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The Importance of Owner Flexibility

You shouldn’t expect to sell your company overnight.  For every company that sells quickly, there are a hundred that take many months or even years to sell.  Having the correct mindset and understanding of what you must do ahead of time to prepare for the sale of your company will help you avoid a range of headaches and dramatically increase your overall chances of success.

First, and arguably most importantly, you must have the right frame of mind.  Flexibility is a key attribute for any business owner looking to sell his or her business.  There are many variables involved in selling a business, and that means much can go wrong.  An inflexible owner can even irritate prospective buyers and inadvertently sabotage what could have otherwise been a workable deal.

Be Flexible on Price

A key part of being flexible is to be ready and willing to accept a lower price.  There are many reasons why business owners may fail to achieve the price they want for their business.  These factors range from lack of management depth and lack of geographical distribution to an overreliance on a handful of customers or key clients.  Of course, one way to address this problem is to work with a business broker or M&A advisor in advance, so that such price issues are minimized or eliminated altogether.

Be Prepared to Compromise

In the process of selling your business, you may want to achieve confidentiality and sell your business quickly and for the price you want.  However, the fact is that most sellers find that it is possible to have confidentiality, speed, and the price you want, but not all three.  Ultimately, you’ll have to pick two of the three variables that are most important to you.

Be Patient

A third way in which business owner flexibility can boost the chances of success is to embrace the virtue of patience.  By accepting the fact that businesses can “sit on the shelf” for a considerable period of time, you are shifting your expectations.  This realization can help reduce your stress level.  The fact is that stressed out owners are far more likely to make mistakes.

Sometimes Losing is Really Winning

A fourth way in which business owners should be flexible is realizing that you and your lawyer will not win every single fight.  There will be many points of contention, and a smart dealmaker realizes that it is often better to have a good deal than a perfect deal.  You may have to make sacrifices in order to sell your company.  Simply stated, you shouldn’t expect the other side to lose every point.

At the end of the day, a savvy business owner is one that never loses sight of the final goal.  Your goal is to sell your business.  Seeing the situation from the buyer’s perspective will help you make better decisions on how you present your business and interact with prospective buyers.  Maintaining a flexible attitude with prospective buyers helps to position you as a reasonable person who wants to make a deal.  Goodwill can go a long way when obstacles do arise.

Copyright: Business Brokerage Press, Inc.

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Major Expansion at New Mexico’s Spaceport America

A company that is developing and testing a mass accelerator with the aim of launching satellites into space orbit, using kinetic energy instead of rockets, is expanding at New Mexico’s Spaceport America, Cabinet Secretary Alicia J. Keyes announced today.

SpinLaunch signed a lease at Spaceport America in 2019 and has since invested in test facilities and an integration facility. The company is now set to hire an additional 59 highly-paid workers and complete the build of its suborbital centrifugal launch system for its next phase of development. SpinLaunch expects to start test launches in New Mexico in 2021.

“Spaceport America is the next frontier for innovation,” Gov. Michelle Lujan Grisham said. “It is a magnet for companies on the cutting edge, like SpinLaunch, and New Mexico is glad for their partnership with and investment in our state. I’m incredibly excited about this latest expansion at the Spaceport. We’ve only begun scratching the surface of what’s possible in aerospace technology in Southern New Mexico.”

The State of New Mexico, through the Economic Development Department’s LEDA job-creators fund, is supporting the expansion with $4 million, paid out in phases as SpinLaunch reaches economic development goals.

“SpinLaunch is part of the growing community of businesses creating jobs and innovating new technologies at New Mexico’s Spaceport America,” Cabinet Secretary Keyes said. “We see the state’s space cluster as an important economic driver to diversify the economy with higher-paying jobs in Southern New Mexico.”

The company, expected to spend $46 million of private money in construction and expansion over 10 years, will generate an economic impact of $239 million over that period of time statewide.

