Archive for the ‘Retail’ Category

Radio Shack’s Mobile Store Experiment

Radio Shack is testing a new store model under the name PointMobl.  The three test stores in the Dallas area focus on “mobile” categories ranging from compact laptops and MP3 players to smart phones and GPS systems.

The depth of selection is greater than what a typical RadioShack store carries and there is no reference to the parent company to be found anywhere in the store or on the PointMobl website which lists the copyright owner as being “PointMobl Corporation”.

That last point is a very smart move which clearly shows Radio Shack understands where the brand sits in the minds of their target PointMobl customer.  I’m making an assumption here that they are trying to appeal to upscale, tech-savvy customers in the 18 – 35 year old range based on the store description and the images shown on the website.   Taking this “anonymous” approach removes one barrier to acceptance by those target customers.  On the other hand, the way they pitch the concept on the website sounds like the typical safe, boring nonsense that I sometimes hear coming from corporate marketing departments trying to appeal to a much broader and older segment:

“It’s time to let your mobile life out to play.  Give your productivity a power-up, stay connected, and take your inner rockstar on a world tour.  It’s time for a true mobile outfitter. One who really listens to your needs, then leads you to the right solution.”

Blech! If you are 18 – 35, chances are you are already leading a “mobile life”, you are always connected,  and when it comes to figuring out what gear you need, you do your own research because experience has shown that you usually understand the technology and the options better than the salespeople.  The rest of the copy on the site doesn’t get much better.  I should also point out that the website has at least one typographical error where they proclaim “You don’t need another mobile store – you need a good listenter“.  Come on guys, any spellchecker program would have found that.

Some analysts have expressed concern about testing new store concepts under the current economic conditions.  I think Radio Shack has no choice but to explore alternatives given that a third of their existing store revenue comes from mobile sales and that business is being eroded by the likes of Best Buy who has opened their own chain of mobile specialty stores and expanded the mobile departments in over 900 of their superstores.  Radio Shack is also losing business to the mobile carriers which continue to pop up like weeds in every stripmall nationwide.  RadioShack has 6,000 company-operated and franchise stores and 700 wireless phone kiosks.  That gives them easy access to real estate that would be retrofitted into PointMobl outlets.  A slideshow of images from one of the test stores is available on YouTube:

This approach could end up generating higher revenue per square foot  than existing Radio Shack stores.  I’m fairly certain that is one of the test criteria and if the test proves this out, an expansion of the PointMobl concept could boost the chains revenue for a few years.  While that idea seems appealing, I don’t see it is a differentiated strategy that can be defended over the long term.  There’s nothing special here.

Store Aesthetics

The stores are described has being “upscale” with white fixtures and clean glass, but based on the following slide show, the interior of the store doesn’t generate that Apple store feel that I’m sure they were going for.  Instead it looks cramped and dark.  In some places, the dramatic lighting makes it seem almost museum-like; not the kind of feel that invites you to pick up the stuff and interact with it. 

The Competition

The mobile carriers all have significant presence in this size footprint and it would be extremely easy for them to expand their product offerings to include a similar product mix.  The only real differentiation here might be in the ability to offer multiple mobile carriers in one store, but that’s not unique either considering Best Buy’s strong position in the market and the growing presence of mass merchants like Walmart and Target in the mobile space.

In order for PointMobl to really be sustainable, it must be able to offer the customer an experience that no one else can.  I just don’t see that happening with categories that are already commodities.

Guitar (Hero) Marketing

aerosmithgh_lgMarketingProfsAnn Handley writes great stuff on her personal blog, Annarchy.  In a recent post, she talks about the transformational magic of Wii Tennis.

“Tennis is a ridiculously hard game, and there are a relative few who can, in the real world, reach pro status. Few of us can do much of anything well enough to attract real acclaim. But it’s a blast to try. And it’s even more fun to feel some pleasure of success from your efforts. To forget–even for a few foolish minutes–that you aren’t an uncoordinated undesirable left standing on the sidelines. That, instead, you are gifted. Talented. A winner on the court. The kind of person the captain picks first for the team.”

If you’ve played Wii Sports, you understand this and it got me thinking about why some experiences can trigger very passionate responses in people.  Videogame designers have has evolved the medium from relatively simple (albeit fun) arcade style formats to realistic 3D-like environments with genres that appeal to sports enthusiasts,  pilot wannabes and fantasy/role players.  The Wii’s interactive controller design takes that to a new level allowing the player to use physical movements to control the game.  This immersive experience puts the player on the court, field, fairway or in the case of the wildly successful Guitar Hero series, on the stage.

The question is whether or not these simulated experiences can motivate some players to try the real thing.

Beyond the numerous debates regarding the level of exercise a person gets playing Wii Sports, I haven’t seen any reports suggesting a game-inspired sporting goods sales surge, but Guitar Hero appears to be an altogether different tune.

