Repeat Customers vs. Delighted Customers

There is nothing better for your business than positive word-of-mouth.  It’s better than any advertising you can buy, and it’s free.  In fact, you can’t buy it at any price.  You can try.  Car salesman, for example, will often hand a new customer a stack of business cards with the promise of a "finder’s fee" for anyone sent in who buys a vehicle.

But, there’s a big difference between me sending you a customer so I can make fifty bucks and me sending you a customer because my experience with you was so good that I want to share it with my friends.  The more of these customer "ambassadors" you have, the more likely it is that your business will grow.

It’s easy to confuse repeat customers with delighted customers.  There are a lot of reasons why someone might come back to your store but it doesn’t mean that they are saying nice things about you.  For example, here in St. Louis we have limited choices in air carriers.  A business person may fly American to Dallas and back every week because their flight times are more convenient, but it doesn’t mean that he or she is delighted, or even satisfied.  They might change carriers in a heartbeat if someone else offered similar service.

I buy most of my gas at the same station every week.  It has nothing to do with their service.  They have no service.  It has everything to do with the fact that the station is two blocks from my house.  In fact, there’s a new Quik Trip going up right down the street and when they open, I’ll switch.  QuikTrip has great coffee.

When we survey consumers who have recently purchased our products, we ask them two questions.  "How likely are you to reccomend this product to your friends?" and "How likely are you to reccomend the dealer to your friends?"  Marketing experts tell us that this is a good way to find out how many customer "ambassadors" we really have.  The good news is that on a scale of 0 to 10, our products and our dealers always score above eight and usually above nine in all of our business units.

It’s intersting that for most of our products, the dealers actually score slightly higher than the products.  It makes sense when you think about it.  Because every manufacturer builds products that they hope will have universal appeal, very few people are going to be 100% satisfied.  On the other hand, because the dealer works with the customer one on one, a relationship is built based on that customer’s individual wants and needs.  Do it right and you have a delighted customer and a high "willingness to reccomend" score.  Delighting 100% of your customers is difficult, but it’s definitely doable.

Ben McConnell and Jackie Huba, proprietors of the "Church of the Customer" blog have written a short piece called "The Customer Evangelism Manifesto."  It’s an easy read, only 21 pages of large type with a lot of white space.  It’s based on their book, "Creating Customer Evangelists:  How Loyal Customers Become a Volunteer Sales Force".  You can read or download the "Manifesto" in .pdf format by clicking here.

More on Health Insurance

This is number ten in our series based on Challenges of the
Future: The Rebirth of Small Independent Retail in America
, a 64 page white paper by Jack Stanyon, underwritten by the George H. Baum
Community Charitable Trust, the Illinois Retail Merchants Association, and the
National Retail Federation Foundation.  Today we take a look at the trend of Health Care Costs.

In an earlier post we discussed the ever-growing problem of employee health insurance.  Turns out health care costs are challenge number six on Stanyon’s list.  He calls it "The most important domestic problem in the U.S." 

High insurance costs hit the independent business with a double whammy.  First, insurance companies charge higher premiums to smaller firms.  This gives the larger competitors an unfair advantage.  Second, because we Americans expect our employers to provide health coverage for us, if you don’t offer it, you’ll never attract the best employees. 

An editorial last week in the St. Louis Post Dispatch said, " A
record 46.6 million Americans were uninsured last year, largely because
the number of people getting health insurance through their jobs has
declined steadily. In 2000, 64 percent of Americans got health
insurance at work. By 2005, it was 59.5 percent.

In part, that’s because insurance premiums have increased much faster
than inflation. On average, family coverage now costs about what a
full-time, minimum-wage worker makes in a year.

Part is also because of the growing role of small business in the local
and national economy. Small companies often don’t have enough workers
to get affordable group health insurance rates, and their premiums can
rise quickly if one employee gets seriously ill."

As mentioned in our earlier post, some progress is being made on a federal law to allow smaller employers to join insurance pools which would decrease the risk for the insurance companies and lower costs for the independent business.  Considering that independent business pays more than 45% of the total US payroll, health insurance relief should be a top priority of the House and Senate.

Customers First

Here’s an interesting story from Fast Company about a business called Title Nine Sports.  The owner, Missy Park, passed up an easy sale for something the customer didn’t really need.  Instead, she took care of the customer and made a friend.

You can hire an expensive PR firm to help you build your reputation, or you can do it yourself just by doing the right thing with your customers.  Word of mouth is a powerful marketing tool.  You can’t buy loyal customer advocates, but you can earn them every day by putting the customer’s needs ahead of short-term profits.

Personalizing the Customer Experience

Ben McConnell writes on the Church of the Customer Blog about his experience at the Wynn Hotel in Las Vegas.  Granted, it’s not exactly Motel 6 (the hotel cost $2.6 billion to build), and the rack rates reflect that, but the kind of personal touches the hotel has incorporated into its guest rooms certainly make a customer feel better about spending his/her money.  Everyone loves the sound (or look) of their own name. 

I’m terrible with names, but they tell me that if you find out someone’s name and make a conscious effort to use it several times when you first meet them, you’ll be more likely to remember it.  And, you’ll make that person feel really important.

Are You Successful?

Here’s an interesting item from Seth Godin on success.  Are you successful?  How do you know?

Different people have different definitions of success.  One thing is certain; if you don’t know where you want to go, you’ll never know if you get there.  And if you never know, you’ll never be satisfied.

If you haven’t already, take some quiet time to define exactly what success means for you.  Maybe you’re a big success and don’t even know it.

