Overview
Seaman’s Furniture was on the brink of bankruptcy, but Jeffrey Seaman, grandson of the founder, paid off the debt by starting a chain of innovative furniture stores. Rooms-to-Go consistently delights its key customers with fast delivery, low prices, and a broad assortment of furniture.
Aesop describes how the consistency of the tortoise allowed him to win the race against the hare. He observes, “A naturally gifted man, through lack of application, is often beaten by a plodder.”
Distribution channels win the prize of customer loyalty by consistently delighting their key customers. Let us learn how Wal-Mart and other distributors delight their key customers.
Vignettes
Out With the Old, In With the New
Distribution channels use various marketing strategies to distribute products and services. For example, Seaman’s Furniture was a chain of traditional furniture stores. Its customers complained about its slow delivery, high prices, and limited assortment of furniture. Before long, the business was on the brink of bankruptcy.
Jeffrey Seaman, grandson of the founder of Seaman’s Furniture, paid off the debt by starting a chain of innovative furniture stores. Rooms-to-Go consistently delights its key customers with fast delivery, low prices, and a broad assortment. In 2014, Rooms-to-Go Incorporated produced 1.8 billion in revenue from 100 stores in 10 states and currently, Jeffrey Seaman has 675 million in Net Worth.1
Rooms-To-Go (reuse rights)
Why Did a Tortoise Beat a Hare?
An Aesop Fable
A tortoise and a hare argue about who is swifter and decide to settle the dispute with a race. The hare has such confidence in his natural fleetness that he does not worry about the race. He brags, “The tortoise is so slow I can snooze by the wayside and still win the race.” The hare lies down and falls asleep.
The tortoise is acutely conscious of his slow movements. Unfazed by the cocky hare, the tortoise plods along affirming, “I never stop, I never stop, I never ever stop.” Eventually, the tortoise passes the hare as he snoozes.
When the hare wakes up, he desperately chases after the tortoise. Unable to catch up for lost time, the hare watches in horror as the tortoise crosses the finish line first. The tortoise wins the race!
Aesop observes, “A naturally gifted man, through lack of application, is often beaten by a plodder.”
Does Consistency Win Customer Loyalty?
Although the tortoise was slower than the hare, he won the race because his consistency compensated for his slowness. Distribution channels win the prize of customer loyalty by consistently delighting their key customers.
Is the Pareto Distribution Consistent?
Whenever Pareto plotted a large unbiased sample of inputs and their results on standard graph paper, the data points consistently traced the Pareto distribution. However, whenever he used common logarithmic graph paper, the data points traced a straight line. Pareto tested this with exhaustive research and the results were consistent.2
Is the Pareto Distribution a Law?
Scientists have confirmed for over a century that the Pareto distribution is a universal law of nature. In 1909, Warren M. Persons refers to Pareto’s law in an article published in Harvard’s Quarterly Journal of Economics.3
That Professor Pareto’s law apparently describes the distribution of incomes with a remarkable degree of accuracy (423).
In his article, Persons replicates Pareto’s research methodology and confirms Pareto’s law using the least square criterion. As predicted by Pareto’s law, the data points consistently traced a straight line on common logarithmic graph paper (Figure 6.1).
Figure 6.1 Distribution of income (a) application of Pareto’s method to Prussian incomes of 900 marks or more in 1982 and (b) application of Pareto’s method to Prussian incomes of 900 marks or more in 1902
What Are Recent Examples?
In Figure 1.5, Gunther Eysenbach reports the tweeting of information about certain articles, while in Figure 6.2, he plots the distribution of the tweets. The horizontal axis sequences the first 60 days after publishing the articles, while the vertical axis accumulates the number of tweets per day. Eysenbach also ranks authors by the tweeting about their articles (Figure 6.3). As predicted by Pareto’s law, the data points for both studies trace a straight line on logarithmic scales.
Figure 6.2 Tweeting of information
Figure 6.3 Tweets about authors
These examples confirm that Pareto’s law predicts results. This means that a business will multiply its profits by delighting its most profitable customers.
