Retail Contrarian

Putting Economic Stimulus in Check

My hometown newspaper likes to pose a Question of the Week column, wherein six or seven citizens are accosted outside a local business and asked their opinion of current events. This past week the question was "What will you do with your economic stimulus check?" Responses ranged from "new tires for my truck" to "fill my [heating] oil tank" and "pay my mortgage". Nobody said "buy a new TV", "go on vacation", or even "pick up that new Mudcrutch CD". Practicality seems to be winning out over leisure. And though practicality still stimulates the economy, businesses that rely on discretionary spending might not feel as stimulated as they had hoped.

As the checks begin rolling in, retailers are jumping at the chance to take advantage of the windfall by encouraging their customers to come in to the store and turn their checks into merchandise. Walmart will cash checks for free. Sears will give a 10% bonus to customers who cash their check at the store and spend it all there. A regional supermarket chain is giving customers a 10% bonus on every $300 gift card bought with a stimulus check. This exchange of stimulus checks for the ubiquitous gift card reminded me of a conversation I had with a friend during the holidays.

When talk of sending checks out once again began to surface at the end of last year, my friend suggested that instead of doling out checks (and direct-deposit lump sums) which could be used for less stimulating purchases like heating oil, tires, and housing, the government should stimulate the economy with gift cards. Send each potential recipient a letter that either directs them to a website or includes a form for them to complete and mail back, indicating their choice of gift cards from dozens of businesses, in varying denominations up to the total amount of their refund. This would all but force much of the population to get out of the house and use their new-found cash to buy goods and services, as opposed to using it for less stimulating essentials like paying the mortgage, lightening their debt, or keeping the lights on for another month. Of course, the option to receive the cash in check form would be among the options, but what fun would that be? Who wants to face the responsibility of having to decide where the money should be spent, when there are so many options for where the money could be spent?

How to Get Customers to Spend More: Make 'Em Cry

The Associated Press recently wrote about a multi-university study on how emotions affect the spending habits of consumers. The study essentially confirmed what many human behavior and retail experts had known for a long time: sad customers spend more.

Study participants who watched a sadness-inducing video clip offered to pay nearly four times as much money to buy a water bottle than a group that watched an emotionally neutral clip.

Most folks will agree that a bit of shopping can lift them out of the doldrums, but what this study illustrates is the commonly unknown impact of mood on spending. Interestingly enough, subjects in the study who were exposed to the sad video and offered to pay more for the water bottle were adamant that the video had no bearing on the price they were willing to pay.

“This is a phenomenon that occurs without awareness,” Jennifer Lerner, a Harvard professor who studies emotion and decision making, said in a phone interview. “This is really different from the idea of retail therapy, where people are feeling negative and want to cheer themselves up by shopping. People have no idea this is going on.”

This phenomenon can be looked at two ways. First, retailers can do what advertisers have been doing for years: take advantage of customers' low levels of contentment and appeal to their need to be happy. The other way is to understand how a customer is feeling when they buy, and work to make sure the sale is permanent. One major side effect of misery spending is the realization that purchases don't have a long-term curative effect. This often leads to buyer's remorse and returned products, and if you don't have an effective way to handle those returns, you'll soon find yourself feeling down. And you know what happens then.

How to Ruin Brand Loyalty

Recently, Doug and I had the opportunity to visit some stores throughout the area. Some were clients, some weren't. I was especially excited to visit one store in particular because I have been a loyal fan of their product and brand for many years, and had yet to visit their store.

Upon entering, I was struck by the awesome assortment of product, most at very reasonable prices relative to other brands in the industry. I felt like a kid in a candy store. My immediate thought upon entering was that if I had a larger house (and a more understanding wife) I could easily spend a few hundred dollars in the short time we would be there. I found things I didn't even know this company sold. I found great impulse items. I even found stuff I didn't know I wanted or needed until I saw it!

But what kept me from going on a crazy spending spree was the staff. The behaviors and attitudes of the three or four employees who stationed themselves behind the cash wrap completely turned me off. Here I was, picking up products, commenting on things, remarking on the great prices, and the staff remained completely aloof and uninterested in my desire to spend money. There was no attempt to build rapport, apart from a cursory and well-worn "How can we help you?" Instead they discussed lunch, talked among themselves, and sat on the back counter. If somebody were to erase the retail environment from around this group, it would be difficult to distinguish them from any other group of twenty-somethings hanging out at the mall, much less determine what brand they were representing. Remember, this was a manufacturer-owned and operated store. The employees work directly for the brand they're selling... or not selling, in this case. One would think that the talent on the sales floor would provide an experience that's representative of the quality and uniqueness of the brand's product. Instead of adding value and raising customers' perception of their product (and, not coincidentally, justifying the premium prices), the staff's lack of interest in their customers and product nearly ruined my appreciation and loyalty for their brand. Imagine what it would do for a customer who had yet to be enticed by the magic of these products.

