As customers, we’ve all experienced the pain of feeling nickled and dimed. It could be the $7.95 so-called convenience fee added on to each concert ticket purchased online. Perhaps the $19.95 fee to access the Internet at a glitzy hotel rankles you. How about your bank docking you $25 when your checking account falls below the minimum balance? Or, your neighborhood restaurant charging you a $5 plate sharing fee.
These add-on fees are classic example of bad profits that undermine the happiness of customers.
Airlines are notorious bad profit mongers leading to very unhappy customers. We’ve all had to pay far more than we think we should to check a bag. And, we’ve all had to fork over an exorbitant change fee to simply alter our flight reservations.
The other month my travel plans changed and instead of paying the change fee plus the difference in the airline ticket fee, it was cheaper for me to buy a new ticket and eat the cost of the old ticket. (We’ve all been there.)
This concept of bad profits was first framed up to me in Frederick Reicheld’s book, THE ULTIMATE QUESTION. In this book, Reicheld outlines how to measure the likelihood of customers to recommend a business in order to better understand the growth potential of that business.
A major factor in whether or not a customer is likely to recommend a business is based upon if the business profits from good or bad profits.
Reicheld writes, “… bad profits are earned at the expense of customers, good profits are earned with customers’ enthusiastic cooperation.” In other words, bad profits result in creating customer detractors while the result of good profits is the creation of customer promoters. Detractors talk bad to others about companies while promoters talk good things to others about companies.
Recently I read how rental car companies are drawing the ire of customers feeling nickled and dimed from fees charged to them when using toll roads. More and more toll roads are going cashless through the use of an electronic transponder on car windshields and no more old school ‘toss your coins in the bin’ toll booth. This change is having an impact on the rental car business.
To address this change, rental car companies offer drivers a flat daily fee anywhere between $2.95 to $5.00 to use an electronic transponder plus the cost of the toll. That flat daily fee is a bad profit but not nearly as bad a profit if you choose to decline the daily flat rate fee and rack up toll booth charges. For example, a Dollar Rent a Car customer declined to use the electronic transponder and was hit with a $30 administrative fee for two tolls that totaled $2.74. (Ouch.)
That one horrifically bad profit will produce one unprofitable relationship because there is no way that customer will ever use Dollar Rent a Car again. A customer lost for life. (Double ouch.)
A rule of thumb I learned many years ago that can help you identify a bad profit (as well as any bad customer touchpoint) is this:
If you find yourself saying “a customer will never notice that”… chances are, they will.
If you think the typical customer will never notice or think twice about the $7.95 convenience fee or the $19.95 Internet access fee, you’re wrong. Same goes for a customer never noticing the $30 administrative fee charged to them for two tolls.
Remember, bad profits undermine customers. Good profits overjoy customers.
Customers that feel abused from nickel and diming practices might do business with you once and only once. Stringing together bad profit one-night stands with customers is sure to come back to haunt your business and lead to unprofitable relationships which will undermine the long-term success of your business. So don’t try to profit from bad profits.
Jay Ehret is relentless in teaching small businesses how to get the most out of their marketing. He’s been blogging and podcasting about it for years and he’s also been a good friend over the years.
Recently Jay started a new podcast series, The Marketing Plan Podcast. His goal with this podcast series is to share practical advice to help businesses develop smarter, more effective marketing plans.
SHOW NOTES: Talkable brands are Original The more obvious you are, the more talkable you become. Being obvious is about expressing a company’s unique personality, not just for one day, but every day a business is in business.
Talkable brands are Informational For word of mouth to happen, someone needs to gain some knowledge from either personal experience, or through conversations, or directly from the brand. The best way to deliver word of mouth information is through stories. Three enduring stories brand can use to spark word of mouth are: (1) Improve a Live, (2) Right a Wrong, and (3) Make Good Better.
Talkable brands are Cultural Company culture starts with your people. It’s people who will make your brand talkable. Competitors can replicate your product, your programs, your services, but they can never replicate your people delivering your product, programs and services.
I’ve begun helping former Starbucks marketers, Shannon Jones and Paul Williams, with their online Local Store Marketing Guide. It’s simply called the LSM Guide (@LSMguide) and it contains much of what we learned from doing field and corporate marketing at Starbucks that can help local businesses increase awareness, drive traffic and become a good community neighbor.