SpinLaunch founder Jonathan Yaney said the technology behind the company is a cleaner and more affordable way to reach orbit.

“Our technology enables a 10 times reduction in the current costs and complexities of reaching orbit. As the number of rocket launches rapidly increases, SpinLaunch uniquely reaches space without releasing pollutants into critical layers of the atmosphere. We’re satisfying both the economic and environmental demands of a space industry experiencing exponential growth. This is the first time in human history we have an alternative to rockets,” Yaney said.

SpinLaunch has also qualified for job training assistance through the state’s Job Training Incentive Program (JTIP). According to Yaney, the economic development initiatives were essential for a small company like SpinLaunch, as it works to innovate and bring to market a unique business.

“SpinLaunch will grow into thousands of employees as we develop,” Yaney said. “When you’re this young of a company, with this bold of a concept, being able to receive assistance is absolutely essential. This support was instrumental in deciding to come to New Mexico.”

Sierra County is the fiscal agent for the project and the Sierra County Commission will consider the LEDA ordinance in the coming weeks.

“Sierra County is excited to collaborate with the Economic Development Department and SpinLaunch on this project,” Sierra County Manager Bruce Swingle said. “This project will create 59 new jobs in the region, at an average salary of $72,322. In a rural community, these high-paying jobs will have an immediate impact and significantly boost our economy. High-paying jobs mean more revenue for our schools, hospital, and infrastructure.”

Yaney said SpinLaunch will strongly recruit from New Mexico’s universities and is reaching out to NMSU and New Mexico Tech for its talent. As the company moves toward test launches, its hires will shift toward engineers and other technical experts.

Cost-Effective Ways to Promote Your Business’s Reopening

ARTICLE BY: NAOMI JOHNSON

If you are a small business owner, chances are you’ve never experienced anything quite like the challenges created by the pandemic. Maybe your business has been closed since March, or maybe you’ve been allowed to reopen at a limited capacity. Whatever the circumstances, it’s essential to prepare for the future—a future where your business is up and running, whether it’s at full capacity or not.

For you to be adequately prepared, not only will you need to make any necessary adjustments to your daily operations, but you will also need to market your reopening so that people want to visit your business when the time comes. We invite you to consider a few practical, cost-effective ways you can do just that:

Make Budgetary Changes

When you are in a tough place financially, it can be hard to accomplish your goals and push your company forward. The first step should be revisiting your budget so you can effectively allocate any money that you do have.

Along with reopening and laying a foundation for long-term success, your business will need money to promote your reopening efforts. Fortunately, there are numerous ways to access both government and private financial assistance and funding during these strange, uncertain times.

For example, the Small Business Administration (SBA) is offering Express Bridge loans for businesses that are struggling during COVID-19, as well as SBA traditional loans unrelated to the pandemic.

Re-Focus Your Marketing Initiatives

With the pandemic having such a significant impact on businesses and the greater public, it’s likely you need to make some major adjustments to any marketing and advertising initiatives you had in place. Everything has changed, and your priority must now be to let consumers know that it’s safe to visit and shop at your business.

Communicate to customers and potential customers the steps you are taking in response to COVID-19, including operational changes, safety protocols, and other details.

Bolster Internal Communication

Along with getting your message to consumers, it’s essential to ensure that effective internal communication is in place. This applies to your current staff as well as any remote freelancers on your payroll. Establishing regular communication and staying connected will help your operations run smoothly. Setting clear expectations for when each worker should be available and using collaboration apps like Slack and Microsoft Teams are a couple of the most practical ways to achieve this. Remember too that everyone needs to make digital security a high priority. Take the time to make sure you and any remote staff are staying up to date with antivirus software and maintaining protection for your network.

Reopen with a Bang

Finally, you will need to entice consumers to come back to your business when you are reopened. Think of any deals that you can offer, whether it’s discounted items, a storewide sale or exclusive promotions for email subscribers. And make sure that you are building hype for the reopening by using all the right channels, such as social media platforms and email.

