no other competitor offered.
6 In 1971, under the third generation of management, the company decided to go public. Two years later Nordstrom reached a critical point in its business, surpassing $100 million in sales, making it the largest volume specialty store on the west coast. Profits were growing, market share was increasing, and Nordstrom‟s marketing plan seemed to be working. Even though Nordstrom was experiencing tremendous success, the management was not satisfied. There was still room to grow. In order for Nordstrom to retain its competitive advantage, the company needed to revise its marketing strategy and further its market penetration. The company decided to take action. By 1975 the company penetrated into the markets of Alaska and California and by the late 80‟s, the company opened up the first Nordstrom Rack in the mid 70‟s. This store was a “clearance center for full-line store merchandise” (Nordstrom Employee, 2006). The higher prices in the regular store targeted the upper segment of society, while the Rack enabled Nordstrom to orient itself to a completely new crowd. Today, more than 100 years after its establishment, Nordstrom maintains the same focus of offering “the customer the best possible service, selection, quality, and value” (Nordstrom Employee, 2006). This is evident in the product line and store ambience. Nordstrom has created a unique store atmosphere designed to enhance the shopping experience of the customer. “Instead of categorizing departments by merchandise, Nordstrom” has “created fashion departments that fit individual‟s lifestyles” (Nordstrom Employee, 2006). Focus on serving the market (or customer‟s needs and wants) has
7 helped Nordstrom grow from a small shoe store in Seattle “into a nationwide fashion specialty chain” (Nordstrom Employee, 2006).
Nature of Firm/Current Situation Aside from Nordstrom‟s customer service, one of its most influential qualities is the store atmosphere. Immediately after walking into a Nordstrom, one experiences a sense of calmness that is not experienced when walking into other department stores. At Nordstrom, “careful attention has been given to achieving an esthetically pleasing atmosphere”, a Nordstrom customer commented (Bee H, 2006). Nordstrom has put a lot of research into testing different layout scenarios within each store. Every time the layout of a department changes, a diagram is made and a record of sales is kept for that layout. From this information, Nordstrom has been able to develop the most economical and profitable layout for the customer and the organization. The Nordstrom colors are also carefully selected. Deep earthy colors present customers with a comfortable and desirable atmosphere. Deep red, brown (wooden floors), blue, purple and green are used to color the store. Every color is strategically placed throughout the store to enhance the shopping experience. Nordstrom has put a lot of research into effects that color has on the human psyche. For example red is chosen because it produces feelings of “energy, desire, and attention” (Bear , 2006). Purple is another color that is placed in distinct locations throughout the store. It brings about feelings of self assurance, dignity, high aspirations, royalty, sophistication, wealth, ambition, fame, luxury, and power. These two colors are used to promote confidence and feelings of satisfaction within the customers as they
8 shop. During sales, employees are also given a tie to wear which almost always includes the color purple. Purple is also found near the more expensive items in the store. The color scheme is critical in creating a store atmosphere that is desirable to customers. Aside from the colors, the product layout also plays an essential role in providing a even-tempered atmosphere. Nordstrom has separated its products into different departments for men and women. This helps provide better service as each department can cater to the specific needs and wants of the customer. Within each department the clothes are either laid out on hanging racks or on tables. Organization is the primary focus when setting up the departments. Clothes are always neatly folded and clothing racks are well separated. A general rule of thumb is that if two people can not walk side by side between two fixtures, they are too close together. To produce an even cleaner look, jackets and heavier clothes are always hung on wooden hangers instead of plastic. The most famous contribution to the atmosphere of Nordstrom is the Piano. Nordstrom has created a “partnership with Levine School of Music” where it hand selects students to work for the company upon graduation. The partnership is working; “the dude playing the piano just adds to the calm shopping atmosphere” commented one man after a day a day of shopping (Bee H, 2006). To provide even more relaxation, comfortable couches are usually found somewhere around the piano for tired shoppers to sit down and for men to wait while their wives shop. Andrew Cooper, a computer design major at North Park University in Chicago said “these couches are a great place for me to relax while my wife spends all my money”. Resources of the Firm Finance:
9 Nordstrom uses a verity of resources to help attract new customers and retain its current customer base. By far, one of its biggest resources is in the area of finance. Nordstrom recently “reported third-quarter earnings of $135.7 million” (Portland Business Journal , 2006). These earnings jumped unexpectedly and are up from $107.5 million earlier this year. The financial resources of Nordstrom are an essential part of the companies marketing plan. This money has given Nordstrom the ability to put on expensive training programs for employees, purchase personal book (a customer database program), send out bulk mailings to customers (such as catalogs, promotions, etc.), build new stores, and create a customer friendly in-store atmosphere.
