Business musings

For those of you who use Facebook and Twitter, you’re likely to have come across the story of Lily Robinson, Sainsbury’s and why Tiger Bread should really be called Giraffe Bread. In case this internet sensation happens to have passed you by, allow me to tell you the story.

How a bread changed its spots

In May 2011, Lily Robinson (age 3 ½) wrote to Sainsbury’s to ask them:

Why is tiger bread c\alled tiger bread? It should be c\alled giraffe bread.

Chris King (who at the time worked in Sainsbury’s customer service team) replied to Lily saying:

Thanks so much for your letter. I think renaming tiger bread giraffe bread is a brilliant idea – it looks much more like the blotches on a giraffe than the stripes on a tiger, doesn’t it?

It is called tiger bread because the first baker who made it a looong time ago thought it looked stripey like a tiger. Maybe they were a bit silly.

I really liked reading your letter so I thought I would send you a little present. I’ve put a £3 gift card in with this letter, if you ask your mum or dad to take you to Sainsbury’s you could use it to buy some of your own tiger bread (and maybe if mum and dad say its OK you can get some sweeties too!).

…

Chris King (age 27 & 1/3)

I first came across this exchange via a post on Facebook last week and it certainly made me smile! Personally, I’m a big fan of Sainsbury’s anyway but this only added to my delight. And I am certainly not alone!

The letters first appeared online in June of last year when Lucy Robinson (Lily’s mum) posted to her blog Lily’s letter followed by Sainsbury’s response. The letters quickly went viral both last year and again this month. Bloggers have written about them; the photos have been shared on Facebook literally tens of thousands of times; the topic has trended on Twitter; Sainsbury’s say that “phone calls from customers mentioned the exchange and commended us for this great piece of customer service”; and BBC News, Huffington Post UK, The Sun and This is Money have all run articles about the story. This simple exchange has certainly made a big impact. To such an extent that Sainsbury’s have today announced that they are renaming their Tiger Bread to Giraffe Bread and will be seeing how it goes.

A tiger story of my very own

Reading Lily’s story reminded me of one of my own childhood experiences.

I’m sure many of you know and love Kellogg’s Frosties and Tony the Tiger. One of the promotions Kellogg’s ran when I was a child featured a set of four Tony the Tiger water games. By collecting tokens from Kellogg’s packs, you could send off for a small plastic game that you filled with water. To play the game, you pumped buttons at the bottom that caused either small plastic rings or balls to rise through the water, hopefully landing on hooks or in holes that were your targets.

I diligently collected tokens for such a game and sent them off, receiving one of the four games shortly after. So excited was I by this gift that I wrote a letter to Tony the Tiger thanking him for my present. In what was to me a completely surprising twist of events, I then received another parcel with a letter from Kellogg’s saying how pleased they were to hear from me and, as a show of their appreciation, here were the complete set of four games just for me.

Much like Chris King’s response to Lily’s letter, this was such a simple act on Kellogg’s behalf but it is something that has made a big difference. As a child, I was thrilled to receive the games and Tony the Tiger seemed like the kindest tiger in the world. With age came the realisation that it was in fact Kellogg’s who had been thoughtful and generous but the story has stuck. Kellogg’s actions had such an impact on me that this is a story I continue to re-tell more than 20 years later (just ask Matt!).

When Smarties failed to have the answer

In contrast, I read an article last week featuring Lily Robinson’s story in which the author said:

When I mentioned this story to my wife (@Jilltovey) she told me about the time when she, aged 8 or 9, wrote to Smarties to ask them why they had the answer and was sent a curt reply telling her it was “just a marketing slogan”.

Again, the story has lasted.

Simple acts of kindness lead to customer delight

I’m sure we all have our own stories of great customer experience and times when brands have let us down. What has struck me reading about Lily’s story and being reminded of my own however, is how simple the acts are that make a lasting impact. It would be easy to dismiss a child’s letter or to send a stock response (just as Smarties did) but by taking a little time to respond to the child in a way they relate to, Sainsbury’s and Kellogg’s have both not only made two children (and their parents) very happy but have also created lasting memories and stories to tell for years to come. Isn’t this how we should be treating all our customers, both young and old? Reaching out to them where they are and delighting them in every interaction we have?

I went to the Barclays ‘Let’s Talk More Profit’ seminar in the latter half of last year and have been meaning to post this blog for a while. Robert Craven, author and consultant, spent half a day talking to around 200-300 companies about how to increase their profits. I found it really useful and practical, so thought I’d share the key message.

There are only 5 ways you can increase your profits…
and not all of them are created equal!

Here are the only 5 ways you can increase your profits:

1. Raise your prices
2. Lower your direct costs
3. Fix the underperformers
4. Increase volume
5. Lower your overheads

And the winner is…

We looked at each of the five methods of increasing profit, and looked at how effective they each were. In reality, increasing your prices is by far the most effective way of increasing your profits.

Let me give you an example:

If you sell a widget at £100, with a cost of sale of £70, this creates £30 gross profit
However, if you reduce the price by just 10%, and sell it at £90, with the same cost of sale of £70, this only creates £20 gross profit.

Therefore, you would have to sell 50% MORE widgets just to make the same amount of profit you had been previously.

So, raising prices has the opposite effect. Sell at £110, less cost of sale £70 = £40 gross profit. A 33% increase in gross profit.

The counter argument is that, based on the supply and demand curve, you would expect to sell fewer widgets if you are charging a higher price, therefore making less money. The bit about selling fewer is true; the bit about less money depends on the demand curve. There is more profitable flex in this than you might imagine.

