Publix & Wegman's: Engaged Employees, Happy Customers

 Last month, Beth Kowitt penned a good article for Fortune about the unique organizational culture and work practices at Publix and Wegman's.  She tries to explain why the companies are highly popular with customers and well-known as good places to work.  She points out that employee turnover is usually very high in the supermarket industry, and it has only gotten worse during the pandemic:

Most striking about the Publix and Wegmans streak is that supermarket jobs, already notoriously low paying, have become even more grueling over the past two years as workers put their lives at risk by showing up every day in the middle of a pandemic. Layer on the stress of dealing with disgruntled customers, and it’s clear why so many workers have reached a breaking point. In December 2021 some 786,000 retail employees quit—a record in an industry already plagued by high turnover. The sector has become the melting pot of all the big labor market issues of our time: minimum wage, the Great Resignation, a desire for remote work and flexibility, the childcare crisis.

Kowitt explains some of the things that Publix does differently.  She stresses that Publix has not responded to the Great Resignation by trying to replace humans with technology. Publix is privately held and still partially owned by the founding family, providing some protection from the usual pressures faced by publicly traded companies. The chain invests heavily in worker training so that the employees know the products and can converse with customers about those items.  The firm has a "promote from within" culture. Kowitt writes that, "Store managers have an average of 24 years at Publix, and 90% of them started out working on the floor." She also explains that don't tend to hire meatcutters from other chains. Instead, they bring on entry-level employees into the meat department and train them how to become meatcutters.  Finally, the employee equity plan provides real skin in the game for everyone and creates an incentive for people to build their career for the long term at the company.  Kowitt explains:

"With 230,000 employees, Publix is by far the largest worker-owned company in the U.S., and that has a lot to do with why people stick around. Employees who work at Publix for a year and at least 1,000 hours receive shares that can only be traded with the company. Just like at a startup where workers are given equity, the model entices people to stay. It’s money on top of their salaries (last year, Publix employees who qualified got the equivalent of 8% of their earnings). But Jones says Publix benefits, too. By having skin in the game, workers are invested in the company’s success. It’s an ownership structure that has turned many Publix associates into millionaires—the kind of lore that gets passed down."

As I read about Publix, I thought about one other key benefit of largely developing their managers from within the company, rather than hiring from the outside.  The managers have a much easier time empathizing with the front-line employees. Why?  They have been there!  They have worked at the checkout counters, bagged groceries, unloaded trucks, and stocked shelves.  Having done that work creates a genuine understanding of the obstacles and challenges front-line workers experience every day.  As companies think about the benefits of developing their talent in-house rather than constantly going outside to attract managers, they might consider the power of empathy and the inherent advantage of building empathy by having people promoted from the front lines to managerial positions.  

Why Companies May Benefit from More Transparency about Product Drawbacks

Source: Pixabay

Most companies, quite expectedly, focus intensely on the positive attributes of their products and services when communicating with customers.   They market all the benefits, and typically, they minimize any discussion of the limitations or drawbacks of the product. After all, who would want to shine a spotlight on negative attributes of your products? 

Well, Harvard Business School scholars Ryan Buell and MoonSoo Choi decided to challene the conventional wisdom.  They sought to examine whether a bit more honesty and transparency might actually be beneficial for companies.  Buell and MoonSoo Choi published their findings in a paper titled, "Improving Customer Compatibilitywith Operational Transparency."   

The scholars worked with Commonwealth Bank, a large Australian financial services company, to conduct a randomized field experiment.  On the bank's website, potential new customers received one of two offers: one highlighted the best attributes of the company's credit card, while the other also mentioned key drawbacks that firms often tend to place in the fine print only.   In short, the company made explicit some of the key tradeoffs inherent in the company's strategy and product offering.   In other words, you get these wonderful features, but here's what we don't offer, or what we don't provide at the same level of service.   Think about Southwest Airlines... we offer you on-time flights, low fares, friendly service, and no baggage fees, BUT we don't assign seats, have no first class and no meals, and won't transfer your bags to other airlines.  The company makes the trade-offs quite clear to consumers.  

The scholars tracked customer behavior at Commonwealth Bank for the next year.  What did the researchers find?   HBS Working Knowledge summarized the key results:

"The researchers found that people who opened an account after learning about a card’s downsides spent 10 percent more each month than customers who heard only the benefits. Their nine-month cancellation rate was also 21 percent less, and they were 11 percent less likely to make late payments on a month-to-month basis... Although the team didn’t probe why customers spent more, they suspect that providing more information helped people choose products that were more compatible with their financial needs, creating a better customer experience."