Consistently Delight Your Key Customers
Are Customers Delighted in the Same Way?
My friends and I were enjoying a highbrow art show in West Palm Beach, Florida. As I admired a painting by Chagall, a woman approached me and raved about my shirt. “How can I buy one just like it?” “I bought this shirt at Penney’s.” “I would never shop at Penney’s!” “This shirt was a Christmas present for my mother-in-law, but it didn’t fit. The shirt is on sale at Penney’s for less than fifteen dollars” “You’re teasing me. Where did you really buy your shirt?”
The next day my husband and I strolled down Worth Avenue in Palm Beach, Florida. After gawking at the expensive boutiques, I bashfully entered one and tried on a coat with ravels drooping from its sleeves. Afterwards, I commented to my husband, “Who would pay $3,000 for raggedy coat like that?”
When we returned to the parking lot, I noticed the woman. She proudly showed me her purchase and asked me to model her new coat as she took pictures. I quickly stuffed its ravels inside the sleeves.
When she was out of earshot, my husband and I laughed at her crazy attitude toward retailers. “She buys raggedy clothes at boutiques, while I buy stylish clothes at Penney’s.”
How Does Wal-Mart Delight Its Key Customers?
Most versatile boy—Sam Walton4
Sam Walton founded the largest business in the world, Wal-Mart Stores, Inc.5 In 2014, the department store chain earned 16 billion in annual profits and had $485 billion in total revenue, 2 million employees, and 11,000 stores in 27 countries.6 This revenue is more than the gross national product of most countries. Recently Wal-Mart announced that it is raising its wages in the U.S.7 Wal-Mart stores delight the key customers by consistently delivering their three favorite benefits: convenience, assortment, and cost-efficiency:
- Almost all U.S. households are conveniently located within 60 miles of a Wal-Mart store.
- Most Wal-Mart stores include an assortment of specialty shops such as a restaurant, bank, an optical shop, beauty shop, and nail salon.
- Recently, Wal-Mart launched Savings Catcher, a new software application for matching prices with competitors.8,9
How Does Dr. Don Delight His Key Customers?
Dr. Don put himself through medical school by selling pots and pans from door to door. During his internship, he observed an operating room emergency. The patient died and her family sued another intern for medical malpractice. Dr. Don was so upset that he vowed to never be a physician so he continued selling pots and pans.
Don offered to show me how he excelled in sales. With skepticism, I shadowed him during his appointment with a Caribbean nurse and her husband. He rang the doorbell and leaned down to inspect a plant on her front porch. When the nurse came to the door, Dr. Don said, “This is such a lovely plant. You must be nurturing the plant with tender, loving care.”
“Yes, I water it carefully and trim its blooms.” “Are you Mrs. Smith? I’m honored to meet you.” “Please come in Dr. Don.” “Just call me Don. Where would you like me to sit?” “You can sit here at our kitchen table.” “May I put my boxes of samples here?” “Of course. This is my husband.” “Good afternoon, Mr. Smith. I’m pleased to meet you. Your home is so attractive and comfortable. You two must really enjoy your time at home.” “Yes we do.”
After building rapport with the couple, Don inquired, “Please excuse my question, but we need to know the answer. I apologize for prying, but at the end of the month, how much money do you have left after you have paid for your home, your utilities, food, insurance, taxes, and other necessities?” After a discussion, they agreed they usually have $20 left at the end of the month.
Looking around, Don gazed with admiration at a bookshelf. “Mr. Smith, did you build this handsome bookshelf?” “Oh yes, I built it for our home.” “You must really love your wife to build her such a handsome bookshelf.” “Yes I do.” “Did you use high-quality tools?” “Yes, I have a full set of carpenter tools.”
Don asked him, “Does your wife cook good meals for you?” “Oh, yes, I love her cooking.” “Does your wife deserve high-quality tools?” “Yes, she does.” Don turned to Mrs. Smith. “Do you love to cook for your husband?” “Indeed.” “Would you please show us your pots and pans?”