Human: Nordstrom‟s employees and management are the company‟s most valuable resource. An article written in the Seattle PI describes exactly why this is true. It states that, “Nordstrom salespeople make decisions as if managing their own business; they are trusted to do what is right. Everyone else in the company is there to help the sales staff make the sale and please the customer” (Mulady, 2001). The way the employees are treated and valued is a perfect portrayal of the company‟s mission of providing the best possible customer service and value to the customer. Even though the sales person is the front man for the company (being put in positions of direct contact with the customer), the human resource and management team act as the glue that holds the company together. The president of the company, Blake Nordstrom, says that people in support positions “like myself or someone in human resources that isn‟t on the floor manning a register,” needs to understand that their job is
10 to use the “energy and the activities they‟re doing (to) contribute to a better customer and employee experience” (HR Magazine, 2006). It is therefore extremely important that the workers in the HR department stay connected to the selling process in order to stay connected with the employees. It is this connection that helps the employees “take care of their customers”. It is not unusual for employees to go in on their days off to meet a customer that is in need of a new suit or pair of shoes. The manager of the men‟s suit department at the Tacoma Nordstrom comes in regularly on his days off. In an interview he commented that if a customer is in need “I will find them the suit, get it altered for them so they can have it in time” (Mulady, 2001). The sales employees have a tremendous amount of trust in the tailoring shop. One employee comments: “We rely heavily on the tailoring shop; they are great” (Mulady, 2001). In one situation, a baseball player needed a special shirt for a conference that Nordstrom did not have. To solve this problem, the sales person took a few shirts up to the tailor shop and used the material to make a brand new shirt. The shirt was then delivered to the player‟s hotel room that afternoon. The employees of Nordstrom are what keep the company going. The trust built between employees is critical in helping Nordstrom provide the excellent service it does. Without trust and support of all the company‟s workers, Nordstrom would be just another company. Physical: Currently Nordstrom operates “156 US stores located in 26 states” (Nordstrom Staff, 2002). Of these stores, there are 99 full line retail, 49 Nordstrom Racks, 5
11 Faconnable boutiques, 1 free standing shoe store, and 2 clearance stores. Even with all of these stores, the company is not satisfied, and is seeking to expand its physical existence even further. Nordstrom is currently in the process of establishing a store in Kenwood, Cincinnati. When interviewed about this decision, president, Erik Nordstrom, exclaimed “there is still much more opportunity to increase our presence around the country where our customers live and shop” (Fasiq, 2006). Nordstrom has also planted stores internationally where it operates 35 Faconnable boutiques, primarily in Europe. Customers of Nordstrom can even enjoy a unique shopping experience without setting foot in the store. The company has developed a unique online and mail order catalog designed to reach those customers who are interested in its products, but may not have the time or desire to come into the physical store. These resources are extremely important to the company. The two contrasting stores (online and physical), reach two diverse crowds. The physical stores provide a tangible place that customers can relate to all across the country, while the online stores take advantage of the stores reputation. They reach customers who have heard good things about the store but do not like to shop.
Policies and Objectives of firm Nordstrom has established many different policies designed to keep employees on track with its mission. The use of good judgment is the number one guiding principle for the employees of Nordstrom. The first page of the employee “Code of Business Conduct and Ethics” states “at Nordstrom, we expect you to use good judgment when it comes to taking care of our customers. But we don‟t expect you to do it without help from us”
12 (Nordstrom Management, 2006). This policy lets the sales people know that the management stands behind them at all times. Aside from the standard company policies reguarding sexual harassment, stealing, drugs or alcohol, and preventing theft; the company also has some policies that make it unique. Employees are not allowed to accept gifts from anyone with whom they do business. This policy was instilled to uphold Nordstrom‟s reputation of acting fair, honest, and professional. Accepting a gift can create the inkling that the gift inappropriately influenced the business transaction. The code of Ethics also tells employees that the company expects its employees to use personal book (a database that includes customer‟s information such as purchases, sizes, etc.) on a daily basis. This policy was designed to help the company keep their “reputation for excellent follow-through and service” (Nordstrom Management, 2006). However, since this in personal information, the company states that, “Personal Book and its contents are confidential and… should be used in accordance with the Confidentiality and Nondisclosure Expectation” (Nordstrom Management, 2006). When an employee ends his/her career with Nordstrom, their personal book is closed off to them and returned to Nordstrom. All of these policies help keep Nordstrom on track with its mission. Almost all of the sections in the handbook for employees end with a line about using good judgment. This shows that Nordstrom has confidence in their employees. Nordstrom truly believes that if the employees use good judgment, the customers will get the best possible service the company can offer.
13 On the opposite end of the spectrum, Nordstrom provides many benefits to its employees. The company provides time off with pay for personal and family needs. It also provides paid time for observed holidays. Each employee is also provided with a twenty percent discount at all Nordstrom locations. Nordstrom employees also have many long term benefits available to them. These Benefits include a 401(k) and profit sharing plan, where an employee can divert 50 percent of his/her compensation on a pretax basis, and an Employee stock Purchase Plan where the employee can purchase stock at a 10 percent discount. Full medical/vision and dental coverage are also provided by the company. Basic short term and long term disability coverage, as well as basic life insurance and long term care are also included in the standard benefit package. These benefits help the employee find meaning in their work and promote a positive attitude throughout the organization. A complete list of all the benefits provided by Nordstrom can be found on page … in the back of this report.
External Opportunities and Threats Social Social factors play a big role in what the way the company operates. For example, in Belleview Nordstrom offers a more upscale product line such as Gucci and other upper echelon brand names. This difference in product lines is evident in the Nordstrom in Tacoma as well. The Tacoma store is located in an area surrounded by many different social classes. Because of this, the store carries a more neutral line of products such as Calvin Cline, Cole Hann, Polo, Northface, and Tommy Bahama. These brands are brands that all of the target market of Nordstrom considers being very nice. To reach the outer limits of the Tacoma population, the store also sells products ranging
14 form Coach and Burberry (reaching the wealthier population), to the Nordstrom brand (reaching the less wealthy consumer). Nordstrom is also a company that strongly believes in diversity. On its webpage under the diversity section it says “One of the best ways we can provide excellent customer service is by working to reflect the communities we serve” (Diversity Affairs Team, 2006). The company believes that an atmosphere encouraging diversity helps the employees as well as the customer. It is “deeply committed to cultivating an environment where the contributions of every employee, customer and vendor are respected” (Diversity Affairs Team, 2006). Creating a diverse company is an important step that Nordstrom has taken to broaden its customer service. Demographics Demographic issues are a big an important issue at Nordstrom. This is shown not only in the mission of the company, but in the physical store itself. Now days a majority of women in the United States enter the workforce after college. Nordstrom has created distinct departments to reach these women. In these sections of the store, women can find suits, and other more expensive dress clothes that Nordstrom would have not carried 20 years ago. The American family has also changed dramatically in the past decade. Because of this Nordstrom has changed its focus toward the individual. Ten years ago, it would not be a common sight to see moms shopping with their children, or dad‟s waiting on the couch by the escalator with their children. Now days, it is almost unheard of to see families walking around the store. Teenagers, women, and men all come alone or with their significant other.
