Just Because It’s Free Doesn’t Mean It’s Worthless

I was going to write about the rights and wrongs of Waitrose giving away cups of coffee but then I read about one of their free coffees poisoning a customer. It wasn’t the fact that cleaning fluid made its way into the cup, it was how Waitrose dealt with it.

As a company, how you deal with a bad customer experience makes all the difference. Many businesses make the mistake of thinking ‘so what? it’s just one lost customer’ without realising that the ramifications go in all directions. The customer tells people she meets, statistically far more than when she has a good experience, and she never shops with you again so you lose a potential lifetime of purchases. For example, I had a bad experience with Kuoni back in the 90s, I felt their response was inadequate and neither I nor any of my family have ever bought a holiday from them since- and we’ve been on a lot of holidays.

The good response is to apologise profusely, show that you’ve looked into the problem and made sure it won’t happen again, and compensate more generously than they are expecting. So, what did this particular Waitrose do when their customer was hospitalised? They sent her an insulting £25 voucher. They soon learnt how much that free coffee was worth when the customer’s husband took to the social media.

Surely an exception to the great John Lewis tradition of serving customers exceptionally well, you might think. Except. It reminded me of an experience we had at Waitrose in Salisbury a few weeks ago. We had found the staff in their cafe particularly inattentive to the point of not listening. Because we thought this was unusual and that the store would want to make sure this didn’t happen again, my wife wrote a ‘more in sorrow than in anger’ letter to the Manager by name.

We received back a hand written note from Customer Service Department Manager. This could be a good personal touch except for there being no apology, simply a terse ‘If you would like to discuss the matter further, please contact me’ and a phone number. My wife was pretty annoyed. She’s taken the trouble to write, now she was expected to take even more trouble to phone. Nevertheless she did, only to find the manager in question was away.

John Lewis and Waitrose have made a name for being better at customer service. That’s one of the points of their free coffee. It says, ‘We’re not just another supermarket, we’re a place where shopping is both relaxing and fulfilling. Of course, it will take more than a little bad service to stop us shopping with them because it has to be balanced against all the many occasions the service has been exceptional. Nevertheless, the halo slipped a bit.

I think their halo has slipped a bit over the matter of free coffee, as well. It may enhance their customers’ view of Waitrose as being that bit more civilised  but it will damage local coffee shops, just as their free newspapers will damage the local newsagent. I expect Costa, Starbucks and WH Smith will survive but I can see it being a problem for smaller independents. Maybe I’m worrying unnecessarily since a satisfactory cup of coffee in a supermarket doesn’t have the same value as a good coffee in pleasant surroundings, which is I guess why so many of us pay £2.50 for something that costs a few pennies to make.

This article was written by Paul Lewis, owner of the marketing consultancy Seven Experience and former Head of Marketing and Operations at The Mayflower Theatre. You can connect with him on Waitrose customer service response Waitrose customer service[/caption]

 

Three Questions To Ask Yourself About Your Pricing

£5.00 or 4.99? £5.00 or 5.00? £5.00 or £7.50 or both? Subtle differences maybe but they can make a big difference to your sales. In her recent post Francesca Nicasio nominates three questions to ask before you set your prices.

The first is whether you should use the old .99 trick. Of course it’s clumsy and no sensible person will be fooled by it but the fact is, according to research quoted by Francesca, twice as many people bought one particular product at 1.99 as 2.00. Although it goes against all common sense, our brains are programmed to notice the left bit of the price more than the right. Also, people associated .99 or .95 prices with bargains. But (and there’s always a but) if you’re competing on quality, your customers are more likely to associate round prices with quality products.

Then there’s the matter of the pound sign. Francesca describes an American restaurant that found customers spent more when they left the $ sign off the prices. Not enough of a sample to draw definite conclusions but maybe the sign reminds them that it’s real money they’re spending.

Finally, Francesca reminds us of the importance of choice. As I’ve mentioned before, customers love, no, need a choice. Some will always pay top dollar, some will go for the cheapest and so on, but most will plump for the middle. In fact, if your customers are always going for the highest prices, you’re probably not charging enough. Offering a range of prices gives your customer something to compare with and reassures them that the price they choose is reasonable. I think the trend to price a handful of the ‘best’ theatre seats at a very high price is a good one. It makes the previous top price seem like really good value. And, if you’ve over priced them, you can always sell your best seats off cheaper at the last minute.

Check out Francesca Nicasio’s blog here. Take a look at my 7 Tips on Effective Pricing.

This blog was written by Paul Lewis, owner of the marketing consultancy The Lewis Experience based at Hampshire Workspace, and former Head of Marketing and Operations at The Mayflower Theatre. You can connect with him on Google+ and LinkedIn.

Happy 50th Birthday, National Theatre, and Many Happy Subsidies

I wish the National Theatre a very happy 50th birthday. To me, it is what subsidy is all about. It could have been a staid presenter of the classics of the English stage. Instead it has encouraged new writing and the discovery of non-English work. It has been challenging and experimental.

