Mine Your Own Business

Let 'em Know What You Do

Over the weekend, I went with my twenty-one year old daughter to help her buy her first new car.  Normally you would expect me to rant about poor customer service, but I have to say that overall this wasn't a bad experience.  It went much better than my own car-buying adventure last fall.

My daughter is a waitress at a sports bar/restaurant.  Not to brag, but she's a gorgeous girl, the type that you remember. [Fortunately she takes after her mother.]  I bring this up because most of the salesmen at the dealership where she ultimately bought her car recognized her from the restaurant.    Apparently it's a hangout for car salesman. 

The point is this.  Megan had no idea that any of them sold cars.  One of them is even the brother of another employee of the restaurant.  For the cost of a five cent business card, any one of them could have had the sale!  That's a shame.  Not only did they miss this sale, but how many people does a typical waiter or waitress, especially in a casual, neighborhood kind of place, talk to on an average day?  How many waiters, waitresses, and bartenders in a place like that are young people, making decent money, possibly students, who either are or soon will be in the market for a car?  How many more sales might be out there, just waiting for someone to make a referral?

Of course, this leads to the question, How many people do you meet on a typical day at THEIR place of business?  Do they know what you do?  Have you given them your card and asked them to come see you when they're in the market for what you sell?  Have you asked them to pass your card along to a friend?  If not, you're leaving more on the table than just a tip for the waitress. 

Our friend Bob Negin suggests that you hand out gift certificates; not coupons that require a purchase, but gift certificates.  The object is to attract customers to your store.  How much is it worth to have someone new visit your business?  $5.00?  $10.00?  Only you can answer the question.  But a free gift, just for visiting, is definitely going to improve your traffic.  Turning the visitors into customers is YOUR job.

To build your business, you have to be a walking advertisement.  There shouldn't be anyone that you meet that doesn't know what you do for a living.

Jet Blue

By now I'm sure you've heard the stories of the massive delays suffered by Jet Blue Airline passengers during Valentine's Day week.  Passengers were stranded on Jet Blue planes for hours at New York's JFK Airport  because of a combination of bad weather, equipment problems, and flight crews being stranded in the wrong cities.

That's old news.  As Paul Harvey would say, "here's the rest of the story."  Today, Business  Week released its listing of the top 25 "Customer Service Champs."  Jet Blue was originally included in the list.  But, after the recent problems, BW decided to remove them.

As I read the article, my first impression was that it only takes one mistake to damage an otherwise excellent reputation for customer service.  Jet Blue became the target of late-night talk shows and now has been unceremoniously dumped from the list of "Champs".  What a valuable lesson for all of us.  Never rest on your laurels.  You're only as good as your last contact with the customer.  What have you done for me lately?

Fortunately, I stayed with the article and the reader comments.  The comments are overwhelmingly in support of the airline.  Some examples:

"Perhaps I should cancel my subscription for BusinessWeek for being so shortsided."

"The mistakes made in the last ten days should not negate seven years of molding an airline that stays focused on safety, caring, and integrity as core values."  [from a Jet Blue crewmember]

"Everyone makes mistakes -- hopefully Jet Blue has learned -- and the other airlines as well. If it happens again -- then consider moving them. Geez--give them a chance!"

"In response to your "X-ing" Jet Blue's name out of the customer services list, I'll be the first to say that I am ashamed of the way this magazine conducts its affairs. I believe it is a pathetic move on your part to cover up the truth in order to increase sales of your magazine. "

"Wow -- did you make a mistake? Talk about one-sided reporting. Why not applaud the fact that Jet Blue admitted their mistake and publicly apologized?"

"Airlines have canceled flights due to weather, botched schedules, ruined travelers' plans, and had their operations end up in chaos for years, no decades, and never apologized to their customers. Jet Blue takes the high road and the news media takes the opportunity to engage in sensational journalism with a big red "X"."

"This "barb" thrown by Business Week shall soon be forgotten, and public opinion shall prevail. It's quite easy to stand in the shadows and throw stones at those who attempt perfection. Maybe the people of Business Week magazine should try reinventing themselves?"

So I guess the real lesson from the "Jet Blue Affair" is that customer loyalty, as Master Card might say, is priceless.  "Satisfied" customers may or may not buy from you again.  Loyal customers will rally around you when things go bad almost like members of a family. 

