We continue our series sharing summaries of principles The Container Store follows to achieve its long-lasting success. These principles are detailed in the book, UNCONTAINABLE, written by Kip Tindell (co-founder, ceo and chairman, The Container Store).
Astonishingly, full-time employees at The Container Store receive close to 300 hours of paid training in their first year. Read that again… nearly 300 hours of paid training. Not 30 hours, but 300 hours. Part-time employees get almost 200 hours of training and no employee gets put on the sales floor without first receiving 40 hours of training.
That’s a major commitment to training. A commitment very few retailers have the courage to do.
The Container Store training philosophy is about building an employee’s intuition muscles.
Kip Tindell explains it this way, “We want our employees to use their intuition—their wonderful life experience—to anticipate the needs of our customers and to recommend the appropriate solutions.”
All the training employees receive prepares their mind to handle most any situation at the store level. It also prepares employees with product knowledge and organization expertise that helps them to explain to customers some of the complicated products The Container Store sells.
As it relates to training employees, Kip Tindell stresses its importance by saying…
“One reason training is more important at The Container Store than at other retailers is because our motto is ‘We sell the hard stuff.’ We actually tell our buyers to look for products that are hard to sell. Why? Because we know other retailers won’t touch those products, giving us an exclusive and yet another reason for customers to shop with us.”
Let’s revisit the nearly 300 hours of training full-time employees receive at The Container Store. How can a retailer justify such an outrageous expense?
For The Container Store, training employees so well results in a turnover rate of less than 10%, which saves the company millions of dollars in recruiting, interviewing, hiring and training people. And since they sell complicated products, vendors can trust employees at The Container Store to tell the story and purpose behind each of the products sold in the store.
One of the most successful retail businesses that grew from a single shop into a much loved and highly profitable multi-unit concept is The Container Store.
The business began in 1978 by selling all sorts of boxes, bins and doodads to help people organize all their stuff. Today, they have grown to 60 locations all over the United States with revenues around $750 million.
The Container Store is a classic category killer concept that has carved a niche in the retail world by following seven foundation principles. Kip Tindell, co-founder and ceo of The Container Store, has finally published a book detailing the principles behind the success of The Container Store.
Over the next two weeks, the Brand Autopsy blog will be sharing summaries of each principle The Container Store follows to achieve its long-lasting success. We’ll address important retail business matters from hiring to training to leadership to vendor relations.
Let’s start with The Container Store hiring philosophy…
1 Great Person equals 3 Good People
Finding great employees isn’t easy for any business. It helps to have the reputation The Container Store has to attract great employees. Many people want to work there, but less than 3.0% of the people who apply to become front-line employees at The Container Store get hired. Once hired, people rarely leave. The Container Store enjoys an unheard of store-level employee turnover rate of less than 10%.
One of the long-standing hiring principles practiced by The Container Store is 1=3. As in, one great employee will do the work of three good people.
The company is very selective in whom they choose to hire. They strive to hire only GREAT employees and they pay them well. The typical full-time frontline salesperson at the Container Store makes nearly $50,000 a year, that’s about double the industry average. Payroll as a percentage of sales at the store level is 11.5%. That’s high, much higher than most retailers would dare to do.
Kip Tindell explains why paying employees more works…
“Our approach to payroll is easy to justify because we are convinced that our 1=3 approach really works. Our employee wins, because she is making far more than anyone else than another company is likely to pay her for that position. The Container Store wins, because it gets three times the productivity at only 50 to 100 percent more the cost. And the customer wins because they have this superb salesperson who actually cares about working in the store.”
The Container Store believes it can pay its employees twice as much and still come out ahead because one great employee is as productive as three good employees.
It’s not easy to get hired by The Container Store. The interview process is time-consuming. It begins with an online application. A phone interview is next for those that make the initial cut. From there, candidates are given a homework assignment and brought in for a group interview. Then, a variety of one-on-one personal interviews take place. This entire process takes time but The Container Stores takes this time in order to find GREAT employees.
Hiring the right employees and paying them well is at the center of The Container Store’s success. Kip Tindell believes, “When you surround yourself with hugely talented, passionate, dedicated, and genuinely kind people, you will succeed in whatever you do—there’s no doubt in my mind about that.”
September 18, 2014 •Comments Off on Bad Profits = Unprofitable Relationships
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.
August 19, 2014 •Comments Off on Talking Word of Mouth Marketing
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.
August 17, 2014 •Comments Off on Hiring Fantastic People
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.
June 6, 2014 •Comments Off on Anatomy of a Starbucks Customer Experience Program
Brand Autopsy Archeology Week continues…
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?
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.