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Denny Hatch's Blog

Denny Hatch's Blog

By Denny Hatch

About Denny

Author, direct marketing guru, and always entertaining Denny Hatch focuses on a major story in the news and shows how businesses can take advantage of–or avoid the pitfalls from–the lessons to be learned in terms of marketing, sales, PR and communications.

 

Mobile-First Marketing

Greg Hoy
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The increasing use of mobile devices, mobile Web, multiple advertising platforms and the advancement of network technologies creates new opportunities...



Making Social Sell

Jeff Molander
Why You Aren't Getting Appointments on LinkedIn
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Ninety-five percent of sales reps using LinkedIn are getting few—if any—appointments. They're using premium services, Sales Navigator, sending InMail, joining...



Direct Mail for the Modern Marketer

Summer Gould
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Oct 16, 2014

How can you get your direct mail to stand out in the mailbox? Have you considered using texture? Coatings do...



Reinventing Direct

Gary Hennerberg
5 Copy Approaches to Influence Gut Reaction
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Call it a gut reaction, but oftentimes our prospects and customers make decisions and respond based on intuition, a hunch,...



Ruthless B-to-B Marketing

Ruth P.  Stevens
6 Great Blogs for B-to-B Marketers
Oct 15, 2014

In our fast-changing marketing world, a smart B-to-B practitioner keeps up to date by learning from thought leaders. While this...



Marketing Sustainably

Chet Dalzell
Truly Greening Digital: The DMA ‘Green 15’ Gain a Digital Edge
Oct 13, 2014

With little fanfare, the Direct Marketing Association just published a "refresh" of its "Green 15" sustainable marketing practices first announced...



The Power Punch

Carolyn Goodman
Do You Live Up to Your Brand?
Oct 10, 2014

As California suffers from one of the worst droughts in recent history, it was recently reported that the chairman of...



Big Data, Small Data, Clean Data, Messy Data

Stephen  H. Yu
Missing Data Can Be Meaningful
Oct 9, 2014

No matter how big the Big Data gets, we will never know everything about everything. Well, according to the super-duper...



Marketing Nuggets

Michael Lowenstein
Marketing Success Is (Almost) All About the Data: Optimizing Customer Loyalty Behavior Initiatives
Oct 7, 2014

Much of what I've learned over the years about sales, marketing and customer service has to do with the critical...



The Integrated Email

Cyndie Shaffstall
Client Maturity
Oct 6, 2014

As an agency, or even a marketing department, you must work with clients of every possible ilk. Oh sure, your...



Keeping Search Profitable

Amanda G. Watlington, Ph.D.
6 Keys to Search Success in 2014
Sep 30, 2014

What if someone gave you scientific data on what hundreds of sites are doing to get thousands of top keyword...



Brand Matters

Andrea Syverson
Is It Time for a True Goodbye?
Sep 16, 2014

As I reflected on a client interaction I had this week, I thought about how helpful it is for organizations...



Muscle Marketing

Wendy Montes de Oca
Penguin 3.0 Is Coming and It’s Time to Clean House
Aug 28, 2014

Anyone who's involved in Internet marketing can tell you that Penguin is more than a cute little seabird that lives...



Triple Venti Dolce Data...

Vince Pickett
Clue Me In, Please
Aug 21, 2013

So here we are, halfway through 2013. You, along with everyone, are still trying to find that magic formula to...



Who's Your Data?

Rio Longacre
Instagram: Does It Matter That It Will Make Money on Your Pics?
Dec 19, 2012

Instagram announced the company will soon begin using your content to sell targeted advertising products to the highest bidder. Does...



SEO & Content Marketing Revue

Heather Lloyd-Martin
5 Tips for Top Positioning (And Converting) Page Titles
Aug 11, 2010

Wondering about a SEO content strategy that offers the biggest impact in the shortest time? Try tweaking your page titles....



