Finding the Owner’s Manual, and Bed, Bath & Beyond Bankruptcy
I needed the owner’s manual, so I opened the glove compartment in my wife’s SUV.
It was crammed full of blue and white flyers. Oh- they’re Bed, Bath & Beyond coupons. I pulled them out, found the owner’s manual, and somehow stuffed everything back in.
“Do you really use all of these coupons?” I asked.
“Yeah- eventually. Sometimes, if they’re expired, I can talk the salesperson into accepting it.”
Sure enough…
We pulled up to the store in early December, and Patty grabbed all the coupons. Turns out that she had more stuffed in the SUV car door pocket. I pushed the cart as she shopped, then we headed to checkout.
Have you ever signed a mountain of paperwork to buy a home?
Checkout looked similar.
There was a fast shuffling of coupons, and negotiations between Patty and the checkout employee. In the end, I’m, not sure that we actually paid anything…
Pricing and customer expectations
It’s the toughest lesson I had to learn during 20 years as a freelancer.
Charge higher prices.
I’d like to think I do good work, and that I should charge higher rates. Charging premium prices requires you to set a customer expectation at the beginning of the relationship- and stick with it.
I got pretty good at saying: “My prices reflect the market price for what I do. If that doesn’t fit in your budget, I certainly understand.” I set an expectation in the customer’s mind.
But there’s a catch.
I’m selling writing and other services- and I think I can demonstrate (with work samples, published content) that my services are measurably better.
Bed, Bath & Beyond is a retailer that sells products also distributed by dozens (hundreds?) of other businesses. To charge higher prices, the company must differentiate itself from the competition. A business might differentiate based on better service, a wider selection, or an attractive e-commerce site.
Without differentiation, people won’t pay more.
I’ll show up for a sale
CNN Business explains what happened to Bed, Bath & Beyond.
“Once a hugely popular marketing tool, the coupons backfired as the retailing business changed.
They eroded Bed Bath & Beyond's profit margins, hurt its brand image and trained customers to only shop at stores if they had a coupon stashed away. This made it much harder for Bed Bath & Beyond to sell merchandise at full price, as customers began to perceive Bed Bath & Beyond's products as overpriced unless they had a coupon. That led to a perhaps inevitable bankruptcy.”
Our family never walked into one of the stores without a coupon. And why not? The retailer sent coupons constantly- seemed like every week.
Like many businesses, Bed, Bath & Beyond did not embrace online sales- and fell behind the competition.
Missing the e-commerce trend
Another quote:
“As online shopping grew, coupons became a less effective tool because customers could compare prices across different sites to find the lowest one. Rival stores also began to offer price-match guarantees.
By then, Bed Bath & Beyond was hooked on coupons and couldn't successfully pivot away.”
The company tried to fix the problem, but customer expectations were too difficult to change.
Fixing the mistake
“Bed Bath & Beyond tried to move away from coupons during the 2010s after they squeezed profit margins.
In 2016, Bed Bath & Beyond began testing a membership model that for $29 a year offered a 20% discount on all purchases and free shipping.
But the membership never caught on. Customers were too attached to Bed Bath & Beyond's coupons and resisted any changes to the model. Other chains, such as JCPenney, also tried to pull back on coupons and faced customer backlash.”
You can imagine a customer’s reaction: “Membership fee? Just send the coupons!”
So where does that leave us?
The lesson
If you provide a service and do good work, there’s simply no excuse for undercharging customers. Run an experiment: Increase your prices by 15%, and see how many new customers turn you down.
You may be surprised to learn that most are willing to pay more.