Thursday, March 4, 2010

Why Do We Pay More and Accept Less

Hi Everyone!

There was a little news blip yesterday announcing that Macy's was discontinuing gift wrap at most of its stores across the country due to reduced demand.  Some articles pointed to consumers tightening their belts and/or being selective as to how they spend discretionary money.  Also, being "green" makes getting the fancy gift wrap at the department store kind of wasteful.

The fact of the matter is that people don't go to the gift wrap counter in departments stores as much as they used to for whatever reason.  It's either because we bought gift cards that only require a greeting card or maybe it's just easier to stuff the present in a gift bag with pretty tissue both courtesy of your favorite drugstore or big box retailer.

Given this gift wrap counter malaise, this news about discontinuing this at Macy's should have been met with complete indifference on my part.  But, it wasn't.  I can understand the high school economics dollars and cents reasoning behind it with our horrible economy as this awful backdrop yet I found this announcement bothersome.  And I want to have this conversation with you about it.

My issue isn't about gift wrap per se but about a pervasive lack of service orientation.  Savvy (and loyal) Macy's shoppers will realize that one of their credit card benefits will be going away with the gift wrap counters.  If you attained a certain level of spend at Macy's every year, you were eligible for free gift wrap service as a "thank you" and recognition for your loyalty.  One wonders if Macy's will "make them whole" by offering another service in place of the one being discontinued.

If you recall my Sears post, there was a time that we could go to our favorite retail store - whichever one that might be - and have confidence that we would walk out after making a purchase completely satisfied with that shopping trip.  We felt smart when we shopped at our favorite retail store.  Sears was known for "Satisfaction Guaranteed or Your Money Back" until they rescinded it a few years ago as a cost cutting measure.  

If you travel on most airlines, you pay to check your bags and overpay for food obtained in flight.  If you want extra legroom, you've got to pay for that too.  It's funny because this same plane will be going to that destination - there will not be a last minute equipment change if people do or do not check baggage or purchase the extra legroom.  The pilots still have to show up and fly safely regardless of the decision.  Airlines only accept credit cards in flight because it's cheaper to pay interchange fees than it is to lose cash due to operational problems with cash management.  All of these examples are uber transparent plays at incremental revenue which we all recognized when announced.  

This isn't about saving 40 cents on a private label can of beans versus a national brand.  That's being an informed shopper.  This discussion is about how we get treated and thanked for our business.  The one off transactions or service discontinuations make me ask if being any kind of customer  - first time or loyal - matters to businesses/service providers anymore (my Neiman Marcus post comes to mind).  

We accept poor service and in some cases reward it by going back to those businesses.  Why?  The data should indicate that business understand that doing the right thing by customers always pays off.  Eureka!  There is some.  Bruce Temkin recently posted his "The State of Customer Experience" (here) and provided some interesting research points:
  1. 90% of survey respondents said customer experience was critical to their 2010 strategy; and
  2. 80% want customer experience to be a form of competitive differentiation.
Last June, Bruce Temkin also pointed to a correlation between customer experience and revenues (here).  There are a lot of great data nuggets as well.  It shows that for every 10 point increase in a firm's Customer Experience Index, it resulted in a $284 Million dollar change for every $10 Billion in revenue in the following ways:
  1. $65 Million in additional purchases; and
  2. $116 Million in reduction of churn; and
  3. $103 Million in word of mouth.
What's the remedy?  I'm not certain reinstating the gift wrap counters will make a material difference in the customer experience at Macy's but little items such as these should make us take note, sit back and examine how as marketers we give short shrift to those who help us keep the lights on and why as consumers we accept less and less while paying more and more.

I can't wait to hear the feedback on this.  Thanks for all of the great emails, comments here and on LinkedIn to these posts.  I enjoy learning from you!

Until Next Time,

Parissa Behnia

1 comment:

  1. Even as we evolve into a service vs. manufacturing economy, the nickel and diming mentality in business is now the norm. Sad, but true, especially when it comes to customer service. I do not claim to be a historian, but this all started with the sprawling of America and the death of Main Street. Parissa, now there is a dinner topic.