Category Archives: customers

The real price of discount retailing

With markets as tough as they are it’s not surprising that more businesses than ever are weighing up whether to adopt a short-term tactical approach or hang tough with the longer-term strategic thing.  Retailers are right at the centre of this dilemma and you only have to glance at your local high street or shopping mall to see the choice that many have made.  Stores with perpetual sales or cut-price offers have become a feature of the retail landscape in pretty well every country around the world.

Even though they know that the path to instant gratification has an inevitable pay-off, cake today is becoming an irresistable proposition for idea and cash-strapped marketers, who can only be aiming to be somewhere else when the bill arrives.  So, what is the price of this kind of short-termism?

In this context there are two types of retailer – those who sell branded goods and those whose offer comprises mainly own brand.  The first group can be further divided into premium and mass-market.  The premium retailers, by and large, are chasing margin with high prices.  They are usually the last to have to make the short-term/long-term choice because their clientele are well-heeled and unfamiliar with the financial reality most of us live with.  On the other, far more popular side of the street, mass-market sellers of branded product are “champions of the consumer”.  We rely on them to negotiate with manufacturers on our behalf to deliver the branded products we all hanker after at advantageous prices.

The own brand retailers come from a different direction.  The value of their proposition is entirely their own making.  Customers recognise own-branders as an authority in the things they sell and trust them to use their knowledge and experience  to produce great value product of their own.  Retailers like this that come to mind would be Ikea and Marks and Spencer.

Now consider for a moment discount promotions as a concept.  Again, you could say they come in two kinds.  The first is the seasonal event that we have come to expect.  This is legitimate.  We understand that these promotions are the retailer’s way of clearing slow-moving stock or ends of lines and as long as it remains occasional it and the retailer will retain credibility.

The other kind of discount promotions are those run by struggling retailers to generate sort-term business.  These usually achieve their immediate objective.  The problems arise with repetition.  You must have heard people dismissing retailers as “the place with the sale on all the time”.  The perpetual sale isn’t credible, so let’s not kid ourselves that consumers are buying this line.  If a product appears to always be reduced to 99p then that’s all its worth to the consumer and no amount of double pricing is going to convince them otherwise.  We’ve all witnessed the Pierre Cardin brand get pulped in markets around the world.  Once a respectable, desirable brand, constant deep discounting has reduced it to a bargain basement brand.  Nobody pays full-price for a Pierre Cardin suit because we all know that it will be 70% off next week!

So, when do you start heading into the mire of perpetual discounts?  The answer is the minute you abandon the accepted seasonal event norm.  Then its just a matter of how far you venture in this direction and how quickly you get back to firm ground that determines whether your business is irreversibly damaged.  Discounting is like a drug habit.  Initially the hit is rewarding – you make a load of cash quickly, but as you stick with it your dependency increases and the reward diminishes.  You lie awake at night racking your brains for new superlatives to up the anti in your advertising, margin disappears and eventually your turnover will too.

Your hard-won brand community will dwindle.  We wear the products we buy and carry branded shopping bags with pride as badges of belonging.  Where’s the cudos in belonging to to the cheap shop community?  Customers will feel betrayed.  The brand that you have devalued to junk had defined their status.  Now you’ve pulled the plug.  Your authority disappears over night and whatever you say to try to re-establish value in your offer is futile.  You are just a cheapskate discounter and there’s no way back!

If your regular customers don’t abandon you they’ll do something even worse –   they’ll only turn up for the deals that you make no money on and the only new customers you can expect are all broke like you.  When The Full Effect Company went into one well-know organisation a few years back, we discovered that a third of their customers were actually costing them money because they only bought the bargains with little or no margin.  There was no spoon-full of sugar to help the medicine go down in this case, we just had to loose 30% of their customer base.  However, there are few shareholders who would stomach this kind of treatment unless, as we did, you manage to get back on track very quickly.  We replaced those customers with new, profitable ones within twelve months and met the company’s growth targets.

So, before you launch your umpteenth BoGoF this year give some thought to where this road is leading.  You may not be planning to be around when this chicken comes home to roost, but there aren’t that many juicy retail marketing jobs around, so you might want to think again.

Turkish Airlines and the price of a reassuring brand

I started writing this somewhere over Eastern Europe aboard a Turkish Airlines Airbus 320 bound for Istanbul the third leg of four in a round-trip from Bahrain to Europe and back.  I can’t recall ever having traveled Turkish Airlines until two weeks ago when I made the reverse trip from Bahrain to the UK, but had I not been a captive of my round-trip ticket I would probably have switched carriers at Istanbul, never to return to the carrier again, such were the horrors of my first leg.