Now, clearly, companies need to be careful with this added level of transparency.  They can't just dump a bunch of negative information on customers and hope to succeed.  However, they can think about how providing more transparency may help them gain consumers' trust and help customers self-select in a way that creates a more enduring and better fit between company and customer.  

Nordstrom Unlocks Its Changing Rooms

Source: NY Times

Luxury retailer Nordstrom continues to innovate in hopes of surviving and thriving in the embattled department store business. The Wall Street Journal reports today on many of the experiments that the firm is conducting. For example, Nordstrom chose to stop locking its fitting rooms recently. The WSJ reports on the change:

In November, the company unlocked the fitting rooms in its department stores. Many retailers keep them locked to discourage shoplifting, but the practice annoys customers. Although theft has increased slightly since Nordstrom made the change, executives say, the retailer is sticking with the new policy.  “Analysts don’t like it,” Jamie Nordstrom said. “But I’m thinking about the next 50 years, not the next quarter.”

I've always found these types of moves interesting.  Typically, managers conduct cost-benefit analysis when they make key decisions.  However, in certain cases, the costs can be quantified rather easily, but the benefits are not as well-defined.  Many managers would not go through with this decision because the cost-benefit analysis does not justify it.  Here, the costs of increased theft can be measured precisely.   The benefits from increased customer satisfaction may be much more difficult to evaluate and quantify.  Still, Nordstrom knows that its loyal customers do not appreciate the locks on the changing room doors.  Will this small change enhance customer loyalty?  Will people be more likely to try on multiple outfits now?  Might it increase the size of the average transaction per store visit?  Some of these things can be measured with time and some creativity.  In certain cases, though, managers simply have to side with the customer, recognizing that it may not pay immediate dividends.  In the long run, Nordstrom won't win against online competition through better assortment or lower prices.  They have to create a superior in-store experience.  This small step appears to be moving in the right direction on that front.  

Engage Your Employees By Helping Them Solve Customers' Problems

Mark Lukens, Founding Partner of consulting firm Method 3, has a good article on employee engagement at Fast Company. Lukens makes the point that senior executives often "throw perks" at employees in hopes of increasing engagement. It does not work. Boring work, a lack of autonomy, and inadequate feedback from managers cannot be overcome simply by offering a few perks. Lukens argues that we can increase employee engagement by helping our front-line works serve customers more effectively. Here's an excerpt:

Employees at the frontline collectively have the best knowledge of what customers want and what bothers them. This is what they care about. If they can satisfy those customers then they will be satisfied in their jobs, feeling like they’re achieving something. To create real engagement start by talking with those workers about what their customers want and the obstacles to their satisfaction. Empower your customer-facing employees to solve these problems whenever possible, and as they feel more successful and deal with happier customers, they’ll also feel more engaged.

The Customers You Do Not Want

New product launches often do not succeed.   That's the unfortunate reality facing many business leaders.  Strong early sales presumably are a leading indicator of a profitable success story to unfold in the near future.  However, some new research suggests that not all early sales, and all early customers in particular, are a positive thing.  Scholars Eric Anderson, Song Lin, Duncan Simester, and Catherine Tucker have conducted a new study examining new product launches.  They have identified a set of customers that they call "harbingers of failure."   If these customers are buying your new product, you might not want to celebrate... you may want to become concerned, quite concerned.   Here's an excerpt from Kellogg Insights: 

The researchers found that just 40 percent of new products are still in stores three years later, a number in line with previous estimates. But critically, a product’s chances of succeeding depend not only on how much is sold but also on who is buying.  The surprising finding is that when sales increase to a segment of consumers whom the authors label “harbingers of failure,” then the new product is more likely to fail.  This finding contradicts nearly every metric of new-product success: How can more sales signal that your product is about to fail?  

Who are these harbingers of failure?  Apparently, there are a set of consumers who consistently demonstrate unique niche tastes.   Their preferences clearly fall outside the mainstream.   According to Kellogg Insights, "Harbingers with a history of making four or more repeat purchases of a failed product are nearly twice as likely as other customers to buy another product that fails."  If these harbingers are involved in your early market research, they may convince you to launch a product that is ultimately going to fail.  So, you have to be on the lookout for harbingers long before launch.   The scholars suggest talking to consumers about the OTHER PRODUCTS that they like, not just the product that you are launching.  If they like mainstream popular products, you are probably on solid ground.  If they cite other niche products that have not become hits, you should be cautious.  They might be harbingers of failure. 

When Should You Respond to a Negative Review or Online Complaint?

