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MARKETING’S BIGGEST CHALLENGE

“McDonalds isn’t in the restaurant business, it’s in show business” Ray Kroc, former CEO and developer of McDonalds

When Ray Kroc said this back in 1970 it was nothing short of revolutionary. Today many people say the same thing. Richard Branson of the Virgin Group echoed Kroc when he said that Virgin Atlantic is not in the transportation business, but in the entertainment business. Yet 47 years after Kroc’s startling observation most businesses still don’t get it. What Kroc meant was that people don’t only go to restaurants for the food. They go to be spoiled and pampered. They go to feel special.

„The ability to make customers feel special is one of the biggest challenges in marketing today“.

It’s true that in many developing countries, you can eat as cheaply in a street restaurant as you can at home, but in most countries people cook and only go to restaurants, (even fast food restaurants) occasionally. If you want to do something nice for your partner or loved one on his or her birthday, you takethem out to eat. That’s why restaurants are always full on Mother’s day and Valentine’s day. No one celebrates their 25th or 50th wedding anniversary by cooking at home. Face it, for most people going out to eat is a treat. It makes them feel special.

Yes, the food in a restaurant has to be good, but just serving good food isn’t enough. Successful restaurants need to do more. No one talked about the “dining experience” before 1970, they just talked about the product or service and do you know what, most companies still do. Sit in any corporate meeting room and what do the people talk about? They talk about the product (or services). After they finish, what do you think they talk about? They talk about the product some more, and when they finally finish, what do they talk about? Right, they talk about the product some more.

Making customers feel special does not only apply to restaurants or firms in service industries.

Firms have long, (for too long) relied on the idea that customers will buy from them solely because their products or services are superior to the competitors. Marketing research, however, finds that customers have a very hard time distinguishing one product from another.

“At Sony, we assume all products of our competitors will have basically the same technology, price, performance and features”.

Norio Ohga, former CEO of Sony

Today it’s not only about price and product. It’s also about providing specialized individual

service, yet few companies are up to the task.

As a result of Kroc’s observation, McDonalds installed play areas for kids in their restaurants. It was done over the objections of Kroc’s management team, who argued that play areas offered no return on investment, (ROI). Kroc overruled his learned executives. McDonalds also introduced the Happy Meal (meal for kids) back in the 1970s. The meal wasn’t that important, but the toy that came with it was. McDonald’s always gave kids a good toy, and at the time it was usually tied into one of the latest trends or Disney films. Kids dragged their parents to McDonalds not for the hamburgers, but for the toy. I know, my daughters did exactly that, and my wife and I took a break and ate the happy meal hamburgers while my girls were busy in the play area.

It was difficult for McDonald’s executives to grasp that their principal customers were more interested in a plastic toy than they were in any hamburger.

What do companies want most of all? They want to sell their products and services.

What do customers want most of all? They want to feel special (individually special)

Therefore to make money, firms need to make their customers feel special, but the vast

majority of them don’t. They just flat out don’t.

Seventy-five percent of all businesses today are service industries. These include: banks,

restaurants, airlines, hotels, fitness, car rentals, health care and higher education.

“Seventy to eighty percent of the decisions not to repeat a purchase of anything are not about the product or price. They’re about some dimension of service.”

Barry Gibbons, former CEO of Burger King

Marketing tells us that we really don’t need most of what we buy. Estimates are that up to 85% of our purchases are not necessary. Ladies, how many pairs of shoes do you have and how many do you need? George Cooney’s character in the 2009 Hollywood, Up in the Air, asked a good question in the seminars he taught in the film. The question was, if you only had a backpack, and everything you owned had to fit in that pack, what would you put inside? It makes us realize that we really don’t need another pair of jeans or an additional lipstick or yet another putter or 3-wood and that what we are doing most of the time is buying happiness.

Customers all want to feel special, individually special. That’s the key problem. The guy who is waiting in line to buy a Big Mac doesn’t care about all the hamburgers McDonald’s sells or has sold. He only cares about his hamburger and how he is treated when he goes to buy it.