It’s ridiculous how much practical and proven marketing advice these LSM Guides share ranging from New Store Openings to Annual Promotional Planning to an exhaustive Catalog of Marketing Activities. Retail businesses from the smallest mom and pop shops to franchisees of the largest brands can benefit from these guides.
SPECIAL OFFER: The first five people who email me will receive one-month free access to the entire LSM Guide library.
The newest LSM Guide is the Hiring & Staffing Guide.
Retail operators know better than anyone that the people you hire are the most important part of your business. Your competitors can replicate your products and programs but they cannot replicate your people. It’s your people who live and breathe your company culture.
The truth is… finding, hiring, training and keeping the best people is the most critical step to long-lasting success as a retail business.
One story shared in the Hiring & Staffing LSM Guide involves the hiring practices at the Container Store.
It’s people, more than its products, that separate the Container Store from its competitors. Kip Tindell, ceo and co-founder of the Container Store, sums up the importance of hiring the best people by saying, “The best thing you can do for your employees is to surround them with people who are fantastic.” (Whoa!)
Perhaps the most interesting thing the Container Store does to hire fantastic people happens during the job interview process. Usually, a store manager brings in a small group of employee candidates and conducts a group interview in the middle of the store during the middle of the day. At some point in the interview, the manager will ask the candidates to go out in the store, find a product they love and then tell the other candidates why they love that product.
Upon hearing and seeing the potential employees tell stories about the products, the Container Store manager can quickly tell who is a cultural fit because of the passion and enthusiasm they display. Obviously, the passionate and enthusiastic people stand a greater chance of getting hired on as the next fantastic Container Store employee.
This job interview best practice from the Container Store is a simple test to determine how much passion a potential employee has. It’s easy to hire warm bodies to fill an open employee position. It’s much more difficult to hire somebodies, not warm bodies, to join your team.
Never underestimate the importance of hiring fantastic employees.
As mentioned earlier, your competitors can replicate your products and programs but they cannot replicate your people. It’s your fantastic people who live and breathe your company culture that will make your business a long-lasting success.
What I don’t know is why a core product is missing from Starbucks new menu boards.
Company culture and brand heritage still matter.
Psst, Starbucks… by not saying you sell your core product of brewed coffee on the menu, it says something.
UPDATE (Wed. Jun 26 @ 3:25pm eastern):
I just heard from a reliable source inside Starbucks that an “error in the menu art” occurred and the omission of brewed coffee was “not deliberate.”
Whoa! That’s a spendy error.
New menu boards with “Brewed Coffee” options will be sent to all Fizzio stores, which include locations in Hawaii, Southern California, Arizona, New Mexico, Texas, Oklahoma, Louisiana, Mississippi, Alabama, Georgia, Florida, South Carolina, North Carolina, Virginia, Nevada and Utah.
UPDATE (Thur. July 10 @ 4:30pm eastern):
Here is the updated menu board that rightly lists BREWED COFFEE.
32 years ago I was adjusting to the awkward world of being a seventh grader in junior high school. The awkwardness was compounded for me because of my wicked good stutter. I could hardly string together two words, much less two sentences, without violently stuttering. People laughed at me. People made fun of me. People were uncomfortable around me. That was part of my life in junior high school.
Since that time, my stutter is still good, just not wicked good like it was then. I’ve learned to adjust to life not talking like most everyone else.
I was reminded of the pain I endured as a child a few weeks ago. Someone who I haven’t talked to or seen in decades sent me a heartfelt message on Facebook.
Earlier that day I posted a video on Facebook acknowledging my oldest sister, Lana, would have been 51 years old if her addiction to alcohol hadn’t intervened. That video trigger the following message…
“I’ve wanted to write to you for a long time but I wasn’t sure how to start. When I saw your video about Lana, I decided the start wasn’t as important as actually doing it.
There are things in life that stay with us. Things that we do that if we could go back in time and erase, we would. One of mine involved you. In Mr. Dowdy’s class one day, I heard someone trying to speak and stuttering. I made fun not realizing it was you. When I turned around and saw the hurt on your face, I felt horrible but I wasn’t mature enough to apologize.
I’ve never forgotten what an ugly thing I did and how it hurt your feelings. I know its been a long time since then and you may not even remember but I am so very sorry, John.
You included the serenity prayer in your video about Lana. I am not an alcoholic but I know one of the steps to recovery is to apologize to those you may have hurt. I believe we should all do that no matter the amount of time that has passed.