A Word on Walking Away

Small businesses have scratched and clawed to stay viable during the pandemic. In some cases, business owners have decided now is the time to step back and leave the business in new hands. If you’ve hit a wall and it’s time for you to move on, consider working with Sam Goldenberg & Associates to help sell your viable business. Contact us to learn more.

No one needs to tell you that re-opening your business during or after the pandemic is a big deal. Along with careful planning for your reopening, be sure to promote it to the best of your ability as well. Reworking your budget, modifying your marketing initiatives, establishing effective communication, and drawing customers to your business through promotions and digital marketing are all methods that can help you accomplish this.

Netflix Plans to Boost New Mexico Presence with Expansion of ABQ Studios

Pledges $1 Billion Investment and Additional 1,000 Jobs

Today, New Mexico Governor Michelle Lujan Grisham and Albuquerque Mayor Tim Keller together with Netflix Co-CEO Ted Sarandos announced that Netflix, the world’s leading internet entertainment service, plans to boost its presence in the state by expanding ABQ Studios and committing to an additional $1 billion in production spend. The expansion will add 300 acres to the company’s existing space at ABQ Studios, located in Albuquerque’s Mesa Del Sol area, making it one of the largest high-tech and sustainable film production facilities in North America. The investment will result in the creation of an estimated 1,000 production jobs in New Mexico over the next ten years. An additional 1,467 construction jobs will be also created to complete the expansion.

“Ever since Netflix first chose New Mexico, they have been nothing but an incredible partner, pushing the boundaries of innovation and expansion while providing fulfilling work opportunities for so many New Mexicans,” said Governor Michelle Lujan Grisham. “My administration has expanded our state’s competitive film incentives, facilitating higher-wage employment for New Mexicans all across the state, and increased opportunities for rural communities. I am glad Netflix has chosen to double-down on its commitment to our state, and our partnership will continue to grow for the benefit of New Mexicans across the board.”

Netflix Co-CEO Ted Sarandos said, “New Mexico provides an outstanding production and business environment in close proximity to Los Angeles with some of the best crews and creative talent in the world. The expansion will bring many new high-tech and production jobs to the region. It allows us to be more nimble in executing our production plans while cementing the status of the region as one of the leading production centers in North America.”

As part of the proposed expansion and Netflix’s commitment to job creation associated with an additional $1 billion in production spend and $150 million in capital expenditures, the company will add up to ten new stages, post-production services, production offices, mills, backlots, and training facilities, wardrobe suites, a commissary to support meals and craft services, and other flex buildings to support productions.

The State of New Mexico will provide up to $17 million in State LEDA funding and the City of Albuquerque will commit up to $7 million in local LEDA funding, including $6 million in infrastructure in-kind. In addition, the City of Albuquerque will issue an Industrial Revenue Bond (IRB) to partially abate property and other taxes over a 20-year term for the first $500 million investment by Netflix to build out the production facility. In addition to the private land acquisition of approximately 170 acres, Netflix will also lease approximately 130 acres from the State Land Office for a total of 300 additional acres. All funding is pending the approval of the Albuquerque Development Commission and the Albuquerque City Council. If approved, funding will be disbursed according to benchmarks set out in the Public Participation Agreement.

Albuquerque Mayor Tim Keller said, “When we brought Netflix to Albuquerque, we put the spotlight on our city’s strong film economy and joined our brand to the one of the top companies in the new global economy. Now, with this expansion we’re looking forward to doubling the impact to 2,000 jobs for folks from all walks of life and a $2 billion investment into Albuquerque’s economy over the next decade. Between Netflix and the likely Orion Project, the Duke City is looking at the very real possibility of a transformative ‘new economy,’ redefining our workforce with aerospace and film jobs.”

