Beating The Odds – Part 2

Beating The Odds – Part 2

We’re picking up our conversation on one of our great clients at American Retail Supply, McLendon’s Hardware, which has seven locations throughout the Seattle area.  To review part one, refer to the last blog post (Beating The Odds).

Competition Makes Them Better

I’ve done a lot of research over the years on how to compete with the national chains.  I’ve been sharing that information with my clients in my monthly newsletter for 21 years and my bi-weekly email retail tip since 2004.  In my research I found that those companies that survive and thrive look at the new competition as a challenge to get better themselves.  McLendon’s has done this also.

For years McLendon’s knew they should be looking into better automating their inventory and point-of-sale computer system.  When the retail giants came to town they made the investment in their future but also were sure to invest in new software that really helped them stay focused on their customers and not allowing the software to take away from their exceptional customer service.

Other areas in which McLendon feels the competition has made them better are display, advertising and pricing.  McLendon says, “We never really concentrated on end caps other than to put things on them.  Now we have a person in every store hire just to do that.”

McLendon’s realizes that with the big guys right down the street they need to be much more aware of price competition so they can be seen as having “good” prices.  Their advertising person consistently pushes to have “hot buys” in their ads.

What can you learn from the competition to make you better?

Variable Pricing Structure

McLendon refers to his variable pricing structure as A item, B item, C item pricing.  “A” items are very competitive, commodity items, that everyone uses and everyone knows the price.  McLendon knows his prices must be “good” on these items.  They don’t need to be the same or lower than the retail giants, but they need to be very close.  “B” and “C” items are not as competitively priced and the company can get better markups.  Sadly, too many independent retailers refuse to accept this type of pricing strategy.

Buy Right

McLendon’s, like many who compete well with the mass merchandisers, is a member of a buying group.  They buy a lot of their product though True Value.  With the exception of direct import items, McLendon feels their costs are in line with the retail giants.  But he believes the retail giants often get advertising allowances that he does not get.

Don’t Compete Directly With the Retail Giants

McLendon’s knows their niche-huge selection and great service.  In addition, McLendon’s now very carefully considers location as a niche when opening a new store.  When opening a new store McLendon asks, “Is it their market?”

The retail giants in the hardware business like to be near freeways and locations that attract large number of people.  McLendon’s looks for a niche that is not close to freeways, has a good population base, but isn’t a place that the retail giants are likely to put a store that requires a huge population to support.

This is huge.  How can you position your product and/or services to go where the competition ain’t?

Brand Names

A strategy retailers like to use to compete with the retail giants is to carry brands that the giants don’t carry.  In the past, McLendon’s tried to carry brands that the big guy didn’t carry.  With the number of competitors now in the market, and the huge popularity of a few brands in the hardware business, that strategy doesn’t really work.  As a whole, McLendon’s tends to carry quality brand products.

Hours of Operation

Historically hours of operation for McLendon’s shows the company’s long roots and reflect the work ethic in the community – early to bed, early to rise. The company has always opened early and closed early.  Today they’re finding they need to extend those hours.

Store used to close on Sundays.  Today, Sunday is the company’s second busiest day of the week.  McLendon’s stores used to close at 6:00 PM.  Now they close at 8:00.

Temporary Sales Decline

McLendon’s has found that retail giants moving into their market is a cause for concern and an opportunity to improve, but it is not a cause for panic.

Like retailers across the country, McLendon’s has found that stores sales drop somewhat when a retail giant opens a store close to McLendon’s.  but like many independents, McLendon finds that within nine months sales are back to where they were before and growing… maybe not growing as fast as they did before the big guys moved in, but growing.

You Can Thrive

Mike McLendon and McLendon’s Hardware have proven that yes, you can thrive in the shadow of the retail giants and compete with them, but not directly against them.  McLendon’s focuses on a broad product line, great customer service, and a niche location to not only survive, but thrive in the shadow of retail giants.

Discover more ways to improve your business by requesting one of my free books: How to Control Your Business and Your Life and The Happy Customer Handbook

by Keith Lee

How Saving 208 Dollars Can Cost You $250,000

By Keith Lee

Here’s a true customer dis-service story that happened to me a number of years ago.  This highlights the value of making sure each of your Team Members know how to take care of customers.  The airline’s name has been changed to Bungle Airline to protect the not-so-innocent.

The day after the big earthquake here in Seattle about 12 years ago, I had a trip planned with another person to the east coast.  It was an important trip that I didn’t want to cancel so I looked on the web and found that due to damage at the airport, my flight had been cancelled.

I called the airline to see if they could get me on another flight.  They couldn’t.  but, as I was on hold, I was also on the internet and found that I could fly America West (name not changed – their service throughout was great!) and make it to my meetings. 

