In this podcast episode, DeAnn and I will explore two concepts: 1. How supermarkets may miss out on customer insights and revenue with kiosks, and 2. How a coffee chain may build customer loyalty in the wrong direction through unannounced program changes.
Table fo Contents
Thanks for your enthusiasm and valuable feedback on our podcast series. One of the big ask is for DeAnn and me to spend more time describing a story or scenario before diving into a back-and-forth discussion. Starting with this episode, each of us will spend up to fifteen minutes showcasing and discussing a relevant or timely topic we experienced personally or encountered in our work. This will expand each episode’s run time from 8-12 minutes to between 22-28 minutes.
Introduction – Making Customers Happy And Helping Retailers Make Money
Hi and welcome to Retail Mashup. I’m DeAnn. I’m Larry. This is a podcast where we bring a subject to the table to talk about, and share with you that’s near and dear to our hearts that focuses on the intersection of customer experience and revenue, how to make more money in retail, and make customers happier in the process.
Supermarket Innovation – Is Self-Checkout The Solution?
This week I think I’ll start because I’m very excited about this subject. I have been preaching for the mountaintops about self-checkout, and so I just wanted to bring a comparison of two self-checkout experiences I had last week and why they really need to be rethought by the retail industry.
Retailers typically think about self-checkout as a way to save staff. They have trouble getting staff. I don’t need all these checkout clerks if I have self-checkout and customers love it because they get out faster. Well, customers don’t love it. They love the idea of getting out faster. But what’s really happening, especially in a store like a grocery or a convenience store where you have more than just a handful of items?
When Innovation Fails…
It turns out that it actually does the opposite. It slows you down, creates cues, and it creates huge amounts of frustration. And the reason is that checkout is not ever going to be truly self at least not with the current check technology that we have out on the market.
So think about every time you go up to the grocery store with your cart full of groceries, you start scanning. There is a broken product barcode. The whole process stops when the employee has to come over and scan it. Same thing if you have a coupon. They have to come over and double-check the coupon.
If you buy a bottle of wine, they have to come over and scan your ID, and it is just a nightmare. On top of that, there is a high chance of theft. You buy an organic product, you scan it and it asks you what type of fruit it is, and you press the regular.
There is a company that did a study on this. The “Banana Study” is what they call it, and they found that they were losing an average of 2 million dollars on people buying organic bananas but logging them as regular bananas. So that’s a lot of bananas.
My point is, checkout is not self. I personally call it direct checkout and it should be two separate systems within the grocery store. You can have a direct checkout and a concierge checkout. The concierge system is fully staffed, slow it down and perhaps even charge a small fee in exchange for the privilege of having that service.
My point is, checkout is not self. I personally call it direct checkout..
DeAnn on what self checkout really is
Otherwise, everyone else goes through the direct checkout, which is staffed. It doesn’t have to be one staff person manning six or eight checkouts. It doesn’t have to be one staff person per checkout. Every store is going to be a little bit different. You’re gonna have to find that sweet spot.
Costco – Back To Basics / Customer Experience Wins Out
One of my positive experiences last week was at Costco they have a staff person for roughly every two checkouts and their job. They’ve been trained to be proactive in looking ahead at the person who’s just pulling up to the self-checkout. They might have a big pallet of something heavy in their cart rather than waiting, for the person to try to struggle to take it out or to look around and ask for help.
They proactively run over and scan it for you, then they will go away and let you scan the small things and make your payment. It’s very easy. And because they’re proactive and there is enough staff to get to you before you have your problem, the frustration is eliminated.
And compare that to my experience with a major grocer last week who will remain nameless to protect the innocent. They had one staff person for two self-checkout areas because they were struggling with this. They were struggling with staffing, and so this poor woman was running like a mad woman back and forth to every self-checkout.
Every time somebody had a problem, had an ID, had a coupon, it was constant. Almost every person self-checking out with groceries had an issue that stopped the system until an employee came over and conducted an action. You better believe that poor employee is gonna suffer from PTSD and look for a new job as soon as possible because it’s a miserable position to hold.
