We went grocery shopping last night. When we got in the car, there was the usual brief discussion of which grocery to go to. There are five groceries in short driving distance of the house, but only three of them get regular business from us: the Milk Pail Market, Whole Foods Market, and Albertsons. Last night we went to Albertsons for the staples of milk, loaf bread, a few frozen foods, peanut butter, etc. and then drove back across town for the Milk Pail. This got me thinking about customer loyalty, and what takes us to one side of Mountain View for Albertsons, despite there being a Safeway a block away from the Milk Pail.
The Milk Pail is pretty much a regular weekly visit for us. The fresh cheeses, breads, and crazy cheap and fantastically fresh produce is a killer feature. Even the cramped and crowded quarters can’t deter me from this place. So, the Milk Pail earns our loyalty through great prices, fast service, and really high quality. They don’t carry even half of the items that we buy each week, so it is definitely not convenience that takes us to the Milk Pail, but we go every week.
Albertsons and Safeway are roughly identical in almost every way. They carry roughly the same mass-market goods. Produce is pricey and of marginal quality. Both have a wider selection and better prices than the Whole Foods. Both have a “customer loyalty” program that involves annoying applications and little plastic cards that one has to carry around. But, and this is the distinction that brings us back to Albertsons and causes us to shun Safeway, Albertsons doesn’t make you have a “loyalty” card in order to get the “loyal customer” prices. If you don’t have a card, the cashier will swipe their own. These customer loyalty cards must be good for somebody somewhere, but I never apply for them, and every time I happen to stop off at the Safeway, and I see a special price for cardholders I feel a small measure of hostility towards the entirety of the Safeway organization. Since I don’t enjoy feeling hostile, I don’t shop there unless it’s on my way somewhere and I must have something in a hurry. Instead I’ll drive an extra couple of miles and go to Albertsons.
Seth Godin, in his book Permission Marketing seems to come down on the side of these kinds of programs, though he seems to think they aren’t being used effectively. And it’s hard for me to argue with a well-known expert on marketing, but I know how I feel about it, and I can say with absolute confidence that there is almost no “value” that a grocery store could offer that would make me want to fill out their applications and fill up my wallet with their stupid little plastic cards. I believe they’re a bad idea on multiple levels.
Since I generally pay for groceries with a credit or debit card, they already know what I’m buying and can track my usage patterns as deeply as they like. So, it’s inefficient to have a whole other data gathering mechanism…they already have almost all of the data, and they shouldn’t inconvenience their customer to gather it a second time. Of course, they’re also gathering my home address in this process, but that’s for their benefit, not mine. Sure, they could send me coupons for the things I buy, as Seth suggests, or for things related to those I buy. But they can already do that, and many groceries do, at the register as I’m checking out. It’s also an inefficient use of the cashiers time and mine in the checkout line. Sure, it’s only thirty seconds, but it’s thirty seconds of at least two peoples time that didn’t have to be wasted. One of those people is me, and I hate it when people waste my time.
It’s hostile to new customers
When we first moved to Mountain View, our first grocery expedition was to Safeway. We were harried from the move, but needed a few things to help us get settled in, and we’d seen the Safeway when coming in. We picked up about $50 worth of items, and checked out. We were exhausted, and definitely did not feel like filling out an application for a Safeway card. For the privilege of shopping at Safeway without a Safeway card, we paid over $12 more for those groceries! Five months later, I still hold a grudge about that measly 12 bucks. Safeway thus earned our disloyalty through being actively discouraging to new customers–those who might not know yet if they want to be a Safeway customer enough to fill out an application. In our case, they insured that we would never be loyal Safeway customers. Perhaps in other circumstances, the grudge would not have developed, but I doubt in any circumstance would it encourage me to shop at Safeway.
There’s another way to encourage loyalty in your customers. I’ve hinted at it above, in reference to the Milk Pail, but I believe even in the case of groceries that are going toe to toe with Safeway, there are better ways to turn an occasional customer into a regular customer. Which brings me to HEB. HEB is a Texas-based chain of groceries, probably the largest independent chain in the US. HEB doesn’t have a loyalty card program. In its place it has practices that engender real loyalty. Genuine loyalty for a grocery store is a strange phenomenon to witness, but I’ve seen it (and felt it) for HEB. When the Wufoos were here in town for Under the Radar or some other Web 2.0 gathering Kevin and I talked about grocery stores (now you know what Y Combinator company founders talk about when they get together). In the course of our conversation it was revealed that both our moms have a strong preference for HEB. My mom, having recently moved from Texas to Atlanta, frequently laments the loss of HEB in her life. I thought it was silly until I moved out of Texas and found myself in a world without HEB. I now know what it is to miss a grocery store.