Please know that I always thought very highly of you. Once again, I am sorry for hurting you that day.”
I teared up reading that apology. It took courage to write it and I can only imagine the pain she has harbored inside. It must have felt good for her to let it go. It felt amazing for me to read. Of course, I responded back but my reply will never compare to her courageous apology.
The moral to this story is simple: it’s never too late to apologize.
The blog archeologists dug deep to unearth a primitive post from before the Brand Autopsy blog existed.
In December of 2003, I joined Paul Williams as guest bloggers for the Fast Company blog called FC NOW. At the time Paul was a customer care manager with Starbucks and I was the national marketing director for Whole Foods Market. We found the weeklong blogging experience to be not only fun but also invigorating. So fun and invigorating, that we started the Brand Autopsy blog the following week.
One of the Fast Company writers asked us to share how to create a great customer experience. In response, Paul and I blogged the following…
first published on December 10, 2003
Anatomy of a Starbucks Customer Experience Program
The following story is real. It was implemented in the Summer of 2001 in all North American Starbucks stores and was widely credited [internally] as a hallmark customer interaction program.
Here is the story of Blended Beverage BINGO as told by the two guys who created it:
John Moore (JM): When I was a serving as the Field Marketing Integration Manager at Starbucks in 2001, I was asked to develop ideas for a store level incentive contest. On occasion, Starbucks will use incentive contests to help goose sales. In the past, all incentive contests have been sales-based. This incentive contest was to be implemented in the summer of 2001 and the goal was to ultimately drive sales of blended beverages (Frappuccinos). Knowing that creativity was needed to help solve for this, I called Paul to help me brainstorm ideas around how to create a dynamic incentive program.
Paul Williams (PW): When John and I talked about this opportunity we kept mentioning how important sampling is to selling beverages. Sampling of products is encouraged at Starbucks and is a major reason why the company has been so successful. Our stores sample many times throughout the day and whenever a new product is launched, you can bet that Starbucks stores will be sampling it heavy.
JM: I remembered seeing a report that estimated for every five samples we would sample to customers, it would stimulate a purchase — a conversion rate impressive for any retailer.
PW: Customers will experience two types of sampling at Starbucks — passive sampling and active sampling. Passive sampling happens when customers help themselves to a sample of a product that is sitting on a table or near the main register. Active sampling occurs when a store partner (employee) serves a customer by physically handling them a sample and engaging them in a conversation. Active sampling is by far and away the best way to connect with customers and to drive sales of a product.
JM: Right then we knew that we had to create an incentive contest that encouraged store partners to engage in active sampling.
PW: As we were brainstorming, we started talking about how much fun we had playing timeless childhood board games like Candyland, LIFE, Connect Four, and Mousetrap. The kitschier the game, the better. We thought it would be great to connect with store partners by turning the incentive contest into a board game — like the ones we used to play as kids. I mentioned that I had recently played BINGO with some friends and that is where we had our EUREKA moment.
JM: Paul suggested we model the incentive contest around BINGO. We wouldn’t use numbers. Instead, we would replace the numbers with a fun activity that would ask a store partner to interact with a customer all the while sampling them a beverage.
PW: For example, we created activities like: Sample a Mocha Frappuccino to a customer working on a laptop; sample Tazoberry to a customer wearing a red article of clothing; teach a customer to order their favorite blended beverage using the “Starbucks drink language.” For the center squares, we got really wacky with one that asked store partners to get five customers and two partners to form a “conga” line in-store.
JM: Not only was this program fun for store partners, it was fun for customers. I remember one store sent us their completed BINGO card and a laminated poster that featured photos of their store partners and customers doing all 25 activities on the BINGO card. PW: The end result was sales of blended beverages increased and the morale of store partners increased as well. Just last week, I was at a meeting where someone mentioned this tactic from 2 years ago! Time and time again, Blended Beverage BINGO has been mentioned as one of the most successful ways we helped partners deliver great customer experiences.
Now that you know the story, let’s dig a little deeper to better understand how the tactic of Blended Beverage BINGO created great customer experiences and ultimately drove sales.
First, it created a fun, interesting way to reward our customers and store partners all the while enhancing the Starbucks culture.
Second, BINGO was all about improving the customer service experience. This program encouraged meaningful interaction between store partners and their customers — it created dialogue, offered our customers a special treat and delight, and provided store partners the chance to step out from behind the bar and interact with their customers.
