Why does it make good business sense to give money away for free?
How does food retailer Gousto keep their customers hungry for more by doing it regularly?
And why should you reward the ranters as much – if not more – as the ones who show support?
This is Zonal Marketing – a series which explores how innovative brands are shaking up their industries with extra-ordinary marketing.
In this episode I’m exploring customer service – the hidden gold in your marketing mix. And I call it ‘hidden gold’ because it’s the part that so many brands neglect or misunderstand. It’s not included in the typical sales funnel (which many people mistakenly think is a good model for planning your marketing).
And yet, done well, looking after your customers is not only a great way of not losing money. It actually contributes to your company’s value and future cashflow, and can actually be a cheaper way of picking up customers than advertising.
That’s why – contrary to what some people will tell you – it’s actually smart to get defensive. And by defensive, I’m of course referring to my Zonal Marketing model where, like a sports manager, you have two priorities when building your marketing formation. Of course you have to attack well (where making sales are the equivalent of scoring goals). But you also have to defend well. Losing customers is like conceding goals and a team with a leaky back line can rack up a cricket score for all I care. It’s still going to struggle to win the league.
In the next section, I’m going to detail how one company has mastered the art of taking negative customer initiated feedback and turning it into all-but-guaranteed future income. It’s like the marketing equivalent of Virgil van Dijk cutting out a critical pass and then spraying the ball forward for his own attackers to run on to.
POPPADUM PALAVAS
So this is a personal example. My family order three meals a week from Gousto – the meal-kit retailer. For those not familiar with the concept, you use an app to select as many meals as you want for the coming week. Gousto then send a box to your door which contains the ‘kits’ you need to cook the meal yourself, complete with a recipe card and the correct number of ingredients.
Except that sometimes they don’t. Every now and then, you’ll open a box and find that you’re missing a tomato. Or a sachet of spice mix. Or a pack of poppadums. Indignant, you turn down the heat on your rice, whip out your phone, bang the app icon and get prepared to shout at some poor customer service assistant. How are you going to consume your curry without the customary poppadum accompaniment?
You follow the process. “Which meal had an issue?” “Which ingredient?” “What is the problem with the item?” Click ‘continue’ to make your claim.
What’s waiting on the next screen? Well, rather than some pathetic, “Thanks for your feedback, we’ll be in touch shortly” message you’re told you’ve had the cost of the product taken off next week’s payment amount.
…
…
What? No argument? No need to provide photographic proof? No hassle?
(You hear that boiling pot of rice start to simmer down.)
“What a painless experience”, you think. “How nice that they just trust me”… “I wonder if people take the mick with this”, you think… “Maybe I should”. And then you don’t. Because you like Gousto. And you appreciate being treated like an adult. And you don’t want to spoil that for everyone else by being a bit of a dick.
YOU’ve got what you wanted – an acknowledgement and a form of compensation. You can probably survive without a poppadum just for tonight.
Meanwhile, Gousto have retained a customer – maybe they’ve even gained an advocate – and all the while, they aren’t actually out of pocket. All they’ve done is secure that I’m definitely going to pay them my thirty quid… OK, £29.20… next week.
And depending on how they’d handled my complaint, that wasn’t necessarily a given at the start of my poppadum palava.
REWARD THE RANTERS
Perhaps you heard my Gousto example and you think they’re being naïve. Perhaps you’re thinking that YOU would take the mick and claim a couple of quid back each week just to see what happens. Perhaps you’re even downloading the app right now and setting up a subscription. In which case, no worries, Gousto – I just picked you up another paying customer.
And this is an argument that Customer Service guru Jay Baer discusses in his book, ‘Hug Your Haters’. Quoting the founder of Fresh Brothers Pizza – a company that regularly gifts money off a next purchase to customers – he writes:
“These people are providing feedback to your business for free so rewarding them with a 10 or 15 dollar gift certificate makes them feel great, first of all. But it’s just really smart… It’s really an easy way to build a relationship with people and to get them to be even further invested emotionally in your company.”
Furthermore, Baer interviews fellow marketer, Gary Vaynerchuk who highlights why it actually makes financial sense to follow the Gousto method. Addressing the question of ‘What if everyone took advantage of such an offer?’, he says:
“Who cares? That’s the cost of doing business. I wish everybody would give away free gift cards because it would provide a better cost of new customer acquisition than marketing does. It’s literally better to give away free gift cards to everybody than to do a broad expensive marketing campaign.”
What’s the lesson that small businesses can take from this? Simply: give money away. And not just to the complementors. Give it to the complainers, after all they’re the ones who are helping you improve your service. And if you’re a small company you’re probably finessing your offering anyway and could do with the advice.
I’m not talking about handing out five pound notes. But offering 10% off their next purchase practically guarantees you the 90% of the money they spend on that thing. 90% that you probably were never going to get if you’d treated the customer badly and they’d decided never to come back.
And if they don’t use their gift card? Well, then, all you’ve lost is the cost of the printing. And THAT is why you should give away money for free.
