Small changes can create a big shift in customer loyalty. Here's a simple approach for turning bad scenes into golden relationships (and profits).
My cell phone sputtered out on me this week. This is never good, because any trip to the cell phone store for service issues is just about as enjoyable as licking a frozen flagpole.
We all loathe this store visit because the service reps can't or don't want to help. So we sit around, and the trip becomes a waste of time. Conversely, the cellcos hate seeing us because they're so un-streamlined that any customer issue creates a massive drag on their profits. Yep, we all lose.
Distracting your customers for fun and profit
But it doesn't have to be that way. In fact, it wouldn't be this way if they'd consider making one simple, feasible and very profitable change: distract me while I wait. And if you do it right, customers like me are more likely to be loyal—to the tune of at least $5 billion.
At least $5 billion, you say? Loyalty? Profits? You bet. Because this isn't about my little trip to the big cellco store in the strip mall. This is about differentiation in a commoditized market by leveraging an opportunity that's woefully untapped. This, my friends, is a story about brand building, and the bounty that comes to those who do it well.
Retailers have a choice: customers or cattle
Our tale does begin, however, in the cell phone store that I visited just outside Portland, Oregon.
I enter. Sales counter on the left, product displays on the right, service counter in back behind lots of unused, open space. Three tall chairs propped up against a wall in the back corner. The interiors have a consistent, clean red-and-black look, and the staff (also in matching branded outfits) seems affable and probably competent.
I approach the counter and we discuss the problem. Yep, I'll have to wait an hour. And that's their first big slam-dunk opportunity: treat me as a guest or as cattle while I wait. Unfortunately, they chose cattle: "Can you stand over there while we look into this?"
But, alas, there is no "there" there. What is is a corner of the room with the three tall chairs, no table, no reading material, nothing. Stark. Uncomfortable. I can't even check email with my phone, for obvious reasons. If you're into branding, marketing or customer loyalty in any sense, I'm sure the danger lights are flashing through your head by now.
Paying the price for a negative experience
Moments like this matter because they affect the bottom line—with this company's 700 retail stores and an average of 30 customers a day (my estimate) stuck in the Waiting Zone, that's 7.5 million negative experiences that they're creating each year (based on a 360-day year). And each one presents one more reason to jump to a competitor. Once you start to do the math on the possible revenues lost, you realize that this is potentially brutal to their bottom line.
Four small things that could make a big difference
Four simple tactics this and any retail services environment can use to reduce the risk of a negative experience (operations issues aside):
- Provide a comfortable space. A couch or coffee table is the first step you can take in shifting the mood from annoyed to relaxed. (Relaxed customers usually shell out more money than annoyed ones.) Investment: $2,000 (furniture).
- Do you have any coffee? A little java goes a long way toward making customers feel like valued guests. Get a decent coffeemaker and good beans. Or outsource the opportunity to a local brandofcoffeebucks that people know and enjoy. Investment: $1,000 per year (coffeemaker and supply).
- Dish up the fishwrap. For less than a buck a day, you can give them something to read or watch while they pass the time. Newspapers and magazines can keep those rambunctious customers under control. Investment: $100 per year (daily news and magazines).
- Nothing but Net. Most people are missing out on work while they're in the store. Give them wi-fi, give them access to information, give them back their productivity, give them back their time. Investment: $700 per year (wireless router and high-speed Internet).
If this sounds a little like what some hotels and airlines are doing with their personal services and first-class lounges, you're on the right track. And this isn't just a retail pipedream—Oregon's Umpqua Bank recently opened a "lifestyle" retail storefront in downtown Portland, complete with Internet stations, free café-quality coffee (and beans to go), reading materials and comfy chairs. After one year, new-account revenues at the branch were four times that of Umpqua's initial expectations, and now their upscale-retail concept is being designed into other branches statewide. (See additional reading for details.)
What's the cost for these little improvements? $3,800 per year, per store. Total investment for all 700 stores: $2,660,000 in the first year, $1,260,000 per year (excludes furniture) after that.
