An astute investor client of mine who travels the country in various financial consultant roles was having a discussion with me about American business, the nature of business in general and big business Vs small business. It's a common topic we often discuss. I appreciate his insights into the typical Fortune 1000 clients he works with and he appreciates my small business expertise in retail and residential real estate.
He was explaining to me how large business entities hire smaller vendors and make them wait for months to get paid, so he has learned he has to factor in that costs when he bids for a job. We also discussed the ramification in both of the types of enterprises we're familiar with that "efficiency" today is mostly as euphemism for "cheap-as-you-can" production deliverables, or what we call the "Walmart Theory" of business. Not only how can I sub-price my competitor, but how can I get this product CHEAPER the next time I order it? The stories are many about how Walmart gets a "best price" from a vendor, sucks out all their productive capacity after negotiating as near cost (or below for foolish vendors), then expects a reduced price often the next year for the same product, using their behemoth sales volume to capture market vendors into their "web of no returns," playing one vendor against another.
This negotiating strategy has created the vast Walmart empire we all enjoy. It has probably single-handedly done more to reduce costs, competitiveness and keep inflation at bay than any other retail product merchandiser in the world, with everyone seemingly trying to out-Walmart, Walmart. Few have been able to stand against this retail juggernaut in any industry. Notable exceptions seem to be Target, in a similar though not identical space, and Costco when competing against Walmart's sister-ship Sam's Club, though they are membership services, it shows that Costco has been able to consistently play with a Walmart sponsored entity and prosper. Costco however does not compete in the traditional retail mall space that has made Walmart so predominant in many parts of the world.
There is of course Amazon and eBay who have become huge product competitors in a different way, through online sales and more and more they are competing well with large retail stores in the consumer product space. A recent rumor has it that one large retail chain not mentioned here has discovered their customers are buying larger volumes of off the shelf products they are known for through such outlets as Amazon. It has caused them to rethink their merchandising strategy throughout the enterprise because sales are being affected this way dramatically. So the technology assisted retailers too have their impact and place, but that is a different discussion we'll address at another time.
Small businesses are supposed to loathe the Walmart behemoth when it arrives anywhere within a 30 mile radius of them. Many emotionally give up the ship deciding "it's useless to try," and await their eventual demise. Some are foolish enough to try to out-Walmart Walmart, and they die because most cannot compete with the sheer leverage Walmart has at its disposal for product negotiations and purchases. Some really smart entrepreneurs re-invent themselves often with the aid of technology to compete or play in the "margins" of the 20% of the products that Walmart cannot buy. Marketing guru Seth Godin of "Purple Cow" fame is a disciple for entrepreneurs in this vein. "Find the edges of the market," he says and "serve them."
Service is NOT Serve Us
As successful entrepreneurs in our own right, my wife and I who both run different successful businesses, often try, or at least attempt to seriously consider small business when we make purchases. We are very willing to pay more for a product or service IF there is a real value added consideration for us.
We changed car dealers from searching strictly for price to a very high quality dealership who understood the nature of our businesses and promised us a quality "loaner" vehicle any time one of our vehicles needed to stay in the shop more than a couple of hours. They didn't "rent" us the car, or tell us they "just let the last loaner out," or any of those shenanigans. When our cars went in, we got a car to use, period. We bought a half dozen cars off this dealership until the franchise brand changed through no fault of the dealer. We did not want the new brand, so we reluctantly left the dealership. We have not found quite the same service since in the last decade. My wife purchased a Lexus several years ago and the service has been great because the quality of the car is great. Whatever service that is required is expensive of course, and we are grateful that when the car does need service the dealer literally brings a car to us from miles away, leaves us the car they drive to us, and returns hers the same way. That is quality service on a high quality product, for which she was willing to pay.
As the more frugal of this duopoly however, I chose another more traditional auto dealer with a good reputation that happened to expand his operations substantially when I was about to trade in my Lexus that had become tenuous for me to drive in winter as a rear wheel drive car. While careening down the highway sideways in a snowstorm one day in January 2009, I decided then and there that if I got out of that alive, I would never own another rear wheel drive car again. A few days later I bought a leading brand utility vehicle that suited my needs. the few repairs it required in the past 4 years were relatively routine, except the costs were enormous. Then I realized what the "free coffee, donuts and wireless" were costing me,. while I waited for my "serve us" to be completed. Having a brake repair done cost me $900 and within 6 months I needed the same repair, which I brought to an independent who charged me 50% less for the exact same repair. That annoyed me. The dealer of the car who did the initial repairs also charged double for an oil change, and always seemed to find "something wrong" at every oil change. Since switching repairs to the independent mechanic I have almost no repairs and my oil is changed at half the price. My wife now brings her vehicle there, as does my stepson, my step-daughter and myself. In addition, we have probably sent at least 20 new customers to this independent over the past 3 years, and have been happy to do so.