Since its introduction on Playstation 2 in November 2005, Guitar Hero has spawned its own culture of fans and fanatics.  Just check out the number of Guitar Hero videos on YouTube.  The Guitar Hero series has been financially lucrative for Activision, the company behind the games. In April, 2008, Wired magazine reported that the franchise had sold 14 million units which equates to about  US$1 billion in sales.  Sensing an opportunity to tap into the passions of music enthusiasts following the initial launch of the game, music instrument retailer Guitar Center partnered with Activision to be the in-game virtual music store starting with Guitar Hero II.  It appears their instincts were right as the musical instrument retailing industry has seen record year over year competitive store increases since the game was first introduced.

Guitar Center recently conducted a survey which “confirmed that the majority of those who play the games are more interested in picking up real instruments, it also revealed that most musicians who play the games use their real instruments more frequently as a result.”

Guitar Center’s move encouraged others in the music business to get their products into the game (literally).  The latest versions of Guitar Hero are music marketing masterpieces with product placements by everything from bands to music publications and beyond.  On a basic level, there is embedded advertising for products from leading manufacturers like Gibson, Mackie and JBL.   These product and logo placements are both passive (a logo on the stage monitor) or active (play a Les Paul guitar).  Beyond the direct music tie-ins are lifestyle placements from brands like Axe and Pontiac, and music publications like Guitar Player and Kerrang.  From a content perspective, record labels have replaced the cover versions found on the original game with the real artist recordings.  Players are exposed to new and “new to you” music.  The more you play, the more new stuff you hear and you are more likely to listen to a song that you might otherwise turn off because you are interacting with it.  The results are impressive:

  • Sales of gear for first-timers at Guitar Center has surged.  In the holiday selling season in the last quarter of 2007, Guitar Center saw a +20.7% jump in comparable store sales for beginner-level electric guitar & amplifiers. This surge grew even stronger through the first nine months of 2008, when Guitar Center’s cumulative comparable store sales for the category increased +26.9%.”
  • Gibson said that it had seen sales on the rise, particularly those that are featured in the video games such as the iconic Les Paul guitar.
  • Digital downloads of older and more obscure music featured in the game have increase dramatically.

So at its core, what is it about Guitar Hero that allows it to not only be a great piece of entertainment but also an effective marketing vehicle and an inspiration for some to take up real guitars?

It’s all about appealing to a lifestyle.  Like the way Harley Davidson has figured out how to be a lifestyle company, Guitar Hero resonates with rock music Passionistas because it taps into that inner rockstar that so many have wanted to be at some point in their lives.  It works because it gives players a taste of an experience that they want in a way that lets them forget–even for a few foolish minutes–that they can be more than just a fan in the audience.  That, instead, you are gifted. Talented.  A rocker on the stage.  The kind of person who gets their face on the cover of Rolling Stone.

Do you have Passionistas as customers?  Are you helping them to tap into their inner rockstar?

The only important thing is…..

“The only important thing is that we make the children happy”.  It’s one of the most memorable lines from the 1947 classic, “Miracle on 34th Street”.  Replace “children” with “customers”, it is also an idea that has unfortunately faded from the fabric of American retail.  In the film, the Macy’s Store Santa makes that important point to an incredulous mom after telling her that she could get the fire engine her son wanted at a competitor.  Mom couldn’t believe that Macy’s would send customers to another store.

Fast forward to today and imagine Macy’s or just about any other retailer helping a customer find the thing they are looking for by pointing to a competitor.  It might occasionally happen, but it’s certainly not Standard Operating Procedure.  To do so would reflect badly on the store’s merchants and send business to the enemy, right?  The retail would much rather send a customer away unhappy than send them to a competitor.  But perhaps the retailer’s perspective is different from the customer’s?  Perhaps in the customer’s eyes, helping them find what they were looking for, at a competitor no less,  was an unexpected “surprise and delight“.  Might that not earn a few loyalty points?

A few years ago, a major consumer electronics retailer was testing various innovation ideas in the Boston area.  One of those ideas was to place a “concierge” near the store entrance with the objective of improving close rate.  The job had two roles:

  1. Greet people coming in and direct them to destinations in the store.  This wasn’t just directing customer to “go to Aisle 5″.  The concierge was trained to engage the customer to learn why they had come to the store.  If  “assisted selling” was involved (e.g. HDTVs, digital services), they would escort the customer to that part of the store and introduce them to a salesperson.
  2. Engage people on the way out.  If they had made a purchase, thank them.  If not, ask to assist in locating the item.  The concierge desk had a couple of internet terminals and the concierge would help the customer find the product they wanted on the retailer’s website.  They were also instructed to help the customer search for other retailers who might carry the product if they didn’t carry it!

The concierge idea was only tested for couple of months and in that time, the close rate improved, but not enough to offset the cost of the position.  With that being the company’s determining success metric, the idea wass killed.  The test also included a survey of customers to get their feedback on the experience and the results were impressive.  Roughly 85% of the 1200 customers surveyed felt that the concierge improved their shopping experience and, more importantly, The same percentage said they were likely to recommend the retailer to friends based on their interaction with the concierge.