Here's What Counts

Chuck McLeester
Planning ROI? Turn the Funnel Upside-Down
Aug 26, 2014

Many marketers use a funnel to illustrate the progression from prospect to buyer because the narrowing graphic neatly shows the...



Yblog

Yory Wurmser
Privacy in the Age of Big Data
Jul 10, 2013

Consumers reveal more than ever before consciously through social media and, just as importantly, unconsciously through their behaviors. This data...



The Whole Magilla

Ken Magill
What Marketers Can Learn From Maine's Political Email Idiocy
Feb 24, 2012

It finally happened. Politicians' idiotic email practices had a measurable negative effect. "Maine Republican Party chairman Charlie Webster has admitted...



Online Video Marketing Deep Dive

Eve Grey
Are Your Videos Champions of Your Brand?
Feb 3, 2014

If you advertise in an ordinary way, it's safe to expect ordinary results. However, when you take the extreme and...



Think Mobility

Greg Hickman
‘I Can't Because, I Need ... ’
Oct 7, 2013

Does this sound like you? Have you ever set up a goal, but then realized (either quickly or too late)...



The Yin and Yang of Dealing with Good and Lousy Customers

 
One of the most fascinating figures in modern retailing is Bradbury H. (Brad) Anderson, a Northwestern Seminary dropout who went to work for a small midwestern music store called Sound Music. Over the years, Anderson turned the little shop into electronics behemoth Best Buy, with 1,400 stores across the United States and Canada, $45 billion in sales and 155,000 full- and part-time employees.

The corporate philosophy of most giant retailers is to drive every possible consumer into the store with TV advertising, cents-off coupons, mail shots, special newspaper offers and all the other bells and whistles of marketing wizardry.

But Anderson saw that many of these giants were performing poorly.

Several years ago in analyzing Best Buy's customer file, he discovered that of the 500 million customer visits a year, 20 percent—or 100 million—were unprofitable.

So he hired on as a consultant Columbia Business School Professor Larry Selden, author of "Angel Customers and Demon Customers: Discover Which Is Which and Turbo-Charge Your Stock."

It was Selden who came up with the revolutionary theory that a company is not a portfolio of product lines, but rather a portfolio of customers.

Direct marketers have operated on that premise since the 1920s.

Selden divides customers into "angels" and "devils." Angels are the desirable customers who buy stuff and keep it—the kind of folks worth doing business with.

"The devils are its worst customers," writes Gary McWilliams in his Wall Street Journal account of Best Buy. "They buy products, apply for rebates, return the purchases, then buy them back at returned-merchandise discounts. They load up on 'loss leaders,' severely discounted merchandise designed to boost store traffic, then flip the goods at a profit on eBay. They slap down rock-bottom price quotes from Web sites and demand that Best Buy make good on its lowest-price pledge."

As with direct marketers, Best Buy carefully analyzes its customer base, spending time and money to lure the angels into the store and eliminate promotional efforts to the devils. It is also enforcing a 15 percent restocking fee for bad actors.

Unlike direct marketers, Best Buy cannot keep these sleaze balls out of its stores. But it can make life difficult for them while, at the same time, giving excellent service to its good customers.

On the other hand, when you have 155,000 employees, not all are smooth schmoozers or judges of people and absolutely "go by the book." The result, nice folks can have miserable customer experiences and tell the world.

Satisfied Customers vs. Angry Customers
For years I used to quote the statistic that a satisfied customer will tell three people, while an unhappy customer will tell 11 people. This was B.I. (before the Internet).

Today, an unhappy customer can go online and reach tens of millions of people around the world with an angry message.

What triggered this story was the following e-mail forwarded to me last week by a long-time colleague that directly relates to Brad Anderson's customer angels-and-devils policy.

Dear friends:

I received several copies of this email. My own take on dealing with retailers like this: Use a credit card.

BEST BUY, MY FOOT
Best Buy has some bad policies.... Normally, I would not share this with others. However, since this could happen to you or your friends, I decided to share it. If you purchase something from Wal-Mart, Sears etc. and you return the item with the receipt they will give you your money back if you paid cash, or credit your account if paid by plastic.

