Saturday, March 31, 2012

Haircuts, Lipstick and Yogi

One day recently I dashed into a local haircut shop shortly after it opened, hoping to beat the rush and get a quick trim before a meeting.  It had been a while and I was looking and feeling shaggy.

The store is one of those national franchise chains that have grown, weed-like, to seemingly inhabit every local shopping center.  It has been hawking its franchises on CNBC, LinkedIn, and other media.

There was no one in the store when I entered…no customers and no employees up front.  After a couple of minutes, a young woman (I'll call her Abby) came up from the back and apologized for my wait, saying, “it takes us a little longer to open up because we are short-staffed these days.” 

My family and I patronize this store frequently.  The staff is attentive, friendly and professional.  The cost of its services are reasonable, the cuts competent and the customer loyalty program keeps us, well, loyal.  The store has been popular and can get crowded at peak times, hence my early morning visit.

During the course of my coiffe, "Abby" proceeded to tell me that this was a corporate-owned store, taken over from a franchisee, and that four stylists had recently left because of the pressure to increase revenues, or in her words "sell stuff that customers don't want." Corporate, she said, "has told us that if we don't sell more, they'll find others who can." Morale is nonexistent and stylists are walking, scissors in hand with their customers, to locally-owned independent shops. The jobs have gone begging, with no applicants, according to Abby, as word has spread.

It's turned the Yogi Berra paradox on its head:  no one's there because no one works there anymore.  If Abby leaves, my family and I will also go elsewhere.  This store is kicking its assets out the door to gain a few dollars here and there.

This is double-palm-in-the-face stupidity.  Whether you are a national chain, a one-location mom-and-pop, a solo practitioner or a multi-partner organization, it costs money (and time, and time is money) to gain customers.  Once gained, most businesses find it is way cheaper to retain an existing customer than to court a new one. 

Is your customer king?   Have your short-term strategies sown long-term unhappiness in your customers?  Putting lipstick on a pig doesn't stop it being a swine.

Sales guru Jeffrey Gitomer nails it in this rant:

Have you run the numbers?
  • How much will you gain from the action you are considering?
  • Do you know much your customers are worth?
  • How many times per year do you do business with them?
  • What's the average sale,  length of relationship, number of referrals they give?  
  • What does that add up to?  Is it a little or a lot?
  • Does it make business sense to put that revenue at risk?
We are all looking for ways to economize in our business and personal lives.  Do the math, and you may find that your actions add up to being penny wise and pound foolish.


Will said...

Good post, Al. Too bad NetFlix's Reed Hastings learned this the hard way.

Jordan Brinkerhoff said...

I see situations like this one every once in a while. As a consumer it is easy to see how some decision effect costumers returning and telling their friends about the business.