While the test did not generate the targeted close rate numbers during the 60 days it was operational, customers really liked it.  If the company had run the test for 6 months or a year, would the close rate improved?  Who knows, but I’d argue that the improved customer experience in those stores would have resulted in higher traffic over time and that’s every bit as important as close rate.

So why are retailers so focused on the transaction and not the experience?  Because it’s the fastest thing they can measure.  Unfortunately, a change in the experience may not lead to improved business in a 60 day time frame and most retailers don’t have the patience or the confidence to invest in an improved experience for the long haul.   Paradoxically, failure to make customer experience improvements may prove to be the downfall of a many retailers in the next few years.

Are You Focused on the Transaction or the Experience (part 1)

With the economic downturn taking a toll on retailers one has to wonder what is going the be the differentiating factor for the survivors.  With people spending less across all retail channels, I heard a pundit on a financial network say last week that retailers were going to focus on taking market share away from competitors.  That sound good on paper but how exactly does one do that.

The vast majority of retailers will be going for the wallet with margin-crushing discounts and deals.  While this may be good for customers (clearly a buyer’s market), it will not be sustainable unless you are a retailer with deep pockets and those are few and far between.  The other approach would be for a retailer to leverage their experiential benefits.  Unfortunately, this approach is not something you can just whip up in time for the holidays.  If you have not been growing your customer base through great experiences, you are not going to be able to take this approach this time around.  That said, you may want to consider making changes now.

In retail, the experience your customers receive is a reflection of your organization’s culture.  An open culture that encourages, rewards and acts upon bottom-up and outside-in feedback is one that fosters engagement at all levels.  Engagement with the organization by your customer-facing people leads to engagement with the customer and that lays the groundwork for delivering great experiences.

I don’t mean to over simplify the idea of an open culture.  If your organization isn’t structured this way, you can simply mandate it.  Getting there requires real leadership, considerable effort and a willingness and ability to dedicate resources to the goal.

As the title suggests, I’m planning a series of posts on this topic.  In my next post, I’ll offer some suggestions on how to build an Open Culture and how to leverage it once you get there.

Circuit City: The Lost Years

I started my professional career as a programmer with Circuit City in 1985 and I remember vividly how very cool a place it was to work.  Not only were you part of a company that sold a cool product, but the organization treated people like family.  On top of that, consumer electronics retailing was a specialty back then and Circuit City was the king of the mountain.  There were many reasons for their dominance but the biggest was that for all intents and purposes, it was still a family business and the values that founders Sam Wurtzel and Alan Hecht built the business on were ingrained in the culture.

I’ll digress for a minute to share some very early Circuit City trivia as a way to convey how savvy a businessman Sam Wurtzel was.  Bear with me, there is a reason for this detour.  It was the summer of 1948 and Sam was driving his family to Florida for a vacation.  Coming through Richmond, VA, Sam saw a billboard announcing that WTVR – “The South’s First Television Station” was on the air.  Sam figured that with a TV station here, Richmonders were going to need a TV store.  With that as his business idea, Sam rented out a corner of a Sears tire store and went into business selling TV’s door to door.  The concept of Tryvertising has been talked about in recent years, but it’s basically how Sam approached selling TVs.  He would deliver the TV on Tuesday and let customers keep it for a week to try it out, which of course meant that they got to see NBC’s hit Texaco Theater with Milton Berle on Tuesday nights. The following Tuesday, Sam was to pick up the TV, but not wanting to miss that evening’s Milton Berle show, most customers decided to purchase it instead.  Simple idea, brilliant approach!

Sam and Al developed the WARDS TV business during the 1950′s.  The “W” stood for Wurtzel and the “ARDS” were Sam’s kids’ initials.  During the next three decades, several other store formats were experimented with. The name change accompanied a regional expansion and public stock offering in the 1980s.  All along the way, Wurtzel, and later his son, Alan, built the business on the the 4-S Model: Service, Selection, Savings & Satisfaction, which was credited in Jim Collins’ 2001 classic “Good to Great” as the differentiator that allowed Circuit City shares to perform 18.5 better than the market between 1982 and 1997.

The 4-S model was the customer lens through which every “associate” viewed their work. Whether developing software or working on the sales floor, everything you did was about delivering those four S’s to the customer. Earlier this week, The Consumerist posted a video compilation of old Circuit City TV spots from the company’s heyday years of the late 80s and early 90s.  The messages in these spots rang true then, but sound like empty promises a decade after the 4-S model was abandoned and management stopped focusing on what mattered – The Customer.  The results speak for themselves.  With a stock price now around $0.28 (yes, that’s 28 cents!) and likely to follow CompUSA into retail oblivion, it’s sad to think about how the leaders of this company were able to destroy it in just ten short years.  The comments on The Consumerist post tell the story of how the brand is perceived today.

