Strategic Location & Customer Loyalty... Will it be enough?

Yesterday, I was driving twice the usual distance to my supplier new office. It was raining heavily. And as usual, traffic and wet road are in-separate able condition. At that moment, I start questioning myself; why do I want to go there still? And whether it would be better off for me to change supplier?

Talking about location, I remember Hoteling Model (economics) which tries to explain on how companies with substitute product usually pool at the same strategic geographical location. It could be for customer’s convenience, but mainly to maximize their market share based on location.

Apart of being close to customers, this group of sellers with similar products also attracts customers in different way. They collectively have stronger location brand (i.e. Mangga Dua – Pusat Grosir (Jakarta, Indonesia), Italian Forum – Italian Food Location (Sydney, Australia). But to what extent can a business rely on these advantages?

A business sometimes needs to relocate its location. Some of the obvious reasons are; the current rental agreement cannot be renewed, the new rental cost is too high, the current space can no longer accommodate the expanding business, and few other similar reasons. If a business has to move to un-strategic location, it will no longer have the advantages stated above.

The need for customer loyalty starts to kick in, when relocation is needed. If a business only relies on location based advantages, it will be put in disadvantage position. Here, it can be seen that branding and building customer loyalty will play significant role.

I think I can consider myself as loyal customer, because I still want to drive the distance only to visit the new store for the first time. Moreover, my satisfaction with that store customer service, pricing, product quality and range could be the force which drove me into its new location. But, these old driving forces might not be enough to push me back for the second time. I could feel the associate cost and increasing distance, moreover the convenient of having supplier nearby.

My supplier has to induce me, so that I will forgive him for moving so far away. And he does. He knows my wish list and he make my dream come true. Understanding customer dream if I may say. In this case he provides me with better products range, something which I truly want. Well he put it this way when I came in: “I have bigger space now, and I know that you are looking for this kind of products. I will have more variety in a few weeks time.” Good enough for me to check him back.

This case is also happened with IKEA. IKEA used to have many stores in different strategic locations. But one year ago, they closed all the stores except one massive store. And the new location is far from the city centre. I went there once and believe it or not, I want to come back! It is simply because they offer me a new shopping experience. That was the biggest furniture store that I have ever been to! And even that I have one big furniture store nearby, I still feel the needs to visit IKEA.

Well, I guess my loyalty won’t be enough to put me behind the wheel, driving the long miles for the second time. Unless, they lure me with something more! How about you?

Author: Michael A Oei - MarketingFirst Group