Archive for the ‘Customer Experience’ Category
Maybe you should take a hammer to your iPod. OK, maybe not literally, but have you given any consideration to what the impact of the MP3 file (and Apples’s game changing iTunes business model) has been on the customer experience for recorded music? Steven Wilson, the driving force behind the band Porcupine Tree has given it a great deal of consideration. Wilson is clearly a minority in an industry transformed by technology and focused in selling three minutes of disposable entertainment at $.99 a pop. He sees the long form package as the best way to deliver a quality experience to the listener. Like legendary artists that came before digital, Wilson still produces limited edition, high quality vinyl collector’s pressings and “Digi-Pacs” that contain both stereo and 5.1 mixes contained in packaging which is in itself a work of art with pages of glossy artwork. Last month, Wilson released his first solo project to critical acclaim. Insurgentes is about music and the album as art form, and applying the same aesthetic vision through the writing, performance, production, artwork, lyrics, videos and beyond. It also reflects a theme which has been in Wilson’s most recent Porcupine Tree releases:
“My fear is that the current generation of kids who’re being born into this information revolution, growing up with the Internet, cell phones, iPods, this download culture, ‘American Idol,’ reality TV, prescription drugs, PlayStations – all of these things kind of distract people from what’s important about life, which is to develop a sense of curiosity about what’s out there.” (Steven Wilson, MTV News)
Later this year, Wilson and long-time film collaborator Lasse Hoile are expected to release a documentary film under the same title which looks into the issues of creating, packaging and marketing music in an era when iPods, Mp3’s and download culture are changing and eroding perceptions of exactly what an album is supposed to sound and look like. In an extract from the documentary included with the DVD-Audio package, Wilson laments the loss of the rock album as an art form.
As a teenager, he would go to the local record store with enough money to buy one album. He would explore the racks of titles and would make his decision on which one to buy based on, among other things, the look and feel of the cover artwork. Once the decision was made, he would spend hours exploring and absorbing his investment from the first track to the last (as it was meant to be heard).
As a teenager in the 1970’s, this really resonated with me. Think about a masterpiece like The Beatles’ Sgt Pepper. It was never meant to be consumed in three minute chunks, but rather as a whole 48 minute composition, while exploring the extensive imagery and lyrics of the album cover. A work of art like that could never deliver the same experience in digital download format with a single two inch square picture. Sadly, most modern artists have abandoned the album format as a result of the available technology.
Nevertheless, we are in a different time and the technology has forever changed the customer experience. Listening to Wilson describe why he does the things differently made me wonder if we haven’t seen a familiar phenomenon with other types of customer experiences. Have we made them superficial and disposable for the sake of technology and the need to do everything faster? More importantly, are there ways to succeed by playing the game differently like Steven Wilson does?
I worked on a customer experience strategy project for a large retailer a few years ago. One of the obvious insights gained from talking to customers was that they were (and still are) increasingly feeling starved for time. They want and expect everything to happen instantly. “Let me get in and out quickly” was the takeaway. This is a common insight used by companies developing their customer experience strategies. As a result, the approach many organizations have taken is to replace human interaction with technology. We self-serve everything from money to gasoline. It’s all very convenient, for the customer and cost efficient to the company, but does nothing to help build the brand by engaging customers through a smile, a greeting exchanged, a windshield washed (ok that’s a really old reference, but you get the point).
The point here is that while technology can be a great experience augmenter, it’s no substitute for building experiences based on the interactions of people. If you ask customers, they will tell you that that the brands they love and continue to be loyal to are the ones that deliver a great experience and a personal touch. And, by the way, they are willing to pay more for it if it’s exceptional. The good news is that so many organizations aren’t really focusing on or succeeding at making customer experiences a strategic differentiator. If the customer experience you are delivering looks more like the iPod model than the ‘album as art form” model, maybe it really is time to smash your iPod.