In the same manner, I needed to get a new prescription for my glasses, and at the insistence of my lovely bride, I went to an Optometrist and Optician that has a couple of offices nearby that one of her girlfriends seemed to like. So last summer I was outfitted with a (wife-chosen) pair of "designer" glasses and paid $700 and change for them. I thought it was a ridiculous, but the bride thought I "looked so good" in them I couldn't resist. They were "guaranteed" for a year, of course. In addition, I purchased an "add-on" product called "Magnetic Sunglasses," that "goes right on your prescription lenses." I asked what she meant by "magnetic," and I got this obtuse explanation about "studs and stubs" and anyway for $67 I said OK. A week later when the package of new glasses and magnetic-polarized sunglasses came in, I went top pick them up and to my annoyance and dismay, the magnetic-sunglasses turned out to be kind of crude looking snap-ons that one can get at most drug stores. I explained this didn't seem like magnetic to me and that I "must have misunderstood." My wife who accompanied me on this pick-up phase of the transaction explained that I "needed something" for the summer and I should "just take them," besides I "looked so good" in my new designer frames and "custom" magnetic-sunglasses.
A few weeks later at a client's property, I somehow misplaced them, never to be found and went limping back to the Optometrist to get another pair, since they were "custom fit" to my "designer glasses." This time I ordered two pair of the $67 magnetic-sunglasses knowing what I was getting, but summer was here and we were spending some weeks at a lakefront property, so I needed sunglasses and felt my options were limited within the timeframe. It required my sending my new prescription designer glasses in to be custom-fitted, so I was another week with my old prescription glasses. This time when the magnetic marvels arrived, one set worked well and the other fell apart in the Optometrist's hand while fitting them to me. When she said she would get them repaired. I said no. I paid for new. I want new. It was another week and I told her I did not want to again be without my new prescription lenses, after all I had one of the magnetic marvels that worked.
Supposedly she sent them in and a week later I got the new magnetic marvel in. The fit was sloppier than the other pair I had but I figured they didn't have my glasses this time and while they were a little ill-fitting they would be OK since I had the other ones that were fine. I only wore the ill-fitting ones occasionally and a few days ago while slipping on the "magnetic" clips, the right lens fell off in my hand. I took them to the Optometrist this morning to see what they would do, since I though they were less than a year old and I had had trouble with this very same set of magnetic marvels that they would repair of get me a new set.
After telling me they didn't sell magnetic lenses for these custom designer glasses and that they must have come from a "third party," I asked her to look up my record, and sure enough they found them and the fact that I had bought 3 pair of the magnetic marvels: the ones I lost and two other pair. After calling her "boss" which sounded a lot like her fiance or spouse on the phone, she told me THOSE didn't have a warranty, and she would try to see if she could get me another pair.
At first I wasn't going to say anything, I still had a good pair, but then since poor customer service is one of my pet peeves in ALL businesses today, I reiterated the retail value and cost I had paid for marginal service to date. I explained that I was fine with it, but didn't understand that I had spent over $700 for one pair of glasses, about 5 times the cost of what I could have gotten from Zenni or $39Glasses.com online, PLUS the cost of 3 pair of "clip-ons" at $67 each that could replace with an actual pair of glasses at these same sources, or any of several others. She apologized and re-iterated that she could see if she could "get them repaired." I declined, because then it dawned on me that most likely the "repaired" ones that fell apart in my hands were not actually sent back to the "lab" after all, and that in fact, they were likely "repaired" right in the Optometrist's office.