I find it hard to remember a more dour cabin crew than that which accompanied me from Bahrain to Istanbul.  I felt sure their training must have included hours spent in front of mirrors perfecting their scowl.  Their general, attitude toward passengers was variably off-hand or aggressive and they seem to have taken their frustrations out on the in-flight fare, which they had managed to suck all the moisture out of before throwing it at us.

What a contrast, therefore, was the second leg of the same journey, where we were greeted by smiles and tended with tasty, well-presented (by airline standard), in-flight catering.

Leg three of the round-trip was even better.  New plane, pretty attendants with nice smiles and truly good food and as I lounged in leather-clad comfort I reflected on how my opinion of Turkish Airlines may have differed, had this been my initial experience.  The final leg demonstrated how great, well-trained customer-facing personnel can even overcome other deficiencies in your offer.  The last of the quartet of Turkish Airlines planes I was to experience was clearly in the twilight of it’s years and it hadn’t been at the front of the maintenance queue either.  I found myself hoping this was because they had spent so ling diligently servicing the engines!  In the cabin there was only one working toilet, a number of the entertainment centres were faulty and the crew were put to the test by a woman with two juvenile delinquents who were sitting behind me and promised to ruin my flight.  However, they didn’t because the cabin crew worked hard to bring the experience back on track.  The complete event has underlined to me the importance for any business of achieving consistency and the essential role that internal marketing plays in that.

I have spoken many times in my seminars and writing about the importance of consistency in the success of a brand.  Not just consistency between the different facets of your business, but within each one too.  Had my third flight been my introduction to Turkish Airlines and what was my first been a subsequent experience I would have been more ready to accept that it may be difficult to get it right every time.  As things are I need more reassurance before I accept that Turkish Airline’s good stuff isn’t the fluke!  I often quote some statistics I picked up years ago that say it may cost ten times as much to sell for the first time to a customer than to make subsequent sales to the same person, but it will cost a hundred times that to entice a customer back once you have disappointed them.  Such is the price of reassurance.

Customers need the reassurance that only consistency will provide and of course while its best for everyone if you are consistently good, with all the implications that has for customer retention, pricing policy and margin; being average all the time is better than lunging from crap to brilliant in a way that makes doing business with you a lottery.

Achieving consistency is about nothing more or less than internal marketing.  Identifying your brand, its values and attributes and introducing them to every employee at every level of your business in such a way that they adopt them as their own.

If you have the right people in place they’ll take this and run with it bringing their personal skills and experience to bear and adding value to your brand and therefore your business.  There’s no shortcut.  Organisations who have chosen instead to apply a dictatorial approach to what they call “training” have consistently failed.  As dictators around the world have learned, dictatorship only works if you can preempt every eventuality, which of course you can’t, so you have to adopt a more nurturing approach and allow well-trained and motivated staff to interpret your brand values. In fact, one of the organisations that has achieved most success in this is another airline – SouthWest Airlines, who famously wooed customers with a consistent, if off-the-wall, brand personality through two industry slumps, almost uniquely maintaining profitability throughout.

These days we are all looking for ways to squeeze the highest return from investment and with the price of mainstream media what it is, communicating within your own business looks like a bargain.  What is more, most organisations find that the return they get on internal marketing significantly outstrips that of external campaigns.

I’m quite sure that had the cabin crew on my Bahrain to Istanbul flight focused on delivering the Turkish Airlines promise my overall impression of the airline would have been a lot better.  As it is, because I was a captive of my round-trip ticket the carrier had the chance to demonstrate what they really could do and I might just be persuaded to book with them again, but probably only if they were cheaper than their competitors.  As I said … such is the price of reassurance!

Matalan – Sometimes, all it takes is the basics.

I’m subscribed to more on-line retailers and loyalty programmes that I can remember these days, but I never cease to be amazed at how badly these companies manage their data.  Its been years (I mean more than twenty) since I started getting my clients to build relationships with their customers by acknowledging dates like birthdays that are important to them, but I can’t remember ever receiving a birthday reward from anybody other than MoonPig and then, of course, it was someone else’s birthday they were reminding me of.

