Tuesday, March 10, 2015

The Last Two Percent (Tradecraft)

The Law of Diminishing Returns basically states that your effort put into a problem will eventually far outweigh the desired results. The goal becomes getting a process far enough along, and not sweating the details. In business nowadays, "close enough" is good enough. We see this all the time in various industries.

My POS software company recently announced a version 2.1 at the same time they announced 2.0, promising to fix the 2.0 bugs with that future version. Car companies are desperately trying to increase sales by homogenizing and dumbing down their cars to the most common denominator, abandoning niche vehicles, and interesting features. Disgruntled Wal-Mart customers flee to Target to find themselves treated just as poorly there, failing to realize their embrace of discount stores comes with a hit to service. Business books suggest getting your business "good enough" so you can lie on the beach for the remaining 36 hours of your work week.

Good small business owners will tell you "good enough" is the enemy. Good enough is not good enough. It might work for your entrepreneurial MBA run business, whose goal is to be acquired or strike it rich with Other People's Money, usually within a strict time limit, but small business is about filling in that last couple percent of efficiency, of striving for perfection, of dazzling your customers. The Law of Diminishing Returns is our constant companion, not a fools errand.

I'm mostly referring to process. For example, special orders are really hard. There's a Reddit discussion about a local game store that flunked their special orders. The thing about special orders is they should be invisible to customers. We spent about $7,000 upgrading our IT infrastructure a couple years ago, primarily to address special orders. Good process and good IT should function below the surface, with no drama.

We often have 20-30 special orders in our system at any given time. Our success rate with this new system went from 95% to 98%. 95% might sound good enough, but it meant we disappointed 1 in 20 customers who placed a special order, as opposed to now, where it's 1 in 50. 1 in 50 is still unacceptable.

Today we got our new sticky notes from the printer to help with that last 2%, a process issue where we either fail to pull an incoming game, fail to notify the customer, or put aside too many games that then sit in a bin for months before they're noticed. A game that sits in a bin is lost opportunity, which costs us money.

This last, analog part of a sophisticated ordering system, a simple sticky note, addresses the last 2% of our problem. It was the end result of a lengthy discussion with other game store owners who had the same problem.

As I've stated many times, we're not special. We're not geniuses because we have a sticky note. We're just one of those game store owners in pursuit of the last 2%. We may fail on occasion and we certainly have our shortcomings, but nobody can accuse us of not trying to improve our process.

Being a store owner then is being the kind of person who wants to embrace this last 2%. You have to be bothered by that final bit of inefficiency, rather than having that "good enough" entrepreneurial mindset.


  1. The comic shop I do odd shifts for does something similar: When you drop something off you want to sell you sign the page that along with your contact information, we commit to calling you within a week with our offer, and 2 more times in under a month (usually 2 weeks apart). If you do not come in to accept or deny the offer within 2 weeks of the third and final call, it is considered donated to the store. (this prevents our 5'X5' backroom from getting overly clogged with collections of comics and MTG cards from 18 months ago that came in when no one who knew prices strongly enough was there)

  2. We need a system like that. We've got stuff 6 months old or so. It's gone as long as a year.

  3. I can tell you that as a customer that there's more than a 2% satisfaction difference between 98% and 100%. 100% means you're secure that when you go to a store you're going to have a good day. If I'm choosing between a 95%, a 98% store? Meh, whichever is cheaper. I will pay premium for a 100%, because some days I don't want to have anything else go wrong.

  4. These metrics are entirely on our end. If you've had a problem with a special order, you're working at 0% satisfaction and very little confidence in the store, regardless of the overall metrics. The goal is to never let that happen to you, or make it up to the 1 in 50 customer when it does.

    Mistakes happen. Working hard to get those close to zero is what this post is about. When they do happen, that's another issue, and stores should go WAY out of their way to make it up to customers. It's especially easy to do when it's 1 in 50 problems in a process that accounts for a tiny fraction of one percent of sales. It gets really harder and becomes an important business decision when it's 1 in 5 or 1 in 10. At that point, making customers happy is too expensive (Target, Wal-Mart). In the case of the Reddit story, they had a problem and didn't fix it AT ALL.

  5. Endgame didn't bother to set aside, or call me, when a product I'd ordered from them came in, fortunately I happened to come by the store and saw it sitting on the shelf. I doubt I'd bother to place a special order through them again.

  6. How do you make use of your sticky note? What do you do when customers don't pick things up? Wouldn't mind picking your brain at GAMA next week.

  7. It's kind of like the "last mile" in telecom, where they can make their network lightning fast, but the retail customer's decrepit copper wire is the bottleneck.

    The sticky note ties in with our super sophisticated POS special order system. When a game comes in on special order, the sticky note helps us process it and ensure the customer is contacted and there's staff accountability. Without the note, the item often gets lost in the process.

    We charge in advance for our special orders, so customers almost always pick their items up. That said, we've had about half a dozen items throughout the years where customers never do pick them up. It just reinforces our pay in advance policy.

  8. If you want I can send you the form we use, I have it as a .docx on my computer.. I had the details a little off.

  9. That would be great.

  10. done, sent to the info email address