Customer Service Best Practices - Wish Domino's Pizza gets this

Sequence of real events (Home Delivery Order number 250, dt. 19-12-2015 at Domino's, Siddhivinayak Residency, Kharghar, Navi Mumbai):

• 9:21:53 pm Pizza order is placed with Domino's
• 10:14 pm Customer calls up the store to check on the order status; is told that deliveries were getting delayed today, Store Associate says that although there is a delay, but a proper product will be delivered, requests customer to bear with the situation and customer agrees - while still on the call Pizza delivery boy shows up (finally)
• 10:18 pm Pizza delivery boy brings COLD pizzas to customer; note this is after almost an hour of placing the order (what happened to promising a proper product delivery, BTW this is not the  first time this is happening -- see the note below)
• 10:18 pm Customer while still on phone with the store associate tells him about COLD delivery, but instead the store associate says it's a) a normal delivery, b) pizza got cold because of the time that got spent in checking the pizza by the customer, c) uses different false names (Shantanu/Sandesh) for himself over the course of conversation (so much for customer service and credibility, not to forget the UBER incidence!)
• 10:19 pm Customer says 'thank you' to the delivery boy, refuses to take delivery (who wants to eat a COLD pizza)
• 10:20 pm Customer takes its family out to dinner elsewhere (matter is closed, what a waste of time in the first place in placing an order with Domino's)

Next day:

• 10:12 am Store Associate calls to inform that his name was used wrongly by another associate (it doesn't matter to the customer any more what name was used by who, stop wasting customer's time), and on the problem faced he says that they didn't tell last night to you but store would have been willing to send a proper pizza later in the night (willing, sure!! wait till eternity for you to do your work properly). Customer tells him he is not interested in discussing this matter any further.
• 10:49 am A person claiming to be District Manager (not sure after false identity episodes) calls up the customer and repeatedly mentions that you (customer) had faced a problem last night with Domino's delivery (yes, CUSTOMER ALREADY KNOWS IT FACED A PROBLEM LAST NIGHT WITH DOMINO'S, why are you wasting his time telling him this over and over again), and finally as a solution to the problem asks customer to place the order again today itself and this time he is personally willing to ensure that it'll be delivered on time (willing again!! why does he expect customer to go through the ORDEAL all over again). Customer tells him he is not interested in placing any order and for that matter dealing with Domino's, Domino's manager says that he offered a solution, but since customer has declined it, the matter is closed. For whatever it means, thank you finally the matter is CLOSED! 
• 2:02 pm But wait ... another call from another manager from Domino's. 

Please note:

• There is one consistency in the entire episode. The previous home delivery order with Domino's which was about 2 weeks ago, the exact same COLD and DELAYED delivery episode took place. (All the talk about customer service and learning from mistakes is a joke!)

Lessons for those who care about customers:

• At least don't make a poor service issue worse by calling up customer over and over again, when all you are interested in is only selling and not service
• If you have failed on service, accept it and fix it so that it doesn't repeat again in future

Private School Pricing -- Prospecting, Positioning, Pricing

Recently, my family relocated to Navi Mumbai, and we were searching for a private school for our son. I stumbled upon a very insightful pricing scenario...

After lots of R&D, we narrowed down our search for our son's school to two, lets call these schools as ABC and XYZ. Both of these schools follow same ICSE board curriculum, are located close to each other, and are very well known for their academic results, student placements in top undergraduate programs, comparable facilities available to students (both in terms of infrastructure -- e.g. swimming pool, football and basketball courts, auditorium, AC in every classroom, etc.; and also other extra curricular programs -- e.g. dance, karate, elocution, singing, etc.), as well as quality of faculty (and I learned from an acquaintance, who is a teacher at another private school, that both these schools pay comparable salaries to its teachers.)

The difference between these schools was in their annual FEE. School ABC was charging Rs. 24,000 for an academic year, while School XYZ was charging Rs. 70,000 for an academic year. When I investigated these schools further, I learnt that School ABC was having 54 students in every classroom, while School XYZ was having 30 students in every classroom. When I triangulated the numbers, I realized that at school ABC, student to teacher ratio was 36:1, while at school XYZ it was 15:1. In every other aspect, both these schools were at par.

How much, if at all, would be a fair premium for a better student to teacher ratio?

By having a better student teacher ratio, the cost of the academic program per student at school XYZ is certainly higher. One approach to pricing can be a cost plus approach. Costs are higher, therefore higher fee. The other way would be a value driven approach. Better student to teacher ratio can be viewed from a value aspect also, and can be translated into higher average time available per student with each teacher. The perceived value of the program, due to better student to teacher ratio is higher, therefore it is ok to charge a higher fee.