“The State Land Office exists to leverage state trust land in order to raise funds for our public schools, hospitals, and universities – and we couldn’t be more thrilled to add Netflix to the family of businesses that help us keep New Mexico moving forward,” said Stephanie Garcia Richard, Commissioner of New Mexico State Land Office. “Netflix’s expansion to state trust land is great news for our state. Because of this partnership, New Mexico will benefit from new jobs and more revenue flowing into communities that become filming locations. Netflix has already been delivering on those promises, but by moving onto state trust land, an estimated $24 million will be going to the University of New Mexico – the beneficiary of the state trust land onto which they will expand their studios.”

The growth of the film and television industry has been a steady driver of economic development in New Mexico over the last two decades. In 2003, direct spend in New Mexico was $7 million. In fiscal year 2019, it reached a record high of $525.5 million.

Alicia J. Keyes, New Mexico Economic Development Department Cabinet Secretary said, “This expansion is the result of an incredible partnership with Netflix that will set a precedent in the industry and signal that New Mexico is the place to be for film and television production. Not only will there be an additional 1,000 high-paying jobs for New Mexicans, plus an estimated $2.5 billion that will benefit New Mexico’s economy, but we are setting the stage for future generations to stay in our state and have employment opportunities with one of the world’s leading global digital media companies.”

As part of the proposed investment in the region, and in an effort to continue to grow and scale up the crew base and talent pool, Netflix has committed to provide training programs for below-the-line positions in partnership with the New Mexico Film Office, local universities, and labor and industry organizations. Additionally, in partnership with the New Mexico Film Office, Netflix has committed to supporting New Mexico’s Native American, Latino, Black, and other underrepresented groups’ content creators and filmmakers.

In 2018, Netflix, along with State of New Mexico and City of Albuquerque officials, announced the purchase of Albuquerque Studios, the first production hub purchased by Netflix in the United States. Since 2018, Netflix has spent more than $200 million in the state, utilized more than 2,000 production vendors, and hired over 1,600 cast and crew members.

Netflix is currently in production in New Mexico on the original films The Harder They Fall and Intrusion and is expected to soon begin filming Stranger Things 4 in Albuquerque. Since 2018, Netflix productions filmed in New Mexico include Army of the DeadEl CaminoGodlessDaybreakChambers and Messiah.

The project will be reviewed by the Mesa del Sol TIDD Board and Albuquerque Development Commission on November 23, 2020 and then reviewed by Albuquerque City Council on December 7, 2020.

About Netflix

Netflix is the world’s leading streaming entertainment service with over 195 million paid memberships in over 190 countries enjoying TV series, documentaries, and feature films across a wide variety of genres and languages. Members can watch as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause, and resume watching, all without commercials or commitments.

 

Santa Fe Chamber of Commerce Celebrates Women in Business this Month

The Santa Fe Chamber of Commerce hosts the 5th Annual Women’s Leadership Luncheon this month. The virtual event will gather, support, and celebrate New Mexico’s inspiring women entrepreneurs throughout November. The remarkably apt theme this year is agility.

The combined weight of personal and professional challenges during the pandemic has fallen especially heavily on the shoulders of women. Women have experienced job losses at a higher rate than men during 2020. “Women-owned businesses are also struggling,” writes Albuquerque Business First Associate Editor Julian Vadnais “According to a survey by the U.S. Chamber of Commerce, the number of female business owners who ranked their business’ overall health as “good” fell by 13 percentage points from 60% in January to 47% in July.”

Despite the obstacles, however, “women have been incredibly innovative and resilient,” says Chamber President and CEO Bridget Dixon. “Women in general are resilient. We learn to pivot, manage expectations, and adapt. We at the Chamber have had to do that with our events. Some of the women who will be panelists and speakers have needed to be agile their entire lives. We think that the whole community can really resonate with that right now. How do you make face hardship and make changes with a positive mindset?”