15 The every store use to give balloons to children, employees all over the store would stop and talk with them and a lot of the mannequins were placed together (a man with a woman, or a child). Now the mannequins are all placed individually around the store, and it is rare enough to see a kid, let alone a kid with a balloon. In order to retain market share Nordstrom has shifted its focus more toward the individual. It has downsized its youth departments and added more upscale departments. Competition Nordstrom is dealing with competition on many different levels. It is competing with higher end stores such as Saks Fifth Avenue, Neiman Marcus, and Barney‟s. It is also competing with second tier stores such as Macy‟s and Bloomingdale‟s. Because of the diverse competition, Nordstrom constantly stays one step ahead with its unprecedented customer service. Saks Fifth Avenue: Saks Fifth Avenue can be categorized as a mini version of Nordstrom. It has similar products, but targets a smaller market and carries less variety. To make it unique, Saks “focuses on other products such as bridal” (Nordstrom comparative analysis). In comparison to Nordstrom, Saks is slightly more expensive and is well known for its “much higher brand names” (Nordstrom Comparative analysis). There is also a difference in the store layout at Saks. Unlike Nordstrom, which it is categorized by department and where popular trendy goods are on the main floor, Saks “bottom floor consists of shoes, make up and teen clothing, and the upper floors are bridal and much higher priced brands and products” (Nordstrom comparative analysis).
16 However, the major difference between the two companies is not in the layout of the store, the products offered, or the price of the goods. The major difference is the focus of the company. The mission statement of Saks is completely different from that of Nordstrom. Saks says the focus of their company is “to be a great place to shop, a great place to work and a great place to invest” (Nordstrom comparative Analysis). Money is what seems to be the number one marketing objective of Saks. On the other hand Nordstrom focuses on the treatment of the customer. It does not have a formal mission statement but the company’s core values can be summed up by the statement “through these doors pass the most courteous people in the world”. This statement is found at the employee entrance of almost all Nordstrom stores across the country. Bloomingdales: Bloomingdales might just be one of the most famous stores in the world. Bloomingdales is known for its “Big Brown Bag” which is something that all avid shoppers like to be seen carrying around. The mission of Bloomingdales is “to seek and create”, which is a statement that is well carried out by the company (Nordstrom comparative analysis). The company has a hand picked product development team that travels to Europe looking for new fashion ideas. If they do not find what they are looking for they create it. The extreme focus on product development and diversity has made the company famous for having a tremendous product mix. However, some stores rather cluttered. The Layout seems to have no structure and Bloomingdale’s pricing ranges form being competitive with Foley’s to stores far more expensive than Nordstrom. On the other hand, Nordstrom has a focused store with individual departments and consistent prices. Its does not have as much variety in its stores, but it can special order and create
17 any product that a customer desires. This creates more satisfaction for the customer because they can easily find what they are looking for. Bloomingdales website also reflects its store atmosphere. It is a full line of goods which overwhelms the customer. The website lacks structure and is confusing to sift through. Nordstrom’s website also reflects it’s in store characteristics. The site is user friendly and easy to navigate through. Macy’s: Macy’s seems to have a similar strategy as Bloomie’s (Bloomingdales). The company is all about selling their name, not their service, unlike Nordstrom. Macy’s also focuses on having a tremendous product width as well as depth. This focus like Bloomie’s has also led the store to look cluttered. Some customers even suggest that “Macy’s looks more like discount store every year rather than a department store” (Nordstrom comparison analysis). This is again where Nordstrom gains a competitive advantage. It offers a smaller product mix in stores to help keep the customer from getting confused and overwhelmed. Macy’s offers a larger selection of home products than Nordstrom. It has a separate department for home furnishings. This department is so large that many times it is located in its own building next to Macy’s. However, Macy’s has a good selection of home products in its retail stores as well. Again, it is the focus of Macy’s that sets them apart from Nordstrom. The specialization of household products and cheaper prices keep Macy’s competitive in the market. However, Nordstrom’s focus on the customer and the employee gives them the competitive advantage in the industry. Technological
18 In the 1900‟s the information systems of Nordstrom “lagged behind many retailers”, such as JC Penny, Federated Department Stores, Dillard‟s, and Belk. (Levinson, 2005) The CFO of Nordstrom commented on the lagging information systems, saying, “our people at one time were our information system” (Levinson, 2005). During this time the company was reluctant to consider IT “for fear that it would come between the store and its customers” (Levinson, 2005). A sales slump in the year 2000 was enough to convince Nordstrom that it was behind the times. The threat of other companies gaining a heavy advantage with new technology was too much to handle. Looking at the other models around them, Nordstrom became an early adopter and began buying IT technology. “Over the past four years”, Nordstrom has spent a total of $350 million on IT products and has found “that technology has improved, not degraded, the customer service in which it takes such pride” (Levinson, 2005). Nordstrom has integrated two major systems into the company within the last five years. The systems are personal book and a new inventory system at the cash registers. These two systems have helped bring Nordstrom‟s customer service to a new level. Personal Book: Personal book is new computer software designed to help companies keep track of customer information. It can track what the customer bought, their size, how much he/she spent, who sold them what, their birthday and other valuable information that sales people need to enhance sales. This is a valuable tool because the sales people can create a more “personal” relationship with the customer. One former employee quotes “the personal book was a very useful tool and instilled in me the importance of building and maintaining customer relationships” (Palma, 2006). This quote describes exactly what
19 puts Nordstrom in a class of its own. Adding a personal touch is the difference between good and great companies. The implementation of personal book has dramatically increased sales at Nordstrom. After its introduction in 2005, Nordstrom‟s first quarter sales increased “7.7 percent to $1.7 billion, compared with $1.5 billion” in the first quarter of the previous year. (Levinson, 2005) Total sales for the second quarter also rose 7.8 percent. CFO of Nordstrom Michael Koppel reported that “approximately a third of all sales are a result of interactions between sales associates and customers facilitated with personal book” (Levinson, 2005). Nordstrom analysts also have reported that 68 percent of the business from the top sales people is generated from personal book customers. More information about personal book can be found on page …. Inventory System: The new inventory system has proven to be “a tremendous home run” (Levinson, 2005). The new system is based around an electronic inventory management system and an automatic replenishment function. Before this new system was installed in 2003, inventory was counted by hand. This old system was definitely “not the most accurate way to [manage inventory], and certainly wasn‟t very quick”, commented Peter Nordstrom during a conference call. This created a problem for the company. The distribution departments could not tell how much inventory was needed in each store, which resulted in a lot more discounts than the company should have had. This loss of money led Nordstrom to purchase an inventory management system. The new inventory system was an electronic system which took a lot of the work load off of the Nordstrom staff. It helped the company determine the demand for each