It might be a bit difficulty to quantify the differences in the delivered value at the two programs, but there seems to be a much stronger perceived value differentiation. As a result of which, different profile of customers will be attracted to the two programs, which is what I found at these schools as well. I also noticed that School XYZ was further highlighting the better student to teacher ratio in other aspects of school operations as well -- more space in canteen for students, spacious classroom with wider desks, larger closets for students to keep their belongings, etc.

If we do a little arithmetic, we will notice that School XYZ was actually making higher contribution margins vs. School ABC, as can be seen below (assuming all infrastructure and facilities charges are sunk costs):

School ABC
Number of students per class = 54
Number of division per class: 3
Number of classes (Junior Kindergarten to Class X): 12
Total number of students (N) = 54*3*12 = 1944
Number of teachers (T) = 54
Student to teacher ratio = 36 : 1
Average tuition fee (F) = Rs. 24,000
Annual gross revenue (A = F*N) = Rs. 46,656,000
Average teacher salary (B) = Rs. 4,00,000
Contribution margin (C = A - B*T) = 25,056,000

School XYZ
Number of students per class = 30
Number of division per class: 2
Number of classes (Junior Kindergarten to Class X): 12
Total number of students (N) = 30*2*12 = 720
Number of teachers (T) = 48
Student to teacher ratio = 15 : 1
Average tuition fee (F) = Rs. 70,000
Annual gross revenue (A = F*N) = Rs. 50,400,000
Average teacher salary (B) = Rs. 5,00,000
Contribution margin (C = A - B*T) = 26,400,000

Does it mean that School ABC is undercharging and it will be better off if it started charging Rs. 70,000 per student per year. I think the answer is NO. In this scenario, School XYZ positioned itself for high willingness to pay parents, and it turns out to be the case that there were just the right number of parents in the neighborhood that were capable of paying the higher fee and appreciate better student to teacher ratio. If the supply of seats at higher price programs increases, it will lead to a mismatch with demand. Such situations are not sustainable. There are sufficient number of parents who can only afford lower prices for school programs and there are enough of those to fill up all the seats available at ABC. A Robust pricing strategy integrates Prospecting, Positioning, Pricing. There are no magic optimal price numbers!

And now Price Match Guarantees at JCP

JCP recently announced a change in its pricing strategy, which now includes a price-match guarantee.

I see two basic issues in taking this approach:

> I don't know how much the customers will trust Price match guarantees, especially when the items you are dealing with are NOT "signpost" items. Certainly such guarantees work very well with competition, as you want to signal to your competition that any price reduction war by the competition will be matched. It's a clever strategy when you yourself don't want to go low price / price war route. But hey, here JCP is the company that is going the low price route.

> With Price Match guarantee, JCP is making a conscious choice of attracting price sensitive customers -- who rank very low on loyalty. The stores will have to rely on volumes, and PMG will probably assist towards it. But now the stores will get crowded with not so profit generating customers, and due to factors like "butt-brush" effect, the experience conscious customers will seek other avenues.

Some of the pricing experts have expressed that JCP's strategies are turnaround, courageous, revolutionary, decisive, etc.; certainly JCP's strategy is very bold - as it challenges some of the traditional wisdom. I am now very curiously looking forward to Q2 and Q3 results.

Making Your Prices Work Against You... CocoBerry!!

Day before y'day, I took my son to CocoBerry's outlet close to Juhu Beach. For the first time I noticed their menuboard carefully, and was left completely surprised by their prices.

 

CocoBerry is a Frozen Yogurt chain operating in India since 2009, and has about 40 outlets in 9 major cities. Along with Frozen Yogurt, they serve Smoothies, Sandwiches, Parfaits and Beverages. They were recently in news for having acquired more than 1 million Facebook fans.

Currently, CocoBerry has priced its Small size frozen yogurt serving at Rs. 58, Medium size at Rs. 122, and Large size at Rs. 197. I am sure on a per ounce basis, Large size must be the most attractive deal, followed by Medium and Small sizes. Given that the Large size is not over priced at Rs. 197 (less than $4), there should be many more customers buying Large size serving vis-a-vis the other sizes. However, this was not the case. I spent about 20 minutes at the outlet and during this time noticed that, out of the 12 customers who visited the outlet, every single customer ordered small size serving.