A customer has had a negative experience.   He or she takes to social media to register a complaint.  Does your company have a fast response capability?   How do you decide when to respond to a poor review?   If you think that you move quickly, check out this amazing story from a recent Fast Company article by Stephanie Vozza:

While dining at the Mexican fast food chain Boloco, a customer sent out a tweet complaining that the music was too loud. Boloco, which operates 22 locations in New England, prides itself on responding to all feedback within 24 hours. This time, they set a record. “We saw the tweet right away, called the restaurant and told the staff to turn down the music,” says Allison Doyle, director of marketing for Boloco. “We also described what the woman looked like from her Twitter picture and had the staff deliver a cookie to her. Then we retweeted her tweet, adding the word ‘done.’ She was floored.”

As the article rightly points out, not every complaint or negative review warrants an immediate response.  Sometimes, people are simply expressing a preference, and that person may not be in your target market.   Most customers in your target market may, in fact, like a particular attribute of your product or service that is the subject of a negative comment.  You do not want to overreact in that case.   Some situations may require a bit more time to study and evaluate.   In those instances, you may wish to let the customer know that you are investigating, without offering a particular remedy.   You need to do your due diligence first before offering a knee-jerk reaction via social media to a negative comment.  

Whose Needs Are You Serving? WEEI vs. The Sports Hub

Regular readers of the blog know that I have commented several times on the fascinating competition that has unfolded in sports talk radio in Boston.   For many years, WEEI had a dominant position in the Boston market.  Entrants came and went, unable to topple the station or even to survive in the market.  Then, the Sports Hub (98.5) came along and knocked off the powerful incumbent.  It took a substantial ratings lead in many key time slots.   In the past, I've commented on how 98.5 did things a bit differently, while also focusing on a few important customer segments, so as to be successful.  

I've noticed one other lesson from this interesting competition.  In the mornings, the Toucher and Rich show on 98.5 has overtaken the once-popular Dennis and Callahan show on WEEI.   They became successful for many reasons.  However, one key thing that they have done is bring on guests in a different manner.  On the WEEI show, most of their prominent guests come on the show between 8am and 10am.  On the Toucher and Rich show, many key guests actually come on the show prior to 8am.   Why is this important?  Well, I've noticed that I miss many of the WEEI guests as I'm at work by 8:00am or shortly thereafter.  Why does WEEI have its guests on after many audience members are already at work?  I think, in part, it's because the guests prefer the later interviews.   They don't want to get up that early, or they aren't yet prepared to be interviewed on radio at that early hour.  WEEI is serving the needs of its guests, but at the expense of its audience members!   The audience wants those early interviews.   The Sports Hub has delivered on that previously unmet customer need.

What's the lesson for other businesses?   Think about whose needs you are actually fulfilling.  Yes, you have multiple constituents.  However, at the end of the day, the customer's needs must come first.  You never want to leave their needs and desires unmet because you are focused on other priorities. 

Do Customers Prefer Products with Small Flaws?

The Ideas section of the Wall Street Journal Weekend Edition reported on an interesting new consumer behavior study.    The scholars (Danit Ein-Gar, Baba Shiv, and Zakary L. Tormala) examined how people reacted to small flaws in a product. 235 undergraduates participated in this study (ok, so right away, we must acknowledge that one could raise validity concerns based on the sample).   The researchers asked the students if they wanted a chocolate bar.  The students could see, through the wrapper, that some chocolate bars were slightly broken, while others were not.   The researchers intentionally approached some students that were preoccupied, while others were not.   The preoccupied students bought more flawed chocolate bars than perfect ones (by a significant margin).  The non-preoccupied students tended to prefer the perfect chocolate bars. What accounts for these findings?  The scholars argued that the flaw caused the preoccupied students to take notice, to pay attention more closely, and thereby to purchase more chocolate bars.

What's the implication for companies?  I certainly don't think it means that we should intentionally produce flawed products.  However, I do wonder if companies that offer early-stage products might benefit by actively engaging customers and asking them to offer feedback on flaws and potential improvements.  Being very direct about possible flaws, and asking for customers to help, may draw their attention to the product in a crowded, noisy marketplace (i.e. one in which consumers are often preoccupied!). Do you see other implications of this research?  If so, I hope you will post a comment and share your thoughts.

Panera Knows Your Name

Has anyone noticed that Panera Bread employees always greet you by name if you have a MyPanera card? Why don't other retailers with loyalty card programs do the same? It's a small gesture, but it's truly wonderful. Here is how Panera does it: They ask for the card before you order. Then, they can use your name throughout the rest of the process, including when they inform you they your food is ready. It's amazing to me that other retailers aren't taking this approach. So simple, such a nice touch.