20 product by using historical sales and fashion trends. Now it could allocate the proper amount and type of merchandise to each store. It also kept track of in store inventory. Every time a product was rung up at the register or returned to the store, the in store inventory went up or down accordingly. This helped the distribution department immensely. They could now replenish the inventory of each store when it was actually needed. This also helped the sales dramatically increase customer service. When a customer wanted to purchase a product, a sales person could look it up on the computer to see how many were in the store, and how many were available at other locations. The results of this new system worked wonders for Nordstrom. Koppel stated that the inventory in 2003 (they year the system was integrated), went down $15 million or 1.6 percent” (Levinson, 2005). Likewise, inventory continued to go down in 2004, decreasing by 5.3 percent. Inventory was also turned 10 percent more in 2004. This increase showed the company there was still a lot of room to grow in their current market and that other department stores had good reason to switch to this way of inventory.
Target Market In each Nordstrom store there is the potential for one consumer to encounter upwards of 30 different departments. For women‟s clothing alone, there are 14 clothing options ranging from teenage apparel, to elegant ballroom attire. The multiple departments within the Nordstrom store cause the target market for a single Nordstrom store to range across a broad spectrum of potential buyers. While each of the target markets differs substantially depending on the department, the members of each of these
21 markets do have a main connecting quality. Each customer, no matter the department in which they are shopping, is looking for a quality product that they know will be guaranteed by Nordstrom for a lifetime. Each consumer knows that while the products offered may not be the cheapest, they are quality made products that come with an implied warranty by Nordstrom. Nordstrom does not have a return policy, which will be addressed later in the paper, to ensure that consumers can return any product at anytime, for any reason. Consumers are also looking for a product that is not only well made, but that is usually contemporary in relation to current fashion trends. This makes Nordstrom‟s overall target market homogeneous in respect to the demographic and psychographic segments. A person‟s income and lifestyle can be the deciding factor of whether they can afford to shop at Nordstrom or not, or whether the products that Nordstrom offers are even of interest. For the sake of space, this paper will look at the target markets of three specific departments within Nordstrom that embody a large number of Nordstrom‟s clientele: Brass Plum for juniors, Point of View for women, and Men‟s Sportswear. Brass Plum (B.P.) is Nordstrom‟s only junior‟s department, targeting young women, ages 16-22 in the middle or upper class. B.P. offers the latest fashion trends for the younger women at a price that is more reasonable than high-end boutiques and department stores. While that price is more reasonable than some places, it still is not as cheap as some other department stores, which is why the target market is the middle and upper class. Those „other department stores‟ however, do not insure their products as well as Nordstrom‟s does, nor is the quality of product comparable either. Lastly, the reason for the target of the middle and upper class is because fashion trends do not usually last for more than a
22 season. Most people of a lower class cannot afford to buy new, trendy clothes every season to match what is popular, which is the only type of clothing that B.P. offers. Point of View has a target market of women in their twenties to early fifties. The age is not clearly defined because more specifically, Point of View has a target market of the working professional woman. While some clothes within Point of View are casual, they still uphold a classy and refined look suitable for a „dress down‟ day at the office. Most of the selection within Point of View however, is professional attire for the working, middle to upper class woman. The clothes are priced comparable to other highend department stores, but are backed with the quality guarantee Nordstrom provides all of its products. The one major difference between the selection in Point of View, and other high-end department stores, is that Point of View tries to offer a selection of business wear for the younger working woman that has a trendier edge. This helps to capture the twenty-something market that is usually skipped over in other department stores. It allows young women to look professional, while still looking their age. While carrying this younger professional attire, Point of View still carries the classic suits and shirts that appeal to the more conservative thirty to fifty year old professional women. The last department is the Men‟s Sportswear department, which like Point of View, targets men in their twenties to early fifties. The word sportswear might evoke thoughts of soccer or football to some, but in this department sportswear are the clothes worn by the middle to upper class while they sail, golf, or simply lounge around at their beach house. This department is intended for the professional male, who in his daily life must dress in professional attire and would like that to translate into his causal wear as well. This casual wear consists of clothes that portray an image of success and prosperity
23 without a suit and tie. The target market is middle to upper class within this department because of the intended uses of the clothes that are sold. Many of the clothes are intended for sailing and golf, leisure activities that the middle and lower class might not be able to afford. The size of the men‟s sportswear department is small in relation to some of the women‟s departments, but this can be attributed to men‟s desire for consistency and ease when shopping. The prices within the men‟s sportswear department are comparable to other high-end department stores, but once again the clothes are backed by the Nordstrom guarantee of quality. While each of the departments have a target market that separates itself from the rest of the store, it can be seen that within all of the heterogeneous factors there are three homogeneous factors that can be found. First, in all departments, the consumer is looking for a quality product that will suit their clothing needs. Second, no matter what their clothing needs, the consumer is looking for clothes that portray a specific image of their choosing, such as an established professional or a young trendsetter. Lastly, throughout all of the clothes offered at Nordstrom each consumer is expecting the Nordstrom, guarantee of quality that ensures the consumers happiness with the product - no matter the circumstances. Marketing Mix Nordstrom seeks to achieve the retention of the previously stated target markets through the use of coordinated marketing activities. These include the use of product, place, price, and promotion inside and outside of the store. These four aspects embody the marketing mix, and their objectives and roles are clearly specified through different offerings and outlets.
