Great Lesson: How A £40 Birthday Cake Cost £300 To Make

Written by Sean McPheat | Linkedin thumb

4 August, 2009

Marks And Spencers “GOT IT” at the weekend.

They well and truly understood the importance of lifetime value and the damage that negative word of mouth can have on their business.

It was my daughter Holly’s 3rd birthday party yesterday. We’d purchased a cake from Marks and Spencers who put Holly’s name on it etc.

I was going to be subjected to 30 screaming kids and then Holly’s big moment when the cake is brought out and she blows out the candles and everyone sings happy birthday.

We received a phone call from Marks’ on Saturday afternoon at 2pm:

“Errrr Mr McPheat. There’s been a slight problem. Your cake for Holly’s birthday party tomorrow is in Leeds, it’s been sent to the incorrect address and we close at 5:30”

Now we live in Rugby so it’s a 2 hour journey up the M1!

“But don’t worry because we’ve already sent a taxi to go up the motorway and he’ll fetch it for you”

Wow, I thought.

5pm came and we received another call from Marks’.

“Errrr Mr McPheat? There’s been another challenge. The taxi driver has had to wait in Leeds for 2 hours because they only had one half of the cake! But we’re going to deliver it to your door tonight so you’ll have it in time for Holly’s party tomorrow”

No problem.

7:30pm came and there was a knock on the door.

It was the taxi driver.

“Want some cake Mr McPheat?” said the driver

We laughed and he explained to me that it had cost Marks’ £120 to get him up to Doncaster and then a further £190 on the clock to get from Doncaster to Leeds and back to Rugby.

So all in all it had cost Marks’ £310 to get the cake to me and the cake itself cost me just £40.

Here are some lessons from this:

1. Marks’ understand the concept of lifetime value. We’ve ordered from Marks’ in the past and we will order from them again so they will “make up” the difference eventually. Do you understand the value of your clients and what money they make you over the long run? Sometimes you can get them in at break even or even at a loss (as in this case) but over a lifetime they are worth far more money to you than the initial transaction.

2. They understand that it was more than “just a cake”. A birthday cake is a big thing. It means more to Donna and I and of course Holly than just some sponge, jam and icing. A cake plays a big role in a birthday party and is an event in itself. They understand this. Do you understand the direct and indirect benefits of what you sell?

3. Negative word of mouth can cripple your business. Just think about this. 30 kids attending Holly’s party with 50 parents who are all in the market for birthday cakes! They all would have seen and heard the horror story if there was no cake at the party and that’s a lot of potential damage reputation wise. I remember when we had a Princess Castle Cake from Marks’ for Holly’s party when she was 2 and 5 of the mums ordered the exact same cake from Marks’ for their daughters parties too. And now they will all get to hear the fantastic customer service that Marks’ has provided us in dealing with this problem. This will only help sales. Lesson – sometimes it better to take “the hit” than to have negative word of mouth spread about your products and services.

It may have cost Marks’ over £300 extra to get the cake to us on time. But how much did it actually save Marks’ in lost revenue due to lost sales that would have resulted in the people who would have known about it.

And now this blog is going out to 10,000 people too and will no doubt get passed around the social media sites.

Power to you Marks and Spencers. That was awesome customer service.

Happy Selling!

Sean

Sean McPheat
Managing Director

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