Sure my sample size is small, but I am sure their sales mix distribution will be way off than the industry, which runs around 40%: 40%: 20%. By pricing their Small size significantly lower than the Medium size (Medium size is more than 2x the Small size price; 3 digit vs. 2 digit pricing), they have created a big hurdle in the minds of the customers. Now the customers are not even bothered about comparing the sizes anymore, and see if there is any price per ounce benefit. CocoBerry doesn't even mention the sizes of the cups on the menuboard, so even if a customer wants to compare the prices he or she will have to ask the person at the counter!

Instead, if CocoBerry raises the price of its small size serving to 80, and drops the prices of medium and large sizes to 97 and 115 respectively (and maybe reduce the sizes of the medium and large size cups a bit), they will be able to get the customers to spend much more money with them, and see better revenues and profitability. 

Until then they are just making their prices work against them!!

Best Faculty Award, at the hands of Prithviraj Chavan, Chief Minister - Maharashtra

Experiential Learning @ the Bottom of the Pyramid

(Contributed by:

Preeti Mathews & Megha Bagaria

Students, II^nd Year FT MBA, NMIMS, Mumbai)

The Ambernath fair is an annual fair organized on the day of Maha Shivratri, when the Ambernath temple is overcrowded with pious devotees who come there to seek the blessings of Lord Shiva. This was the venue for the field activity in the “Business at the Bottom of the Pyramid” course, and the objective was to experience the art of selling to rural and semi-urban customers. A brainchild of our professor, Dr. Anshu Jalora, all the second year students of NMIMS’s MBA Core program, who had taken up this elective, were divided into a total of 9 groups each comprising of around 6 students. The task given to each group was to choose a product which could be sold in a rural market, pool money within the groups, buy items from wholesale markets, and sell the same in the fair. An experiential marketing campaigm was deemed a must. The groups chose products like food products, stationary items, sports goods and games, while one group chose a service of applying mehandi and nailpaint.

At 5:30 am on 20^th Feb, the students left for Ambernath in an attempt to reach early and catch the customers while they were on the way to the temple. However, on reaching the venue, they found that all the stalls had been taken and there was no place for them to sell their products. So, they had to resort to techniques such as collaborating with the other stall people to share space and revenue. Some groups found places in stalls which were not occupied and set up their shop there temporarily.

The students also faced many challenges on the way. Food and water had to be carried on the trip as it was hard to get these things at the fair. Washrooms were scarce and students had to walk some distance before they could access one. Also, the customers were predominantly Marathi and spoke in the local language. Students had to learn few words of the local language to engage the customers in a more meaningful manner.

After this, began the hard task of convincing people to buy the products and service. Initially, people were sceptical of buying the products as did they not associate much value to the products the students were trying to sell. This activity was an eye opener as most teams found that their initial strategies they had come prepared with were not working in the field. They were compelled to think on the fly and make sure they didn’t lose their own investments. 

For instance, one of the groups which was finding it difficult to sell its food products had to change its strategy to one in which they convinced people to play a game of darts at a certain price and then gave away their food products as prizes. This worked well because customers attached more importance or significance to winning and paid less attention to the prize that they received. This change in strategy was an immediate success as it played well on the consumer psyche and the group was able to sell all the products it had.

Other groups followed suit and played games like snakes and ladder, pencil sharpening etc. Each one customized their offerings to the public to make it more attractive and appealing. For example, the group playing snakes and ladder customized their game by asking questions every time a player proceeded to the next stage. The questions were mostly from Bollywood films and movies, which greatly appealed to the audience, so much so that they were more eager to answer the questions rather than playing the game.

The sole group which was trying to sell its services of applying mehandi and nailpolish was also an instant success. The target group of women was kept in mind. The group did adequate preparation and took posters and pamphlets to distribute among the customers. Bright and colourful nail paints were brought to appeal to the customer segment. The group found that ladies were mostly shy and it was their husbands who were coaxing them to apply nail paint and mehandi. Also, the group realized that customers were paying them for the whole experience of someone applying nailpolish for them, being able to choose the nailpolish/design of mehandi and relaxing. Hence in the end, when the group tried selling off its nailpolish bottles in bulk, it did not meet with much success. People were willing to get nailpaint applied for Rs 5, however they were sceptical of buying a nailpolish bottle for Rs 10 even though they could have applied nailpolish 10 times over with that bottle. Hence, the lesson learnt was that an experiential campaign is very important to engage the customers at the BOP

The popularity of each of the activities organized by the students was stupendous. The games played by each group attracted huge excited crowds. One group attracted so many people that they actually blocked the flow of traffic. This resulted in the interference of the local cops who asked them to shut down their stall or move to a more suitable location.