24 Product The products that are offered within a single Nordstrom store compliment each other very well. On one shopping trip a family is able to buy clothes and accessories for everyone. Women are able to complete an outfit from Point of View by getting the perfect pair of shoes from the Women‟s Shoes department, accessorize the outfit in fine jewelry, accessorizes and handbags, and can shop her favorite makeup line in the makeup department, all in one trip. These products are enhanced by a multitude of factors including their warranty, return policy, customer service, and the internal workings of any Nordstrom. Each transaction within Nordstrom comes with an implied warranty of the goods purchased by the consumer. If the consumer is unhappy with the product at anytime, even after the tags are removed, the product has been worn, or the receipt has been lost, the consumer is more than welcome to return the product back to the store for a full refund or exchange – no questions asked. This return policy is exemplified through the mythical story that circulates throughout Nordstrom stores and their competitor‟s outlets. It has been said that a woman tried to return a set of snow tires that she claimed she bought at her nearby Nordstrom store. When the employee was unsure of what procedure to follow since Nordstrom did not sell tires, the employee contacted the store manager. The manager told the employee to take back the tires and offer a full refund of the standard price for snow tires to the woman. So while it is obvious that Nordstrom might not appreciate consumers returning goods from other stores, they are dedicated to customer service and their guarantee of quality. Nordstrom wants to carry quality items that consumers will love, and if the consumers decide they do not, they are able to return them
25 at anytime. This allows Nordstrom to have an absent return policy to ensure that a return is bound by no limits. Aside from offering their products for free, customer satisfaction within a Nordstrom cannot be better guaranteed in any other way. By knowing that every purchase is basically guaranteed for life, a consumer‟s satisfaction is not bound by any measures on behalf of Nordstrom. Along with such a liberal return policy, Nordstrom offers a range of other amenities for consumers to enjoy and enhance the value of the product to the customer. For instance, with anything that you purchase from Nordstrom you can have it altered for free. Upon trying the clothes on, a person from the alteration department will come to your fitting room and measure your clothes according to your needs. The altered clothes are usually available within a week‟s time. Also, in the lingerie department, women can receive a free and accurate bra fitting. Unlike other popular lingerie stores, employees within the lingerie department must attend class and earn the right to do bra fittings. This ensures each consumer an accurate fitting. In the shoe department, if a pair of leather shoes is too tight on a consumer‟s foot, the Nordstrom employee will stretch the shoes out at no cost. Also, when trying on clothes there is no limit to how many pieces of clothing a consumer is allowed to take in, and a consumer is never expected to clean out their dressing room when they are finished. Any purchase that is made can also be complimentary gift wrapped. While these factors may seem miniscule, it does help consumers reduce shopping time and have a more enjoyable shopping experience. So while the consumer might only be in and out for a white t-shirt, they know that if needed all of these amenities are available for their use, enhancing the value of the product for the consumer.