Registration is open now. Sessions begin Wednesday, Nov 4. Lunches are provided by women owned restaurants and women owned businesses will be spotlighted throughout the month. Expect the same networking and mentorship opportunities from the extended, virtual version as from the in-person event, with more flexible scheduling. Click here for more information and registration.

In an interview series, we speak with Dixson and Events Programmer Katie Capener about the event, women in entrepreneurship, supporting local businesses, and more.

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SGA: Please tell us about this year’s event!

Bridget Dixson:  The Women’s Leadership Luncheon is an idea that we came up with five years ago. There was a Forbes article pointing out that Santa Fe had more women entrepreneurs than anywhere else in the country. That is such a testament to our community. I think this is partly because we’re so welcoming to new ideas here. People can try really creative ideas and be successful in Santa Fe.

The conversation at these events centers around women’s lives and leadership, mentorship, and how they’re able to build a balanced home and work life. That’s something we need now more than ever, not just women, but men as well. This year, we’ve all had to find agility and work-life balance, especially if you have young children at home.

SGA: How will the event be structured this year?

Katie Capener: While this year’s event is virtual, we will absolutely foster engaging, inspiring, and candid conversation. We have an incredible lineup for the entire month, starting with Monique Jacobson this upcoming Wednesday. [Among many other things, Jacobson transformed tourism in New Mexico during her time as Director of the state’s tourism department.]

There are three consecutive Power Up Lunches every Wednesday, November 4, 11, and 18, leading up to the culminating Women’s Leadership Luncheon on November 19. People love this event for making connections, meeting people, mentors, and colleagues, and sharing meaningful conversations. We’re excited to virtually recreate the event’s essence and value and even expand our reach.

You can participate in one-day Wednesday sessions individually, the luncheon individually, or you can purchase it all together. The virtual format creates so much flexibility it actually allows us to do more for participants.

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Stay tuned this week for more about the event, how women are exemplifying agility, and the­ inspiring Santa Fe business community!

 

 

Job Training Incentive Program Helps NM Companies Expand

The September awards totaled $3.6 million for 672 trainees and 1 intern, with another $1.9 million for 129 trainees and 1 intern awarded in October. Average salaries for trainees ranged from $11.62 to $69.71 per hour, with companies located throughout New Mexico, including Albuquerque, Deming, Las Vegas, Los Alamos, Santa Fe, Sunland Park, Taos, and Truth or Consequences.

“The recent job-training grants show that businesses from Taos to Deming are looking to create good jobs in all corners of the state,” said Gov. Michelle Lujan Grisham. “My Administration will continue to do everything possible to support businesses who want to hire workers or promote employees into higher-paying jobs so we can have a long-lasting recovery that benefits New Mexico families.”

The JTIP program is instrumental in attracting and retaining businesses in New Mexico. It’s reimbursement for training new employees and employees who wish to improve their current job position is a driving force for expansion of local employment. The robust program recently earned New Mexico a Top 10 spot on site selector Business Facilities‘ 16th Annual State Rankings Report.

“JTIP is supporting new jobs in timber, meat processing, energy, robotics, food manufacturing, software, and satellites,” Cabinet Secretary Keyes said. “These are the diverse industries that are growing and expanding in New Mexico with help from JTIP and other economic incentives. This is one way the state and lawmakers can help businesses grow and create jobs in uncertain economic times.”

If you’re thinking of expanding or making a new move, New Mexico is a great place to buy a business! Learn more about opportunities to own a business here and contact us for more info.

Strength in Flexibility? Some Unexpected Benefits to “New Normal”

A recent Economist article titled “Countering the Tyranny of the Clock” explores our changing relations to time as work becomes more flexible. A little philosophical? In fact, it’s super pragmatic!

“Flexible working existed well before the pandemic. But it only offered employees the ability to choose when in the day they worked their allotted hours,” writes Bartleby. “Remote working has brought a greater degree of freedom.”