Take a walk down memory lane (if you’re old enough), and remember that you brand is not what you say it is, but rather what your customers say based on their experience with you.

Not Expecting Great Things at Kohls

I’m a frustrated customer.  I drove to a local Kohl’s store today to purchase the Men’s Nike Air Tri-D II running shoes that they advertised in their 10/1 – 10/11 sale catalog.  The shoe department at that store was a disaster.  There were very few men’s athletic shoes on display and the shelves were in disarray.  The shoe I wanted and that they had gone to the expense of advertising, was not even on display.  I asked someone to check stock and the answer came back that they only had a size 8-1/2 in the back room.

Years ago, retailers used to practice a fraudulent tactic called “Bait & Switch” in which a desirable item was advertised at an attractive price, but in reality, there was little or no inventory to support the offer.  When the customer arrived at the store to purchase the item, they would be offered an alternative item which often provided the retailer with higher margin.  There are Federal Trade Commission laws that make that practice illegal.  If a retailer knowingly advertises a product that has limited availability, they have to say so in the ad (“quantities limited”). I understand that sometimes operational issues come up which can result in advertised products not being available and I’m assuming that is what happened in this case.  Nevertheless, it was a frustrating waste of an hour of my time.

Multichannel Retailing to the Rescue (or NOT!)

I wanted the shoes to take on a trip this week, but settled for ordering them on Kohls.com so I could take advantage of the additional discount offered to Kohl’s Charge customers.  A search of the site took me right to the shoe, but when I went to put it in my cart I saw that it was only available in sizes (wait for it….) 8 and 8-1/2!

I could understand a single store in a 1000 store chain not having a particular advertised item, but to not have enough product available through a national website is a big problem.  Kohl’s Merchandising team has to know about this.  Any merchant responsible for a line of products checks to be sure they have sufficient stock chain-wide before advertising something.  In this situation a good approach would have been to put a note on the product detail page acknowledging the shortage of inventory and apologizing for the inconvenience.

This is a great example of a really bad customer experience.  Kohl’s tells me to “Expect Great Things”, but based on interactions in two different channels (web and store), I “expect” that I won’t be shopping at Kohl’s in the future.

On-Line Banking Experience – FAIL!

In my last post, I talked about a local grocery store chain’s customer experience.  One of their innovations was partnering with National Commerce Financial Corporation in which it co-owns 35 First Market Bank branches.  Ironically, this post discusses an on-line banking experience with First Market Bank.

Yesterday, I tried to access my accounts with First Market Bank to pay a few bills.  I was able to get to the home page, but when I selected the link to sign in to my account, I got nothing.  The site eventually returned a page load error.  Frustrating, but since I had a hundred other things to do, I moved on.

This morning, I went back to the First Market Bank site to access my account only to find that the problem had not been fixed.  There was no message on the homepage regarding the problem, so I called the Internet Banking support line.  The CSR apologized and informed me that “the site was down for maintenance”.

Having an IT background, I translated that to “something has gone terribly wrong with the software and the IT support team is having a hard time fixing it”.  OK, I understand these things happen, but while the support team is busy wrestling with the problem, it’s critical that you let you customers know what’s going on.

At a minimum, the home page should be updated with a message that acknowledges the problem and provides direction for customers who need to transact business.  If, for some reason, the home page can’t be updated, the account access link should be redirected to a page with the message.  Now that the site has been down for more than 24 hours, they might want to consider sending an e-mail to their customers explaining the situation. These are simple things to do, but instead, I’m willing to bet that their call center is handling a unusually high number of calls, which in turn impacts the level of service provide through that channel.

If you walk into a store that’s in the process of remodeling, you usually see a “Pardon our Mess” sign.  If you’re web business is dealing with technical problems that impact the customer experience, put up a sign to let your customers know.

Update (9/24 6:30pm):  First Market Bank still not working, but they did put up a sign:

“First Market Bank is experiencing some technical difficulties which could impact some of our customers’ ability to access Online Banking. We are currently addressing the issue and should have it resolved shortly. Thank you for your patience.”

Thank You!

Winning Against the Big Guys: Ukrops

Ukrop’s is a 28 store, family-owned grocery chain based in Richmond, VA.  All of their stores are located in central Virginia, mostly in Richmond, so you’ve probably not ever heard of them.  That’s too bad because Ukrop’s is a very unique retailer.  Over the last four decades, Ukrop’s has steadily grown to dominate the central VA grocery marketplace, competing easily against much larger regional and national chains.  Instead of taking the “lowest price” approach, Ukrop’s has always focused on delivering a great customer experience.  Ever since Joe Ukrop opened the first store in 1937, the operating philosophy has always been “treat customers, associates and suppliers as they personally want to be treated.” That attention to the customer experience coupled with a history of innovation and community engagement has built incredibly strong brand loyalty.  In this post, I’m going to share some of things Ukrop’s has done to build their brand.