26 Along with these externally obvious factors of product value to the consumer, there are also internal functions within Nordstrom that ensure that customer service is ideal in any situation. Quality customer service is Nordstrom‟s main competitive advantage against its competitors. Nordstrom has focused itself since 1901 on the basis that superior customer service is the first and foremost important aspect of the company. While other companies have a chain of command when dealing with customer service issues, Nordstrom is void of any such rules. When hired at Nordstrom, the new employee is greeted with an employee folder that includes a welcome packet, employee expectations, rewards, benefit information and information about the specific Nordstrom store the new employee will be working. On the very front of each folder is a 5x7 card that states: “We're glad to have you with our Company. Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them. Nordstrom Rules: Rule #1: Use your good judgment in all situations. There will be no additional rules. Please feel free to ask your department manager, store manager, or division general manager any question at any time”. Nordstrom‟s idea is to put the employees in control of every situation so that the consumer feels a sense of security at all times within the store. While specific instances might dictate manager involvement, employees are granted the right to deal with consumer situations based on their judgment. These words ring loud within any Nordstrom store because they are printed in the employee entrance and in the backrooms of most departments. Through out the hiring process Nordstrom ensures that customer service is always handled in a way that upholds their reputation. Nordstrom is able to
27 supply a quality product based on the judgment of the consumer, while also providing a trusted and quality environment by empowering the judgment of the employees. Place/Distribution The next factor of the marketing mix is to coordinate the marketing activities for the retention of the target markets through place and distribution. Nordstrom currently has 157 stores located in twenty seven states. These include 99 full-line stores, 50 Nordstrom Rack stores, five Façonnable boutiques, one free-standing shoe store and two clearance stores. Nordstrom also operates 35 international Façonnable boutiques in Europe. Façonnable is a men‟s clothing line developed by Nordstrom for the more upscale shopper to accommodate their business and leisure clothing needs. Nordstrom‟s popularity is based on the west-coast, primarily because of its headquarters and flagship store in Seattle, Washington. Mainly, the Nordstrom stores are located in shopping malls which usually provide a heavily populated central area which contains a portion of their target market. Since Nordstrom is located within a mall, access is relatively easy for consumers. Even if consumers do live some distance away from the faculties, coming to the mall is more acceptable because they will not only have the option to visit Nordstrom, but will have the ability to shop at other stores as well. This justifies their traveling time, which would not happen if Nordstrom had only free-standing stores. While access to Nordstrom facilities is relatively easy on the west coast, there is room for major improvement by Nordstrom on the east coast. In New Hampshire, Maine, South Carolina, Vermont, West Virginia and Massachusetts, there is not a single Nordstrom store to date. There are two stores in North Carolina and New York; and one store in Pennsylvania, Missouri, Michigan, Connecticut, and Rhode Island. This is
28 compared to the thirty two California stores, nine Washington stores, five Oregon stores and two Hawaii stores. However, this lack of access to facilities by consumers on the east coast will soon be partially remedied. Nordstrom plans to open twenty five new stores in the next five years. Out of these twenty five stores, it plans on opening four in Massachusetts, two in Michigan and one in Missouri. Once Nordstrom has established a stronger base on the east coast, I believe they will gain an even better reputation and have the ability to fine tune their marketing and customer service strategies. Along in place and distribution is not just the physical outlet that Nordstrom has, but also the atmosphere in each of the outlets. Since we are at the peak of the holiday season, it is a good time to look at the atmosphere within a Nordstrom store. Garland and decorative curtains decorate each entrance into the store. Holiday music played live in each store on the well known Nordstrom piano echoes through the departments on speakers. A giving tree accompanies the bottom side of each escalator, and on weekends the tops of the escalators have live carolers. Each department has holiday specials, and pictures with Santa are held every year. This atmosphere helps to evoke the holiday spirit within the consumers, and also provides them with a place to shop that is enjoyable during the busy holiday time. When it is not a holiday season, front window displays are changed bi-weekly, and in store decorations and manikins are changed multiple times each week. Also, a night cleaning crew makes sure that all the carpets, mirrors and dressing rooms are kept in pristine condition. This type of atmosphere allows the consumer to shop at ease without heaps of clothes in a mess, or stained carpets. Instead, they can go to a place where the only thing they notice is the clothes and the quality of the presentation.
29 Promotion The next factor of the marketing mix is to coordinate the marketing activities for the retention of the target markets through promotion tactics including advertising, public relations, personal selling, and sales promotion. Nordstrom does not engage in heavy advertising. TV commercial spots are few and far between, and only usually take place on major televised events. Instead, Nordstrom does most of its advertising through print. Local newspapers usually contain a full page spread during Nordstrom‟s half yearly and anniversary sales. During the holidays, Nordstrom also has featured spreads as well. These spreads are hung in the employee entrance area so that employees are aware of what consumers are looking for, if they come in and refer specifically to that advertisement. Also, Nordstrom puts out two catalogues per month that premiere a few new items within each department. They also feature gift ideas during the holidays, and include an easy way to order straight from the catalogue. Anyone that has a Nordstrom account will receive this catalogue, along with anyone that registers online Advertising: Nordstrom has also engaged in some other intense advertising campaigns in the past few years. Most of these have been directly related to online advertising. In 1999, Nordstrom started to campaign heavily to gain consumer awareness of their new website, Nordstromshoes.com. Nordstrom claims the site is the world‟s biggest shoe store. It is titled „Make Room for Shoes‟. The name was selected to entice users not only to their main website which was linked on the new shoes site, but also to educate users on the broad selection of shoes that Nordstrom offers. In 2005, Nordstrom debuted NordstromSilverscreen.com. The website combined music and pop culture with
