Categorized | customer service

The Panera Paradox: Don’t you want my money?

My customer service book is now in the polishing and fine-tuning stage. While the publication date is still well into the future (sorry, I’m not in control of that), I thought I’d start passing around some tasty little morsels culled from my upcoming opus. I’ll readily admit that the title, The Ten Commandments of Customer Service, has all the nuance of a kick in the butt, but customer service, unlike any other aspect of running a business, isn’t exactly rocket science. In fact, as I’m fond of repeating endlessly in the book, it’s not even third grade science. A modest serving of common sense is enough to see a business through almost all customer service issues, and, since so few businesses get customer service right — or even get close to right, maybe a good kick in the butt is what people need.

While the publisher has a queasy stomach about it, I’m not afraid to “name names” in the book as case studies. For ten years now, I’ve been collecting customer service experiences both good and bad. Watching one business after another get customer service wrong sends me into head-slapping, what-a-moron reactions, rather than a temper-busting, blood-boiling experience.

So, as a treat for loyal readers of this blog, I’ll be publishing many of these case studies over the next six months. Some have made it into the final book, but many were cut for space reasons. These case studies are meant to illustrate a common sense principle or problem in customer service. Some are positive, many are negative (many are called, you know, but few are chosen). So, without further ado, let’s move on to the customer service “condition” I call the “Panera Paradox,” which I draw straight from the book itself.

The Panera Paradox

I have a one-question “quiz” that I light-heartedly administer to business owners or managers whenever I’m in a mischievous mood. It goes something like this:

“What is the single most important thing you do in your business? The one thing that, if you don’t do it, you go out of business?”

Surprisingly, every bricks-and-mortar, traditional businessperson gets this question wrong, while almost every ecommerce retailer gets it right — and often without any hesitation. What do virtual retailers know that their “real” bretheren don’t?

Before we answer that question, let me scratch your itch and tell you the answer to my quiz:

The most important thing a business does is get paid by customers.

I had to tell you that?

If customers don’t pay you, you go out of business. It doesn’t matter how perfect your business plan is or how brilliant your marketing is. The whole purpose of everything you do — everything from marketing to merchandising to brushing your teeth — is to get customers to hand you money.

Which means that the most important, most critical customer service function you perform is to make it as easy, pleasant, polite, and efficient as possible for customers to give you money.

Why does anyone have to be told this?

Why do so many businesses get this part so dreadfully wrong?

If I walked up to you, a complete stranger, on the street and said, “Here. Let me give you one hundred dollars,” would you say, “Not right now. Stand over there and wait. I don’t have time for you right now.”

If you saw a twenty dollar bill on the sidewalk, would you ignore it? Talk to somebody else? Polish your shoes? Or would you stop what you’re doing and pick the sawbuck up right then and there without a second to spare?

Why does any business, then, make the paying part so lengthy, unpleasant, and aggravating for the customer?

That, folks, is the Panera Paradox, which I have helpfully distilled to five words:

Don’t you want my money?

I want you to memorize the Panera Paradox and remember it every time you’re standing in a long line, or being ignored at a cash register, or simply being treated rudely when you’re trying to pay.

“Don’t you want my money?”

Now, Panera is one of those wonderfully brilliant hybrids that combines a restaurant with a bakery with a Starbucks-style coffeehouse. The basic business idea is brilliant, the food is excellent, and the environmental design as good as it gets — three compelling reasons why they have high in-store sales and enviable growth.

These guys aren’t slackers. They’re doing just about everything right.

But, for some reason, they seem to have a life-threatening allergy to staffing their cash registers.

This isn’t a complex matter of queue management, which we’ll discuss in mind-numbing detail in just a few short pages. The issue here is blindingly simple. At Panera, the staff have more important things to do than take your money. Which means that, when you want to pay them, well, you’re just going to have to wait.

Which is why I find this so paradoxical. Of all the places during the long, arduous, and expensive process of finding, pitching, acquiring, and motivating a customer, the absolute, hands-down stupidest place to lose the customer because of poor service is at the very end of the process when they’re about to hand you money. Kind of like running an entire marathon and quitting two inches from the finish line because, well, you have better things to do.

In the three Panera stores I frequent with increasingly less frequency, the cash registers are totally unstaffed when you stand in line almost 50% of the time; and seriously understaffed the rest of the time.