Customer Focus Differentiators

Ukrop’s does things for their customers that I’ve never seen at any other grocery chain.  They’re little things, but as I’ve said before, it’s the little things that differentiate you from your competition.  Things like:

  • Ukrop’s employees carry your groceries out to your car and load them for you.  By the way, don’t bother tipping them.  They won’t accept it.
  • If you get to the checkout counter and realize you have forgotten your wallet, don’t worry.  In most cases, Ukrop’s says to take the groceries and pay them next time you come in.
  • Ukrop’s provides in-store “Tot Spots” in their larger stores.  Parents can leave their child at the “Tot Spot” while they shop.
  • Ukrop’s listens and responds to individual customers.  Each store has a Customer Requests board prominently displayed at the front of each store.  Have feedback or want the store to carry a new product?  Simply write down your request and put it up on the board using a refrigerator magnet.  Each note is read and replied to within a week.  The next time you come into the store, check the board for your note and the reply.  I once asked for a specific flavor of ice cream.  The product was in the freezer the very next week.

Marketplace Innovator

Ukrop’s has a history of grocery industry innovations that have allowed them to differentiate their brand.

  • Like most Americans, you probably carry around some kind of supermarket discount card, but I bet you didn’t know that the very first supermarket card program in the US was launched in 1985 at Ukrop’s as part of a Citicorp Point-of-Sale initiative.  Ukrop’s saw huge potential in being able to identify their customers by name and understanding purchase behavior of it’s best customers.
  • Research conducted during the mid-1980s revealed that changing consumer demographics and lifestyles indicated a growing demand for convenient, restaurant-quality food. Demonstrating their “sense and respond” competency, Ukrop’s decided to tap into the demand and further differentiate themselves from competitors. The result was one of the grocery industry’s most lauded success stories of the late 20th century.  Ukrop’s already had experience with a central bakery, having purchased a well known local bakery to supply bakery items to to their stores.  The bakery gave them some experience with manufacturing and logistics.  Leveraging that experience, Ukrop’s decided to create a 10,000 sq-ft “central kitchen” to package chilled prepared food, which consumers could then re-heat.  On Halloween 1989, the company’s prepared foods line debuted, featuring ten items that included twice-baked potatoes, lasagna, and macaroni and cheese. By 1994, the roster of prepared foods had swelled to a rotating list of 125 items. Ukrop’s foray into prepared foods became the talk of the industry, accounting for nearly 15 percent of the chain’s total sales and adding further incentive to shop at Ukrop’s.
  • Don’t feel like cooking? Ukrop’s added an in-store grill to their larger stores in the late 1990′s.  The grill serves everything from sandwiches to stir fried Asian dishes to steaks.  Of course, the ingredients for all the menu items are available in the store.
  • Ukrops’ latest innovation is a partnership with a local gas station operator called Fuelperks.  Capitalizing on the concern over rapidly rising gasoline prices, the program rewards Valued Customer Cardholders with a 10 cent per gallon discount (up to 20 gallons) for every $50 spent.

The Other Bottom Line

Ukrop’s is perhaps best known for their community involvement.  Each year they commit to giving at least 10% of their pretax profits back to the communities they serve. They sponsor many local events including the Monument Avenue 10K and the upcoming Richmond Folk Festival, but perhaps their biggest community program is the Golden Gift.  Started in 1987, the program allows customers to designate a local non-profit organization.  It might me a charity or perhaps your kid’s school. Each year, Ukrop’s allocates an amount to the Golden Gift fund.  This year it was $400,000.  During February and March, Ukrop’s awards each customer with a Golden Gift point for each dollar spent.  At the end of March, the fund is allocated to the customer’s designee based on points accumulated.  The customer then receives a certificate that they can give to their non-profit which can bee redeemed for cash.  Since inception, the program has given back $11.6 million!

These are just a few of the many things that have helps build the Ukrop’s brand.  By putting customers and community first and through innovative ideas that have redefined the grocery store, they have been able to stand the test of time.

Do you own or work for a local or regional retailer?  Having a hard time competing against the big guys?  Perhaps you can take some lessons from Ukrop’s.

PR Lessons Learned: Circuit City

image courtesy of consumerist.com

image courtesy of consumerist.com

Last week, I wrote a post comparing the Twitter presence of Circuit City and Comcast.  I was highly critical of Circuit City for not using the platform to reach out and connect directly with customers.  The very next day, a story broke about a PR debacle at Circuit City.  The first part of this story is a bit of a tragedy but it does have a happy ending, thanks to some fast thinking by a savvy PR guy.

The August issue of MAD magazine featured a four-page spoof tab for “Sucker City”.  The spoof included advertisements for items like HDTVs and video games, including the Nintendo Wii “Guaranteed In Stock … if you’re friends with an employee who hid it in the back for you. Otherwise, ooh, sorry, all sold out.”