I was reassured therefore by my mother’s delight at having received a £5 shopping voucher for her birthday this week from, of all people, Matalan.  I’ve always wondered why the retailer didn’t appear to do anything much with the data they collect when they register their customers.  Especially as you are strong-armed into subscribing to their loyalty programme at your first visit to one of their stores.  It seems that having hit rock bottom in recent years the retailer has addressed issues well beyond their dowdy stores and stock.  Well done Matalan for showing UK retailers how its done!

Customer Loyalty – Stop trying to buy it and start earning it!

Yesterday I came across a great piece by Luca Paderni on iMedia Connection entitled “Why Your Brand Loyalty is Failing”.  Luca covers pretty well all the angles and raises many important issues, but there’s no escaping the underlying truth that kept surfacing among the other well-made points – customer loyalty is simply a product of customer satisfaction.

I run many workshops on this subject with businesses around the world and I’m used to receiving a torrent of ideas from delegates for programmes and initiatives designed to reward loyalty.  Sadly I get fewer ideas for ensuring that the brand promise that brought customers to the point of purchase in the first place is delivered. If my delegates are indicative of the people driving marketing these days, its hardly surprising that the focus of so many businesses appear to be trying to buy rather than earn customer love.  And they do this regardless of the fact that it’s a ludicrously expensive and extremely short-term way to run a business.

These days loyalty is the dominant business driver.  With most customers already claimed/assigned to vendors (apart from in emerging markets there are few emerging customers) the return you’ll get on acquisition investment is always going to be limited and its hard work.  The future lies in selling more stuff to your existing customers and they’ll only buy if they love you.  The problem is there seems to be confusion among marketers over what drives these brandships.

Sure customers will appreciate add-ons and freebies, They’ll add to the customer experience, but they only have value if you have already given your customers what they came for and simply will never be an alternative to simply delivering your brand promise.  My advice to any business that asks me about customer loyalty is to start by measuring customer satisfaction.  There’s only one way to do this and that’s by measuring your performance against your brand promise and the pillars that support it. (see the tab for Brand Discovery above for definitions.

Yes, there is no escaping it.  It’s back to my old favourite, the Brand Model again, because that’s where everything in any successful organisation has to start and it’s why my Brand Discovery programme places so much up-front emphasis on this vital business tool.  If you have set about creating your Brand Model correctly and placed the appropriate emphasis on marketing it internally, if you have developed the right briefing processes and checks to back it up, everyone (and I do mean everyone) in your organisation will be focussed on delivering your Brand Promise and none of your customers will be disappointed.  THEN the rewards that everyone seems so keen to give away can make sense.

When customer service is more about internal marketing than training

Because, unlike most other countries, when a bank holiday coincides with a weekend, we Brits nominate the nearest weekday a public holiday, today (Monday 2nd May) was Mayday bank holiday in the UK.  As a consequence, I caught “Don’t Get Done Get Dom” on daytime TV where, cheeky chappie Dominic Little champions the consumer cause.  The object of his ire this week were the retailers Currys and PC World and Dom had a mailbag full of customer service complaints that he set out to resolve with the retailers’ parent Dixons Stores Group.

Over the last few years the consumer group Which have consistently highlighted DSG’s customer service deficiencies, its surveys revealing a customer satisfaction rating of something in the region of 30%, so the state of affairs can’t be news to DSGI management.  It’s bemusing therefore that, if they have done anything at all it’s had little or no impact on the end product, which frankly appears as bad as ever.

How can it be that a big organisation like DSGI can firstly deliver such poor customer service and secondly fail to address the fact when its pointed out to them in such irrefutable fashion?  Well, it could be that it’s a strategic choice.  I’ve heard of organisations before that had made the conscious decision to set their customer service rating target low because they had calculated that the cost of raising it above that point would not be recouped.  Putting aside the many and obvious flaws in that argument, I can’t imagine that a 30% rating would be acceptable to anybody, so I have to assume that this state of affairs is rather more an accident than a plan.

The feedback Dom received from DSG management was confusing.  Their comments suggested that they view inconsistencies in customer handling skills as an inevitable consequence of their rapid pace of recruitment and accepted that limitations in training capacity would result in new employees arriving on the shop floor with limited or no training.

I don’t buy any of this.  Firstly training may be an issue, but the fundamental problem here is clearly internal marketing.  The reported problems had far more to do with the willingness of customer-facing staff to disappoint or even upset customers than it did with processes, which it seems were largely not at fault anyway because all the customer issues were resolved once Dom had escalated them.

