My favorite neighbor! I can definitely appreciate the point about superior quality. The other side of the coin to quality is price. Consumers make purchases when the perceived quality more than justifies the asking price. This is certainly true of L.L. Bean products and touches on the first of five standard objections in every sales process (from The Personal MBA by Josh Kaufman):
1) Loss Aversion: It costs too much. Makes spending feel like a loss.
2) It won’t work.
3) It won’t work for me.
4) I can wait.
5) It’s too difficult.
L.L. Bean overcomes each of these objections through its pricing strategy, quality, and/or customer service.
– Objection (1) is dealt with because perceived quality > price.
– Objections (2) and (3) are usually addressed via Social Proof. L.L. Bean’s exploding popularity on social networking sites like Pinterest in the last 3 years checks that box.
– Objection (4) is best dealt with by educating the customer on why they need what you’re selling, and L.L. Bean’s Outdoor Discovery Schools are an opportune forum during which to do so.
– Objection (5) is best dealt with via “Risk Reversal” – transferring the risk of purchase from the buyer to the seller – thereby reducing the final “Barrier to Purchase.” This is where L.L. Bean’s customer service and highly accommodating return policy comes into play. Your final question about when does customer service essentially become “too” accommodating to the point where the bottom line is adversely affected is a logical one. However, I think in an age where everyone is hypervigilant for the asterisk at the end of company guarantees, L.L. Bean is wise to maintain its customer service policy to perpetuate trust in the Risk Reversal they offer to consumers.
Nice post, Danielle. I’ve been familiar with REI for many years, but I never realized it was a co-op. I was thinking about the stress REI places on membership sales, and it is somewhat counterintuitive to me. Membership sales are more “costly” to the store than non-membership sales. Last year, REI paid $123M in dividends to its 5.5M members, or roughly $22/member. Ironically, the most profitable business would involve collecting membership fees from customers A, B, and C but selling its products to non-member customers E, F, and G. Basically, this was a long-winded way of asking why membership sales are a key performance metric for employees.
Nice post, Bruce. Who doesn’t love Chick-Fil-A? I had a thought similar to Peter’s. We saw in LEAD’s MOD Pizza case that the company is at a crossroads in deciding how to preserve its culture given its plans to rapidly expand. MOD Pizza’s hiring process, though not as exhaustive as Chick-Fil-A’s, presented an interesting dilemma for them in that it is a challenge to hire so deliberately while trying to expand so rapidly. Compromising company culture for growth was a real concern. Chick-Fil-A has historically chosen not to grow just for the sake of growth but now has its sights set on rapid expansion in cities like Chicago and Los Angeles. I hope their vetting process remains intact because, as you mention, there is otherwise a low financial barrier to becoming an operator. Partnering with the right operators is crucial to preserving the culture.
I’m curious how IKEA’s desire to learn more about its customers through the “click and collect” model aligns with their current operations. Whatever cost savings are realized by the procurement teams being located close to suppliers are probably countered, at least in part, by the need to deliver smaller, more frequent shipments from their distribution center(s) to these smaller locations. Since they’re still in the learning phase for these locations, local customer preferences are likely not fully understood, which could translate into over/under-stocking of certain SKUs. Just, as you say, IKEA uses its customers as free labor, they are also using customers as a free delivery service. The “click and collect” location in Norwich charges its customers up to £10 to pick up their own orders, perhaps in an attempt to recover some of the added costs incurred by the extension of their supply chain to these locations.
Forecasting demand is inherently inexact, but L.L. Bean did alleviate its 2007 seasonal inventory overstock problem after their investment in inventory management. Supply had been outstripping demand for those seasonal items, and that is no longer the case. The question becomes has the pendulum swung back too far the other way. As you point out, demand has outweighed supply for its iconic boots over recent years. It is interesting to note that, after existing for decades with predictable purchase patterns, its boots experienced an uncharacteristic spike in demand (>57% in 1 year’s time) after exploding in popularity on social networking websites like Pinterest. That “spike” has yet to subside. The company has responded by flexing its labor policies during the holiday months when they essentially double their manufacturing employee base. Point being, no company will ever forecast demand perfectly, and it would have been impossible to predict the boots’ surging popularity in advance. The company will need to look into how they can scale manufacturing this labor-intensive product if demand continues to outweigh supply, which as you say, will not be easy. However, at least their separation of inventory into “core” and “non-core” pools isolates the problem.