Cleveland, Curveballs
and Common Sense

It's not a real business without a box fort.

Some time ago, on a cold night after work, I stopped in at Chipotle for dinner on my way home. Columbia had just opened its first Chipotle, and it’s located in Forest Acres, an upscale neighborhood with a large commercial and residential footprint, not to mention a major Army base. So even though the lunch crowd is more formidable, by the time I arrived, the dinner rush was in full swing. The night was abnormally cold, and soldiers, businessmen, soccer moms and college students did their best to crowd into the restaurant to stay warm while they waited to order.

In front of me in line was a couple that did not look like they belonged. An older couple, they looked a little out of their element as they stared up at the menu trying to decide what to order. Chipotle’s menu appears simple at first glance, but the ability to create your own burrito right there, on the spot, in front of everyone, can be a little intimidating. The austere, almost industrial concrete floors, metal counter and table tops, and abstract decorations probably wouldn’t help.

The couple made their way through the line, asking a lot of questions and carefully selecting their ingredients. “What’s barbacoa?” “Honey, do you think I’d like the carnitas?” “What did you say was in this salsa?” They reached the end of the line and the elderly man reached for his wallet, he and his looking relieved.

The cashier, who was older than most of the people working behind the counter and I inferred was the owner or at least a general manager, had a friendly look, and asked, with a smile, “would you like chips and salsa with that?” The wife looked at her husband; the husband, back at his wife. They weren’t expecting this. The looks of relief faded, as they wondered to themselves and between each other whether they’d want the chips.

The manager, sensing this moment, hurriedly interrupted: “You know what? It’s your first time here. The chips are on the house.” And he grabbed a bag of chips, a container of salsa, and added it to their tray. The couple looked surprised for a moment, then both smiled, and thanked him as they paid and sat down to enjoy their burritos.

A different night not so long ago, I arrived home from work and checked my mail before heading inside. Among the junk mail, I found a new Netflix movie, and after walking inside and eating dinner, I opened the trademark red envelope and removed the disc from its sleeve.

Like most movies that come from Netflix, especially Blu-rays, the disc art wasn’t colorful and attractive. Instead, it was subdued and grey, with the movie logo in white across one hemisphere, and in the other one, little swatch on the bottom with the word “RENTAL” inside.

Usually, the fact that a disc is a rental disc means that the disc is coded onto the disc in such a way that most Blu-ray players are unable to skip the previews or advertisements; your only option, if you’re (for some reason) not interested in seeing 30 minutes of previews for movies that came out 6 months ago, is using the fast forward option, which you have to restart when the track changes. This is annoying, but honestly, I’ve sort of gotten used to it.

But I was pleasantly surprised that this movie, for whatever reason, let me skip right through the ads at the beginning to the main menu and then the movie with no further interruptions (sometimes they getcha’ with previews before the movie). I watched and enjoyed the movie, an above-average comedy.

When the movie was over, I decided to see if there was a blooper reel, which is usually my favorite special feature of any comedy. Happily, I found one, and clicked it to start. And that’s when I got a message saying: “We reserve special features for customers who buy the movie.” Annoyed, I got the movie out of my Blu-ray player, and returned it to its sleeve and envelope to mail back.

It took me a while to realize what I like about businesses like Chipotle, Netflix, Five Guys, and even sometimes Apple. Companies like these have great reputations with customers because customers feel taken care of, the brand feels like a friend, and no matter the actual profits the company is reeling in (have you seen Apple’s stock price lately?), customers feel like “with this company, it’s about more than just the money.” This seems a little naïve to me: I don’t think any business on earth values anything more than money, it’s like saying some fish value water less than others. But it is true that it seems like some companies put more relative weight on the other issues.

Every business has “good” customers and “bad” customers. No business can predict, with 100% accuracy, whether a customer will prove to be a good customer or a bad customer. Thus, as a business, you have two choices of how to treat your customers:

• Option 1: Assume most of your customers are going to be good customers. Realize that new customers are more likely to become good customers if their first (few) experiences are good. Understand that this won’t always work: that some new customers, despite your best efforts, won’t become good customers. Further understand that if this happens more often than not, the problem is with you, the businessowner, not the customer. Act by figuring out what you can do to make a new customer’s experience a good one, and a returning customer’s experience just as good every time they come back.
• Option 2: Assume most of your customers are one-time customers. Further assume that you have very few opportunities to get as much value as you can out of a customer, because most of your customers are coming to you with a situational need. Act by figuring out what your customers tend to need, and extract as much value as you can out of those needs.

From the first story, Chipotle is clearly taking Option 1. But the Blu-ray manufacturer (Universal), is taking Option 2: they’re assuming that most rental customers won’t ever buy the movie unless they’re “forced” to (for reasons like: needing the movie the day it comes out, as opposed to 28 days after Blu-ray release; wanting to see the special features; wanting to be able to skip advertisements and previews).

It’s true that in the short term, Option 2 is more profitable. But in this age of social networking and endorsement, good customer experiences are more important than ever, and the short term success of Option 2 is growing shorter than ever. And here’s the thing about Option 2: nobody likes you. No one’s on the street singing Wal-mart’s praises, no one’s talking about what a great burger they got from McDonald’s, and no one is talking about what a great experience they had pumping gas at BP. It’s Option 1 that makes you relevant, even cool, among today’s society.

Take Louis CK: last month, he released a comedy special. However, rather than just a standard DVD release, Louis decided to release the video online, DRM-free, for $5 (about $10 less than the average new DVD). When you bought the movie, you got three separate downloads, but once you paid your money and got your video, you were basically on the honor system: there was nothing to stop you from putting it in your Dropbox and sharing it to the world.

Louis’s rationale was that DRM, while it may prevent some theft, is easily circumvented (if you’re motivated to do so), and in most cases just annoys people who bought it legally: DRM-ed video files can’t go on every device, some of them are associated with online accounts with passwords, etc. So he took the risk of losing some money short term in the interest of providing a good customer experience. How’d it work? He made a million dollars in twelve days. He had a lot of factors working in his favor, like the fact that he was already well-known and trusted, but still, he called the experiment a success.

But unlike much of the coverage said about it, Louis CK’s experiment wasn’t anything new: companies like Chipotle, Five Guys, and Netflix have been treating their customers like this for years. Ever get a Netflix disc with a scratch that doesn’t let you watch the movie? You don’t fill out a long form, mail in the broken disk, wait for approval, and then, finally get a new disc; you click a button and a a new disc is shipped immediately, with Netflix assuming that you’re a good customer and aren’t trying to take advantage. I imagine there’s some cutoff where Netflix will stop being so trusting, but they’re willing to risk a few Blu-ray discs if the reward is the customer being happy with their service.

And I think this is where we are in the 21st century. Businesses can’t hide behind brick and mortar or geographical boundaries; if they try to do so, they’ll be wiped out by a business who didn’t. So Universal (and other similar companies, I’m looking at you big media): treat your customers like you want them to be your customers again. Make their experience great, and expect that if you succeed in doing that, their repeated business will make up for your earlier slimmer profits.