Rather than an unraveling of work ethic when work is removed from strict office routines, we’re actually seeing people coming together and doing more. Slack conducted a survey of 4,700 people working from home to determine responses to flexible work schedules. The results were extremely positive. Only 12% of workers wanted to return to a “normal,” pre-pandemic schedule. Respondents indicated improved productivity and engagement. Interestingly, Bartleby points out, “flexible workers scored more highly on a sense of ‘belonging’ to their organization than those on a nine-to-five schedule.”

Employee engagement is a hot topic in workplace research. It correlates positively to improvements in service, sales, quality, safety, retention, and profit and share holder return. If productivity and work culture camaraderie are on the rise, we might consider how to sustain this unexpected boost.

The link between independence and engagement seems paradoxical. But people enjoy working to their own rhythm–and do it pretty well. “Few have the ability to concentrate solidly for eight hours at a stretch,” observes Bartleby.  “There are points in the day where people are tempted to stare out of the window or go for a walk; these may be moments when they find inspiration or recharge themselves for the next task.” Employees working at their own pace may bring more enthusiasm and focus to their own work as well as their team’s.

The Economist reflections agree with another study on work from home, conducted by researchers at Harvard Business School, MIT Media Lab, and McCombs School of Business at the University of Texas at Austin. That study found that job satisfaction and engagement, after an initial dip, have recovered and even increased.

Ironically, the catch to flexible working hours actually seems to be people working too much. “In the weeks immediately after the lockdown began, only half of employees were able to maintain a 10-hour workday or less, whereas nearly 80% had been able to do so previously. These patterns have started to trend back to pre-lockdown levels, although the workdays are still 10% to 20% longer on average,” according to the Harvard, MIT, and UT Austin study.

If you’re managing a team remotely, modeling perspective is a powerful way to keep your work culture energized and sane–even at a distance. Clear communication, effective collaboration/project management tech, and organized work plans (for yourself and for your team) go a long way. But helping your team not over do it is not a bad problem to have! Can your business hold onto some of the workplace flexibility of this year for higher performance moving forward?

Communicate Care for Positive Online Customer Experience

Creating a positive online customer experience has been catapulted into top priority status by the pandemic. We have written lately about a recent survey-based study titled “The New Reality: Understanding the Retail Consumer Experience During a Pandemic.” In it, Wharton Marketing Professor Thomas Robertson finds “about a 10% increase in problems from before the pandemic to the middle of May, with some decrease in loyalty. As the percentage of online sales was going up, many retailers weren’t ready for the onslaught and had trouble coping with it.”

Business can seize this opportunity to improve online customer experience to stand out in their field.

Online (dis)Engagement and Empathy

Communicating empathy is a fairly simple and extremely powerful way to improve online customer experience. In an article titled “How Should Companies Talk to Customers Online,” in MITSloan Management Review’s Creating Great Online Customer Experiences, marketing researchers Brent McFerran, Sarah Moore, and Grant Packard point out the shifting nature of business’ opportunity to interface with customers.

More and more consumers are engaging with customer service through digital channels, including websites, email, texts, live chat, and social media. In 2017, only half of customer experiences with companies involved face-to-face or live-voice-based interactions, and digital interactions are expected to represent two-thirds of customer experiences within the next few years. The vast majority of customer service interactions around the world begins in online channels. Despite the convenience and speed of such interactions, they lack some of the most important aspects of off-line customer service. In-person interactions are rich in nonverbal expressions and gestures, which can signal deep engagement, and an agent’s tone of voice can convey empathy and focus in phone conversations. Over time, these interpersonal touches help companies build and sustain relationships with customers.

The Research

Customer service scripts tend to emphasize the use of “we” (as in, “We–the company–are happy to help you!”) and “you” (as in, “We’re sorry you are experiencing difficulties.) To test whether this language is actually helpful, the authors surveyed over 500 customer service managers or agents, analyzed more than 1,000 customer service emails from 41 of the top 100 global online retailers, and conducted controlled experiments with 2,819 North American adult participants.