If you're familiar with Stephen Covey's "7 Habits of Highly Successful People", one of his concepts is the "emotional bank account".   Simply stated, every time you do something for someone, you make a deposit in your emotional bank account with that person.  When you do something wrong, you make a withdrawal.  As long as the deposits are greater than the withdrawals, you have a positive balance.  Like a personal savings account, it is possible to recover from an overdraft, but it's going to cost you.  Of course, the higher your average balance over time, the more likely the bank is to work with you.  It's much better to make sure that account always has a big enough balance to cover any possible future checks you may need to cash.

Aparently Jet Blue understands this concept better than Business Week.

Radio Today

There's no question that word-of-mouth marketing is the most cost-effective way to promote your business, but most businesses still spend at least part of their ad budget on the more traditional media.  With the hundreds of choices available today including cable and satellite TV, the internet, and more print media than you can count, 93% of all Americans 12 years old and older still listen to radio every week.

According to Arbitron, the radio ratings people, "no other medium-electronic or otherwise-claim as many weekly consumers as radio does."  The percentage of people listening to the radio remains nearly constant from age 12 through age 64.  Even so, nearly 85% of women and 87% of men 65 and over still listen to the radio at least once a week.

The 2006 edition of Radio Today from Arbitron breaks down the various radio formats by geographic area, age, gender, time of day,ethnicity, and other factors.  Some of the statistics are no-brainers .  For example 87.3% of "all sports" radio listeners are men.  Some are less obvious, even surprising. You could  probably guess that "country" radio ranks highest in the south central states (TX, LA, OK, AR, MS, AL, TN, KY) but you might not think that the second highest "country" share belongs to the west north central states (ND, SD, NE, KS, MO, IA, MN).

You might also be surprised that only 30.2% of "country" listeners describe themselves as "blue collar". 

Given the political nature of "news/talk/information" radio, you might think that it would pull big numbers on the east coast, but only the New England region has higher than national average ratings for the format with the south Atlantic region, which includes Washington, D.C., having ratings just 89% of the national average.  Not surprisingly though, the format's listeners have high household incomes.

You can download and read the full report from the Arbitron website. 

If you want to maximize your advertising dollars (and who doesn't), it's worth taking a look.  Besides, your radio ad salesman will think you're really smart when you pull it out of your desk.

For a lesson in how NOT to run a radio promotion, click on the picture above.

More on Wal*Mart Fabrics

If you're like me, it takes a lot to make you feel sorry for Wal*Mart.  But as the mini-controversy swirls around the Bentonville behemoth's rumored decision to walk away from the cut fabric business, some internet posters are getting really nasty.  Here's what one lady had to say:

"Is it possible that Wal-Mart is discriminating against women? Perhaps. I haven't heard of any plans to close the sporting goods department or the exercise equipment department. I cannot say whether or not those departments are more or less profitable than the full-service fabric department, but I have been paying attention and I very rarely see people flocking to those areas to buy things!"

As you probably know, a sex-discrimination law suit is currently pending against Wal*Mart by a group of former employees.

According to Laura Richardson, a crafts, home decor and leisure analyst quoted in Forbes, the average sales per square foot in the typical Wal*Mart store is 25% of the company's target.  I suspect that has a lot more to do with their decision than sexual discrimination.   

It goes to show that it doesn't matter what your intentions are, it's what the customer thinks that's important.  You have to do everything you possibly can to protect your image and your reputation.

Costco

There's an interesting article on msnmoney.com about Costco.  For those of you not in their market area, Costco is a warehouse club, similar to Sam's Club, but with a more up-scale image.  Their merchandise tends to be a little more high-end than Sam's. 

Costco (and Sam's) are able to work on low margins because of their low expenses and because they generate substantial revenue from membership fees, $1.2 BILLION for Costco in their most recent fiscal year. The article is generally favorable toward Costco.  Compared to many of their big box competitors, some of the kudos are well-deserved.  For instance, they are much more generous to their employees with both pay and benefits than Sam's Clubs.

One thing the article doesn't point out is that many of the expenses that Costco and other big boxes "save" are actually passed along to their manufacturers.  Selling them can be an expensive proposition.  For example, the writer praises Costco for their no-questions-asked return policy.  Guess what?  The costs of that liberal return program are born by the manufacturers, not by Costco.  Other expenses associated with their streamlined distribution process also fall on the manufacturer.

