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Iowa Commerce
is the official publication of the
Iowa Association of Business and Industry.

Customer Is King

The age-old adage that the customer is always right may not be completely true, but companies that treat their patrons like royalty are earning invaluable loyalty.

Story by Denise Edgington; Photographs by Paul Gates

There once was a day when business deals were sealed with a handshake. Credit was extended based on a name, not on account balances. And the customer was never wrong.

While times have changed, the wise businessperson still shakes a hand–but only after the papers are signed. And the passing of credit is given only when due. Yet, many feel, the customer continues to rule.

Marti Ann Schwartz, the Oregon-based, self-titled Consummate Consumer, travels around the country giving her spiel: In the old days, businesses understood that without customers they wouldn’t have their businesses.

"Today, nobody believes the customer is right," she claims. "Not even the customer."

Iowa business owners beg to differ.

The Early Days

Gone are the days when doctors were considered God-like and shopkeepers, the smartest men on earth.

Today’s consumers are brighter, wealthier, and choosier. But this transformation didn’t occur overnight. It may have happened quite by accident in the ’50s and ’60s when shoppers began earning S&H Green Stamps with their purchases. For absolutely nothing, or so it seemed, one could pore over catalogues, ordering the heart’s desire.

Coupons became popular. A few cents off of any product would nearly empty store shelves. It was a time when consumers really began to expect more for their money, says Joyce Gioia, president of The Herman Group, a North Carolina consulting firm.

"The problem with adding value is that the threshold keeps getting raised," she says. "If you have two innovative ideas, you’d be better off to use one now and save one for next year. Because as soon as you announce one, someone else will offer it and it’s no longer more than what the customer expected."

Gioia offers this example: American Airlines came out with its AA Advantage Program in the ’60s. It was a creative customer loyalty program. Travelers would earn a free ticket for every 25,000 miles flown.

Soon thereafter, Continental rolled out its loyalty plan: A free ticket with every 20,000 miles traveled. Suddenly, American Airlines’ program wasn’t quite so special.

Free For All

It’s a wonder Henry Ford was successful at all. When he introduced the Model T, each was an exact replica of the rest. He said his customers could have any color they wanted–as long as it was black.

Ford wouldn’t last long in today’s marketplace. According to the Federal Reserve Bank of Dallas’s report, in the early 1970s there were 654 vehicle styles. There are now more than 1,200. And they come in every color from white to jade to azure blue.

The number of available products and services is phenomenal. Grocery stores carry about 10,000 different products; manufacturers put out nearly 5,000 new ones a year. There used to be just a handful of brand name hotels. Now there are more than 200.

Furniture formerly consisted of tables, chairs, sofas, and beds. Add entertainment centers, recliners, curio cabinets, and computer desks and credenzas to the mix and consumers are shopping for furniture more than once or twice an adult lifetime.

"You will always have your primary pieces," says David Merschman, president of Des Moines’ Homemakers Furniture. "But now you have all of these new pieces. Bedroom sets must have companion pieces, like lighted mirrors or Mr. and Mrs. dressers. Many items have hidden compartments to hide valuables.

"Curio cabinets always sold well on Mother’s Day and Christmas. Now, every time somebody gets the urge to collect something, they buy a curio cabinet. People that collect $4 and $5 Beanie Babies spend $400 to $500 to display them."

Retail sales have been either steady or rising for the last several months. In May, sales totaled a seasonally adjusted $242.2 billion, according to the Commerce Department. In fact, the May numbers were 7.8 percent higher than during the same month of 1998.

Almost every market is making gains. Auto sales jumped 2.5 percent. Furniture rose 1.1 percent. Apparel, accessories, food, and drugs continue a gradual climb.

The reason for steady growth lies partially in the Baby Boomers’ rampant spending habits.

"The Baby Boomers grew up in an age of aplenty," Gioia says. "They feel that they don’t have to put as much money away, and they spend a lot on their kids. The Baby Boomers are expected to inherit $7 trillion from their parents, but the children of the Baby Boomers will be much less fortunate.

