When No Price Is the Right Price

Below is an an article from the May edition of my free Buzz Bulletin monthly online newsletter. To subscribe, please sign up on my website.

I can never get enough ice cream so I was chagrined last year when Dreyer’s, which makes some of my favorite flavors, shrunk their most popular container from two to 1.75 quarts. Last week, Dreyer’s cut their standard ice cream packaging even further, from 1.75 to 1.5 quarts, with only a small reduction in price. Pretty soon, we’ll be taking magnifying glasses to the grocery store.

As people reduce their purchases in these tough economic times, Dreyer’s is just one of many companies that believes that shrinking packaging is a smart way to keep prices down while enticing people to buy more. However, other businesses have discovered an entirely different lesson: reduced pricing or even free products and services can be a much better way to engender customer loyalty and create buzz.

As soon as the weather gets nice in Portland, I feel like riding my bike. Invariably my tires are flat or I’m facing other mechanical nuisances. Two weeks ago, I started calling local bike shops to ask how much it would cost to repair a flat and tune up my bike as well as my wife’s. Three places quoted me prices in the $75 to $85 range. However, the Community Cycling Center in Portland, Oregon told me to bring my bike into the shop and they would see what it needed.

Because I was in hurry, I dropped the bike off and told the mechanic to do whatever he thought was necessary to get it working as smoothly as possible. When I returned, the mechanic told me that he only fixed a flat and put cloth tape on the inside of a wheel which is always getting flats as a preventative measure. The mechanic said that he looked over both of our bikes carefully and that there was no reason to do a tune-up on either bike since they were operating without any problems and the brakes were safe. I left the shop after paying a $14 bill, instead of the $150 I had expected to pay.

I had a similar experience recently with our Subaru Outback. After noticing some minor rattling coming from the left front tire area, I took the car to Superior Import Repair in Portland and left it there to see whether they could figure things out. The mechanic said that they drove the car a couple of miles, listened to sounds coming from the car with a stethoscope, and couldn’t find anything wrong with the car. While he was looking at the car, he checked fluid levels, brake pads, lights, and other items. He made me feel great when he said that our car was running so well that he would feel confident driving it across the country. The bill: $0. When I asked why I wasn’t being charged, the mechanic said, “it’s the least we can do for a good customer.”

In their commitment to providing great service first and worrying about pricing second, my bike and car mechanics solidified my loyalty. Why would I shop around for other providers when I have people looking out for my best interests? Furthermore, these stellar customer service experiences have inspired me to buzz about both businesses to friends since they’ve occurred. Surely, some of this positive word of mouth will lead to new sales.

Clearly, in this difficult economy, it’s critical to watch your expenses closely. However, sometimes giving things away is the best way to grow your buzz and your business.

Comments

[Leland]

Absolutely right Patrick.

I feel that many companies these days are primarily focused on the short term value of their customers. Sometimes, this term might even be less then a month!

For example, in a big company such as Blockbuster, every customer is just a number. Hey, the entire marketing team's job is to crunch the numbers and turn a customer into a walking dollar sign!

Imagine if your friend came over to your home one day, and when you looked at him, the only thing you saw was an open wallet with $52.32 hanging out of it... And do you do acts of kindness for walking dollar signs? I don't think so. :)

It's not going to engender a very good relationship, is it?

Instead, as you mentioned with the car company, and the bicycle company, they see you as a valuable, long term asset... maybe even a partner or a friend. So, giving up $20 now might not look good on accounting's spreadsheet for the month.. but imagine how vividly you will remember getting that low-cost or free bike/car repair.

Businesses have got to start realizing that the long term value of a customer can be potentially unlimited (mabye they are the owner of a related business that you can form a partnership with.. who knows).

Is that on the same thought-train that you are riding on Patrick?

[Patrick Galvin]

Leland,

Thanks for taking the time to comment. We're completely on the same thought-train and I love your Blockbuster example. I'm convinced that businesses that appreciate the long-term value of customers will weather this recession much better than companies just looking to make a quick buck.

Best,
Patrick

[newly 39]

Pat - you make a lot of good points, but keep in mind that Dreyers' portions may be smaller, but the ice cream is way better than Joe's.