Majestic’s Rowan Gormley on when not to follow the crowd

So, right now, all retailers are looking hard at their cost base, and that has to be common sense.

But sometimes the right thing to do is to do the opposite of everyone else – and this may be one such case.

“The lessons we learned may seem counterintuitive, but we can prove that they work”

The key to sustainable growth is to look after your people, customers and suppliers. Even in an uncertain market.

This does not mean that we are a charity, or all nice and cuddly – we drive a hard bargain like everyone else.

What it does mean is that sometimes you make more money by investing when everyone else is pulling back.

This is the premise we are using to transform Majestic. The lessons we learned may seem counterintuitive, but we can prove that they work.

Sustainable cycle

If you look after your people and suppliers, in turn, they look after your customers, so sales grow, profits grow and the business generates cash.

You can then invest that cash back into growth. That makes the whole cycle sustainable and you create a virtuous circle.

“Now someone who does their job well can grow their income by 20% a year and earn more than their manager”

Let me give you an example. The clever young man who runs Naked Wines UK spotted something interesting.

We ask all customers who interact with us to rate the experience on a scale of one to five.

Customers who had a five-star experience were 62% more valuable than customers who had a four-star experience.

So we rebuilt our customer service function to deliver five-star experience: we changed the name, from customer service to customer happiness team; we stopped emphasising the number of calls per hour and now only focus on five-star ratings; and we changed the incentive scheme.

Now someone who does their job well can grow their income by 20% a year and earn more than their manager.

The result? Five-star ratings increased from 86% to 90% in 2016 and customer retention rose from 78% to 80%.

The magic sauce

When it comes to buying wine we aim to get good value from our suppliers like everyone else.

But there are times when we offer to increase the amount we pay, in exchange for better wine.

“If Toblerone followed this example, they would be adding extra peaks to their chocolates”

The reason is that a small investment in quality in the bottle can make a huge difference to the taste.

That makes customers loyal to the brand, and customer loyalty is the magic sauce that makes the growth engine go around.

We know that improving quality makes us more money in the end as we can track the relationship between wine quality (we have over six million customer ratings) and customer retention.

If Toblerone followed this example, they would be adding extra peaks to their chocolates.

“We believe that the best way to build sustainable growth is to look after your people and your suppliers, so your customers become loyal”

The reason we can do this is that Majestic has an amazing asset. We have customer data on 90% of our transactions, going back 30 years.

That means that we can we can test counterintuitive decisions – not just guess.

Majestic has increased its store staff pay/work ratio (what they earn for what they have to do) by nearly 50% in the past two years.

Staff turnover has reduced and our talented people are more motivated and engaged.

So that is our philosophy. We believe that the best way to build sustainable growth is to look after your people and your suppliers, so your customers become loyal.

It sounds simple but, so far, it works.