So what makes HEB so damned fancy? While the quality of their produce and selection of both mass-market and organic foods is good, they aren’t a premium grocery like Whole Foods. They don’t have fresh cheeses and breads from local bakers like the Milk Pail. And they don’t have any kind of “loyalty” program at all, like Safeway.
But, they’ve got good prices on everything in the store. Literally everything in the store is competitively priced…even the mighty price-cutting Wal-Mart Supercenters can’t topple an HEB, despite concerted efforts to do so in Texas. I feel like I’m always getting a fair price at HEB.
HEB is fast. When there’s a line of more than one or two people at an HEB, they open another register. Always. Even at 7 PM, when every register was active and the aisles were packed with people, I’ve never had to wait more than five minutes to check out at an HEB. It’s an amazing thing to see. They respect my time, and that’s a powerful thing.
HEB is generous. They offer to carry your groceries out for you, if you have more than a couple of items. Really. Have you had anyone offer to carry out your groceries in the past two decades at any other store? HEB does it every time, and they offer it even if you’re not older or in a wheelchair or otherwise seem like you might need help. Of course, the vast majority of people don’t take them up on the offer, so it costs them almost nothing to offer. But, when my mom had an extra large load, or wasn’t feeling well, or whatever, she knew she would be best served by HEB, because no other grocery would offer to help her out to the car. Of course, any grocery will probably find someone to help you with your groceries if you ask them to, or if you’re obviously not able to do so on your own. But, my mom, like most moms, wouldn’t want to trouble the busy folks at the grocery if there wasn’t the assurance that it was part of their job and they expected to help you out to your car if you needed it. And, of course, no one likes to be identified as uniquely incapable of doing something for themselves…at HEB, it’s not special treatment, it’s part of the package, and when you need it you simply say, “Yes”, to one question. In short, I believe this one standard practice at HEB is better for loyalty than a million coupons or plastic cards. I appreciate it, and I’ve never needed help. Who knows when I might.
Finally, HEB is friendly and personal. I don’t know what their hiring practices are that leads to such high caliber people, but I’ve never been dissatisfied with an interaction with an employee at HEB. They’re universally friendly and helpful. It may simply be that they keep enough people on the floor to keep things running smoothly which helps employees not feel stressed or overworked, or it may be that the people are better trained (which may explain how HEB seems to magically open a new register when more are needed, without any intercom noise begging someone to come to the front), or it may be that they pay their employees more than most groceries, or have better in-store management, or some combination of those things. HEB is also the only grocery that hasn’t drunk the Kool-aid on self-checkout (though I believe some of the HEB stores offer it, they don’t do so at the expense of not having enough human cashiers, unlike Wal-Mart). Whatever it is, shopping at HEB is pleasant.
Of course, they do all of the other stuff right, too. Aisles are wide and comfortable. The stores are clean and well-lit. The shelves are generally well-stocked and neat. Etc. But many groceries meet those qualifications, including Safeway and Wal-Mart…and I’ve never heard anyone exclaim their dedication to a Safeway or Wal-Mart, and I can name off half a dozen people who deeply appreciate HEB.
Applying the HEB model to other industries
Now, I’m not in the grocery business. In fact, my business doesn’t have a physical presence, at all. But when a business as boring as groceries can instill the kind of loyalty that HEB customers have, it’s worth paying attention to.
So, what are the important elements? Good value, don’t make your customer wait, no artificial barriers to becoming loyal (e.g. don’t make someone fill out an application and sign a loyalty oath before you treat them like a good customer…give them the benefit of the doubt), always offer to go above the call of duty (especially when you know most customers won’t take you up on it).
We’re already doing a lot of these things with our product and website, but I think we can do better.