Well, I purchased a GPS for my car, a Tom Tom XL.S from 'Best Buy'. They have a policy that it must be returned within 14 days for a refund!

So after 4 days I returned it in the original box with all the items in the box, with paper work and cords all wrapped in the plastic. Just as I received it, including the receipt.

I explained to the lady at the return desk I did not like the way it could not find store names. The lady at the refund desk said there is a 15% restock fee for items returned. I said no one told me that. I said how much would that be. She said it goes by the price of the item. It will be $45 for you. I said, all you're going to do is walk over and place it back on the shelf then charge me $45 of my money for restocking? She said that's the store policy. I said if more people were aware of it they would not buy anything here! If I bought a $2,000 computer or TV and returned it I would be charged a $300 restock fee? She said yes, 15%.

I said OK, just give me my money minus the restock fee.

She said since the item is over $200, she can't give me my money back!!!

Corporate has to and they will mail you a check in 7 to ten days. I said 'WHAT?!'

It's my money! I paid in cash! I want to buy a different brand. Now I have to wait 7 to 10 days. She said the policy is on the back of the receipt.

I said, Do you read the front or back of your receipt? She said well, the front! I said so do I. I want to talk to the manager!

So the manager comes over, I explained everything to him, and he said, Well, sir, they should have told you about the policy when you got the item. I said, No one has ever told me about the check refund or restock fee, whenever I bought items from computers to TVs from Best Buy. The only thing they ever discussed was the worthless extended warranty program. He said, Well, I can give you the corporate phone number.

I called corporate. The guy said, well, I'm not supposed to do this but I can give you a $45 gift card and you can use it at Best Buy. I told him if I bought something and returned it, you would charge me a restock fee on the item and then send me a check for the remaining $3. You can keep your gift card, I'm never shopping in Best Buy ever again, and if I would of been smart, I would of charged the whole thing on my credit card! Then I could have canceled the transaction.

I would of gotten all my money back including your stupid fees! He didn't say a word!

I informed him that I was going to e-mail my friends and give them a heads up on this store's policy, as they don't tell you about all the little caveats.

So please pass this on. It may save your friends from having a bad experience of shopping at Best Buy

It's true! read it for yourself!!

Takeaways to Consider

  • As a result of this letter, I will think twice about ever shopping at Best Buy.
  • If this letter was forwarded—and re-forwarded—around the world, tens of thousands of wary prospects will drive right past Best Buy make a point of shopping at Wal-Mart, Target or Radio Shack.
  • It is assumed that you analyze your customers every which way to Sunday. The simplest formula in the direct marketing community is recency-frequency-monetary value (RFM). (Other highly sophisticated systems are available and should be looked into.)
  • Divide customers into quintiles, with the top quintile being your caviar and cream.
  • The bottom quintile is very likely costing you money.
  • The object of marketing is to move customers in the second quintile into the first quintile, the third quintile customers into the second quintile and so on.
  • In direct marketing, it is relatively easy to control the bottom quintile by marketing to it with less frequency, but keeping the addresses current so you can make money off of list rentals.
  • In retail, the bottom quintile is a nightmare. It's tough to keep undesirable customers out of stores. One possibility is to divide the bottom quintile into its own quintile with the bottom two-fifths—the serial returners and shysters whom you do not want as customers—dealt with firmly.
  • This must be handled with great delicacy. Otherwise consumer activist groups can get on your case and create a flurry of poor publicity.
  • When you go to www.bestbuysux.org, you will find that Best Buy owns it and has turned it into a sales pitch for its products and services.
  • You may want to own the following URLs: www.[YourCompanyName]sucks.org and www.[YourCompanyName]sux.org and follow Best Buy’s example.
  • It used to be axiomatic that a happy customer will tell three people; an unhappy customer will tell 11 others. Today, with the Internet, an unhappy customer can tell the entire world.

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