"The Boomers are out buying new cars, new furniture, and new appliances whenever they tire of the old. All of that is literally fueling the consumption in this country, which is fueling the economy, which is fueling competition."

All The Wiser

People may be spending more, but they’re more knowledgeable about what they’re buying.

"There is a vast amount of information available to the buying public right at their fingertips," says Sheree Clark, co-owner of Sayles Graphic Design in Des Moines. "Legislation has contributed to this by providing guidelines for labeling products, especially food products, over-the-counter drugs, and liquor labeling."

Customers, says Arthur R. Bauer, American Media CEO, were infinitely more naïve than they are now. "People would look at a how-to video and it had to be reasonably good. But in our industry, we’ve had to make dramatic changes. We are competing with Hollywood and it’s putting out quality feature films like Jurassic Park.

"There was nothing like that 10 or 12 years ago, but now people have come to expect Jurassic Park quality in their training videos."

Jeff Chelesvig, general manager of the Des Moines Civic Center, understands. He’s challenged each theater season with providing the best quality of shows–on- and off-Broadway–that he can muster. People, he says, will pay for quality.

The president of Adventureland Amusement Park works hard to provide fresh entertainment for its 550,000 visitors each season. "Our business hasn’t changed greatly," says Jack Krantz, "but we’ve changed. We have to bring something new to the people each year."

For instance, Krantz added a circus to the park three years ago. The first year it featured trapeze artists and animals. Last season, it was made up mostly of exotic animals. Guests over the 1999 summer saw practically all trapeze acts.

"Consumers are still looking for wholesome family entertainment, and for that reason, amusement parks have become even more popular in the last ten years," he says. "Now, it’s not unusual to find three generations coming through the gates at one time.

"I’ll go to the carousel, a kid’s ride, and I’ll see grandma and grandpa sitting on horses, riding around, licking ice cream cones. An amusement park is one of the few places that everyone can still be a kid."

Delivering The Goods

Tom Boesen, former president of Boesen the Florist and now senior vice president of its parent company, Gerald Stevens Co., says products in the floral business have changed little. The movement has been in speed of delivery. A call to an 800-number can send flowers around the world in hours.

"Some people call the florist at 9 a.m. wanting their flowers delivered by 10. We’re not making pizzas here and there are too many recipes to do that, but we try."

Boesen says that in days past, one would be hard-pressed to find a florist open on a Sunday. Now, orders are taken via phone by live operators 24 hours a day. Bouquets stand ready in many supermarkets seven days a week. And the internet is available at any time.

By the year 2002, more than $500 billion in commerce is expected to transpire over the internet. According to eBusiness World of Phoenix, customers will benefit from greater choices and enhanced convenience. Brands will become increasingly important, costs will drop, and competition will multiply again and again.

"The internet will radically change the way we do business," agrees Bauer. "Imagine going to a car dealer, getting a price, clicking on the internet, and finding the best price in the country.

"It’s kind of scary for the businessperson. We’re going to have products sold like commodities–at little profit levels. I’m not selling corn or auto parts. We do the research. We assemble the product."

A study by the Chicago-based Leo J. Shapiro & Associates reports that 11 percent of all households bought goods over the internet during the 1998 holiday season. Of those people, 72 percent said they would increase their number of purchases this year. And nine percent more people will be buying off the web in the next few months.

Bauer doesn’t worry that the internet will eliminate shopping as we know it. The social aspect of shopping will remain.

"I have a 1924 article here from Popular Mechanics," he says. "FM radio had just been introduced. The article says that within a decade schools will begin to close because kids will get up and listen to the radio and become educated.

"Of course, that hasn’t happened. Technology may get bigger, but everything else around grows too."

In Search of the Hook

Most consumers drown in marketing messages each day. From billboards to radio and TV commercials to direct mail to internet advertisements to telemarketers to storefronts, they’re everywhere. People learn very quickly to tune out these messages, says Clark. Her challenge is to help businesses find non-traditional approaches to marketing.