She returned with appalling pots and pans and Don inspected them with concern. After pondering how much they could afford, Don put a form on the table and asked Mrs. Smith for a pen. She quickly handed him a pen and the couple signed the form without any discussion.
“I’ll bring your pots and pans to your home in a week. Do you have friends who cook great meals for their husbands?” With great pride, they promised to refer him to their friends. Don picked up his samples and graciously bid them goodbye.
Afterward I realized that Don did not convey three essential details. He did not show them any products, tell them their monthly payment, or disclose the length of the contract. I learned how to sell pots and pans from door to door and become a millionaire like Dr. Don.
How Do Other Distributors Delight Key Customers?
These are various ways that distributors can delight key customers:
- Assortment
- Convenience
- Cost efficiency
- Financing
- Guarantees
- Packaging
- Personal service
- Quality control
- Reminders
- Shipping
- Speed
- Store environment
- Technical support
- Training
Successful distribution channels delight their key customers in various ways. As their key customers are different, these distributors delight them in different ways:
- Representatives of Mary Kay, Inc. prioritize personal service, training, and guarantees of its beauty products.
- Owners of Hallmark Gold Crown stores prioritize social status, enjoyment, and packaging.
- The employees of GoDaddy.com, LLC, prioritize speed, technical support, and reminders.
- Sales clerks at hhgregg, Inc. prioritize point-of-purchase promotions, product expertise, and financing.
Which Distribution Channels Are Best?
Your best channels consistently delight your key customers. Retain the top 20 percent of your distribution channels, find similar ones, and prune the other distribution channels.
Key #6: Deliver Delight
Warren Buffet10
Your premium brand had better be delivering something special, or it’s not going to get the business.
Warren [Edward] Buffett, business investor, CEO of Berkshire Hathaway, Inc., and philanthropist.
What Does the United States Consistently Export?
When I taught International Marketing I would challenge my students to guess the biggest export from the United States. My students usually mentioned obvious industries such as vehicles, weapons, or software. A student from Eastern Europe guessed, “Franchises.” Astonished, I realized he was right! When I visited Japan more than 40 years ago, we had a “Mac Attack” and headed for McDonalds. Today, travelers see franchises from the United States in every city around the world.
In descending order, the top 10 franchises are Subway, McDonald’s, 7-Eleven, Hampton Inn & Suites, Great Clips, H&R Block, Dunkin’ Donuts, Jani-King, Servpro, and MiniMarkets.11 Until recently, all of their headquarters were in the United States, but in 2005, 7-Eleven was purchased by Seven and I Holdings Co., Ltd. in Tokyo, Japan.12
Why Are Franchises So Successful?
The franchiser understands its key customers, knows exactly what they want, and develops systems to deliver it. The franchise system trains, manages, and regulates franchisees so they will consistently delight their key customers. To be more successful, imagine the distribution channels of your business are franchisees. Make sure that they consistently delight your key customers.
Summary
Jeffrey Seaman, grandson of the founder of Seaman’s Furniture, avoided bankruptcy by starting Rooms-To-Go, a chain of innovative furniture stores. Aesop observes that consistency wins the prize.
Pareto discovered how to consistently predict results. Whenever scientists plot input and their results on logarithm scales, the points consistently traced a straight line. This indicates that the Pareto distribution is a law of nature.
Distribution channels win the prize of customer loyalty by consistently providing the services that their key customers seek. Franchises are successful because they understand exactly what their key customers seek and develop systems to consistently deliver it to them. A wise business retains the top 20 percent of its distribution channels, finds similar ones, and prunes the other distribution channels. The sixth key to enhancing profits is to deliver delight.
Deliver Delight to the Key Customers
Decide how the business will delight its key customers:
- Which three distribution services are most important to key customers of the business?
- Which distribution channels consistently delight key customers of the business?
- Which distribution channels do not delight key customers of the business?
- Which distribution channels will the business discontinue?