The American retail giant, Walmart, did something interesting for many years, they employed someone to stand inside their entrance door and say hello to everyone who entered. The person’s job title was a “greeter”. The Walmart greeter didn’t just give you a casual greeting either, they gave you a flamboyant, exaggerated “hello”, which made you feel special, because most of the places you go, no one says hello to you. Why don’t most firms do something similar? The answer is the same that Ray Kroc encountered in 1970, no return on investment.

Hire someone just to say hello? Why bother?

Walmart used to hire old ladies to be their greeters. They did this for a reason. The older

woman was supposed to represent your grandmother, and you always felt good when you

went to grandmother’s house, because she spoiled you and treated you special.

One of the most successful retail chains in Thailand is the Japanese retailer Seven-Eleven. A few years I attended a seminar at 7-11 headquarters in Bangkok. The message at the seminar was a simple but important one. 7-11 were successful, the head of the company in Thailand explained, because of two key factors, price and convenience. 7-11, he elaborated, are price competitive to the big stores on the items they sell, and they’re in your neighborhood. They’re downstairs from where you live. He went on to say that a third key factor had recently emerged, service. “If you don’t like the way you are treated by the staff in a 7-11 store, he asserted, you’ll go to our competitor, Family Mart. Therefore, from now on when you enter a 7-11 store in Thailand, our staff will say hello to you.”

Unfortunately, they don’t do it very well. Instead of employing someone to act as a greeter, 7-11 burdens their staff with the added task. Therefore, someone standing behind the cash register always calls out “hello” (in Thai) to you as you enter, without making eye contact. The greeting isn’t personal, and it fails to have any impact.

Recently another retail chain, Big C, whose stores are now popular in South East Asia, started doing something similar. (Big C is the Asian operation of the French retail chain, Casino) Big C’s greeting is even worse than 7-11s. At Big C stores your entrance trips a recorded message.

When you enter, a strange, almost unearthly voice says, “hello and welcome”. It’s canned, corny and silly. It would be better if they did nothing at all.

Customers all want to be treated special. A statistic from United Airlines states that 15% of their customers account for more than 50% of their business. That means that an airline should také special care of that 15% but unfortunately they don’t. When you get off a plane an airline doesn’t know (or care) if you are happy or upset or if you will ever fly them again, (this includes first class and business passengers). From a marketing perspective that’s crazy, and it highlights the battle between providing uniformity and special service. While the need is more and more for special service, uniformity (and economics) still wins the day

The vast majority of customer service reps have no power to help customers with theirnproblems. All they can do is smile and say I’m sorry or refer you to someone else, (often now online) who says the same thing, (which is the only thing the reps been authorized to say).

Traditional customer service escalates problems up to supervisors, often through 2 or 3 levels of supervisors, until the customer gives up or customer service no longer has anything new to offer. These organizations expect the customer to either put up with the problem or go to the competition. Customer service does not care which option the customer chooses, just as long as they go away.

The 80-20 rule in marketing states that 80% of a firm’s sales come from 20% of its customers.

This is also in line with what United Airlines has found. Core customers are a firm’s most

important asset. They buy from you again and again, without looking at price or at the

products/services of your competitors. They are easy and inexpensive to retain. All you can do if you are running a company is hope that these valuable customers never have to use your customer service.

Relationships are easier to destroy than they are to form. This is like you having a problém with your partner and when you talk to them about it, they just smile and say “Sorry. I can’t do anything. That’s the way it is. If you don’t like it, you can go find someone else.”

From a marketing point of view, it makes no sense to work hard to acquire loyal customers only to have a shoddy customer service department lose them

Individual customers in B2C businesses have no voice and have no power Firms today are telling their customers:

Yes, you’re important to us

Yes, you’re our greatest asset

No, you have no voice or meaningful way to complain

No, you have no power

That sounds to me a lot like the relationship between a parent and a child.

Hey, if you thought being a kid was tough, try being a customer.

Team General Director, Associate Professor Art Gogatz.