In a panicky overreaction, Circuit City management instructed their stores to remove and destroy all copies of the issue (yes, you can get magazines at some Circuit City stores, but that’s a subject for different post).  Of course, the decision was another great example of how Circuit City doesn’t understand the new reality of operating in the age of social media.  A copy of the remove and destroy message quickly found its way to the Consumerist.com who shared it with the world.

That’s when PR guy Jim Babb stepped in to deal with the damage control.  As many of my readers know, I worked at Circuit City’s corporate headquarters and had the opportunity to know Jim and his extremely dry wit, so I’m not surprised with how he handled the issue.  Here’s an excerpt from Jim’s letter:

“As a gesture of our apology and deep respect for the folks at MAD Magazine, we are creating a cross-departmental task force to study the importance of humor in the corporate workplace and expect the resulting Powerpoint presentation to top out at least 300 pages, chock full of charts, graphs and company action plans.

In addition I have offered to send the MAD Magazine Editor a $20.00 Circuit City Gift Card, toward the purchase of a Nintendo Wii….if he can find one!

Starbucks The Way I See It: “Save Our Starbucks”

Starbucks recently announced they will be closing 600 US company-operated stores.  The company said 70% of the cafes slated for closure had opened after the start of 2006. The chief financial officer, Pete Bocian, said that meant Starbucks would close 19% of all US company-operated stores that opened in the past two years.

A funny thing happened on the way to closing these 600 Starbucks locations. Now that the customers closest to the targeted locations (see map) have learned about the impending closure of their local store, many have rallied for the “Save our Starbucks” campaign. They are writing letters, making phone calls and signing petitions begging the company to reconsider the decision.  People have even commented on some of my earlier Starbucks posts, asking the chain to not close their store.

Starbucks’ profits may not be so great right now, but they do have something that many companies can only dream of: Customers who are passionate about their brand.  Yet with their latest cost cutting decision, Starbucks is turning them into passionately unhappy customers.  You see, these folks who are willing to pay $4.00 for a latte on a regular basis, have become quite attached to “their” local Starbucks. Sure there is probably one a few miles away (on across the street, depending on where you are), but to frequent customers, these are not “Their” Starbucks. They have an attachment to the local store. They know the Baristas who make their drink just like they like it (and contrary to Howard Schultz’ direction, consistency isn’t that common).

It’s unfortunate that the necessary cost cutting is coming at the expense of customers, but what else is Starbucks to do?  While I can’t claim to know the facts regarding the financial analysis behind the decision, I might suggest a few alternative cost cutting ideas.

Take a Closer Look at Existing Store Saturation.

When Starbucks announced the closing, the CFO said a Starbucks store’s revenue dropped 25 to 30 % when a new one opened nearby.  There are no closings planned for my city, yet I am amazed by the saturation of Starbucks outlets in my area.  Within three miles of my house, I have no less than ten Starbucks outlets to choose from (including Target, Kroger, & Barnes & Noble locations).  There are two company owned stores and a Barnes & Noble outlet which are literally across the street from each other.  In a move that seems to go against the CFO’s comments, Starbuck’s is building yet another cafe with a drive-thru on the same corner.  This ain’t Manhattan folks.  This is downtown Short Pump, VA; hardly a bustling metropolis, and four Starbucks within walking distance seems a bit unnecessary .

Starbuck’s Card Rewards

I think the incentives-based Starbucks prepaid card is a highly innovative idea to cut operating costs.  Like most retail today, most Starbucks transactions have historically been tendered using a credit card or cash.  Both have expenses (fees and operating overhead).  By getting customers to use prepaid cards, Starbucks lowers their transaction costs and it get more cash into their hands sooner.  That cash can be held in interest-bearing accounts generating income for the company.  In return for customers Registering the cards, Starbucks is offering a number of perks including free WiFi access and free beverage upgrades (syrups, etc).  I think this is where Starbucks may be giving up too much.  My sugar-free vanilla, breve (half & half) latte in Richmond, VA is around $4.00, but when I pay with the Starbucks card, I get the syrup and breve upgrades for free saving me $.70.  That’s more than 20% off.  The way I see it, my profitability as a customer has gone down and my transaction volume has stayed about the same.  Again, I don’t have the financial analysis behind this plan, but instinctively, it seems like they are leaving money on the table.

In retail (and food retail is no different), you normally want to get the customer to upgrade their purchase  (“would you like fries and a drink with that?”. “Have you considered the extended warranty?”).  That’s often where the biggest margin is and the Starbucks upgrades are no exception.  By giving it away it’s like saying the fries and drink are on the house.  It’s really not necessary because you already have me as a regular customer. and I’m going to order the same drink on a regular basis whether you give me the syrup or not.

What are your thoughts?  What alternative cost cutting ideas would you explore if you were Starbucks?