As a result, you stand and wait. And wait. And wait. Even with a line of three or four or five or six or even seven people, cash registers often stand openly and defiantly empty . . . often for five minutes or longer. Once for almost twelve minutes (at which point, I tracked down a manager). Even with staffed registers, a line of ten or more people will be serviced by one or at most two cashiers, while other cashiers and managers engage in other tasks — the business equivalent of polishing their shoes (remember what I said about being customer-oriented rather than task-oriented? By now, this should be an automatic thought in your head whenever you see customer service staff cleaning, stocking, or doing something other than serving customers looking for help).

Let me make this as simple as possible.

Taking money from a customer is a drop-everything task. You don’t need to make it any more complex than that. There is nothing — outside of walking away from a customer — an employee can do that is more important than helping a customer pay.

Why? There is no louder, bolder way to tell customers that you don’t care one fig for them than to barely make an effort to take their money.

Here’s what you’re saying to a customer waiting in line at unstaffed or understaffed cash registers:

“You’re so unimportant to us, we don’t even want your money.”

Would you purchase a $10,000 print ad with that headline?

On practically every page of this book, I have said the same thing over and over again: excellent customer service is not rocket science. It’s not even third-grade science. I am continually flabbergasted that anyone has to be told that ignoring customers during the payment process is a bad idea.

In case you’re one of those, I’m now going to tell you why it’s a bad idea.

But first, remember when I said that every traditional retailer gets this question wrong while every ecommerce retailer invariably gets it right? What do online retailers know that traditional retailers don’t know? Especially since traditional retailers actually deal with customers face-to-face?

In fact, online retailers actually do know something traditional retailers don’t. They know how many customers leave the store before paying. They know, unlike Panera, how much business they’re losing and often know exactly how many dollars they lose every time a customer takes a hike.

That’s incredibly valuable information. Online retailers can easily identify and measure customers that decide not to pay them for one reason or another. They can track every customer who puts stuff in their shopping cart but gives up at some point before paying. And they spend big bucks figuring out how to make paying as easy as possible and capture more of those lost dollars.

Online retailers also know if regular customers stop buying from them, or buy less frequently, or spend less money (it’s called the RFM number — Recency, Frequency, and Monetary, and online retailers can track the RFM of every customer they do business with). And, again, they spend big money to decrease the R and increase the F and the M part of the equation. Traditional retailers, unless they have a shopper’s club that collects data from every purchase, have no idea when customers drop out or start spending less.

Let me give you an example. Let’s say I walk into Panera and encounter a line and a bank of empty registers (as I’ve said, that’s the situation half the time I wander into a Panera). Now, I’ve seen this many, many times before and I know that I’m in for a hefty wait before a cashier shows up — in fact, I once waited over ten minutes — so I turn gracefully on my heels and march out the door (an all-too-common occurrence). If this were an online store, the folks crunching the Web stats would know that I came and went. They would be able to identify the line and the empty registers and say, “Whoa! We just lost a customer because no-one was at the register!” (And, if they know who I am, they could even identify how much money they lost when I walked out the door.)

Panera, on the other hand, has no knowledge of this whatsoever. They have no idea that seven or eight dollars just walked away from their income statement.

Multiply seven or eight dollars by enough customers walking out the door and you’ve got a pretty good pocket of change.

But Panera will never know exactly how big that pocket of change is.

Here’s another thing they don’t know. Because of the poor customer service and the long, long waits at the registers, I currently spend at their stores about 2% of what I spent three years ago. That’s a 98% drop in one customer’s revenues — and I’m in a pretty crowded company of disenchanted customers. An online retailer with their RFM numbers would know that I’ve dropped out (my R would go up and my F would go down) and might, if I spent enough money before, try to fix the problem. But Panera has no idea that I’ve given up on their business. They have no numbers. No RFM tracking. No charts. And that’s not their fault. There’s no way they can ever know this, try as hard as they might.

No-one at Panera — or any other traditional retailer — can tell you how many customers are shopping elsewhere because the business is failing at critical customer service functions.

That’s why delivering stellar customer service at the payment juncture is so important.

Which, as always, returns us to our first commandment of customer service: Every failure in the customer experience must be treated as nothing less than a lost customer.

Based on several years of statistical research I’ve done for various clients, businesses often lose anywhere from 10% to 60% of their annual revenues by making a subpar effort at servicing customers during the payment process.

Put in economic terms, these businesses are not servicing their potential demand. While they can’t measure it, that’s real money they’re losing by having better things to do than take people’s money.

Let me translate that into an operational metaphor: excellent customer service — fast, efficient, effortful, polite, and friendly — at the business-critical customer payment juncture enables a business to reach full capacity relative to potential demand.