30 shopping. Visitors of the site were able to be a DJ and mix up songs recorded by artists specifically for the site. The visitors mixed the song, by mixing up clothes on a corresponding manikin. This allowed visitors to see new fashion trends and learn how to mix and match clothes to find their very own style. Visitors of the site could also „shop‟ the site, by clicking on any the clothes worn in the video made exclusively for Nordstrom. Anything that the artist was wearing in the video was available for sale at Nordstom.com. Nordstromsilverscreen.com was one of the first attempts by a retailer to mix shopping and interactive media making Nordstrom an innovator in this new market. While Nordstromscilverscreen.com is no longer available to visit, the launch of this new and innovative platform says a lot of Nordstrom. This company is willing to take risks to advertise and capture a new and different consumer, and to evolve and be ahead of other department stores in the advertising industry. Aside from these new websites, Nordstrom.com is still a large, comprehensive site that allows visitors to see everything that Nordstrom has to offer. Visitors are able to search by brand, in-store department, or by age and gender. Along side every choice that the visitor views, is a selection of other clothes that are closely related to the current viewing. Also, if a consumer has provided Nordstrom with their e-mail address, Nordstrom sends out weekly e-mails that highlight new items, and special discounts. Lastly, the newest advertising campaign that Nordstrom embarked on was for the Nordstrom MOD card. The MOD card is a debit card that is set up through a consumer‟s personal bank and checking account. The MOD card is specific to Nordstrom, and allows Nordstrom to track what is bought and how much consumers spend. This way, consumers can gain points like what is offered with the traditional Nordstrom‟s credit card. For
31 every dollar that is spent, the consumer earns a point; and during promotional events, they can earn twice the points for every dollar spent. Once the consumer reaches a certain level of points, they get a gift certificate in the mail redeemable at any Nordstrom. Nordstrom realized that not everyone wants to hold a credit card at Nordstrom, which led them to the idea of the MOD card. This way, consumers can buy from Nordstrom using cash, and still receive the points they deserve. Nordstrom has heavily advertised the MOD card and the rewards that a customer gains from having a Nordstrom account. Through these advertising activities, Nordstrom is better able to promote their stores in a positive and controlled manner. Public Relations: The next segment of promotion is public relations. Nordstrom is equipped with a public relations representative, who is located at Nordstrom‟s headquarters in downtown Seattle, Washington. Consumers are able to find out about public relation activities on their website under investor relations, or in their annual report. On the Nordstrom website consumers are able to find out about new store openings, upcoming events, stock information, news, and press releases. Nordstrom also relies on customer word of mouth. While other competitor department stores deal with union battles, and declining sales, the quality and outstanding customer service is rarely questioned by consumers. Consumers know by personal experience and word of mouth that Nordstrom is dedicated to its customers. Nordstrom also engages in public relations activities through the promotion of some of their clothes. Most recently, Nordstrom has taken an active role in the “ONE” campaign and formed a partnership with the company Edun. Edun is selling a t-shirt with
32 the word „ONE‟ across the front. This promotes the idea that if the United States government allocated just one percent of its budget to health, education, and medication for underprivileged countries, the United States could save millions of lives. For every shirt sold Edun contributes ten dollars to the Apparel Lesotho Alliance to Fight Aids (ALAFA). The ONE shirts are made in Lesotho, Africa. Upon selling the ONE shirt within their stores, Nordstrom donated $100,000 to ALAFA. Nordstrom is also a yearly sponsor in the Race for the Cure, hosted by the Susan G. Komen Breast Cancer Foundation to raise money for breast cancer research and awareness. Nordstrom exclusively hosts the Beat the Bridge to Beat Diabetes marathon in Seattle, Washington. The proceeds benefit the Juvenile Diabetes Research Foundation. So far in 2006, the Beat the Bridge marathon donations have raised $855,078.57. Through not only their exceptional reputation, but also through involvement in philanthropic activities Nordstrom is able to enhance their public relations. These positive public relation activities in turn influence consumer perception and decision making. Personal Selling: The next section of promotion is personal selling. Personal selling is defined as a purchase situation in which two people communicate in an attempt to influence each other (Lamb, et al, 2006). Personal selling is the basis of Nordstrom‟s philosophy and mission statement. Personal selling emphasizes the relationship that is developed between a salesperson and a consumer. Within any department at a Nordstrom store, a consumer will be able to find numerous employees who are knowledgeable about the products they offer, and who are also eager to help them find whatever it is they are looking for. When a consumer is shopping within a department, a single salesperson will usually help them
33 through the entire purchasing process. If what the consumer is looking for happens to be in a different department, that same salesperson will go to that other department and get whatever it is. The salesperson will find sizes, colors, and styles from other stores if what the consumer is looking for is not available at that specific store. Salespeople also can take payment on Nordstrom credit cards at their payment station, and can hold clothes for the consumer. Salespeople are endowed with the ability to manage customer service situations, so if one consumer feels comfortable with a specific salesperson, basically all of their needs can be taken care of through that salesperson. This created a very strong relationship between the salesperson and the consumer. If the consumer knows that when they go to Nordstrom they can count on someone being there that they know and trust, they will be more likely to ask more questions and try on more things. Nordstrom has made personal selling even easier through their new system of Personal Book. Personal Book allows a salesperson to enter in consumer information such as their address, phone number, birthday and recent purchases. During sale times, salespeople are asked to call at least fifty people from their personal book to the consumer know that they are excited to see them at the sale. Having this information also enables the salespeople to send out thank you cards which are supposed to be done a daily basis by a salesperson. The thank you cards are mailed out to the consumer, and add a personal finishing touch to the purchase, which also enhances the bond between the consumer and the salesperson. Personal Book also can keep track of what a consumer has bought, so when Nordstrom has a big sale, some of the consumers who have purchased the most throughout the year are invited to shop the sale prior to anyone else, and to preview what is going to be offered. Personal Book also allows for promotional materials