You’re running around trying to satisfy customers that are already angry, they’re already frustrated, they’re already waiting. That’s not a good position to put your employee in as opposed to Costco where they’re going over and delighting people because they’re showing up before the help is needed. That system and I call it direct checkout because it’s not self, you know, it’s a collaboration between a few optimized employees and the customers, which creates a very positive experience.
It makes it easier to staff the position and it makes the customer’s last memory of what they did in your store, a positive one. This is important because going back to helping the bottom line; if you can retain just 5% more of your customers and keep them from jumping ship to some competitor because they’re frustrated with your long lines, you can increase your top-line revenue by 25% or more depending on the type of business you have.
So you can pay back the training and the pay that you give to employees, staffing that position. You can create a position that’s a lot more enjoyable for the employee because they now have time to focus on the customer and you can create happier, more loyal customers.
So that’s my story.
Treat Customers Like VIP
I love the idea a lot and really thinking about direct checkout versus concierge checkout, and even adding the dimension of loyalty programs within the supermarkets. If you are a VIP customer for the supermarket, why not have their own lane?
Absolutely. And charge them for it.
Yeah. Customers are more than willing to pay when there is a value that they perceive as important to them. This expectation that everything is free shipping, free returns, free curbside, and free delivery? It’s crazy and it sets retailers up for failure. At the same time, it’s hard to back off from that position.
So introduce extra services and extra benefits. When you look at someone like Tesco, they are implementing a slow lane where they encourage chat between the cashier and the customer. How was your day? What’s funny weather we’re having? Are you cooking this for your grandkids? You know, slowing it down and encouraging that conversation just in that lane.
I don’t know yet whether they’re charging a premium for it, but they could.
Self-Checkout – User Friendly Experience?
I often find it interesting with self-checkout that you may not. Be able to see the value of a particular product. I often wonder if the user interface should change accordingly so that they know who I am a little more. The screen will change and recommend other products I’m purchasing so that I can be inspired.
I don’t see that. I find self-checkout using the same user interface that is not always friendly to different age groups with different accessibility challenges as well.
Having different lanes available for people and educating them in advance that we have a different checkout solution for all your different needs. That makes people feel good. If you want to just use a self-checkout because you are able to do so, great. But if you want the extra assistant or you just want to not have to do the function yourself, well, that is also available. That would be great for people.
I think so too. The other thing I hear from retailers is the need for speed. Let’s get these people checked out quickly. I know it’s partly because at the point that a customer gets to check out, they’ve finished selecting all their products, and they’re not buying anything more, so let’s get ’em out of the store, as quickly as possible.
Customers do express a desire to speed through checkout. But when you look at the research, it’s not actually the speed, the minutes that go by that customers are perceiving as what they want. It is the ease of it. The meaning of convenience is changing. It’s not necessarily as much about fast as it is about the level of effort.
If I want to burn a hundred calories. I can go on a 30-minute walk or a 15-minute run. 15 minutes is a lot faster to get to that calorie burn. But walking is so much easier. So chances are I’m going to walk far more often than I’m going to run unless I’m a very disciplined athlete, which I am not.
That’s really what it is with groceries. They want frustration-free. They want convenience, they want ease. They don’t wanna have to scan something, place it on a conveyor belt, and then run around and load it into a bag, and try to keep up with this system and, and stress, stress, stress. The screen is freezing for an employee to come over and verify something.
Every few products may be a faster experience than a manned checkout, but it doesn’t feel faster. It feels frustrating. Creating a system that may not be as fast as you think it should be, but making it effortless and painless and actually somewhat pleasant then that’s really where the focus should be. I think it’s become lost in this push for faster, faster, faster.
Revenue Opportunities Lost With Self-Checkout:
Impulse Buying And Digital Ads
I love the idea. With regular cashier checkout, there are a lot more impulse buying opportunities. Since the eighties and nineties when you see more magazines, candies, and other products available at the cashier desk.
We know that as we wait in line to get things cashed out, maybe we would get some last-minute items. That opportunity upselling, even smaller products for people is lost in self-checkout. I wonder if there is revenue lost because of self-checkout being in such a contained, smaller space and I don’t really get engaged.
I wondered about digital ads. We haven’t really seen digital ads or screens at cash checkout. As we wait, maybe I want to be inspired by other things too. I don’t know. But since I’m somewhat captive, I’m looking for something to look at, it minds as well engage me meaningfully.