A “fair price” for any non-commodity item is whatever price customers will pay and feel like they’ve come out ahead. This means “ahead of where I’d be without any product of this kind” as well as “ahead of where I’d be if I’d chosen a similar competing product”. So, in our case, we have to provide better value or a better product than cPanel and Plesk, or do both. We’re solid on both counts, though I believe we can do better at explaining to people why we’re building a better product.
Not making your customer wait has a lot of implications in the software business. The software can’t be slow. The website where ordering and support take place can’t be slow. Delivery of purchased digital goods should be immediate. Support query response time should be fast. These are hard problems, and almost every business could do better. In our case, we have some sluggish components in our product (not many left, but still a few remain), our website is pretty sluggish (to be mostly fixed by our upcoming migration to a new CMS), we already make purchased products (except human services) available immediately, and finally, support queries are sometimes handled within a few hours and usually not more than 24. We’d like to improve on that last number, but I’m not sure it’s possible with only two people. I think the new website will help us on that count, as well…a wiki for documentation will allow us to better translate support interactions into better coverage in the documentation, and a better issue tracker will help us involve some of our more educated users in the support process (in exchange for fabulous prizes, like T-shirts and free software and such).
Avoiding artificial barriers to becoming a customer is a hard problem, not made easier by most of the pre-written software out there to handle selling and communicating with customers online. Our current website is running on OpenACS, and it’s actually pretty good about staying out of the way, but it still has some stupidity that is inexcusable. One of the major projects in our Joomla migration has been to make it less demanding of the end user. By default, it’s got a lot of features that really get in the way of simply using the applications, and it’s been a long hard slog to get rid of most of those nuisances. User registration should ask for only two things: Email address and a password. A username my be a valid extra third field, if it’ll be displayed publicly in forums or wikis or whatever. In our case we’ve opted to have usernames. But we don’t ask for anything else to sign up. If the user wants to give us more data, or give us billing information in order to buy the product, we get to that later. Posting to the forums, using the bug tracker, wiki, etc. can all be done without giving up more than those bits of data.
Being friendly and personal. Well, that’s just how you interact with people. I’d suggest not hiding behind generic email aliases in order to seem bigger. We send out support emails with our name attached from our personal mailbox. When we talk about things in the bug tracker and forums, we use first names, and treat it all like a friendly conversation…both for ourselves and our customers. Sure, people now know that we’re a two man shop, and there’s not a suit in sight. So, what? If we’re kicking cPanel and Plesk’s ass with two guys imagine what we’ll do when there’s five of us this time next year? I think being genuine is a net win.
Going above the call of duty is the hardest to define. What is expected, and what is cost-effective to offer above that? A full refund policy is a given. If you don’t have a good refund policy, you’re losing sales and reducing customer loyalty. You’re also probably hurting employee morale. Nobody likes to have to tell a customer there’s nothing they can do, so don’t put anyone in that position. With software, support is the expensive thing, and so it’s hard to make a practice of offering it on top of the product itself at no extra cost. In our case, we’re doing it anyway. I’m not sure it is a sustainable practice, but during our open beta we’re viewing it as a development expense. The customer is our second tier of QC. When we find that the vast majority of support queries are, in fact, not problems with the software or the documentation and instead are a failure on the part of the customer to make a modest effort with the documentation first, that’s when we’ll start rethinking the policy. We’re getting closer to the point: we have a few problem customers that take far more than their fair share of support resources with questions that are well-served by the documentation and online help. The primary way we can tell is when they have questions that the other 99.8% (1 out of roughly 500 commercial users) of our users have managed to figure out on their own. If it’s a rarely used or new feature, we’ll instead assume it is poorly documented, has a bad UI, or simply isn’t working right. In all cases, as long as we’re calling the software beta, we’re giving unlimited support at no extra cost.
What else could we do to go above the call? We’ve got an Open Source version. Free stuff is a pretty good thing…but it doesn’t directly help our paying customers, except to build a wider pool of people who have expertise in our product (so if they need custom development, third party plugins, etc., the odds of finding it are better). We’ve got an open bug tracker so anyone can file a bug. That’s pretty valuable, though not a lot of non-technical users are familiar with the process. We’re launching a wiki for our documentation, so users can tell us what’s wrong with it and help fix it.
What are you doing to go above the call and engender real loyalty?