Cost of Bad Business and Bad Service
So, what will this annoyance cost me? I'll spend $39 to get a new pair of glasses with new lenses at $39Glasses.com and another $22 to have lenses only put into my "old" existing titanium frames. THEN, I will tell the Optician and Optometrist what I have done, and my wife and I will actually be pro-active in telling our many myriad friends and clients about the GREAT resource we have found online for unbelievably inexpensive glasses online. I could have purchased 10 pair of $59 "progressive" lens glasses: frames, lenses and all for 1/3rd LESS than what I paid for one pair at the local "quality" Optometrist's/Optician's place in our affluent town. I found out about these vendors from a Forbes article, and customer testimony was impressive.
I once was so upset with a computer store where I purchased two laptops because of the $150 rebate on each and was denied the rebate for some foolish reason, in the days when it was a real challenge to get a rebate back from a vendor that it was more false advertising than not. This was a large computer chain store, larger then than now. I went on a personal mission and calculated that I had personally changed the minds of people to buy elsewhere. I took satisfaction in knowing that I cost that chain at LEAST $100,000 in lost sales, then I stopped tracking it. Since I've had computers for about 30 years, I've become the friend to "recommend" hardware and software to, when people who know me purchase products. That was BEFORE Blogs, LinkedIn, Facebook and MySpace.
It annoys me terribly that when a small business claims to offer superior service and products and fails to live up to that standard, or even the innocuous department store standard of box stores as a minimum, I consider it a fraud perpetrated on the public. I believe we have a responsibility to weed out these frauds because it gives the rest of us a bad name by virtue of the category called small business.
I would encourage the public and other small business people to let it be known WIDELY when they receive sub-par products or service from small business. The very WORST excuse I sometimes hear from "quality" pretenders is "well we're just a small business, we can't afford to (pick your excuse) like the big guys." To that I say, "if that is so, then stop pretending you offer quality product OR service." At least with the Walmarts of the world you know what you're getting.
Business Model Failure
Business needs to be accountable. If small business ever hopes to compete with the big guys they need to offer SUPERIOR not INFERIOR services and products to the customers, over that of their big-box counterparts. Small business needs to be VERY careful. SOME big box vendors have had an epiphany.
One of the large home improvement chains in our area has staff that wears the identifying logo wear, so you know who the staff is. I seemed to notice over time that any time I was there, when I was looking for a staff person to help me they would seem to spy me and as I began to open my mouth to ask for assistance, they would disappear down an adjoining aisle rather quickly. At first I thought it was an anomaly but it seemed to happen every time I went to ask someone where things were in their store. There are several in my area and I shop each from time to time. They were all the same.
After one particularly exasperating experience of having several staff dart away from me just as I approached them, I cornered the Service Desk people since they were in a stationary spot, and asked the question: "why does your staff seem to dart away from me every time I'm asking for help?" The initial reaction was interesting. The person smiled at me and said "they must be busy with other customers." I knew better and the smile was telling to me.
After that little trip I went online to the website of this large vendor and in the "Customer Service" section, I explained in detail the problem I had at several of their stores in several states. I addressed the post to the President/CEO, having looked his name up online.
I received no response, and I certainly do not take credit for anything that occurred thereafter, but over the last two years I have noticed a remarkable change in this store's customer service. I can no longer go in this place without being asked several times; "can I help you sir? Did you find what you need?"
My guess is I was not the only customer complaining, and that's what it takes to improve service and product quality.
For small business this should be a NO-BRAINER. Small business should be rolling out the red carpet every time a customer walks through the door. Staff should be solicitous without being overbearing; they should be helpful; well trained and consultative. If the staff does not have the answer required, they should get it QUICKLY. Staff should be rewarded for the quality of service they provide their customers and be encouraged to solicit existing customers to come back with rewards, financial incentives and incentives to bring in new customers on their own.
What if service clerk brought in 10 new customers in a week because the offered their church group an extra 10% discount on anything purchased that month, and the store would track the purchase affiliation. Wouldn't that employee deserve maybe a 50% increase in their paycheck that month? What if they had the option of "donating" their discount to their church or other group affiliation? What would that be worth to a business?
The big box guys are figuring out they can actually compete with extra service and higher quality for a little higher premium over their existing products and services. Meanwhile, many small businesses haven't figured it out that they are beginning to lose even at the "margins" of their categories because they are refusing to fill the void by act of commission or omission. That my friends is unforgivable! Why? Because it will put you out of business.
Consider What Salesforce Has to Say
Source: http://www.desk.com/customer-service/bad-customer-service
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