Maybe it’s something on sale, you know?
Absolutely. That’s a key way that you can move the checkout experience away from being just a strict cost center to becoming a revenue center. As more and more retailers and groceries are big into learning more about this. It’s really exciting for them.
And that is retail media and in-store media networks. Having that queue of shoppers waiting in line, think of all those eyeballs that are available to look at ads on screens, that are your partner brands or compatible outside brands that don’t conflict with your own personal brand image.
You can actually charge for that so you can start making money from ads by offering the eyeballs in a checkout queue to generate some extra revenue. And so creating a queue should almost be a goal in-store design, but making that queue smooth, seamless, comfortable, and easy, effort-free.
That’s really gonna move the needle in the revenue. Perfect. Larry, what have you got for us today? I’m really excited about this one.
A Customer Loyalty Tale Through A Coffee Chain
I want to talk about a specific coffee chain that is about to change its loyalty program. This coffee chain is well known and has a lot of stores around the world.
How Are You Communicating With Me?
Recently it was posted in various news outlets that they’re changing their loyalty program where you would need double the stars for a coffee drink. That’s a lot of stars and people are asking themselves, a few things. Number one. Why wasn’t I notified by the coffee chain by email, or most likely on the app because most people use the app to mobile order?
Or talk about it more openly and tell people why they’re doubling the stars. I feel like I have to hear the news from other sources about a brand that I have intimate relationships with. Drinking coffee. It’s very intimate, and yet I don’t hear from them first. I feel a little bit betrayed.
Rethinking How Much My Loyalty Is Worth?
I feel a little sad about the state of my relationship with them. That they have to go behind my back to tell me something that is not good news. If you have an explanation, at least I’m willing to listen. But if you don’t have an explanation for me, then I have to ask myself, are there other things you don’t want to tell me about?
I think to myself, well, how am I earning the stars currently? Do I go to this coffee chain or any coffee chain at all? And spend a lot more money than I used to before the pandemic on buying coffee, drinks, and food. If that is not the case then given the changes that I wasn’t told about, maybe this is the perfect time for me to explore other chains and what else is out there.
This is very interesting because loyalty programs are designed to get people to go into whether or not it’s online or a physical store environment to spend more money. By tying you to an earning power, you feel rewarded every time you spend money. You know there’s a goal in sight, there’s a reward you may achieve that gives you happiness.
If that goal is moving further and further away, or the achievement doesn’t seem as joyous and delightful as it used to be, then you ask yourself, is my loyalty worthwhile?
Going back to the coffee chain, if they believe that doubling the number of points required to get coffee, is going to motivate people to come in and drink more coffee, maybe not. That’s something they should look into their data and see if is that something they wanted. I often tell some of my clientele that a loyalty program is a two-way relationship.
Customer Loyalty: Rewarding A Purchase Habit
Number one, it’s to motivate people to change their behavior or habit; to buy more of your products and services. And number two is to collect intelligence on how your products and services are being perceived. How are they being purchased? How are they being consumed and or how are they being used?
If suddenly, your customers wake up in the middle of the month not seeing their stars being worth as much as they used to, you potentially may lose them possibly for a few months because they’re just angry with you. Or maybe it’s permanent because there are other options available given that it’s a coffee chain. I wondered what is the business proposition in increasing the number of stars required and what is the offset.
Revenue Opportunity For The Competition
For other coffee chains, this is a perfect opportunity to place an ad and to show people that they may have a stronger valued loyalty program available for consumers to move to. Give them some bonus points to entice them to switch.
Tell them that they have different locations available and showcase what happens to them if they go to a new experience. I find that to potentially be a great revenue generator for different coffee chains.
Has the coffee-drinking experience changed? We want to sit at a coffee house and buy one drink, and that’s it. That doesn’t seem worthwhile for the coffee chain because you preoccupy three, or four hours’ worth of time or space that doesn’t generate revenue. So what could be a compromise? I was thinking of perhaps taking ideas from airports and other public venues.
Maybe it’s to set up a space designated as a quiet space. An enhanced phone booth where you can block off time in advance, pay a little extra and get your own space so that you would not be in a noisy environment of a coffee house.
