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Good news for your customers is good news for your business

Good news for your customers is good news for your business

Last updated on: February 26, 2015 at 4:59 pm by Fred Clark

Good news for your customers is good news for your business 2015-02-26T16:59:52-05:00 Fred Clark

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Walmart recently announced it will be raising its wages at 1,434 of its stores — boosting the incomes of nearly 500,000 of its employees. The parent company of T.J. Maxx, Marshalls and HomeGoods followed by announcing a wage increase for about 200,000 workers in their stores.

I work for another big retailer — one with about 2,000 stores of its own here in the U.S. And for that company, this is fantastic news. About 700,000 of our customers just got a raise! They’ve now got more money to spend in our stores.

There’s no way that fact is not Very Good News for the Big Box chain I work for.

Let’s call him Bob. Bob works at a HomeGoods store and he’s making nine bucks an hour. By the end of the year, he’ll be making $10 an hour. That’s not a huge raise, and $10 an hour still isn’t really even a living wage. Bob isn’t suddenly living the American Dream. But still, at the end of the week, he’ll be taking home an extra $32 bucks or so. He’ll have an additional $64 in every paycheck, and an additional $128 in his monthly budget.

Bob won’t be spending all of that, or even most of that, in our Big Box store. But he’ll be spending some of it there. He’ll finally be able to get around to some of the things he’s been putting off — the home improvements he’s long wished he could make, the maintenance he’s too-long deferred around the house or the apartment. The next time he comes into the Big Box it won’t just be to pick up another roll of duct tape. He’ll have a project.

The up-selling mantra in our company is “sell the project.” That’s a bit less sleazy than most forms of up-selling, because the aim is to send customers home with everything they need to get done what they’re trying to do. They’ll be happier if they don’t have to make a second or a third trip back to the store before they can finish the job. So if somebody’s buying paint, make sure they’ve got brushes and rollers and pans and masking tape and dropcloths. If somebody’s buying a new bathroom mirror, make sure they’ve got the hardware to hang it and maybe a stud-finder and tape measure. That means more sales, yes, but it’s also pretty good customer service.

But you can’t “sell the project” to customers who make $9 an hour working retail. Guys like Bob can’t afford to buy the project. For customers like that, the trick becomes figuring out the bare minimum they can use to scrape by or to make do. That means you can sell them duct tape and Vimes’ boots,* but you can never sell them the cartful of stuff they’ll need for a quality, satisfying home-maintenance or home-improvement project.

An extra $128 a month won’t mean that Bob can run wild, remodeling his kitchen with top-of-the-line appliances, oak cabinets and granite countertops. But you can still do a lot with $100. Instead of coming in to buy another roll of the cheapest plumber’s tape, Bob might come in to get a decent new bathroom faucet, and maybe even a decent wrench to install it.

Bob got a raise. Bob can now spend more money in our stores. That’s Very Good News for our company.

It’s Very Good News for a lot of companies. Bob has been making $9 and hour, so he has been forced to learn the discipline of thrift. Thrift borne of necessity involves the making of conscious decisions dozens of times a day, every day. Bob is acutely aware of every one of those decisions — every deferral and denial he has been constrained to make. And he will be just as acutely aware of what the difference between $9/hour and $10/hour means for every one of those decisions.

That additional income — that new influx of $64 a paycheck, or $128 a month, or $192 dollars in those glorious three-paycheck months — is going to be spent. Bob has been denying himself minor luxuries and deferring minor necessities — probably even some major necessities — and he won’t need to stop and think about what he’s going to do with this new income. He already knows. He’s been thinking about this, constantly, for years.

Bob is our customer, so good news for Bob means good news for us. “Customers first,” like our CEO always says.

But this isn’t how our CEO will react to this happy news for Bob and for 700,000 more of our customers. None of the above — absolutely none of it — will occur to him at all. Because our CEO, like most CEOs, has lost the ability to think of our customers as people with jobs and budgets. So he won’t be thinking, “Woohoo! 700,000 of our customers just got a raise!” He’ll be thinking, “Ohnoes! Wage increases in the retail sector could lead to higher labor costs — I must oppose this!”

And if the fear of the possibility of the potential of the shadow of a slight increase in labor costs requires our CEO to fight to screw over 700,000 or 7 million or 70 million of our customers, then he will enthusiastically screw over our customers.

This is why the lobbyists of the Chamber of Commerce and the National Retail Federation always fight against any increase in the minimum wage. That screws over their customers — which is stupid and self-destructive and Very Bad Business, but this is how CEOs and Chambers of Commerce think. Or how they fail to think.

We just went through an iteration of this whole process involving the Affordable Care Act. The officers, executives and local managers of the Big Box had a great deal to say about Obamacare. They predicted all manner of calamity and sky-falling — none of which came to pass. But not one of them ever, even for a second, entertained the possibility that reducing health insurance costs for tens of millions of our customers might be good news for our company.

“Customers first?” Our customers didn’t enter their thinking at all. Ever. Never once, apparently, did any of our managers or district managers or corporate officers ever entertain the possibility that, for example, people financially constrained because they were denied health insurance due to diabetes cannot afford to repaint the living room or to spruce up the front walkway with those spiffy paving stones.

But it’s not just the managers and executives at the Big Box who think this way. The managers and executives of most companies think this way. They employ armies of accountants to strangle every last cost-cutting penny from their labor expenses, and then hire a second army of lobbyists to fight for newer, more extreme ways of cutting those costs. And that is the only lens they have for considering any public policy.

The health and security and well-being of their customers never appears anywhere in their policy agenda, or in their personnel agenda.

P.S.: “But wait,” someone might say, “I have an overly simplistic economic ideology gleaned from dimly remembered textbook abstractions and a denial of global realities, so isn’t it fair to worry that these raises from Walmart and T.J. Maxx could produce inflationary pressure?”

No. No it’s not. There’s a simple test for whether or not any given economy faces such inflationary pressure. Anyone who thinks that describes the context today in the U.S. is invited to attempt that test to see for themselves.

– – – – – – – – – – – –

* From Terry Pratchett’s Men at Arms: The Play (which I’ve never read, except for this bit, which well-read commenters here have posted so many times over the years that it’s become a favorite passage of mine):

The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.

Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

This was the Captain Samuel Vimes ‘Boots’ theory of socioeconomic unfairness.

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