“You” Know Who “We” Are (and When We’re Lying)

Findings suggest something basically intuitive but alarmingly easy to lose sight of: customers are people. We’re wired for social interactions. Most of us instinctively understand–and strongly dislike–when communication is insincere.

In all cases, our modified responses with “I” pronouns significantly outperformed the “we” pronouns that real service agents were using. Relative to using “we,” the benefit of using “I” stems from the fact that customers perceive the employee to be (a) more empathetic and (b) more agentic, or acting on the customer’s behalf.

When two people are communicating with each other, “I” suggests a personal focus on the issue at hand. Specifically, our research on customer service finds that saying “I” signals that the agent is feeling and acting on the customer’s behalf. For example, telling a customer “I am working on that” conveys a greater sense of ownership than “We are working on that,” which can imply a diffusion of responsibility. Similarly, “I understand the issue” shows more empathy than “We understand the issue.”

Ultimately, customers need to know that the agents with whom they are interacting care and are working on their behalf. Research has consistently shown that customer perceptions of empathy and agency drive satisfaction, sales, and profits,9 and our studies show that “I” fosters these perceptions to a significantly greater degree than “we.

We also resent feeling like we’re being blamed. The use of “you” can backfire.

Sometimes, using the word “you” can actually have a negative effect on company and customer outcomes. For example, we found that saying to a customer, “Sorry your product was defective,” rather than “Sorry the product was defective,” resulted in decreased satisfaction and purchase intentions. This result was driven in part by perceptions that the employee wasn’t being accountable (that is, lacked agency), potentially shifting the responsibility or blame toward the customer.

Key Lessons

The takeaway: service employees should be coached to communicate from a personal perspective that implies real, live, human care. “There are simple language changes that any company can implement,” conclude McFerran, Moore, and Packard. “By making these changes to customer service language, organizations can create more meaningful interactions with their customers — and improve the bottom line.”

For Happy Online Customers, Deliver Meaningful Benefits

We recently wrote about customer frustrations with online shopping experiences and the related opportunity for businesses to foster delight. In a survey-based study titled “The New Reality: Understanding the Retail Consumer Experience During a Pandemic,” Wharton Marketing Professor Thomas Robertson finds “about a 10% increase in problems from before the pandemic to the middle of May, with some decrease in loyalty. As the percentage of online sales was going up, many retailers weren’t ready for the onslaught and had trouble coping with it.”

Actually Rewarding Rewards Programs

Specifically, Robertson identifies poorly executed customer loyalty programs as a source of annoyance. In another article titled “Why Personalization Matters for Consumer Privacy,” McKinsey partners Phyllis Rothschild, Julien Boudet, and Gadi BenMark take a deep look at customer attitudes towards data use and personalized reward programs. (That article is part of a compilation from MITSloan Management Review called Creating Great Online Customer Experience.)

Their main takeaway: “By understanding what people value, companies can do more to create trust.”

While privacy concerns are different than service concerns, there are instructive parallels for understanding how customers decide what is or isn’t worth their time and money. To find out, Rothschild, Boudet, and BenMark conducted a survey of 1,012 U.S. consumers between the ages of 18 and 70 who had made an online purchase in the last six months.

Levels of concern diminish as the benefits of personalization go up, the McKinsey researchers find. That might sound obvious, but personalization is hard to get right. You need to actually understand something about the person you’re rewarding. To deliver meaningful benefits, businesses need to make sure the advantages they’re offering are important to their customers.

What do online shoppers want?

“Not surprisingly, receiving individualized pricing in the form of discounts for a product or service that consumers really wanted was among the most favored benefits for data use, with 57% expressing excitement,” according to Rothschild, Boudet, and BenMark, “Coming in second, with 55% expressing excitement, was receiving a free product or service that consumers wanted but felt was too indulgent or not high enough in priority to purchase themselves. Interestingly, receiving dedicated concierge services and personalized advice came in at the bottom of the list of customer delights (less than 25% excitement each).”