It seems obvious to me that the focus of DSGI employees is miss-aligned.  They seem to act on the assumption that customer satisfaction was secondary to adherence to processes (which they misunderstood anyway).  Yes, training would help them get to grips with the processes, but internal marketing is the tool to set customer satisfaction as the priority.  Once that’s established, when an employee can see that they are in danger of disappointing a customer they’ll realise that the process, as they understood it, is leading them down the wrong path and put the brakes on.

I don’t accept that employees find themselves on the shop floor without first receiving training either.  Training like this doesn’t have to be process-based.  In fact, the priority should be a culture-based induction that can be undertaken by the local manager, on-line or in a classroom, depending on time and cost pressures and there are many ways in which this process can be policed.

Over the years I have devised and run numerous training and internal marketing programmes, for retailers, who have witnessed improvements despite high volume recruitment.  In fact internal marketing, linked to a clear brand model reduces employee turnover, so volume demands are usually reduced too.  The evidence of Dominic Little leads me to suspect that DSGI are making a fundamental error in thinking that training holds the solution to their problems.  My belief is that they need to take a step further back.  Their customer service issues and a number of their other problems are, I am sure, all down to the lack of a clearly defined brand model and the internal marketing programme that makes it live and the sooner they recognise that and address it the sooner they will stop finding themselves the focus of programmes like Don’t Get Done Get Dom.

Is your customer support a bit of a let-down?

Most businesses these days understand that they are driven by Brandships.  Many appreciate that Brandships are built on trust and few would fail to recognise that if their words and deeds are in any way inconsistent, either with each other or with their Brand Promise, they stand little chance of establishing the level of trust that success is built on.  So where is it going wrong?

Having acquired this wisdom, organisations around the world now devote a great deal of time and invest heavily in initiatives designed to represent their brand values consistently at every touch-point.  Getting every communication to say the same thing is the essence of integrated communications.

Because customer acquisition for all the reasons I’ve explored here in the past, is getting horribly expensive, Brandships are more valuable than ever, which is why businesses are increasingly seeking to improve their customer support,  a factor that is accentuated by the growth in e-tailing where the incidence of customer complaint is, as I mentioned last month, a bit of an issue.

I’m encouraged by the increase in the number of businesses who, instead of trying to make customers with a complaint feel like Oliver Twist asking for “more gruel”, have adopted a no-quibble replacement or compensation policy.  It seems that,  at last, the penny has dropped on this one (Although you’ll note from my earlier post on this subject that Halfords still don’t get it!).  However, you can have the best complaint resolution policy in the business, but it ‘aint worth a hill of beans if your customers have to navigate a maze of on-line and telephone obstacles to get to it!  There’s no more telling evidence of a genuine commitment to Brandships than an organisation’s on-line or call-centre process and it’s certainly taken by customers as a pretty good guide to brand values.  So why do so many businesses get it wrong?

My guess is that they simply don’t recognse what’s happening.  I’ve been advising senior execs lately to call up their own customer support line from time to time, rather than rely on the KPIs they get every month.  Whether your process is automated or not, the way you handle after sales contact with customers can be pivotal to the success in Brandships.  This isn’t just about damage limitation (because nearly all the calls you receive are going to be potentially damaging), many businesses have demonstrated that you can actually reverse the momentum, turning a potentially damaging situation into one that strengthens Brandships, if you handle them correctly.  For most this is nothing more than aligning the process to the brand model, which, sadly, few businesses do well.

In recent weeks I’ve experienced both the best and the worst in customer call handling.  The worst being the episode with Halfords that I reported on here last week and a more recent still, an encounter with HP’s customer dis-service process that starts with their un-navigable web site, designed to send you round in circles until you screw yourself!  Yes HP seem intent not to engage with you unless they absolutely have to, which is a pity, because if you can get around the system and actually manage to speak to the person you need, the response (in my case anyway) was exemplary.

I was also disappointed when re-visiting a brand that I have been happy to deal with for years.  I have never before had cause to complain about Polar UK, The local distributor for Polar, who manufacture heart-rate monitors for athletes, but I’ve called and spoken directly to their service people in the UK a number of times.  Such an old-fashioned process may have been a little at odds with their global positioning, but it was very reassuring and, overall, it worked.  Sadly, they have succumbed to pressure to automate their calls handling, but in their case the band-waggon has a wheel missing.  In fact, its possibly the most bumbling and poorly conceived process I have come across for a good while and the antithesis of everything that I have come to expect of the Polar brand.  This takes me right back to the principles of Full Effect Marketing – individual marketing elements, which because they are neglected, neutralise some of the brand building benefits of higher-profile elements that the business is investing in.  In other words … waste!