I told the agent at Bungle that I was going to book on America West and keep the second part of my ticket open with Bungle to come home.  This last minute ticket on America West was much more expensive but it was important, so I made the trip anyhow.

I confirmed with the agent at Bungle that I would be able to get a credit on the first part of my ticket.  She offered to transfer me to someone who could do it right them, but I was in a hurry to book my other flight and get some things done before I left.  She assured me I could get the credit later.

The next night, while in my hotel room in Massachusetts, I called Bungle to get my credit for the cancelled flight.  Since I had not used the first part of my ticket the return reservation had been cancelled. 

I assured the agent that I was indeed in Massachusetts and that an agent the previous day had told me that I could use the return portion of the ticket and that I needed to go home on the flight that I was reserved on.  The agent would need to talk to her supervisor…

Ten minutes later we found that luckily I had the credit card that the flight was charged on so they could see that I had not fabricated this story.  Again, luckily there was room on the flight and yes, they would break the rules and accommodate me.  Not bad.  A bit of a hassle, but I’m going to get home!

I asked them about the credit on the unused cancelled flight – $208.  I was told, “That’s a nonrefundable ticket.”  Even though the flight never took off they told me it was nonrefundable!  You can imagine where it went from there.  I was told that the supervisor had already gone out of her way to get me on the return flight and that I should be grateful.  I was told they would gladly refund my entire unused ticket for the full price of $416 and I could then book a one-way back to Seattle for $1800!

I asked to talk to the supervisor.  I just as soon could have talked to a brick wall.  She pointed out that they could not control earthquakes, but seemed appalled when I told her I couldn’t either.

I asked to talk with her supervisor.  She was the top person there at 9pm eastern time.  When I asked for a supervisors’ name to talk to in the morning I was told, “Just talk to anyone.”

As I got ready to hand up I mentioned to this supervisor that I owned a company that took about 50 round trip flights a year and Bungle Airlines was probably not going to see any more of our business.  I was told, “Well, we can’t have special rules for everyone.”  I replied that I didn’t want anything special, just a refund on a flight that was cancelled by them!

To make a long story short, I decided not to call until I got back to Seattle.  When I called I decided to act like I had never talked to anyone about the refund.  I really didn’t want to get into a long drawn out discussion again.  I simply wanted a $208 refund on a flight that had been cancelled.

I called Bungle and told them my story.  Within two minutes I had my refund applied to my credit card.

What Customer Service Lessons Can We Learn From This?

  • Be sure your front line customer service people (heck, make sure EVERYONE is) are trained to truly take care of customers.  Review common problems and complaints and be sure your Team is trained to handle them quickly and efficiently.  Remember, Only Happy Clients Come Back!
  • Supervisors and managers must be able to think, act, and do.  Maybe Bungle Airlines couldn’t get the message to all of their customer service agents to take care of people whose flights were cancelled due to the earthquake (I haven’t got the foggiest idea why they couldn’t, but who knows?)  Regardless, if they couldn’t get the word to all the customer service agents at least the supervisors should have been trained to understand that the customers can’t control earthquakes, either, and that “nonrefundable” doesn’t apply to cancelled flights.
  • Be sure everyone in your company understands the “Lifetime Value” of a customer.  In this case, Bungle was looking at losing the opportunity to compete for at least $250,000 of business.  Our company takes about 50 round trip flights a year.  At the time this happened I planned to be around here for at least 20 more years.  I would have very likely told everyone here to use Bungle only as a last resort if I had not received my refund.  They would have missed out on the opportunity to get their share of at least $250,000 in airline travel over saving 208 dollars.  What is the Lifetime Value of your Customers?
  • Be sure everyone in your company knows that word-of-mouth can be your best advertising or your worst advertising.  The cumulative effect of word-of-mouth is absolutely amazing, and with social media as popular as it is, it costs too much to have poor customer service!  You have Facebook, Instagram, Twitter, Yelp, blogs… you name it, if you create a bad customer service experience you and everyone else on the interweb will hear about it!

 

Do your people know that a happy customer will tell 1-2 other people about their experience and your great service?  Do your people know that a dissatisfied customer tell an average of 16 people about your poor service?!?!  OUCH!

 

And what about word-of-mouth in this instance?  At the time when this story happened I was sending out my newsletter to 25,000 customers (this is through my main business, American Retail Supply).  If I had not received my refund I would have not changed Bungle’s name.  I would have told every one of you about their incredibly poor service.          

  • Check yourself out.  Do your policies, procedures, and practices allow your people to use their good judgment to take care of customers?  Do you put your customers through the wringer in order for them to get their request fulfilled, or do you empower your Team to make the best choice possible to make the customer happy?

 

Remember, Only Happy Customers Come Back!