What Not to Do – Food Lion

Food Lion is a regional grocery store chain with stores in the Southeastern US.  I had an “interesting” experience last weekend while making a last minute run to the local Food Lion store for two cans of baked beans, an onion and a green pepper.

I’m in the express checkout line trying to navigate the payment pad when the clerk hands me a pad of preprinted forms and asked me to fill out one explaining why I thought he should be employee of the week.  Seriously!  So all this guy has done is swiped four items (remember this, it gets better) and pushed a button.  Why should he be employee of the week?  What things are being measured to qualify one for this honor?  Still trying to focus on the difference between the “Yes” and the “OK” button on the payment pad, I told him I didn’t know why he should have that title, and he said, “that’s OK, just put it on the form”.  So apparently, collecting the most forms makes you employee of the week.  I guess working the express lane is a advantage in this contest.

Needless to say, I ignored the request.  After I paid, I noticed that he had not put my pepper and onion in the bag and had, in fact, rung them separately thinking they belonged to the person behind me.

I’m pretty sure this program was something that the local management came up with.  I’m sure they had the best intentions: improve performance of the team through competition and improved the quality of the customer experience, but their approach was completely wrong.

This program was focused on the employees, not the customer.  It resulted in the employees being more concerned with scoring points that delivering consistently great experiences.  The “express” checkout line was slowed down as a result and the overall customer experience suffered.  Employee of the week/month programs are fine, as long as they don’t get in the way of what should be the primary objective: taking care of the customer.

Hey Target, This Ain’t Very Appetizing

Target always puts their outdoor living stuff on clearance around the July 4 holiday, so I made a trip to my local store this morning to see what kinds of deals I could find.  This particular store has just been renovated and enlarged to their new format with an expanded grocery section.  While the outdoor living secion was a bit picked over (I guess I’m not the only one who knows about this little secret), my wife and I did manage to run the aisles grabbing interesting looking snacks for the weekend.  Then I same across this shelf:

I guess having rodents in grocery stores is a pretty common thing and that Target is not alone in deploying traps to keep the population down, but I’ve just never noticed them so prominently displayed like this.  Snacks, anyone???

Thank You Customers

There is a small, award-winning burger franchise call Five Guys Burgers & Fries. Their menu consists of basically four things: burgers, fries, hot dogs and soft drinks. No breakfast, no salads, no chicken and no wait staff. Their products don’t have names like “Whopper” or “Big Mac”. They’re call “hamburger” and “bacon cheeseburger”. Everything is cooked to order so it’s fresh and hot and the team behind the counter operate like a well-oiled machine with a clear focus on delivering a great product. They know that you come in hungry so while you are waiting for your meal, they have cases of roasted peanuts to crack open and munch on.

I went to Five Guys tonight to pick up dinner for the family. While I was chowing down on peanuts by the cash register, one of the employees was sweeping the area of spent shells. As she approached me, I started to move away to give her room, but she stopped me and said, ” You stay right there. You’re the customer”. So I did for a minute, but then moved over to the pickup counter. That’s when I saw this sign:

As customers, we interact with lots of organizations every day. Some of those experiences are bad and most are unremarkable, but occasionally you have a really great experience. I suspect that the organizations that really deliver have at their foundation, something like this baked into their cultural DNA.

Organizations can make all kinds of operational adjustments in the quest to deliver a better experience, but without a culture that gets this simple idea, they will not succeed.

What do you think? Think about some of your best customer experiences. Do those organizations get it?

50 Ways to Improve Your Customer’s Experience

Doug Fleener over at Retail Contrarian has reposted his list of 50 ways to be more customer focused. Take a look and see how many you and your team do on a regular basis:

1. Open the door for your customer whenever possible. This is especially important if her hands are full.

2. Don’t just hand your customer his product, “present” it to him.

3. Keep the store temperature at a setting that is comfortable for customers. Most retailers set the thermostat at what’s comfortable for the employees.

4. Acknowledge your customer’s children.

5. Offer to gift-wrap purchases if you already know it is a gift. Don’t wait for your customer to ask.

6. Always suggest accessories and other items that will enhance a customer’s purchase and his/her life.

7. Offer to carry your customer’s purchase, however big or small, to her car.

8. Send handwritten thank-you notes. Come on, do you really do it?

9. Smile.

10. Introduce yourself to your customer.

11. Ask your customer her name. Use it.

12. Compliment your customer on his purchases. This is especially effective if he is another staff member’s customer.

13. Don’t give your customer too many choices. You’re the experts, so recommend a product based on what you learn from him/her.

14. Tell her why a product isn’t right for her.

15. If you can’t fulfill a customer’s need, suggest another company that may be able to do so.

16. Never ever say something negative about another company.

17. Act just as happy to see a customer with a return as you are one who walks into make a purchase.

18. Make it easy for customers with returns. Almost all customers are honest and should be treated as such. If you have to give a customer a refund, end the conversation with “I’m sorry this product didn’t meet your needs but we will welcome the chance to serve you again.”

