Magnus Marketing Blog

Speaking of entrepreneurial hubris...sometimes not enough exists when dealing with difficult clients...

The Harvard Business Review, one of the most prestigious business publications, selected my letter for the July 2008 issue.

The letter is a commentary on firing customers. Interestingly, Marketing News also had an article similiar to that. I bet I will get some interesting rebuke commentary, but I know its coming.

Like many department stores, Kohls emphasizes the importance of signing up customers for department credit cards. Research has shown generally that owners of department store credit cards will stay more loyal and shop more frequently at that particular store. Associates who sign up customers do get a little "commission" which does help out on the financial end.

For 2008, the company has decided to implement what I call a "get credit or die policy", meaning associates (salesfloor and register) now must sign up customers for credit and meet certain goals per month or else risk 1) cutting hours back or 2) termination. Nice way to treat your long term loyal associates!

Let us discuss why this new "credit or die policy" is one of the worst examples of customer retention and spending incentives ever. Kohl's needs to fire its CMO or whoever thought of this one (plus the "rush hours" was outright stupid too..but that is another post).

As many people, except the Corporate Management, seem to realize is that we are in a recession and people will NOT a) spend money on clothing - which prices are going up b) sign up for high rate credit cards when they are trying to stay out of debt by - oh, paying mortgages, gas, electric bills which are going up, food - which has gone up...trying to stay alive??

In this particular region, the Kohl's stores are well known and the rate of new area entrants is not particularly high. What that translates to is SATURATION. Those people who have charge cards - have them, those that don't - probably don't for good reason. Maybe one out of 50 people are new to the area or to Kohl's and would have the propensity to sign for a card. The rate of actual new sign ups will be significantly less overall.

Second. What is more important? A piece of plastic which only gets used when there is a credit incentive (additional discount applied for using the card) or associates who develop relationships and "treat the customer right". I am sure research will show that customers will likely return to a store and/or buy more if they are treated with respect, personal attention, and knowledgeable advisors. The better the treatment, pricing, and environment (neat racks, clean store) the more often they will return and return specifically to a particular store. Emphasis should be on customer service above all. Pressuring associates to solicit credit and threatening them with termination, isn't going to translate to happy associates willing to help a customer first!

Third: Consider the culture change. In the past, floor associates were happy to refer customers to register people and let them take the credit for - credit. Talk to Irene or Joanne, they will set you up with the account! I have to help that gentleman over there, he is lost over a gift for his wife. Now, floor associates will have to stop everything to walk the customer to the register and sign them up, hoping the register person won't steal their credit. Plus, Meghan in juniors is going ask Customer A for credit, Rachel will ask her in Misses, John will ask her yet again in housewares....uh, Customer A is going to drop the merchandise walk out and never return because of the "annoying and pesty salespeople pushing credit". The culture of collaboration and teamwork, plus helpful friendly focus will deteriorate into a competitive environment full of distrust.

Fourth: There are associates who are superior at customer service, cleaning the floor, selling jewelry, putting things away, etc, but who are not good at "selling" or asking people for "things". There are old people, disabled people, and minors...they are not able to fulfill the credit goal. Remember, servicing and selling are two different skill sets. In order to keep a job they now have to do something or yet another task that they are really unable to do. This is not fair.

As far as getting hours cut, I think that is happening naturally as the number and frequency of customers is diminishing resulting from the need for survival elements that overcome the latest "coffee stained shirt" from Vera Wang. So, why threaten to cut them more? Aren't the associates suffering enough? Many have bills to pay, cars to pay for, college educations, medical bills! MY GOD - take care of your employees!!!!!!!!! Talk about how you can give hours to people in light of challenging conditions, not how you can financially hurt them MORE.

The stores should have a credit goal for the month,
everyone should share in achieving that goal, however - this should not be the be all end all of someone's job or hourly assignments. We are in bad economic times, take care of your associates so they will stay with you. Focus on customer service, improving merchandise selection and quality, and incentivizing through credit contests or competitions.