Mary Schmidt Marketing Troubleshooter

I stood in line for nearly two hours to vote on Friday. So, got to talking to people around me. And, somehow we got on the topic of Big Clueless Companies (BCCs) and how shabbily and stupidly they treat people (including their own employees).

All of which got me to thinking. Figuring revenue losses due to the spread of unhappy customers is like figuring how many additional cats a single mating pair and their offspring can generate. It quickly adds into the millions. (Over 11 million in nine years.) And, the initial amount over which the BCCs diss and dun you, one customer and a single transaction, is not even enough to be a rounding error on their books! But, those rounding errors, like kittens, have a nasty way of adding up over a very short time.

The woman ahead of me in line told the story that “I tell everybody” about Abercrombie & Fitch. Over two years ago, she spent $400 in just one trip to an A&F store. (She’s got three teenage daughters). Yet, when she asked the “snotty little” (her words) young sales clerk (who had just rung up the $400) to hold a pair of jeans for a few minutes so her daughter could look in another store, the answer was, “We can’t do that. (sniff)” So, she hasn’t set foot in an A&F store since, tells everyone about the experience and spends her money at places like American Eagle, which has friendly, helpful sales people.

So, let’s do a quick little number-crunching for Ambercrombie & Fitch, with the following assumptions and data:

Unhappy Customer One-Time Sale: $400. (Woman with three daughters, one trip)
2005 Revenues: $2.8 Billion
Number of Stores: 850 (est.)

Lost revenues from one customer: $400 (just one transaction)
She tells 500 people: $200,000 (one transaction per person)
One unhappy customer per store ($400 x 850): $340,000 per year in lost revenues, one transaction; $680,000 per year, two transactions, and so it goes. Those cats are going to start piling up very soon.

To take it down a level, the woman told me it’s been two years since she set foot in an Abercrombie store, so right there, that’s another (very, very conservative) estimate of $800 lost. Keep in mind the initial amount was $400, so the company has already lost twice as much as the initial sale. I don’t know what biz school the A&F executives attended, but in my accounting classes this have would been called - um - stupid.

Maybe investors should stop reading stuff like this in Business Week - and go stand in a few lines.

Tags: Abercrombie & Fitch, retail marketing, marketing troubleshooting, customer service