Whether you're a manufacturer or retailer, brand loyalty is one of the most valuable assets you can build in your customers. The trust and advocacy that comes from a loyal customer is priceless. It's critical to empower employees with the skills and tools necessary to build brand loyalty in customers. Otherwise your brand simply becomes a name.

The Gifts That Keep On Giving... Back to You

The holiday season is fast approaching its inevitable conclusion for another year. Hopefully your sales have been better than last year and your staff has delivered exceptional experiences that will turn your customers into loyal advocates. And hopefully you've had the opportunity to complete your personal yuletide duties. In addition to meeting your responsibilities to your family and friends, you've hopefully remembered to include your peripheral business associates in your holiday cheer. Consider how many individuals impact and support your business without being your direct customer. Of course, you should already include your employees in your year-end thanks. How about the FedEx/UPS/DHL courier who picks-up/delivers to your site every day? The janitorial staff? The postal worker? The bank tellers? How about the staff of neighboring stores? The caffeine king or queen who provides you with your first jolt of bean juice in the morning? If you're on a first-name basis with any of these people, do yourself a favor and include them as recipients when it comes time to hand out small gifts or cards. Heck, even if you're not on a first-name basis (and goodness, you should be) these folks you interact with regularly can become great advocates for you and your business.

What's that you say? You're already paying some of these folks for the privilege of your business? Well, of course you are. But thanking somebody for helping you to run your business is different than paying an invoice. And we're talking a token gift here, not a college endowment. In fact, many companies forbid their employees from accepting gifts above a certain dollar value. A personal note of thanks, a $5 gift card to the coffee hut, or some tchotchke is sufficient.

When you remember those who helped you succeed throughout the year, they'll continue to do so throughout the new year and beyond.

Predictions for Retail in the New Year (Plus One)

The National Retail Federation's Stores.com website recently published a list of predictions for the upcoming year in retail. While there were no real surprises (consumers will continue to shop despite threats of recession, "green" practices will continue to pervade the way retailers appeal to customers, shopping excursions will become less of an event for more shoppers), there were a few interesting points of interest and one glaring omission.

First, the interesting bits. While social networking remains a dominant activity on computers, its infiltration into portable devices (cell phones, smartphones, media players) will drive a need for retailers to provide a more proactive approach to engaging customers. When a customer is able to get their questions answered by referencing a website or personal expert via their handheld device while they're standing in front of the product, retailers will need to be able to communicate a compelling reason to buy from them.

Another interesting, if not perplexing, conundrum facing retail in the next year is the growing rate of consumers' paradoxical desires. As Stores.com puts it:

You know this guy, right? Installed solar panels on the roof of his home; insists on cutting his grass with a push mower; recycles with vengeance. Yet, parked in his driveway is a Hummer. Having trouble putting the pieces together? That’s the challenge retailers and marketers face.

The real challenge will be to provide an experience on the retail floor that appeals to all sides of this consumer's psyche. Expect to see more and more customer segmentation and personality profiling studies over the next twelve to eighteen months.

Finally, it looks like one prediction was left off of the list. It speaks to a few different items on the list, but it deserves to stand out on its own because it's something retailers can have direct control over so that it doesn't adversely affect their business. We predict that over the next twelve months, customers will continue to grow increasingly intolerant of unengaging store personnel. As time and money start to reach parity in terms of value and scarcity, and more and more retail employees are brought on board with little-to-no customer engagement skills development, the result will be more consumers turning to the web or other avenues for their purchasing, eroding the loyalty that's so valuable to growing a business.

Well, just like Ebenezer Scrooge was able to prove the Ghost of Christmas Future wrong by changing his ways, retailers can thwart this course to destruction by investing the resources into making their sales talent engagement specialists. The retailers that succeed beyond the next year will be the ones that have customers singing the praises of their people.

Is That Customer Really Satisfied?

Since most retailers focus more on selling products and stocking shelves than on delighting their customers, they more often than not miss the fact that they have an unhappy customer.

Most unhappy customers don't bother to complain; they just leave the store and never come back. Meanwhile, store management and staff chugs along believing they are giving good customer experience when the opposite is true.

A study by Forrester Research's Marketing found that while 80% of companies reported providing a superior customer experience, only 8% of consumers who were asked the same question said they had received a superior experience. This is another example of the experience gap.