Millions of hearts, billions of bucks
What's that investment worth? That's where our $5 billion enters the picture. Until now we've looked at lessening risk. But if you create a space people actually enjoy (rather than one they merely find inoffensive), then you're adding value to your offering, fostering a passion for your brand and increasing long-term profits.
If, for example, I have a great time during my customer service visit—slurping the coffee and getting real work done while I wait—I have one more reason to stick with my cellco.
For everyone like me who stays with this big cellco for one more year, either because we had one more reason to stay or one less reason to leave, then all 7.5 million of us spending $50 each month will put another $4.5 billion in their coffers. Extend that relationship to five years, and we're talking $22.7 billion in additional revenues. Not bad for an investment of just over $1 million per year.
The cost of doing nothing
Just for fun, let's compare the cumulative difference between five years of customers retained based on this ($22.7 billion additional) and five years of customers lost ($22.7 billion lost).
That number: $55.4 billion. And that's based only on typical service-only revenues each month—this doesn't include product upgrades, service upgrades or growth from word of mouth that are givens in any good customer-loyalty franchise. Make sure you're sitting down if you dare to run those numbers.
More approaches to boosting customer loyalty
Why stop there? Let's explore a few other small changes that could vastly improve the revenues in any similar retail space. Be warned: we're going beyond simple cosmetics now. But just barely.
- Assign me one problem solver. It's the account-exec approach. If (in the case of the store I visited) your store has enough greeters milling about, why not divvy them up to ensure that each customer us greeted by one person—who's accountable for that customer's in-store experience?
- One shot or two? Rather than having coffee or other beverages simply available, your staff can take orders and personally deliver to the customers lounging about. Now you're moving from offering a good experience to something that's downright upscale. If you execute properly, your upscale experience allows you to charge upscale prices. (If you're spotting a pattern, it's spelled c-o-n-c-i-e-r-g-e.)
- Let me play with your products. If I'm really bored, I'll poke around. Cell stores have all those phones on display—what a sales opportunity —but they're locked to a display board. Nobody can actually play with them. If you're in the high-tech retail biz, you'll want to unlock your sleekest, sexiest products, place them on the coffee table and turn them on. Let customers dial up their friends and make sales calls on your behalf. Let them convince themselves that they need these babies, no sales pitch required.
- Charge extra for club-level service. What would the service have to be like if you actually charged people to come in and have you fix their phones? Pretty darn amazing. But that's the type of environment we're describing here anyway, so it's not unreasonable to imagine two classes: basic (free, no amenities, one-hour wait), and first class ($20 per visit, goodies aplenty, 30-minute turnaround). Suddenly your service operation is a profit center of its own.
OK, I get it. But is all this really necessary?
All right. So it's a lot to absorb for a simple customer-facing space. "Is all this really necessary?" you wonder. "Why can't I just focus on making money?"
For marketers in any commodity retail service, this is exclusively about making money. Here's why:
- It's cheaper to retain a customer than it is to attract a new one. Such is the case here, and this isn't just a cheap investment. It's downright miniscule.
- Customers in this business don't stay because they're loyal. (Know any people who love their cell company?) They stay because they're lazy. Motivate them enough to leave, and they will. On the other hand, if you motivate them to be loyal they'll tell their friends (who'll tell their friends). That's cash in the bank today, tomorrow and for the foreseeable future.
- The cell-phone market is increasingly commoditized. And now, with number portability, it's easier than ever to switch to a competitor that simply offers a better deal. Cell carriers can no longer differentiate on features, price or plans.
Obviously, these suggestions apply to a limited part of the marketing world: cell stores. However, the ideas behind them apply to any type of customer experience or interaction. If you're responsible for your customers' happiness, chances are you have an opportunity to create your own best-imaginable, rich experiences that need not cost an arm and a leg.
Whatever you do, don't just sit there with limited-profit space, focused on today's numbers rather than tomorrow's viability. Providing memorable moments will help your brand become one that customers truly appreciate. With an investment this tiny, there's so little to lose. And in the case of at least one large cell-service provider, $5 billion (at the very least) to gain.
Additional resources:
- The Experience Economy, B. Joseph Pine II, James H. Gilmore.
- Umpqua Bank Case Study, Ziba Design.