34 to be sent out pertaining to certain events that occur within a department that a consumer frequently shops. All of these benefits from Personal Book enhance the personal selling aspect of promotion. Consumers are not seen as a target market within the store, but are rather seen as individuals with specific needs and wants that are catered to be the Nordstrom employees. Sales Promotion: The last component of promotion is sales promotion. Sales promotion is everything else that is not covered by personal selling, advertising, and public relations. Usually sales promotions are a quick tool that immediately increases consumer demand of a product. Nordstrom does not offer a lot of the one day sales, or door buster sales that other department stores offer. Instead, Nordstrom focuses all of their attention on their three major sales per year. These include the half yearly sales, in June and November, and their Anniversary sale in August. These attractions are not just a sale, they are an event. Special promotions, rewards and deals are offered. A kick-rally prior to the doors opening helps to hype up the employees for the coming busy weeks. Consumers line up outside of Nordstrom‟s doors hours prior to opening. They enter a newly decorated store from the previous day, with new displays, merchandise and prices. Nordstrom focuses on these events for the purpose of showing the consumer that they do not just want to push inventory in and out of the store. They want to offer quality products that consumers enjoy, and reward consumers for their purchases through major discounts at these sales. Lastly, another important factor of these sales is that they have created a tradition. Women and their daughters take time off school and work to attend the first day of the sale. At the sale they go Christmas shopping, school shopping personal shopping. This is
35 important for Nordstrom because their limited numbers of sales are not only seen as a time to get a good deal, but they have penetrated the culture and created more than just a sale. Price: The last factor of the marketing mix is to coordinate the marketing activities for the retention of the target markets through price. Nordstrom strives to provide the most quality product for the cheapest price allowable. However, Nordstrom does cater to an upper and middle class target market which does raise their prices from other lower department stores. Each department within Nordstrom, as stated earlier, has a different target market which does vary the range pf prices immensely within one store. In the St. John department catered to upper class wealthy women, a consumer can buy a suit jacket for $2,000. In Point of View, targeted toward the more middle class women who want to look professional without spending as much, a suit jacket is available for seventy dollars. Through this, it can be seen that the department a consumer goes to will determine the price they will pay. Whatever the dollar price of the purchase, Nordstrom tries to justify that price through their personal selling efforts and their product guarantee. A sale is not just a sale, as proven earlier in the personal selling section. Consumers and salespersons are able to establish a relationship which enhances the consumers purchase experience. Because the consumer knows that no matter what they buy, whether it is a pair of socks, or a mink coat, the quality of that purchase is indefinitely guaranteed by Nordstrom. All of these factors help justify the price of the products Nordstrom offers to the consumer. By Nordstrom‟s deep success it does seem to be working.
36 Nordstrom Employee Benefits
Balance 1. 2. 3. 4. 5. 6. 7. Paid Time off Resource and Referral Services Employee Assistance Program Observed Holidays Leave of Absence Program Paid Bereavement Leave Adoption Financial Assistance
Save 1. 2. 3. 4. 5. Merchandise Discount 401(k) Plan & Profit Sharing Employee Stock Purchase Plan Health Care Spending Account Dependent Care Spending Account 6. Customer Spending Account 7. Employee Discounts and Services (Workstream Rewards) 8. Nordstrom Bank 9. Nordstrom Federal Credit Union 10. U.S. Savings Bonds
Protection 1. Medical/Vision Coverage 2. Dental Coverage 3. Basic Short Term Disability 4. Supplemental Short Term Disability 5. Basic Long Term Disability 6. Optional Long Term Disability 7. Accidental Death & Dismemberment 8. Basic Life Insurance 9. Group Home/Auto Insurance 10. Group Legal Services 11. Long Term Care
*This list of benefits is taken from the employee benefit handbook given to all Nordstrom employees.
Bear, Jacci. H. (2006). Color meanings. Retrieved November 19, 2006, from desktoppub.about.com Web site: http://desktoppub.about.com/cs/color/a/symbolism.htm Fasiq, Lisa. B. (2006, 10, 21). Nordstrom gives Cincinnati second chance. Retrieved November 21, 2006, from cincinnati.bizjournals.com Web site: http://cincinnati.bizjournals.com/cincinnati/stories/2006/11/20/daily13.html H, Bee (2006, 12, 03). Nordstrom. Retrieved December 5, 2006, from www.yelp.com Web site: http://18.104.22.168/search?q=cache:ef4nZ0EG_DcJ:www.yelp.com/biz/Bfgh0ow0qS24aEcsVP6xQ+Nordstrom%2Bpiano%2Batmosphere&hl=en&gl=us&ct=clnk&cd=7 Levinson, Meridith (2005, 12, 1). A season on the brink. Retrieved November 1, 2006, from http://www.cio.com Web site: http://www.cio.com/archive/120105/retail.html?page=1 Magazine, HR (2006, 10). Views from the Top. Retrieved November 21, 2006, from www.shrm.org Web site: http://www.shrm.org/hrmagazine/articles/1106/1106ceoex.asp Mulady, Kathy (2001, 06, 26). Nordstrom Way is legendary in shopping. Retrieved November 1, 2006, from seattlepi.nwsource.com Web site: http://seattlepi.nwsource.com/business/28924_nord_way26.shtml Nordstrom Employee, (2006). Company history. Retrieved November 21, 2006, from about.nordstrom.com Web site: http://about.nordstrom.com/aboutus/companyhist/companyhist.asp Nordstrom Management, (2006, 02). Corporate governance - code of conduct. Retrieved November 21, 2006, from phx.corporate-ir.net Web site: http://phx.corporateir.net/phoenix.zhtml?c=93295&p=irol-govConduct Nordstrom Staff, (2002, 06, 10). Nordstrom.com CEO and president resign. Retrieved November 21, 2006, from phx.corporate-ir.net Web site: http://phx.corporateir.net/phoenix.zhtml?c=93295&p=irol-newsArticle&t=Regular&id=304515& Palma, Maria (2006, 02, 15). How to build customer relationships. Retrieved November 1, 2006, from www.customerarealways.com Web site: http://www.customersarealways.com/2006/02/how_to_build_customer_relation.html
Portland Business Journal , (2006, 10, 20). Nordstrom reports improved Q3 earnings, signs new store deal. Retrieved December 1, 2006, from portland.bizjournals.com Web
38 site: http://portland.bizjournals.com/portland/stories/2006/11/20/daily12.html?surround=lfn