Another study, this one conducted by M/A/R/C Research and National In-Store, found over 16% of consumers said they would stop visiting a store all together as a result of a bad customer experience. Over 95% of consumers indicate sales associates are very/somewhat important, with two-thirds indicating they are very important.

When retailers focus on creating memorable experiences they're less likely to create unhappy customers but on those occasions they do fall short they're more likely to know it, even when the customer doesn't tell them outright.

These are just a few of the ways your staff can tell a customer is unhappy without the customer actually saying it.

1. They state their complaint in the form of a question. I was out to dinner with my children last week and it took an hour for us to be served in a restaurant that should have served us in 20 minutes at the most. When the waitress arrived with our food I asked, "So does it normally take an hour to be served here?" Without missing a beat she said, "Nope. We just had a few big parties place their order before yours" and off she went. It's clear she didn't hear my question as a comment or complaint. My ten-year old did, though. Her comment: "Boy, dad. She's clueless." Yes, Kate, she was. And unfortunately she's not alone.

2. They abruptly stop shopping and leave the store. This can happen for numerous reasons, but it's often the result of an unhappy or frustrated customer. I remember once a customer stormed out of the store and I said to the store manager, "Wonder what's wrong with her." He looked at me and said, "Well, I don't know, go find out." It had never occurred to me to go after a customer and ask if there was a problem. Sure enough, when I found her outside the store she was upset with one of the associates. I invited her back into the store and saved a $500 sale.

3. You overhear one customer telling another customer that they're not happy. If the customer said it loudly then you can easily walk up to him/her and offer to solve the problem. If it wasn't said in a "carrying" voice you may have to take a different tack since you don't want to appear to be eavesdropping. Either way, this one's a gift. . . and it's not polite to refuse a gift.

4. The "I changed my mind" product return. A lot of customers do simply change their mind about a purchase but that still doesn't mean they aren't disappointed or unhappy about it. There may be days you find this hard to believe, but most customers won't complain about a return. By politely asking one or two follow-up questions to the "changed my mind" comment you're likely to uncover either the real reason for the return, or at the very least how the customer really feels about the product.

Dealing with an unhappy customer is never the most pleasant part of our job but it sure beats losing a customer and their future purchases.

Vocal Advocates

When I was a kid, my father used to boast to his friends and associates that he was a manufacturer’s representative for a popular shoe company. He would leave the company’s mail-order catalog mixed in among the other magazines on the living room coffee table. Whenever somebody mentioned shoes, he strongly encouraged them to look into his favorite brand. After all, he was quick to remind, he was a manufacturer’s representative.

Now, my father didn’t sell shoes for a living. He didn’t work for a footwear manufacturer, and he didn’t have any financial stake in that particular brand, other than buying their shoes on more than one occasion. But my dad was a great advocate of the company whose shoes he wore, and that company recognized the value in the word-of-mouth he generated. So much so that they made him an honorary “manufacturer’s representative”, the only proof of which was that those words appeared above his name on the catalog mailing label.

Some new research on customer word-of-mouth has come to light, and it puts into question some long-held beliefs. On a recent entry on The Perfect Customer Experience blog, author John I. Todor, Ph.D comments on these findings. Among John’s insights:

Word of mouth is emotionally triggered and emotionally driven. Both the triggering and the emotional expression are harder to achieve online.

…harness and amplify those customers who are prone to evangelize.

…leveraging your most vocal customers is powerful and expedient. However, unless the value customer's gain from interaction with your company is compelling the impact will be short-lived.

So, despite all the technology that can drive and sometimes challenge retail, it’s still old-fashioned word-of-mouth that compels a vast number of consumer decisions. When a potential customer hears of a positive encounter at retail, they will more likely want to experience it for themselves. And when customers have positive experiences, they want to talk about it. Give those vocal customers an incentive to talk about their experience, and they become powerful advocates.

So, can you identify your honorary “representatives”?

Alfred H. Peet 1920 - 2007

There are many ways a retailer or service provider can define success in their business: financial growth and independence, loyal and happy customers, loyal and happy employees, respect from the community, reverence within their industry.  It’s rare that an individual achieves all these things.  Alfred H. Peet was one such individual. 

Long before Seattle assumed the title of coffee capital of the world, Alfred Peet started roasting, grinding, and brewing coffee in a small shop in Berkeley, California. Mr. Peet grew up in the family's coffee and tea business in Alkmaar, Holland. After World War II, he worked in the Indonesian tea trade. At age thirty-five, he moved to the San Francisco Bay Area and opened his shop in 1966, roasting coffee in the distinctive style he learned from his family.