The warehouse clubs are able to keep their inventory low by forcing their suppliers to hold the merchandise in their warehouse.  That's why, in spite of their wafer thin profit margins, the prices in warehouse clubs aren't necessarily the lowest in town.  Manufacturers, at least the smart ones, load these additional expenses into their wholesale price.  So, even though the warehouse club sells at a maximum of 15% gross margin, they're often adding that margin to a higher wholesale price.

It's easy for a manufacturer to get excited by the potential business generated by Costco or any big box store.  But the costs are high, both the expense of supporting their bare-bones operation and the expense of the loss of loyal dealers.

Demand lines with names like Black and Decker, Panasonic, or Sony may develop a long-term relationship with a warehouse club, but for the most part, products are in and out of the clubs very quickly.  As the video that accompanies the article points out, every product is carefully scrutinized and the ones that don't perform are quickly replaced.  (While the article is favorable to Costco, the video looks like a Costco infomercial.

The club model is unique but the high-volume/low-service style of business isn't that different from any of the big box stores. 

Watch Out for the "Average"

Here’s something to think about. Let’s say you’re a huge national chain. You have thousands of stores. How do you decide what items to put on your shelves. Obviously you’re going to look at your “average” customer. The law of large numbers means you have to target that average or you’ll never get the turns you need to be profitable.

But, what exactly is “average”. We’ve all heard the joke about the average family having 2.5 kids. It may be average, but I’ve never seen a half of a child and you haven’t either. That’s where the average breaks down.

Here’s a hypothetical example. It’s very simplistic, but I think it makes the point. Let's say you're in the shoe business.  A national marketing company surveys your market area and announces that the average woman's shoe size in your area is seven. 

The women's shoe buyer for a national chain, who’s responsible for thousands of stores in hundreds of different markets sees these results and decides to add more size sevens to the mix for your area. After all, that’s the average size. But the reality is that the surveyors found that 1/2 the women in your area wear size six and half wear size eight, making the average a size seven.  The end result will be a lot of missed sales and a lot of leftover shoes for the local chain store location.

Now, let’s say you’re the owner of a local shoe store. You see the same survey results, but you know your market. You know that last year ½ of your sales were size six and ½ were size eight. You also know that, for whatever reason, none of your customers wear size seven. You buy accordingly and seldom disappoint a customer or have any major markdowns (except for those purple pumps you bought last year, but that’s another story).

The point of this very simple illustration is this. You know your market. You know your customers. You’re an expert at marketing to your niche. That’s your advantage over the chains. You’ll often hear so-called “experts” talk about the chain stores’ volume purchasing. Since they’re big, they must be able to buy better. What the “experts” overlook is that when you buy big, you make big mistakes. Big mistakes mean big markdowns that eat up a lot of that volume advantage.

The best way to maintain your edge is to focus on what you do best. Don’t try to be all things to all people. Concentrate on the customers that you know and understand and be the best possible source for that group. It’s tempting to branch out into new markets but the best way to group your business is almost always to find better ways to serve your current customers. And you know that there’s nothing “average” about them.

Why should I buy from you?

Face it. When a prospect comes into your store, there are only two possibilities. Either she’ll buy from you or she won’t. I know, there are some sub possibilities. For example she might not buy today but will come back later and buy. But, in the short term, in the here and now, either she’ll buy or she won’t.

What’s the difference? The difference is whether you’ve answered the question “Why should I buy from you?” to her satisfaction. If you don’t answer the question, you don’t get the sale. That seems fair enough.

It’s a pass/fail exam. There are no As, Bs, or Cs. Either you answer the question or you don’t. Either she buys or she doesn’t. It would seem like developing an answer to the all-important question would be the number one priority of every retailer in the world. In fact, it should be the number one priority of every business.  Yet a recent survey shows that only a tiny percentage of business people can come up with a good answer.

A good answer isn’t “great customer service”, or “quality products”. Does anyone actually believe that they give poor customer service or that they sell junk? Every single one of your competitors thinks their service and products are the best, even the big box stores.

So, what is the answer? I don’t know. You’ll have to answer that one for yourself. What is your unique selling proposition? What makes you different (and better) from your competition? What’s your mission statement? What sets you apart? What makes your service great? Why are your products the best? Why should I give you my hard-earned money instead of giving it to the guy down the street (or the guy on the internet)?