It’s a mistake to think of customer service as involving only your customers. Customer service is always about the customers you don’t have. It’s always about reaching the full potential of your business. Yes, you’ve heard it a million times already in this book, but it’s the bedrock of customer service common sense.

Because getting paid by customers is the most critical function in any business, getting payment customer service right, then, is about full utilization of your business. Which we’ll discover when we explore the Trader Joe’s Triumph in the next section!

How do you avoid the Panera Paradox? You’ll just have to buy the book (it’ll be a while, so jot down a note to yourself)! And there you’ll find exactly how to do the payment part right. Of course, it doesn’t take an MBA to tell you that cash registers should be continuously staffed and employees should always drop everything to help a customer pay. But maybe that just seems obvious to me . . .

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6 Responses to “The Panera Paradox: Don’t you want my money?”

  1. What do you think of the Apple Store model, where virtually very employee *is* a cash register and can check you out (take your money) at any time?


  2. Kay says:

    Funny – might be a problem with your Panera in your area – here we have the cash registers fully staffed from 8 – 2, and if there are more then 2 customers waiting, then another person is being called to staff the register. The only problem we have with our Panera is finding enough tables to sit. It’s always full and busy. Maybe the managers in your area should take another session at the Panera University, it’s in the business model that a customer should be served (order taken and delivered) in the bakery department within 2 min and in the cafe department within 5 min. Only problem: to many choices, which holds up other customers. Patience is a virtue most Americans do not posses though. Oh and not very professional to generalize the problem you have with your 3 Paneras towards ALL stores.

  3. Thank you, Kay, for the comments. I really appreciate them and I absolutely understand that other Panera stores may and probably do deliver excellent customer service — and they should be lauded for that. I completely believe you when you say that the Panera you frequent or work at gives stellar service and I don’t mean to undercut that or imply that you don’t. And I think I state clearly in the article that Panera has several things going for it, especially it’s excellent food. It doesn’t surprise me that you’re store is filling your tables.

    But I’m not generalizing about individual stores, I’m talking about Panera. Panera the brand and Panera the company. And it’s perfectly fair to generalize about Panera (not about other stores, but Panera) from three stores because . . . that’s what customers do. They generalize. You give them a bad experience over and over again in one store, they don’t say, “Well, other stores with this brand might be good.” No, they say, “Boy, service is terrible at Panera.”

    The major point of what I’m saying in the book (and I say it here) is that customer service is 100% or it’s nothing. When Panera allows abysmal customer service at one store, that affects the good stores, too. When one store drives customers away, they get driven away from the good stores, too. (If you don’t believe me, you can bet the marketing executives at Panera do — that’s the whole logic of branding.)

    You’re right. It’s not professional. It’s how the world works. It’s how customers think. It’s how they behave.

    And, it’s funny, but this came up just a couple weeks ago, which is why I chuckled a bit when I first read your comments. I’m at a party and nobody at that party reads my blog (different crowd — I know something like two people at the party). Somebody mentions meeting at Panera for their upcoming weekly gathering. A woman sitting across from her, someone I’ve never met in my life, says, “No way, they have the worst service in the world.” A guy sitting next to her, another person I’ve never met, starts recounting in great deal and in high dudgeon a bad customer service experience he had at Panera a month previously, ending with an unbreakable vow never to go back to Panera no way no how not after what they did. Another person out of my line of sight chimes in that “Panera is really lousy.” So they all decide that Panera is out.

    None of these people said, “Hey, there’s one Panera store that’s really lousy, but it’s not fair to generalize about all Panera stores.” The fellow recounting his bad experience at Panera didn’t vow never to go back to that one store, he vowed never to go to Panera, that is, any store called Panera.

    Is that fair? Is it professional? No, but it doesn’t matter. That’s how customers talk and how customers behave and how customers influence other customers. Because of that, Panera lost the immediate business of the dozen or so people in that group. And for everyone in listening range who had never been to Panera, they were given strong word-of-mouth that they should never even try it, even if they happen on your good store. And Panera has no idea any of this is going on. And you at your good store have no idea that any of this is going on.

    Are you okay with the fact that there are Panera stores out there producing customer talk like this? The staff at your store is busting their humps giving good service, and you’re okay with your other Panera stores producing customer feelings like this towards Panera?

    That’s how powerful bad customer experiences can be. In fact, just one bad customer experience has more power than dozens of good ones. Why? Because negative word-of-mouth is always exponentially more extensive and prolonged than positive word-of-mouth (this has been demonstrated in numerous studies).