Throughout the 1970s and 1980s, Peet's Coffee & Tea was a pioneer among other food purveyors in Berkeley's "gourmet ghetto".  Today, Peet’s continues to maintain the traditional values that are essential to creating coffees of distinction: hard work and attention to detail.   Berkeley is still home to Peet’s, but they now have shops throughout the country. In addition, Peet’s coffees and teas are available at peets.com, through mail order, specialty food and grocery stores, offices, fine restaurants and hotels.  Chances are, if you’re a coffee drinker, at some point you’ve sipped a cup of Peet’s.

On August 29, 2007, Alfred Peet passed away, leaving behind a legacy that many can only dream of.  The man’s impact on the lives of those he touched is evident from a unique memorial his employees have constructed.  On the website for Peet’s Coffee & Tea you’ll find a memorial blog where customers and employees alike have shared their thoughts and memories of what Alfred Peet and his vision and values mean to them.  As one reads the kind words that have been written – some of them very moving – it reminds us that true success shines from within us, and is reflected back by the people we serve.

Thank You, Come Again

As regular readers of this blog and our Dynamic Experiences Group newsletters know, Doug and I are advocates of thank-you cards to help remind customers of their experience and invite them back.  For the past few years, my home state of Maine has taken this approach with the customers of its biggest industry: tourists.  With its reputation as Vacationland, a plethora of shimmering lakes, miles of white, sandy beaches, and more natural wonders than you can shake a pine stick at, Maine sees its population nearly double in the summer months as visitors from all over the world infiltrate the state to eat lobster and make fun of the way natives (supposedly) speak.

Most of these tourists arrive via automobile along Interstate 95, stopping to pay a highway toll at the plaza in the once-sleepy town of York.  Since visitors pay this toll when they enter and exit the state, traffic tends to back up for miles northbound on Memorial Day (the start of the summer tourist season), and southbound on Labor Day (the end of the season).  A few years ago, the state government and Board of Tourism thought it would be a good idea to thank the thousands of visitors exiting the state on Labor Day, and thereby extend the customer experience.  But how?  Hang a banner?  Not personal enough.  Have the Governor personally thank the occupants of each car as it paid its toll?  Maybe too personal.  The final idea was to have state mascots stand in front of the toll booths and wave good-bye to the departing tourists.  And so, for the past four years, Miles the Moose (pictured), LL Lobster, and Baxter the Maine Black Bear have stood and bid farewell to thousands of customers as they leave the store... er, state.

This year, as in years past, travelers will also receive a thank-you gift more tangible than a mere wave from a Highway Department employee in a plush costume.  This year it's a moose-shaped cookie cutter, complete with a printed recipe for shortbread cookies with Maine maple syrup glaze, a personal favorite of Governor John Baldacci and his family.   Vacating vacationers will also get a thank-you card from the governor and his family, inviting visitors to return in the fall to attend any of the autumn fairs and other events listed on the card, a simple reminder that the state is open for business all year round.

If an entire state can thank nearly every customer as it leaves, and invite them back, you'd think more retailers could.  Now, if the Board of Tourism could just get all of the toll-takers on the northbound side to give arriving visitors a warm and friendly welcome, that would really be something.

Cheap Luxury's High Price

Today’s New York Times Op-Ed section has an interesting article on the connection between luxury handbag counterfeiting and terrorism. At first I was skeptical but the article convinced me otherwise.

In Terror’s Purse Strings, Newsweek correspondent and author Dana Thomas shares how important handbags are to the fashion industry.

According to consumer surveys conducted by Coach, the average American woman was buying two new handbags a year in 2000; by 2004, it was more than four. And the average luxury bag retails for 10 to 12 times its production cost.

If the margin is this good for the manufacturers, imagine what it is for counterfeiters!

As soon as a handbag hits big, counterfeiters around the globe churn out fake versions by the thousands. And they have no trouble selling them. Shoppers descend on Canal Street in New York, Santee Alley in Los Angeles and flea markets and purse parties around the country to pick up knockoffs for one-tenth the legitimate bag’s retail cost, then pass them off as real.

Luxury goods counterfeiting is NOT a victimless crime. These same crime rings that counterfeit goods also deal in drugs, weapons, human trafficking, and even terrorism. There is a known connection between counterfeiting rings and numerous terrorist organizations, and even the 1993 World Trade Center bombing.

We retailers need to let our customers know that counterfeit goods are not a victimless crime. As long as consumers will buy them, criminals will make them and continue to steal sales from legitimate retailers and luxury good manufacturers. Even worse, the stealing of the lives of children and innocent victims.