Today’s post was inspired by a series of interactions I had with VirginAmerica this week . Two lessons to be learned….
In one week, the family is headed to Southern California for a vacation. Although not as convenient and more expensive than flying out of Richmond, we decided (after standing up to considerable pressure from our daughter) to fly VirginAmerica from DC. Don’t tell her, but I’m looking forward to the experience.
Like all airlines, VirginAmerica has a rewards program. Theirs is called Elevate. Prior to purchasing our tickets in January, I joined the Elevate program. This past week, I received the following email from VirginAmerica:
You joined Elevate but have not flown us. That just won’t do. We want you to come and see what you’ve been missing, so here’s a special offer just for you – 30% off our lowest advertised fare on your flight with.
Now I love a good deal and this clearly is one, but there’s a big problem here. You see, I already bought tickets to fly with them, and I might add, didn’t get the 30% discount, so why doesn’t their Marketing department know that??? Companies that deliver a truly exceptional customer experience, do so consistently at every touchpoint. My expectations for VirginAmerica have been set high based on feedback from other customers and their advertising. That e-mail sent the message that they aren’t aware I’ve already booked flights. That is not what I would expect from a company focused on a great customer experience.
Lesson #1: Take advantage of the rich customer information you have at every touchpoint. Don’t send a solicitation that says “Hey, when are you going to buy my stuff” if I already have!
Twitter to the Rescue
Many companies have established a presence on Facebook and Twitter, but the ones that approach those communities as listeners and facilitators are the ones demonstrating that they get it. VirginAmerica (@VirginAmerica on Twitter) is one who gets it. This morning, I mentioned my frustration about the email experience in at “tweet” to Nick Schwartz, the guy behind the VirginAmerica Twitter presence. The response was almost immediate. He gave me his email address and asked me to send a note telling my story (in more than 140 characters), which I did. To be clear, I was not asking for nor did I have any expectations that my email would result in a fare reduction or other adjustment. I simply wanted to communicate an opportunity to inprove the customer experience. Nick passed my email up the chain and within an hour I got a reply from VirginAmerica Guest Care indicating they had forwarded my concerns to the marketing department.
I love the immediacy of being able to tap a company on the shoulder and start a conversation with out having to go to their place (i.e. website, 800#).
Lesson #2: If your company is participating in Social Media channels, take a lead from companies like VirginAmerica. Listen and Help first. The value that you deliver by doing that helps to strengthen your brand over time.
Seems like Facebook has been on a redesign binge lately and with every iteration, you can hear the increasing sound of users who are unhappy with the results. Last month, after Facebook’s redesigned Terms of Service debacle, Zuckerberg promised to be much more “democratic” about future changes. Of course that was last month and based on the track record, it’s just about time for an other customer “disruption”. In his latest move, following a failed attempt at acquiring Twitter, CEO Mark Zuckerberg decided to give Facebook users a very twitter-like, steady stream of updates. The problem is that the change is almost universally disliked, and that includes Facebook employees. Valleywag recently reported on the story based on an insider tip:
Zuckerberg sent an email to Facebook staff reacting to criticism of the changes: “He said something like ‘the most disruptive companies don’t listen to their customers.'” Another tipster who has seen the email says Zuckerberg implied that companies were “stupid” for “listening to their customers.”
There are only alleged statements, but if that’s a part of Facebook’s longterm strategy, then I think young Mr. Zuckerberg may face some problems down the road. Perhaps this thinking comes from the 24 year old’s lack of business experience . Maybe he feels that the people who place advertising on the site are the only “customers” he needs to listen to. Either way, I can think of no competitive business which has been successful in the long run without listening to its customers. If people stop liking your product, they will look for alternatives in the marketplace (just ask MySpace). When they start leaving, so will your advertisers. There’s probably a couple of college students sitting in a dorm room right now dreaming up the Facebook-killer.
