Staying Loyal to Your Loyal Customers

January 6, 2020

As we announced in our last post, we’re starting off the new year with a brand-new format! Essentially, we’re expanding our questions into the realm of strategic situations and strategic stories that we will be analyzing for the purpose of providing educated opinions and advice. The idea is to use real-life stories and experiences to help illustrate strategies that work, strategies that don’t work, and everything in between. This, then, is the first of those stories, submitted in question form. And it is…

Dear Strategy:

“I recently bought an item online from a fairly large retailer. A week after I bought the item, it went on sale for Black Friday. This particular company has a price matching guarantee, so I called to get an adjustment, but was quickly told that, because it was Black Friday, their normal price matching policies didn’t apply. After doing some research, it seems like this is not an uncommon practice around this time of year. The question is, why do some companies do this? I get that they want to make as much money as possible, but it hardly seems worth it when some of your customers end up hating you for it. What are your thoughts on this strategy?”

The thing about strategy stories is that they can happen to anyone. And, as it turns out, this first story that we’re featuring actually happened to me! But it is real – I can assure you of that. And it also hits on a very real pet peeve of mine. But, before I go into all of that, let’s try to break down exactly what’s happening here.

As most of you probably know, Black Friday, which takes place on the Friday right after Thanksgiving here in the U.S., is the biggest shopping day of the year. It’s so big, in fact, that the entire 7-day period surrounding this day is often referred to as “Black Friday Week” in its honor. Being that Black Friday signals the official start of the holiday shopping season (which is typically the busiest time of the year for most retailers), it goes without saying that retail companies want to post really strong numbers during this week. And the best way to do that is to lure in a whole load of new business with ridiculously low prices.

Now, many of these businesses (especially the larger and more established ones) also have standard price matching and/or price guarantee policies in place. The idea here is that participating stores will match any advertised competitive pricing (including their own) within a certain period of time from the purchase date. This is all about ensuring that already engaged customers aren’t being lost to competitors – either at the time of purchase or, worse, sometime after the purchase has already been completed.

Given the fact that the week of Black Friday is a brutal, cutthroat time of year in the retail world, it almost makes sense that some companies would temporarily suspend their price matching policies for fear that they might be forced to match a competitor who is willing to sell their products below cost during that week. It should be noted that not everyone does suspend their price matching policies during this time, but I certainly understand those who do.

However… that’s not exactly what we’re talking about here. In this case, we’re talking about a company that decided to suspend all price matching during this week – including matching their own prices! And, at least in the research that I’ve done, this doesn’t appear to be an isolated situation. And it also doesn’t appear to make a whole lot of sense to me.

If a customer purchases a fully returnable item, and then that item goes on sale within the standard return period, the new sale price should be honored. Why? Because that customer would still be within his or her rights to return the item and rebuy it at the new price. So, rather than put customers through all that hassle, it’s a whole lot easier for everyone involved when companies agree to simply refund the difference in price. That assumes, of course, that companies actually do want to make things as easy as possible for their customers…

During this critical week, it seems that some companies prefer to put short term gain above long-term customer satisfaction. In my particular case, the company that I was dealing with told me that they would not match their own lower Black Friday pricing over the phone. Instead, if I wanted the lower price, what I needed to do was go down to the store, return my online purchase in person, and then rebuy that same item at the lower price. In other words, they wanted to make it as difficult as possible for their existing customers (i.e. those who had already purchased the item) to have access to their lower “new customer” pricing. It’s all in the fine print, so it’s certainly above board. But the real question is, is this a good strategy?

I’m sure the goal for companies that take this approach is to maximize their revenues and profitability during the critical Black Friday performance period. And if that assumption is correct, then it would seem that the strategy of temporarily lifting their standard price matching policies would help them to accomplish that short-term goal. But this is also where I think many companies tend to make a critical error.

Almost every company I work with has a goal of growing their business over the long-term. And, without fail, most companies say they’re going to do this by putting their customers first. Great words. But, when push comes to shove and those same companies need to “make the quarter,” many of them succumb to satisfying their own bottom lines over satisfying their customers’ ultimate needs. And then they wonder why their long-term strategies never fully come to pass.

My pet peeve, if you haven’t guessed it by now, is when companies pay more attention to getting new business than taking care of the business they already have. I get it – companies need to grow. But they also need to sustain that growth.  And the only way to do that is to make sure that their existing customer base continues to stick around.

 

“My pet peeve is when companies pay more attention to getting new business than taking care of the business they already have.”

 

So does that mean that anytime a company offers a discount to new customers that it should also retroactively be offered to their entire existing customer base? Maybe – but that might be too extreme of a position that could very well put a company out of business. And I’m pretty sure that most loyal customers wouldn’t want to see that happen. What they would want, however, is for companies to do the right thing.

For my situation (and, at least in my opinion), simply matching the sale price would have been the right thing to do. My request was within the return period and was part of a policy that was valid for 51 weeks out of the year. By making it as difficult as possible for me to have access to the sale pricing, this company effectively sent the message that it cared more about retaining profits than retaining me. And, no matter which way I slice it, I just can’t see how that was a good message to send.

So the lesson here, if there is one to be learned, is to remain constantly aware of the fact that your company wouldn’t exist without the customers you already have. Short-term gains may be nice, but they can’t possibly amount to anything if the foundation of your business is crumbling away.

 

Listen to the podcast episode
Dear Strategy: Episode 102

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Bob Caporale - Host and Author of Dear Strategy Podcast and BlogBob Caporale is the founder of Strategy Generation Company, the author of Creative Strategy Generation and the host of the Dear Strategy podcast. You can learn more about his work by visiting bobcaporale.com.

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