    It’s not fair, it’s not professional, but it’s how the world works.

    That’s the whole point of my customer service book and what I’m trying to say here.

    Business isn’t about “fair.” It’s about customers spending money. You fail in one store, you end up failing your good stores, too. If I have a bad customer service experience in a local Panera, will I stop at the good Panera that you frequent? No. Those folks at the party who sat around telling Panera horror stories, will they go to your good Panera? No and no. For that reason, I believe that there are really only two scores in customer service: 100% or fail.

    You aren’t failing at customer service. Your store is not failing at customer service. But Panera is failing at customer service.

    And, just as a side note, lousy customer service at 3 stores is not a very good track record. To paraphrase Ian Fleming: One bad store is an exception. Two bad stores is a coincidence. Three bad stores is a habit.

  4. Let me add a little tidbit I found as a comment on the Business Week Web site from Pete Mortensen from March 19 of this year:

    “I have to admit, I like the premise of what Panera is doing, but the last several times I’ve gone into one of the company’s stores has been very disappointing from a quality perspective: soggy bread, very old tomatoes, and really inattentive service. I’ve been a Panera customer for about 10 years, and it’s been appalling to see prices hold level as quality has dropped.”

    Those words, “inattentive service,” along with “the last several times” shouldn’t be in combination if a company is devoted to customer service.

    Panera is flying high during the recession, but look at what happened to Starbucks when they declined in customer service and quality . . .

  5. Interesting stuff Richard. Look forward to seeing the boook!

    We have similar problems in the UK with many businesses. I recommend to my clients that they ‘stand in their own queues’ to find out what they sort of expereince they give their customers. It’s a really simple question, but i ask the ‘How easy are you to buy from?’

    Scarily, so many businesses are difficult to buy from people that stop it happening – I call them ‘Sales Prevention Officers’.

    Getting people to identify their Sales Prevention Officers, and more importantly, the causes of them, should be a priority for any customer focused business. By the way, the ‘search’ is not about coming up with a list of people you want to fire, it’s looking for the things that create Sales Prevention Officers – that usually means systems and processes that hinder good service.

    This often also starts by looking at ourselves as role models. How many of us have responded to a colleague who wants to put a call through to us ‘just tell them I’m not in!!’???

    keep up the good work!

  6. Andy, I am greatly honored finding a comment from you on my little blog! Believe it or not, I have frequently visited your blog at and have always considered your posts valuable, insightful, and required reading. If any of my readers are paying attention right now, I strongly advise they mosey on over to your blog and poke around.

    I absolutely love the idea of Sales Prevention Officers, but I would submit that many SPO’s have even loftier ambitions — you can call them Brand Asset Destruction Associates (or BADAsses, for short). They’re intent on not just marching you away from a purchase, but creating a permanent, indestructible, negative impression of the brand.

    My take on customer service is an absolutist one: every business should consider every customer interaction to be the equivalent of an ad on TV, radio, or print. If you wouldn’t make it a headline in an ad (“Er . . . about five hundred and fifty pounds?”), it shouldn’t be said or done to a customer.

    I agree with your focus on management and I’ve read some excellent management pieces on your blog (Who Calls the Shots?, for one); an entire section of my book is devoted to “nurturing” great customer servicers. That being said, some employees have the skills and character, and some don’t. Reward the A’s, train the B’s, fire the C’s, D’s, and F’s. Why? Management typically spends the bulk of their management time on the C’s, D’s, and F’s, a bit of time on the B’s, and ignores the A’s (because they cause no trouble). My second commandment of customer service is that you don’t train for customer service, you HIRE for customer service.

    But I have two unique takes on management’s role. First, I believe that excellent customer service is overwhelmingly a “character” issue, both the “character” of the employee and the “character” of the business itself (not the “culture,” “mission,” or “management,” but character). And I know I’m wandering into esoteric land here, but I am absolutely convinced after years of work and research in the character education arena (it’s popular here in the U.S., but you have similar curricula in UK schools), that the “assets” model of character is the most correct and actionable model of individual and business character (as opposed to the “values” model of character). So I see management’s role as establishing and husbanding the “assets” that produce superior customer service experiences. And that, in large part, is the primary concern of my book (and I explain as best I can how to apply the assets model of character to managing a customer-oriented business).

    Andy, many thanks. Keep up the fabulous work on your blog and best wishes for continued success!


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