Perhaps it’s to entice you to come in at a specific time so that you would be able to get the best available products and services. Many people use wifi in the coffee house. Those with the loyalty program and part of a higher tier, maybe they get enhanced wifi over other people who are just coming in wanting to use the free wifi. They may get lower bandwidth.
Those are some ideas I think of. Who is the audience? Are they trying to get them to come in and out quickly? Do they want to stay a little longer but want to spend more money? How can we really fully manage their needs and expectations the best that we could and still make money? I think that becomes a talking point for the next three to five years as people’s taste change in coffee.
I love that. It makes so much sense, and I love the idea of a higher level of bandwidth for loyalty subscribers. I think they made a mistake by just doubling the number of stars and not giving something else in return. It feels like you’re getting less for your money. It feels greedy even if it isn’t. Your point about transparency is really important and communicates the why, but also finds ways to change or improve the reward system.
It feels like, yes, it’s taking more stars for me to get to that coffee now, but I also get better wifi if I’m a loyalty member. I can book a table in advance for co-working. Giving them things that don’t necessarily cost money to Starbucks but are perceived as benefits. I don’t see that happening right now. I’m a Starbucks loyalty member. I did get an email notifying me that this increase was going to happen, but I don’t think you did, did you?
No, I did not. The problem has always been that Starbucks created a relationship with me, specifically with the mobile app. Key information and key engagement point need to be done in the medium best suited for the clientele. In this case, it will be the mobile app, not emails. Yeah. Or phone calls or any other means actually. Yeah, so I’m really disappointed that I don’t see this, and nor do I see this at any of the stores that I’ve been to tell me that stars are expiring or what are the enhancements coming up soon so that people can mentally prepare themselves.
Building Relationships With Customers Takes Time And Trust
Yeah. It’s okay to have bad news, but it’s not as good to know bad news by chance. you’re not mentally prepared.
Right, like it or not, it is a relationship between a shopper and a retailer. I, I, I laugh all the time when people get indignant when a retailer goes out of business or they struggle financially because they have become so enamored of a certain service that they almost view it as a Right.
“So what do you mean I can’t get my Starbucks, but you know, I’ve had my Starbucks every day for 20 years and they don’t offer that particular type of drink anymore, oh my gosh.” And they forget that this is a business.
And businesses at the same time, forget these customers and view them as part of their daily life. To have something arbitrarily changed can be a little bit annoying, or at the very least, frustrating and sometimes even traumatic. Communication is really essential just like you would with any other family member.
You wouldn’t just automatically take something away from them or change something without at least giving them a heads-up. I find that it’s a strange dichotomy between it being a business, but at the same time, it’s so much more from the customer’s perspective.
Perceived Value Versus Reality
It’s always been about perceived value and is much more easily calculable by say Starbucks because they know exactly how many transactions you bring them, and how much coffee. Mm-hmm. or food you buy per visit so they know exactly how much they’re making from you. That’s easy for them, but the perceived value from a consumer is a lot more difficult to detect and a lot more difficult to place a value on.
We don’t have a system beyond feedback or providing some type of testimonial that is not always a number-driven testimonial. And even then, it’s not like we collect it in our black book of ours. There is no database physically or some digital form where we say, oh I went to Starbucks this time it’s only four and a half stars.
My perceived value of Starbucks has changed. But what does impact our perceived value calculation is how you are managing our needs and expectations. How are you forming them? Define them in the first place, and then we refine them as your business model changes.
How are you helping me move along with you on your journey? It’s, it’s equally important, if not more important. At any point, if that relationship is broken because you’re moving in a direction and did tell me with more passion or more energy. Then I feel that you don’t care or I don’t feel that the perceived value of your products and services is as high as it used to be.
Do I still want to pay a premium to drink at Starbucks when there are other chains similar to Starbucks that offer different types of food, different menus on a quarterly basis, or have their coffee made with different ingredients?
Those are our stories for the week. If you like this format, tell us in the comments below and subscribe to us and we look forward to talking to you more. Until next time. Thanks, Larry.
Note: This transcript has been modified to improve quality and ease of understanding, as needed. While it is not a word-by-word replication, we preserved the meaning of the concepts discussed.