The up-side of my engaging with customer service processes has been a discovery I made of a business that specialises in designing models that actually contribute to brand development.  Brand Audio in Edgware, North London, will study your brand (even work with you to help you profile it if you haven’t already) and then bring it to life in navigation, messages and music.  Just what every business needs in fact.  This isn’t about hardware or programming (although I’m told they can provide that too), its pure brand development and while I am sure they are not alone in this space, it made me feel good to know that there is someone my clients can turn to for this kind of specialist help.  Brand Audio work with a host of leading brands who recognise the need to prioritise their customer handling processes.  At least, one route to great Brandships (and therefore a healthy business) is in the way you interact with customers on-line and on-phone and I recommend to every business to address this area of their marketing before its too late.

Footnote: Brandships, as it suggests, is the name I use to describe the relationships we have with brands.  Enter the world of Brandships at http://www.thefullblog.com or follow me on Twitter @thefulltweet.

Halfords’ customer service sucks – well, it would if I had my way!

I’ve never had anything against Halfords.  In fact, I could refer to various supportive comments that I have made over the years.  They seems to have carved a niche for themselves in the bike sector, they triumphed in a deal to distribute Boardman bikes, they were smart enough to partner with an auto service business and now fit the products they sell to motorists and cyclists alike and they made the forray into Poland and the Czech Republic.

Their staff in the UK at least, while nothing to write home about, are certainly, if Mary Portas is to be believed, as good as you would expect from a multiple specialist retailer these days.  On the down-side, their on-line performance leaves a lot to be desired and dealing with their head-office at any level is a bit like wading through porridge, but its my recent experience of their approach to customer support that has sent my overall personal satisfaction rating way into the red.

OK, so Halfords aren’t having the best of times at the moment.  Like-for-like sales are down and despite all the usual excuses – recession, weather, cost of car ownership etc – that always has something to do with the way you treat your customers.  You’d be right to point out here that, last we heard, profits were up, due in part to a concerted effort to drag their back office, logistics and pipeline into something approaching the twenty-first century – Oh, and a quick reverse out of the Czech Republic and Poland.  Nevertheless, I still hold on to the idea that if you treat your customers well you’ll succeed whatever the size the market may shrink to.

Halfords has never gone out of its way to make customers feel wanted.  It wasn’t that long ago that they undertook to respond customer-support e-mails …  wait for it …”within eight days”!  Communication has been a bit quicker lately, but that’s not a lot of use if they aren’t being helpful.  Someone should point out to them that making statements like “we value your custom” and “we pride ourselves on our customer service” is all very well, but until you actually resolve issues its only “lip-service”, not “customer service”!

If you drop your Tesco shopping on the way to the car, Tesco will replace any broken items.  They don’t have to, it’s just their way of making you feel good.  You may consider this as giving 110%, but, let’s face it, it costs Tesco tuppence and the value to them in customer satisfaction ratings is worth far more than that.  Yes, every little helps!  In contrast, telling you they make every effort to make you satisfied, is “job done” in Halfords book!

Last weekend I bought a four-litre plastic container of concentrated screen-wash from Halfords, along with a bunch of other stuff.  I placed it in the passenger foot-well of my car and drove home, only to discover, when I arrived, that the foot-well was now an inch-deep in screen-wash and the container was almost empty – no doubt where that had come from then!

I took it back to the store where the manager pointed out that the seal that should have prevented the cap from coming off the container, had been broken, presumably by someone in the store, which he added, was not unusual.  He replaced the purchase, but I still had a screen-wash lake in my car and thick-pile carpets that don’t come out just like that.  On his instructions I e-mailed Halfords’ customer service to seek recompense for the cost of having my car bailed.  And after a couple of days I received a reply.  Apparently, they don’t see that its anything to do with them and suggested that if I had taken proper precautions while transporting the screen-wash I wouldn’t now have an on-board swimming pool, steamed-up windows and a very smelly car.  I get the impression they think that by explaining this to me they resolved my issue.  I’m sure I just went into their customer service database as another satisfied customer, but right now I feel as though the customer service manager should personally suck the screenwash out of my carpets!

They may be making a profit, but with an attitude to customer service like this, in a shrinking market I wouldn’t put my money on this lasting long!