Did you know the average sell-through rate for a magazine is about 30%? The sell-through rate is the rate which a given issue of a magazine will sell from a store. That means 70% of all printed magazines are just stopping by the newsstand on their way to the garbage dump or recycling center. All that time, work, and energy, just to make trash.
Speaking of the hardware store, I had a profound experience while shopping at the Ace Hardware on West 3rd St. (between 6th Ave and MacDougal).
I had to buy some machine screws and some washers (but not too many of either), and they sell loose ones individually for a few cents a piece. My total was a high-rolling $2.76. I gave the cashier three singles, and she handed me back my receipt and a quarter.
Now, you don’t have to be a math whiz to know that’s not quite right. But, you also don’t have to be an economic mastermind to see what happened: instead of making things a little bit more inconvenient for both of us by giving me the six-coin, two-dimes-and-four-pennies combo, she spotted me the penny and slid me a Mr. Washington (the silver kind, not the paper kind).
No big deal, right? Not quite. It actually made me feel pretty good. I appreciated it. And you know what? I’m going to go back. They’re my hardware store now, and I’m their loyal customer. And if someone else needs to go to the hardware store, well, I’m probably going to give them directions to my friendly neighborhood Ace.
Loyal customers matter. A box of Kleenex only costs a couple of dollars, and no one buys more than a few boxes a year. But to the company, a loyal Kleenex customer is worth about $994 over the course of his or her tissue-buying life. While that’s not a huge amount of money to a corporation like Kimberly-Clark (Kleenex’s parent company), over a broad customer base, that’s the money that keeps Kleenex alive.
As a company, how much would you be willing to pay for that loyalty? Econ 101 tells us Kleenex should be willing to pay anywhere up to $994 for that loyalty. Ace Hardware got my loyalty for a penny.
That’s a very powerful penny.