Say you sold 100 widgets at £100 making a total gross profit of £3000 (£30 profit on each widget x 100), then increased your prices to £110. You would now only need to sell 75 widgets to make the same profit (£40 profit on each widget x 75 =£3000), resulting in less work (and therefore overheads) for the same amount of money.

In addition, it is likely that your ‘worst’ customers are also the most price sensitive and will take up the majority of your time.

So, let me put it this way…

If you would like to work less, earn the same, and get rid of your least favourite customers… consider putting your prices up!

You can then spend the time you have saved looking for new, higher paying customers. When you have found these new customers and returned to selling 100 widgets, you will now be making £4000 profit instead (an extra £1000).

The only proviso is to be aware of demand sensitivity: if your business’ particular demand curve is very price sensitive (for example, if you were raise to prices by 10%, you would lose over 25% of your customers) you will then end up making less money, not more. That said, this sensitivity may be counteracted by upgrading your branding, customer service, or product/service differentiators to justify the price increase and thereby retain more existing customers. Raising your prices might mean raising your game, but then when has that ever been a bad thing?!

And finally, what about the other 4…?

The other 4 listed above are also very valid. Robert Craven suggests you work down in order, from 1 to 5. Implement each element and then move onto the next. By working in order, you ensure that you start with those that will have the most impact on your business’ profitability.

So, why not consider giving it a go!

The Problem

I wanted to book a van into the local tip at short notice to dispose of an old fridge whilst I still had the van on hire. Surely not too much to ask on a Friday morning? It wasn’t going to be that busy, was it?

I rang the City Council hotline, only to be told I have to book 24-hours in advance. Any chance of changing the rules just this once? Surely they had spaces left?

“Sorry sir, they print out the booking sheet at the beginning of every day. They won’t pick up your booking until tomorrow.”

A good reason for the 24-hour booking rule? I don’t think so!

A prime example of systems first, customer second. The frustrating thing is, it would be so easy to fix!

A Solution

There are lots of solutions! Solutions aren’t the problem these days with the continued advance of technology. You can get systems to do what you want, when you want. And with an increasing number of technology platforms, you can provide access to them far more easily.

The cheap and cheerful solution
The easiest and cheapest solution I came up with was emailing or texting new booking details from the central call centre to a pay as you go mobile located at the entrance to the tip. The booking details are then added to their paper list; job done!

What the customer would really like
However, in the world of business excellence and web technology, what customers expect is probably far beyond that. How about real-time telephone and online booking for your slot; online cancellations; postcode eligibility checking; text message reminders; and (if required for businesses) integrated payment system? And, at the tip, how about a rugged handheld Windows Mobile device with 3G access to check visitors off in real-time and keep up-to-date with bookings?

Worried about the cost? Factoring in the time saved at the call centre, higher tip utilisation, shorter waiting lists, plus the fact that a system like the above wouldn’t actually cost the earth to set up, you might be surprised at the speed with which you get a return on investment. You also have happy customers. And they’re priceless!

You wouldn’t catch us doing that!

It’s easy fall into the trap of making customers work around your systems, rather than the other way round. We get numb to our own systems because we use them all day, every day. Our customers don’t! It will never be possible to delight your customers by making them work around you.

Customer service first

By working around your customers and exceeding their expectations, you’ll pave the way to increased customer loyalty and positive word of mouth – both highly valuable commodities!

Systems can, and must, come second.

Technology and systems are, after all, adaptable and upgradable. Customers usually are not!

Try exploring your business through the eyes of a customer. What would frustrate you if you were on the receiving end of your business? How much of a difference would it make to you as a customer if the business had put your experience first?

Ask your customers how they experience your business. Ask them if there is anything they feel could be improved. Listen to that feedback.

Find out how much it would cost to make the changes.

Implement the improvements, and watch your customers smile.

A recession could be an opportunity for your business

It might sound like a strange statement but could it be true? I am not saying that a recession is something to look forward to, nor am I saying that it is not without its considerable uncertainties or risks. However, there may be opportunities available that would normally be out-of-reach in a stable marketplace.

Here are some opportunities to look out for…

1. Increase your market share. If you keep marketing and working on building your business when everyone else is running scared, you could capture a much larger share of the market than would otherwise have been possible.
2. Use the external pressure to develop a highly efficient and effective business. Use the economic pressure as an incentive to re-assess processes and systems thereby cutting out wastage and inefficiencies; this will enable you to cut costs and deliver a more efficient and effective business. However, ensure you continue to build strong customer service into your processes and don’t cut down at the cost of your product or service quality.
3. Look for opportunities to diversify into new markets thereby spreading your risk and increasing your revenue. This doesn’t necessarily mean expensive new product development. Could your product be sold in new markets you haven’t tried before with a little bit of re-positioning? Maybe you have the skills to offer new services with very little effort? It may just add a little stability to your business. Be careful about the more risky moves. I’m not saying they’re not worth considering but don’t jeopardise your existing business for the sake of a riskier alternative.
4. Buy your competitor’s assets if they go into liquidation. Select your competitors carefully, but making an offer for selected assets, such as their customer list or any intellectual property they may own, could be an opportunity that only comes up once in a lifetime. Think about this in advance: pick them now, then keep an eye on them. Companies House offers a monitoring service for £0.50 a year per company so you will get an email about any documents are filed by your competitors. You could also set up Google Alerts.