Third, the BINGO game was about community. Stores had to make these activities relevant to their customers on that particular day. Partners needed to think about who would fit the requirements for the sampling activity and then interact with them.
And fourth, the BINGO game was an innovative way to enhance sales and drive profit. By making sampling fun and top-of-mind for store partners, Starbucks was able to drive incremental sales and profit.
“A leading brand should promote the category, not the brand.”
That statement is from the book, The 22 Immutable Laws of Branding by Al & Laura Ries. I riffed off this smart branding law in my book, TRIBAL KNOWLEDGE, and explained how Starbucks followed this law to become a leading brand. That riff from my book is below. Enjoy.
first published in September 2006
Creating Category Intrigue Builds Brand Intrigue
Starbucks did not create the specialty coffee category in the United States. But by 1996 Starbucks clearly emerged as the leading specialty coffee retailer. And it established this leadership position not by creating interest in the Starbucks brand, but rather by creating intrigue with the specialty coffee category.
It sounds counterintuitive to promote the category before the brand but, as marketing consultants Al and Laura Ries point out in The 22 Immutable Laws of Branding, “Customers don’t care about new brands, they care about new categories.” Customers looking to be part of the “new best thing” are looking for a totally new experience, not just a new product. In the ’80s and early ’90s the specialty coffee category was just that—totally new. But for customers to be attracted to the new experience, they had to know about it; for customers to appreciate the category’s leading brand, they first had to appreciate the category. Without widespread consumer acceptance of the specialty coffee category, there would be no Starbucks brand to promote.
We can laugh now, but twenty years ago the specialty coffee category was virtually unknown beyond a few coffee connoisseurs. Most of us had never sipped a cappuccino (much less pronounced it) or savored the rich, bold flavor of a single-origin coffee like Sumatra. Most of us drank canned coffee and we liked it (okay, at least we tolerated it).
Before Starbucks could get customers to appreciate and admire its unique brand of coffee, it had to educate them to first appreciate and admire the specialty coffee category. So Starbucks set forth on its mission to educate customers on 1) what the specialty coffee category is, 2) what specialty coffee does, and 3) what specialty coffee aspires to be.
Starbucks promoted what the specialty coffee category is through teaching customers the appreciable differences between canned coffee and specialty coffee. The defining difference, shown especially in early marketing materials and employee training tools, is in the bean itself. Starbucks coffee uses only 100 percent high-quality arabica beans, while canned coffee uses inferior, lower-quality robusta beans. Arabica beans only grow at higher elevations and flourish in the shade. Because they’re grown higher, they take longer to grow, which partly accounts for their full flavor. Arabica beans can be dark-roasted to bring out an array of fuller flavors. Robusta beans, on the other hand, can grow in low elevations in full sunlight. Partly because robusta coffee trees grow quickly, they produce uninteresting, milder tasting coffee than do arabica beans. Plus, robusta beans can’t be dark-roasted without becoming burnt and extremely bitter tasting. Fast-growing beans roasted lightly means that costs can be maximized but at the expense of flavor—and maximizing costs (not flavor) is what the canned coffee companies do best.
The specialty coffee category is all about arabica beans. While coffee brewed with arabica beans cost more, the payoff is all in the taste. Starbucks could educate its customers about the differences of their coffees, but only through taste could the customers really ever begin to appreciate specialty coffee and what it could do.
Starbucks promoted what specialty coffee does by having customers taste the difference through sampling. One sip of a freshly brewed cup of Arabian Mocha Sanani and customers immediately knew that this coffee was different from what they drank out of a can—this was coffee they actually liked. And after sipping the slightly sweet, roasted nuttiness from a handcrafted caffé latte, customers knew this was something they wanted to experience again and again.
Starbucks showed its customers that coffee could be good, downright enjoyable. It promoted that specialty coffee aspires to be the uncommonly good “everyday coffee.” Yes, its cappuccinos and lattes could be viewed as occasional treats, but it is the dark-roasted brew—the “regular” coffee—that could and should kick-start any morning and cap-off any evening.
Starbucks shared its pride in its product with customers willing to learn about the specialty coffee category. By promoting the category and creating customer preference for higher-quality, better-tasting coffee, Starbucks became the recognized category leader. After all, a business is not defined by its brand, it’s defined by the “category” company it keeps.
What leadership role could (and should) your company play in promoting the category it does business in?
