The bitter taste of nickels and dimes
Stopped by a Whole Foods early one morning this week for an iced tea.
I ordered a hot rooibos (you should try it) poured over a glass of ice.
Whole Foods is under two kinds of pressure: shareholders that want better results, and consumers who point out that it’s really expensive. They’re working hard to position themselves as not so expensive.
Anyway, the tea was $1.79 (a 90% gross margin) but the ice cost 50 cents extra.
Huh?
I mentioned to the cash register person that I wasn’t going to pay fifty cents for ice. Understandingly, she said, "no problem."
And then, instead of doing what I expected (giving me the precious ice for free), she didn’t give me the ice. I had hot tea. I got what I paid for.
The thing is, Whole Foods didn’t get what they wanted. They focused on the add on revenue and generated ill will. No joy in Mudville that morning.
The problem with the infinite add on gross margin strategy is that it doesn’t work on everyone. The problem with charging $95 to deliver a $10,000 purchase is that all the buyer remembers is the indignity of the add on.
Here’s my advice: have all the add ons you want. But waive them early and often. Waive the charges for great customers or for customers that make a face or just because it’s Tuesday. "Well, the to go charge is usually a dollar, but since you come here a lot, no charge for you."
It’s not about charging less. It’s about delight.