19. Warmly welcome every customer who comes into your store.

20. Loan umbrellas on rainy days for customers to get to their cars. Ask them to either drive up to the sidewalk where you are waiting to receive the umbrella back or to bring it back on the next visit. Most customers will turn you down but you score major points for offering.

21. Don’t interrupt the customer to talk. Talk – listen – talk – listen. You get the idea.

22. Do whatever you can – within reason – to keep an unhappy customer. What you’ll lose on the one transaction you’ll make it back because he will tell his friends and family how wonderful you are.

23. Refrain from visiting with a colleague when he/she is with a customer. It’s distracting to both the customer and the colleague.

24. Never rush customers out at closing time. Gently let them know that you’ll be closing in a few minutes. Never flash the lights or sound the air horn. (I’m joking.)

25. Offer to teach your customer how use the products. Clothing and home goods retailers might show their customers how to accessorize the items he/she have already selected.

26. Never blame the company for a policy or decision. You are the company.

27. When a customer says “Thank you,” say “You’re welcome.”

28. Add “It’s my pleasure” after you say “You’re welcome.”

29. Provide written details of frequently asked questions.

30. Don’t coach or reprimand an employee or colleague in a customer’s presence.

31. If you’re on the phone with a customer and you absolutely must put him on hold, tell him approximately how long he will have to wait.

32. Don’t interrupt an employee with a customer unless it’s extremely important.

33. Create a children’s craft area in your store so the kids can create art while their parents shop.

34. Give your customer your undivided attention when she is talking. Everything else can wait.

35. Accept responsibility when the store has made a mistake. Too err is human. To not admit it is stupid.

36. Empathize with upset customers. Say you’re sorry.

37. Offer free drinks to your customer.

38. Give a gift for no reason. Even better, give a gift for being such a great customer.

39. Have the owner or manager personally call a high-ticket customer and thank her for her purchase if the sale was made by another staff member.

40. Loan books and other resources at no charge. This positions you as an expert and creates repeat traffic.

41. Ship a replacement to a customer with a defective product before you receive the original back.

42. Open the doors early when customers are waiting outside.

43. Provide seating for customers and offer to bring them product to look at.

44. If you’re busy and a customer is waiting for help, give him an estimate of how long he’ll have to wait for someone to help him.

45. Stop cleaning and doing busy work when customers are in the store. They’re less likely to ask for help if you’re doing other things.

46. Partner with restaurants and other stores to present exclusive discounts and offers to your customers. (A win-win-win. The other company gets incremental revenue, your customer saves money, and you’re the nice person doing it for both of them.)

47. No checking email or text messages on your phone when customers are in the store. It makes you look bored and nobody wants to shop in a boring store.

48. If you have to walk away from your customer to go to the backroom or counter tell her what you are doing.

49. Always offer to contact your customer when a product she wants comes in. Never tell her to call and check.

50. Always thank as many customers as you can for coming into your store and invite them back.

51. Always go above and beyond for every customer.

You can download the 50 Ways to Improve Your Customer’s Experience article that’s formated as a handout from Doug & Matt’s website .

(Image courtesy of Becky Carroll)

Amazon TextBuyIt

textbuyit1.jpgWhen you are shopping over the web, its very easy to compare prices through multiple browser tabs, but comparison shopping is not so easy to do in a brick & mortar store. Browsing e-commerce sites using most cell phone browsers is a painful experience. Text messaging on the other hand is a very easy task on most cell phones and for younger cell phone users, “texting” is the primary method of communication.

With that as the backdrop, Amazon is once again showing that it “gets it” and in the process, has created a new competitive advantage against traditional retailers. TextBuyIt is an innovative new service which lets people text the name of a product, its description or its UPC or ISBN to 262966 (that’s “Amazon” on the keypad) from anywhere their cellphones work — including from inside physical stores.

If Amazon stocks matching items, the service returns two results at a time. Shoppers can immediately buy one of the first two the selections by texting back the number “1″ or “2,” or they can ask for more by texting the letter “M.”

New TextBuyIt customers will be prompted to enter the e-mail address associated with their existing Amazon account plus a shipping zip code. The service then calls them and walks through the checkout process using an automated voice system. Shoppers get confirmation by text message and e-mail.

From there, the customers can check on order status on Amazon’s website.

Why This is Disruptive

Say you’re out shopping at the mall and see some new, expensive thing that you just gotta have. Historically, you have had no way of knowing whether the price is good or not. By allowing you to send a simple short text message to initiate an order, Amazon has just empowered you with comparative price information to make a fact-based decision about the purchase in the physical marketplace and in the process, have inserted themselves into the middle of your purchase process in hopes of steering your dollars in their direction

This is a clear “Make It Easy for Me” differentiator targeted squarely at younger, text-message-oriented consumers. It is also a wake up call for traditional retailers already impacted by the information empowered consumer. Your competitor is now actively competing with you inside your four walls.

 

[From USAToday]

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