"Everybody is clamoring to get attention," she says. "There are ads on the back of bathroom doors and in some airplanes. You have to find a new avenue for marketing."

Take the toy store Alphabet Soup. At Easter, it created a ready-made Easter basket. Not necessarily a novel idea, but certainly one that saved time for its customers. Especially for those people who don’t have kids of their own, says Clark.

The Civic Center of Greater Des Moines dug into a hat of old tricks when it presented a direct mail piece that promoted its new subscription series. Each included a CD with a sampling of the musical scores for the upcoming shows. It was the old "try it before you buy it" theory, but Clark says it was very clever and, perhaps most important, effective.

"Sometimes the toughest thing for us to do as marketers is to convince our clients that risk taking is important. Companies must stay innovative to get their messages to the public."

Clark cites Des Moines coffee house Timbuktuu. Owner Charlie Bienert put his trust in Sayles Graphic–and it worked. All of his furniture, packaging, menus, and wall designs were custom made. Even the company name gave Bienert a sound and look all of his own.

Casey’s General Stores CEO Don Lamberti says his company’s success lies in remaining constant. His customers expect clean stores, adequate parking, and the ability to get in and out quickly. He’s responded by giving them time.

The chain of 1,190 stores eliminated barcode scanning. "Scanning created lines at some of our busiest stores. Our clerks could key in three or four items before customers could set them on the counter. Even though we like the category management that scanning provides, we’ll take care of it at the distribution center rather than at the expense of customer time."

At one time, Lamberti says, people would wait for an available gas pump if the parking lot were full. Now, even loyal customers will drive by if they can’t get in and out immediately. Lamberti’s theory of speedy service is working. This year, Casey’s will sell 91 million doughnuts, 7.3 million pizzas, 50 million cups of coffee, and 700 million gallons of gasoline.

Bowing to Desire

Consumers really do know what they want. They want value for their money, to save time, and to be treated with respect. "Customers aren’t always right," says Schwartz. "But if you treat them as a valued part of your business, they’ll beat a path to your door."

Gioia suggests that businesses teach their employees how to create experiences for guests. Educate salespeople to become consultants. They must know your products from inside and out. "People love to buy, they just don’t like to be sold," she says.

An owner of a coffeehouse in Greensboro created games, like crossword puzzles and treasure hunts. Each game helps her workers learn everything there is to know about the products she sells.

"Information is important all the way around," says Gioia. "We’ll see more ‘events’ taking place at retailers. Boutiques will offer seminars for women, similar to what bookstores are known for. Health clubs are branching out beyond fitness. They’re holding seminars for nutrition, time management, and stress reduction."

At the Des Moines-based Bankers Trust customers are getting one-on-one treatment–courtesy of the return to relationship banking. Staff positioned in cubicles have replaced teller lines.

"By building relationships, we’ve increased the number of our product sales, and we’ve decreased wait time for our customers," says Senior Vice President Paul Erickson. "We have more people performing more job functions, and the benefit is that customers can come in and sit down to make a deposit."

The bank promotes its customer-friendly atmosphere with a locally owned name guarantee. If it ever changes its name, customers will receive $100. The tactic is paying off. In just four months, Bankers Trust added 2,400 new checking and savings accounts.

Loyalty offered reaps the same, according to Gioia. Give people what they don’t expect–more than your competitors down the street. Offer special pricing. Give a perk or two. Make each customer feel that she is the most important person in the store. "Consumers want to feel good and they want to feel like their dollars are well spent," Gioia says. "If they don’t feel that way, they’ll pick up their pocketbooks and move on to your competition. It’s as simple as that."

–Denise Edgington also wrote the piece on recruiting a minority workforce in this issue.

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©2001 Iowa Commerce, Des Moines, Iowa

"Today, nobody believes the customer is right."