Given the opportunity not to play safe, the National Theatre has produced many incredible productions that have become huge hits. Who could have predicted the success of a play starring life size puppet horses?  Or the recent stunning production of Frankenstein? It’s hard to believe its director Danny Boyle would ever have learnt the skills to put on that unforgettable opening of the London Olympics without a grounding in subsidised theatre.

It is of course a worry when you rely on a subsidy. I’m about to attend my first Board meeting as a trustee of the Theatre Royal in Winchester and I am already concerned about what would happen if our city council were to follow some other local authorities and cut grants to the arts.

It was the opposite case when I worked at The Mayflower. There, the lack of subsidy meant that the programme was inevitably full of known quantities that could be relied on to fill seats – great shows of course (quite a few subsidised in their original productions) but no thrill of discovery or pushing the boundaries.

To those who object to paying to subsidise something that offends them or they would never go to see, I can only say that for every subsidised play I’ve disliked, there is something else that I’ve loved that might never have seen the lights of the stage but for a grant. Les Miserables is one of them. War Horse is another.

Small scale work is important too and more under threat than the large scale endeavours. I still remember the stunning impact of Peta Lily’s Beg! 20 years later- and I loved her latest show when she performed it for the Winchester Theatre Royal. Blue Apple Theatre’s Hamlet last year changed lives both of the participants and the audience. As a trustee of that company, I know just how much we rely on grants.

It is sometimes suggested that independent shops should be subsidised, perhaps with reduced rates or rents. The idea has merit. The big chains would object to this interference in a free market just as the commercial theatres objected to the creation of the National Theatre fifty years ago. Now they would see that the National has enriched the West End with productions, actors and directors.

Small independents fill gaps. Some become large chains. Others provide a testing ground for new products. Think of the Body Shop for example. They also make a city more attractive to visitors and residents. Winchester is enhanced both by its subsidised Theatre Royal and its large number of independent shops.

This blog was written by Paul Lewis, owner of the marketing consultancy The Lewis Experience and online retailer Your Life Your Style, and former Head of Marketing and Operations at The Mayflower Theatre. You can connect with him on Google+ and LinkedIn.

Amazon: Future Tense

In a previous article, I established that, despite its market domination, Amazon makes little or no profits because the pursuit of low prices has led to very low margins. I asked is there a David out there that can exploit this Goliath‘s weaknesses and what we would lose if we didn‘t have Amazon?

Straightaway we need to remind ourselves that at least one online retailer has already grasped the concept of what is unique about the web better than Amazon. Step forward Apple iTunes, a brilliant idea for selling a product that has no physical substance and therefore no fulfillment costs. Amazon has come late to this game with their Kindle e-books.

National retailers like John Lewis or Sainsburys also have a potential edge with their marriage of shop and online. Customers can use the shop as showroom but buy online (rather than using Waterstones as a showroom then buying from Amazon) or utilise the excellent click and collect. There is still a huge percentage more shoppers visiting shops than buying online which means Amazon are limited by having no showrooms. You might wonder what will happen to Amazon book sales, apart from bestsellers, if Waterstones closes and we can’t check out the books before buying online.

Some retailers make a success of selling own brand products because they have a monopoly. Next, White Stuff and even Marks and Spencer (if only M&S had products people want to buy) are examples of retailers who can set their own prices. Again Amazon lose out because they only sell goods in competition with other retailers.

Independent shops like Your Life Your Style do not have the advantage of either a national chain of outlets or exclusive products, but as I said previously the online competition is not so great for niche products- overheads are the reason for us leaving the high street and taking our chances selling purely online.

Amazon tried to tear up the retailing rule book that said competing on price can only end in tears because you end up with no profit. The key to success in the pre-internet days was to compete on quality, service and marketing. The trouble was, back in the nineties, people were reluctant to change their buying habits to this new fangled internet. Offering low prices was probably the best way to get people to switch to buying online. In fact, tearing up the rule book may be proving as difficult as tearing up a telephone directory.

The Amazon website is a wonderful warehouse but the emphasis is always on the cheapest price. Service is excellent but the clinical photos and bullet point descriptions do little to put across the value of the products. This works when it comes to selling a light bulb or something the customer already knows he or she wants but is no help when you need an uncertain purchaser to make an emotional connection with a product. John Lewis or even our own website do a much better job at persuading someone to buy a product. Its the difference between a description of a teddy bear’s size, colour and materials and a story of a child getting a bear, cuddling it and it becoming her friend. Or a picture of a wine glass and a photo of a dinner party with people chatting and drinking from the glasses.

From the early days of e-commerce, Amazon’s tactics have been the same. The company announced from the start that they would lose money for years while they built up their online business. As a result, they led the way, first as a cut-price bookseller who caught all other booksellers unawares. Then it widened its range of products, before moving into e-books which offer a better profit margin. Its best idea has been to invite other merchants to sell on its site. The virtually cost-free commission it earns from these traders may prove Amazon’s salvation.

If Amazon were to go, I would most miss the company’s tremendous commitment to innovations that make online shopping easier and more attractive to the customer from One-click shopping to rating the products to e-books.

Not that I would bet against Amazon winning the battle for the wallets of online shoppers. Nor it seems would investors who sent Amazon shares up when the results were announced.