Furthermore, younger shoppers, shoppers who live in urban areas, and shoppers who spend more time on social media were more comfortable with online purchasing and rewards programs. Depending on your business’ demographics, you may need a closer look to really know what your customers will appreciate in a loyalty program.

Understanding and Communication are Key

Rothschild, Boudet, and BenMark conclude with two pieces of advice:

  1. 1.Understand your consumers’ preferences “Companies need to analyze consumer preferences to develop a clear understanding of what benefits each demographic values the most. By delivering on those benefits through personalized offers, companies can mitigate some consumer concerns. This requires companies to invest in deep consumer research, ongoing testing of the effectiveness of offers, and advanced analytics to provide deeper levels of insight.”
  2. 2. Communicate and educate “Companies that do this best focus on communicating in simple terms, clearly defining the benefits, and being transparent about the types of data collected and how it is secured. They often communicate this information within the typical user’s onboarding or sign-up experience.”

 

 

Challenge and Opportunity in Online Customer Experience

A recent study by Wharton’s Jay H. Baker Retailing Center and WisePlum suggests rising consumer frustration with retail as shopping shifts online. The survey-based study, “The New Reality: Understanding the Retail Consumer Experience During a Pandemic,” finds mounting customer impatience and decreased loyalty. In a Knowledge@Wharton interview, the study’s co-author, Marketing Professor Thomas Robertson, says these findings are related to underprepared online shopping and loyalty program customer experience and the tech that underpins it.

The Challenge

We have written before about the importance of (and some ways to) deepen customer relations during this time. But Robertson raises an excellent point. “Loyalty programs will not compensate for poor service or a poor product. They will just add cost,” he says. “You have to have the IT in place. Point of sales data, for example, has to be in place for you to be able to use loyalty programs. And if you’re transitioning to online, you have to be ready for it. You have to design integrated online-offline programs.”

As health concerns ferry more and more commerce online, customers’ expectations for a positive virtual shopping experience are on the rise. But businesses have struggled to meet these expectation.

“It’s about a 10% increase in problems from before the pandemic to the middle of May, with some decrease in loyalty. And there is a difference,” says Robertson. “Before, when consumers had problems, the focus was in-store. They would have problems not being able to find things, or they would complain about the messiness of stores or that the salespeople were not helpful. As we got to May, all of this had changed, and what people were now sensitive about was having to pay for shipping to return things, that you needed a receipt to return things, and that the website was difficult to navigate. This seemed to suggest that as the percentage of online sales was going up, many retailers weren’t quite ready for the onslaught and had some trouble coping with it.”

The Opportunity

The takeaway, according to Robertson? “Service recovery is absolutely critical.”

There are some significant bright sides to this story. By smoothing out kinks in your online systems, you can really differentiate your business. There is also a tremendous opportunity in “transforming disappointment into delight.”

In Creating Great Online Customer Experience, a compilation of research by MIT Sloan Management Review (available for download here), Stefan Thomke writes about creating the kind of customer experience that stays with someone:

“When employees are taught to be in tune with the customer’s emotions, they can notice changes in emotional state and respond quickly. As their alacrity accelerates the shift from disappointment to delight, the intervention creates a sudden contrast that makes experiences sticky.  Magicians, who constantly think about the audience experience, understand the emotional value of rapid shifts from disappointment and confusion to happy resolution. They have developed techniques to change people’s emotional states. Momentary disappointment at failure to “catch” the magician quickly transforms into delight in his excellence. Disappointment to delight: Magicians know that this emotional transition will wow audiences more than a constant flow of technically perfect tricks. The former creates memorable moments, while the latter may cause eyes to glaze over.”

In upcoming posts, we’ll share more tips on online customer experience. Stay tuned!