Update: Robert Scoble has an interesting take on this over at Scoblizer. He makes a case in favor of Facebook ignoring the complaints in the interest of achieving a longer term objective. He says people will complain but they won’t leave. Perhaps not at this point. Too many people are joining facebook as their first foray into social media and are invested there. I would compare their position to where Twitter was when the Fail Whale was a common occurence. People didn’t leave because of the value and the investment there. Still, I think Scoble and I are looking at this from two very different perspectives. Perhaps Facebook is like mobile carriers. It’s market position allows them to grow despite doing things that customers dont like. Most competitive businesses cannot operate like that. Don’t use Facebook as your model.
What do you think?
“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:
- 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.
- 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.
Now that the turkey and pies are gone, I guess it’s time to jump back into the blog. Recapping from my last post:
- Companies who differentiate on customer experience are more likely to succeed in the face of shrinking margins and discretionary spending.
- A highly engaged customer-facing workforce will deliver a consistently better experience.
- An “Open Organizational Culture” is necessary to drive employee engagement.
So what exactly is an Open Organizational Culture? Fundamentally, it’s one that fosters transparency and accountability to its employees, customers and the public. This is in contrast to traditional organizations that operate in a hierarchical model with an authoritarian culture that seems to foster privacy or secrecy.
An Open Organizational Culture has several unique characteristics:
Transparency and Open Communications
Leaders of high performance organizations nurture a culture that allows for people to question openly and have honest dialogue. They create a climate of candor throughout the organization. They remove the organizational barriers — and the fear — that cause people to keep bad news from the boss. They understand that those closest to customers usually have the solutions but can do little unless the organization encourages open discussions about problems. When people can raise objections when when necessary (and without reprisal), it paves the way to higher engagement.
In an Open Organization, the leader’s beliefs and values create the direction and the boundaries that people need to perform well. The values are clearly defined & communicated, and reviewed periodically for relevance. More importantly, the organizations practices, systems & processes are clearly aligned with the values and management ensures that employees’ day to day experiences are consistent with the values. You can quickly identify an organization that does not adhere to its stated values by gauging the level of cynicism amongst the staff. Open Organizations really walk the talk and it is reflected in their employees’ attitudes.
Empowerment in Organizational Culture
In “Good to Great” (2001) Jim Collins asserts, “good-to-great companies built a consistent system with clear constraints , but they also gave people freedom and responsibility within the framework of that system.” Open Organizations not only actively engage members of the workforce, they rely upon their contributions to on-going improvement. Driving Empowerment and responsibility down to the lowest appropriate levels within the organization, especially to the customer-facing members, has many benefits:
- It provides employees the opportunities and incentives to shape the company experience. Encouraging involvement in this way fosters a feeling of ownership on the part of employees.
- It promotes organizational creativity which leads to innovation. As I stated above, customer facing associates are typically the ones with the best insights regarding the customer.
- It allows decisions to be made without unnecessary or authoritarian approval process which can lead to a more responsive organization.
- Encourage continuous learning which in turn improves decision making.
So in summary, an organization’s culture is shaped by and reflects the values, beliefs, and norms held by its founders, leaders, and organizational members. In Open Organizations, values are aligned and honored, transparency and open communication are the norm and decision-making is informed by a process of continual learning. Cultures that embody these characteristics demonstrate them in the organization’s structures, standards, policies, and systems. They shape the work environment, staffing practices, and organizational performance, all of which influence the employee experience and by extension, the customers they serve.
If this sounds like your organization, great. I’d love to hear about it. If not, I’m curious about that things you see are barriers to getting to an Open Organization.
[image: Open 24 Hours on Houston Street]
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.
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.
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.”
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.
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.
- In 1997, Ukrop’s established a unique partnership with National Commerce Financial Corporation in which it co-owns 25 First Market Bank branches in Ukrop’s locations and 10 free-standing branches First Market Bank. Customers who bank at First Market can receive points worth up to $200 in free groceries each year.
- 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.
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?
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.
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???