What activities might your business do to build greater customer-appreciation through education?
A hallmark of the Brand Autopsy blog has been taking offbeat sources and connecting the dots back to business. In March of 2004 I connected the dots between the business practices of drug dealers to activities we in the legitimate game of business strive to do well.
My seven-part “Street Corner Selling Curriculum” series of posts were based off of Bruce Jacob’s classic book, DEALING CRACK, which shared field research he had done to better understand the ins and outs of selling crack cocaine.
This particular post shares quotes from drug dealers on how they develop enthusiastically satisfied customers.
first published on March 3, 2004
Today’s topic is:
Developing Enthusiastically Satisfied Customers
Businesses that focus on cultivating enthusiastically satisfied customers will typically generate a loyal customer base that will gladly refer that business to their friends and family. Drug dealers must also develop enthusiastically satisfied customers because nearly all of their sales growth is tied directly to customer referrals.
In the world of illicit street drugs, the mythic importance of a good connection cannot be overstated. Most people involved in the generic process of purchasing want the most and best product for the least amount of money, and crack buyers evaluate dealers by seeking out those who are perceived to offer the best deal.
A number of sellers attempted to target their market strategies accordingly. Selling the fattest stones, offering more product for the money than was customary, and giving credit were all geared to entice customers to seek them and them only.
Read these smart street-level quotes on how drug dealers develop enthusiastically satisfied customers:
Bo Joe — “The bigger ones [rocks] you serve, the more customers you get. You don’t gotta worry about no one else getting’ the sale because they [users] want you.”
Ice-D — “You give’em more than what you should because they look at their competitors and know that ain’t what so and so gave me [last time].”
Deuce Low — “Everybody try to keep they own clientele. Homie spoiled a customer so much last night, he don’t wanna deal with me – only him.”
K-Rock — “Providing fat stones may hook customers into buying from a particular seller, but smaller quantities – provided sometimes at reduced cost or free of charge – keeps the addiction going. Cultivation is arguably most effective (and most appreciated) when users are at their height of desperation, In the twilight of a binge, for example, even the most meager form of generosity can look colossal and reflect positively on the dealer who is ‘compassionate’ enough to offer a free or cut-rate nugget.”
K-Rock — “When a customer’s geekin’ … I’ll break off some pieces like give’em a fifteen for a ten, or a ten for a five, or just break off like two and three dollar pieces. I kinda feel guilty – know that they got kids. So I don’t be taxin’ like that. You’re gonna lose money, but you’re gonna keep your clientele. You know they get paid at the first of the month, and they gonna keep spendin’ with me [because I did that for them]. I’m true to the smokers. That why my clientele be so high.”
It’s Archeology Week on the Brand Autopsy blog so expect to read vintage posts that are just as relevant today as when they were when first published.
We start the blog archeology dig with a post from December of 2007 that shares smart product marketing wisdom from Dilbert. Yes, Dilbert.
first published on December 17, 2007
In STICK TO DRAWING COMICS MONKEY BRAIN, Dilbert creator, Scott Adams, shared the above sharp and snappy business advice on how to predict success. He continues by saying, “The only thing that predicts success is passion, even if only 10 percent of the consumers have it.“
When the Dilbert comic strip first started in late 80s, Adams remembers most people didn’t love it. However, about 10 percent of its readers did love it and many of them clipped-out the comic from the newspaper and shared it with their friends. These people were passionate about the humorous look at dysfunctional office life portrayed in Dilbert. They decorated their cubicles with Dilbert cartoons. Some even put together homemade books of Dilbert cartoons long before the first Dilbert book was sold. They loved Dilbert.
Scott Adams didn’t worry about trying to make the Dilbert cartoon successful by making the indifferent reader passionate about Dilbert. Instead, he relied on Dilbert succeeding by fueling the passions of those most passionate about all things Dilbert.
A greater predictor of successful product introductions is to gain a passionate and loyal customer base, no matter how small in numbers they are.
This isn’t an absolute predictor as the abandoned product graveyard is littered with products that failed despite attracting a small, passionate customer base. However, if your product only attracts indifferent customers and fails to attract passionate customers … chances are, that product will not succeed.
I believe passion and a sense of purpose fuel successful marketing messages, whether delivered via a product, a service, an experience, or a presentation. My background includes a decade working deep inside the marketing departments at Starbucks Coffee and Whole Foods Market.