The trip to Ambernath also saw the active participation of the french (exchange) students. The enthusiasm and commitment showed by them was commendable. They mingled with the crowd, tried learning the local language and shouted slogans like “das ka maal paanch mein” and “dah ka paanch, chamki shiny pen” along with the other group members.

As a class, the students realised that the customer at the bottom of the pyramid is no different from any other customer. The spending capacity of the local people was more than the students expected. People had no hesitation in paying Rs 20-30 to play a game of snakes and ladder. However, they are not willing to compromise on the quality of the product/service. They want value for every penny of their hard earned money. While they are shy and difficult to approach, once you have them at your stall, they examine everything with an eagle eye. They are particular about the products and services they use and make sure nothing is of sub-standard quality. Also, the students realised that language is a big factor while selling to this segment of the population. If you can speak to them in their own native tongue, it establishes some amount of instant credibility with them and gets them to atleast hear you out. Many are brand conscious, as consumerism and advertising are causing this information to seep into their psyche, and they compare what you have to offer to established brand offerings.

What the students learnt in that half a day was far more than any number of classroom sessions could have taught them. There was a marked change in the body language of the students as the day progressed. Students who started out with soft voices, hesitantly approaching customers were soon shouting slogans that overpowered that of the local vendors.  Initially unsure about the viability of their selling proposition, students were soon managing crowds at their stall and employing different methods of customer engagement.

In a particular instance, a group actually collaborated with the stall setup by a political party and used their loud speakers to promote their offerings. This just proved how the students used the whole experience to showcase their innovative skills, passion and zeal for what they loved doing.

The whole experience was one of its kind. It turned the students into professional sellers and marketers. It filled them with enthusiasm and passion for selling their products. They changed strategies according to consumer sentiments. They persevered till they sold their last product. They approached customers with zeal, passion and confidence. Some students even realized their hidden talents. Almost every student in the class felt that he or she was now better prepared to develop marketing strategies for serving BOP markets.This exercise in experiential marketing truly resulted in experiential learning for the students!

At the end of the activity, out of the 9 student teams, except for one team that went into a loss of 50 rupees, every other team either broke-even or ended the activity with profits. Each team felt that they could have sold double the quantity they had planned and saw tremendous opportunity in the market there. They regretted not carrying more inventories as few teams had sold out all their products within one hour of reaching the fair.

Ultimately the success lay not in the profits but in the sheer pleasure of being able to sell to the customer at the bottom of the pyramid.

PWYW: Honor code or fear of embarrassment?

Last week I decide to verify the hypothesis that I had put in my last month's blog entry "Pay What You Want - Is it Honor Code that makes this work, or is it something else?", which was "It is the fear of embarrassment that makes most people pay a fair price, honor codes were buried way back in school days!!"

I picked two groups of students, and gave the following problem to them:

Group 1 got the following problem:

"Let's assume Sweet Evenings is a fine dining restaurant in the Juhu area. This is a special restaurant that does not have fixed prices for its menu items. In fact, it allows the customers to pay whatever they want for the food and beverages they have consumed.

You love this place for the live music played here and the impeccable service. Today, you have taken your long time friend from work to this place, and together you consume a bottle of wine, two-entrees, salad, bowl of soup, and a dessert. How much would you pay for both of you?"

Group 2 got the same problem, except for the last statement:

"Let's assume Sweet Evenings is a fine dining restaurant in the Juhu area. This is a special restaurant that does not have fixed prices for its menu items. In fact, it allows the customers to pay whatever they want for the food and beverages they have consumed.

You love this place for the live music played here and the impeccable service. Today, you have taken your long time friend from work to this place, and together you consume a bottle of wine, two-entrees, salad, bowl of soup, and a dessert. How much would you pay for both of you? Sweet Evenings has a small display screen behind the bartender where they display the table number when a payment of Rs. 1200 or more is made."

Since the only difference between the two groups is that small screen behind the bartender, which just displays the table number, both the groups should be looking at paying about same amount of money to Sweet Evenings. The office colleague won't know the price paid in either of the situations. In both the situations, the person paying low price is not getting singled out.  But still, just this minor, probably irrelevant, difference lead to first group of students averaging at Rs 1,155(~$23.11), while the second group averaged at Rs. 1497(~$29.95). That's a difference of 29%. In the first group, only 36.84% of the students responded with payment of Rs 1200 or more, while in the second group this number is 75%.

Fear of Social Embarrassment at work here!!