Give this one some serious thought. Ask your staff. It’s important enough that you might want to hold an off-hours meeting with the troops to discuss it. Order a couple of pizzas and some soft-drinks and have a brainstorming session. And when you come up with your particular answer to the question, build on it. Make sure everybody on your staff, not just sales people, knows it by heart. Use it in your signage. Use it in your ads. Make it your mantra. Make sure every customer hears it and understands it.

 It doesn’t have to be long. “Always the low price” is one retailer’s answer to the question and they’ve been fairly successful. Since that one’s taken, what’s yours? Why should I buy from you?

Do-It-Yourself Tech Support

Thanks to Ralph of Ralph's Vacuum and Sewing in Redwood City, CA, for pointing out this video.  It's been making the rounds on the web for the last few months.  A soldier in Iraq wasn't able to get tech support for his printer.  When the manufacturer told him he would have to pay for instructions on how to fix the device, he decided to take matters into his own hands.

The video was sent to the manufacturer and distributed on the web by Break.com.  To their credit, on receiving the video, the manufacturer sent the GI a new printer.  But, was it too little, too late?

The lesson here is that bad pr from an unhappy customer can cost a lot more than the price of a new piece of merchandise.  I can't even imagine the cost of bad pr from an American soldier serving in a war zone.  It has to be HUGE.  The company ended up sending a new printer as damage control, but as they say, it's hard to shove the genie back into the bottle.  More than 360,000 people have viewed the video on Break.com.  Another 64,000 have seen it on YouTube.  It's available from other sources as well.

How much better would it have been if the replacement printer had been sent out immediately?  Well, the company wouldn't have spent any additional money. More important, the video would have never been made and the company's image wouldn't have been damaged.

The internet and the new social media, like MySpace and YouTube have given everyone with a computer the ability to reach huge numbers of people.  Creative people, like the soldier, who can create a unique presentation can literally destroy a company's image.  People who participate in on-line conversations have a tendency to be passionate about their interests.  Bad news travels fast.

Today, more than ever, it just makes good sense to do everything we can to keep our customers happy.

Parental Discretion is Advised.  The video contains a four-letter word at the very end.  You can avoid it by stopping the video after the soldier says "Thank you very much."

Customer Perception

Word on the street is that Wal*Mart is going to do away with the cut fabric departments in its stores, beginning with new and remodeled locations.  The company confirms that it's making the change, but won't discuss which stores are affected.  As you might imagine, this move has caused a lot of conversation on the sewing blogs, especially among consumers located in towns where Wal*Mart is rumored to be making the change.

Some of you may be directly affected by this change.  Many of you won't.  I bring it up here because it's interesting to see how some consumers are reacting.  Some are hopeful that the absence of fabric in the discount store will lead to a revival of the independent fabric store.  Others are concerned that they will have to pay higher prices.  It's this perception of the dynamics of independent retailer vs. chain store that should concern all of us.

I'm going to quote from a blog posting by a consumer who falls into the latter group.  I've eliminated any references that might identify this lady or her location.  I'm sure that the writer means well and  represents the thinking of millions of other consumers.  She represents the "new consumer" whose voice can be heard over long distances via the internet.  Regardless of good intentions, these are the type of comments that can be very damaging to the independent retailer.  She writes:

"But remember, there are a lot of people out there that absolutely cannot pay the higher prices independent fabric shops offer, and the independent fabric shops can't afford selling for less as
they don't have the high volume fabric purchasing ability that the larger stores do."

Face it.  This is a perception held by many consumers.  Small store = higher price.  Notice that the writer doesn't present this as her opinion.  She states it as a fact.  She goes on:

"As an example, there was a place in (town) when I first started quilting.  Fabric there (and this was a LONG time ago - say 25 years at least) was anywhere from five to ten dollars a yard. If you
went about ten blocks South, on the same street, there was a (chain store). I could buy the EXACT SAME MATERIAL there for $1.50-$2.00 per yard."

TWENTY-FIVE YEARS AGO??  Remember, we're talking about perceptions here, not facts.  Something that happened to this lady in the mid-eighties has permanently affected her feeling toward independent retailers.

"The only advantage was that at times the (independent retailer) brought in some beautiful fabrics ........ which could not be bought at the larger store. But then the larger stores started carrying those fabrics, at a large discount, and the (independent) went out of business."

Here's the real key.  Obviously this consumer continued to visit the independent retailer to see new, "beautiful" fabrics.  Once the independent stores created a market for the new merchandise, the chains jumped in, bought large quantities which lowered production costs,  lowered prices, and grabbed the easy sales "and the (independent) went out of business."

The writer closes by saying, "You WILL be paying more for fabric. You WILL NOT have as large a selection."  [Emphasis is the writer's, not mine.]

Clearly this last statement is false.  The chain stores have carefully created the myth that their prices are always lower.  As you know, and as we've discussed here before, the chains will always be lower on a selection of easily shopped items.  That's how they create the illusion of across-the-board lower prices. 

As far as selection, the writer has said that the independent store used to carry "beautiful fabrics" that weren't available at the larger store.  Of course, she expected to buy this special merchandise at chain store prices.

The new "social media" gives consumers what amounts to a 3,000 mile long back fence.  We can talk to our "neighbors" from border to border and coast to coast.  This can be a wonderful thing or it can be a nightmare, depending on the topic of the conversation.  People who get involved in on-line conversations are usually passionate about their subject.  They're also very suggestible.  When one of them makes the blanket statement that "you WILL be paying more", her compatriots will take her seriously.  And they obviously have long memories.

There's no way of knowing what experience this person actually had twenty-five years ago.  There may well have been a retailer in her town who was gouging the public.  It doesn't matter.  She believes that independents charge more than chains and wants everyone else to believe it too.

So, how do we counteract this type of information?  First, we must be aware of what's happening in the market, not just the market in our town, but the world-wide market represented by the internet.  We also have to be aware of what people are saying about our market, especially on the web.  We have to be aware of the price-sensitive items in our product mix and either price them competitively or not carry them at all.  We also have to be aware of what things are selling for on the internet.  It's not  necessary to meet internet pricing, but we have to be aware of it and have a plausible explanation for the difference between our local price and the price available on the web.

Look at the big picture.  If the chain down the street sells item X for a dollar, for crying out loud, don't try to get $2.00 for it.  Sell it for a buck (even if it costs you more than that) and have a better item, one that earns you a profit, available as an alternative.  Tell the customer why yours is better.  Explain the cost of ownership.  If they insist on the $1.00 item, sell it to them and try to sell them something else.  If that fails, then take the dollar, accept the fact that you won't make a profit on everything you sell and be glad that this person won't be spreading the story that your prices are too high.  She may become your best spokesperson. 

The other choice is to not carry item X.  The few sales you lose are certainly not worth the damage to your reputation that comes from being perceived as being "twice as expensive" as the chain store.  It's worth noting that Home Depot, who certainly sells a number of "price sensitive" items at or below cost, reported an overall gross profit of 33.5% in fiscal 2005.  Obviously they sell many items at a much higher margin.

Finally, become an ambassador, not just for your own business, but for independent retailers in general.  Let people know, in your advertising, and in your day-to-day conversations, that your prices are competitive and your products and service are better than the chains.  Even when the sale is made, be sure the customer understands the extra value that she receives by shopping with you.  Never, ever let anyone leave your store thinking that your prices are too high, whether they buy from you or not.

Whatever you do, don't just talk the talk.  Walk the walk.  Don't buy your lawn mower at Wal*Mart and then wonder why your neighbor shops there.  From a creditability standpoint, I can't imagine anything worse than running into one of your customers at the discount store.  And don't have bottles of Wally World cleaning products sitting around in your store.  Remember, we're all in this together.

Valentine's Day

This is a RED ALERT primarily for our male readers.  Tomorrow is Valentine's Day. 

The National Retail Federation reports the following Valentine's Day facts from their 2007 Valentine's Day Consumer Intentions and Actions Survey:

• The average consumer will spend $119.67 on Valentine's Day, up from $100.89 last year.
• In total, Americans will spend $16.9 billion.
• The average male will spend $156.22 while the average female will spend just $85.08.  The president of the NRF speculates that men may be trying to make up for buying the big screen HDTV for the Super Bowl.
• 62.8% of us will buy cards.
• 48.4% of us will buy candy.
• 36.7% of us will buy flowers (which cost about three times as much this week as they did two weeks ago).
• Nearly half of us (45.3%) will treat our special someone to a Valentine's Day evening out.
• 189 million roses were produced for Valentine's Day last year with 74% of them being bought by men.
• The National Confectioners Association reports that 8 billion "conversation hearts" will be produced in 2007.

Whatever's your favorite gift to give, just don't forget.