Google and Quick Books

From Inc.com comes the news that Google, the web’s number 1 search engine and Intuit, maker of QuickBooks accounting software, have joined forces to provide new functionality to owners of small businesses.  This is in no way an endorsement for either company, but since QuickBooks is used by nearly 4 million small businesses, you may find this very interesting.

With QuickBooks 2007, which is scheduled to be released this fall, users will be able to:

  • Have their location(s) automatically listed on Google Maps.
  • Have the items they carry listed in Google Base, a searchable on-line database for consumers.
  • Create Google AdWords campaigns from within the QuickBooks software.
  • Create a web site by filling out a form in QuickBooks.
  • Perform a Google search of their own computer and the Internet from within the accounting software.

According to Google CEO Eric Schmidt this is just the beginning of the collaboration between Google and Intuit.  Since Google is a market leader in on-line tools, you can expect competitors, particularly Microsoft and Yahoo to offer something similar in the near future.

There’s a good article about the Intuit/Google marriage in the Oakland Tribune, and at MSNBC.com.

Guarding the Gates

This is the ninth in our series based on Challenges of the
Future: The Rebirth of Small Independent Retail in America
, a 64 page white paper by Jack Stanyon, underwritten by the George H. Baum
Community Charitable Trust, the Illinois Retail Merchants Association, and the
National Retail Federation Foundation.  Today we take a look at the trend of community activism.

This is the first time that I basically disagree with Stanyon’s position.  What he calls "community activism" is best described as local businesses banding together to stop the spread of retail development in order to protect the "personality" of the local area.  In the past, you saw it most often when Wal*Mart announced plans to move into a new community.  Local merchants would try all sorts of strategies to keep them out. 

Today, we’re seeing the same thing happening in major cities.  A recent example is the attempt by the City of Chicago to keep Wal*Mart and other big boxes out of town.  Although the ordinance, specifying that large retailers would be required to pay a "living wage" and provide certain benefits was passed by the city government, Mayor Daley vetoed it.  There have been similar fights in other cities. 

Where Stanyon and I disagree is his statement that "protectionism from increased competition has often proved unproductive.  First, consumers will find their way to where they want to shop–big box, specialty store, or national chain.  Secondly, trying to stop new development often becomes a major distraction for the small retailers when they should be spending time thinking about their own business and improving their downtown or neighborhood shopping areas."

While Stanyon’s premise seems sound, local governments are often taken in by the promise of more jobs and a better economy that the big box stores offer.  To get these perceived benefits, they open their wallets and provide outrageous incentives to the chains.  This gives the big stores an advantage that they don’t need and that taxpayers shouldn’t have to provide.

A good specialty store should have little trouble competing with a big box store on a level playing field.  Their presence may require the independent dealer to change strategy and work a little harder, but the inherent benefits of an agile, flexible, locally-owned retailer should outweigh the advantages of size that the big guys enjoy.

But, given millions of dollars in tax breaks, the chain will win every time. 

While Stanyon has a point that too much concentration on possible incoming competition might distract from running the business and improving the local community,  the two aren’t mutually exclusive.  In fact, preventing new competition from getting a sweetheart deal from the local politicians may be necessary in order for the independent to have a business to run.

As most of you prove every day, it’s possible to survive and thrive in the face of competition from the big boxes.  In fact, it’s been shown many times that having a chain store nearby can actually help the local businesses.  Given the choice between having a Wal*Mart in your town and having one in the next county, it’s generally better for the independent to have them in town.  Otherwise, shoppers may do all their shopping in the neighboring community, bypassing you altogether.

The arrival of a big box store doesn’t necessarily create jobs.  In fact, it may replace existing jobs with jobs that pay less, giving the area a net loss in income (and tax revenue).  Local stores that don’t meet the challenge go out of business, leaving boarded up store fronts that reduce tax revenues and actually add costs for the local government.  As members of the community, it’s up to all of us to see that our
tax dollars are spent in the most efficient way possible.  Ignoring our responsibility to our fellow citizens to devote 100% of our time to our own business may turn out to be rearranging the deck chairs on the Titanic.

Is Your Business Customer Friendly?

Thanks to Seth Godin for pointing out the Four Paws Design web site.  Only one thing keeps any of us in business and that’s customers.  They’re doing us a favor when they buy from us.  If we don’t make the process easy, there are plenty of other choices.  Laying down rules for the customer to follow is seldom a good policy.  If we must have restrictions, then there are ways to let the customer know without sounding heavy-handed.  Here are some quotes from Four Paws FAQ’s (Frequently Asked Questions) with comments in brackets.

Why am I limited to the number of items I can order?
Due
to rising fuel costs, we can no longer order and store large amounts of
inventory. During the busy holiday shopping season, we generally limit
items to 1-2 per order. If you see something you would like us to
special order in bulk for you, or want an additional item, email us for
availability. At this time we cannot offer discounts on bulk orders but can discount your shipping charges.

[translation:  Our stock is limited.  Chances are we only have one or two of an item in stock.  If you want us to place a drop-ship order direct from the manufacturer, don’t expect a price break, even though we’re selling you something that we have no investment in.  We’re busy during the holiday season, but we know you’re not.  If you want more than two items, you can always place another order.]

The item description states there are 4 in stock, yet I can only order 2, what should I do?
We
are making every effort to accurately list the exact quantity of each
item in stock. If the item description states there are more in stock
than you are allowed to order, please email us and we will add the new
amount to your order.

[Allowed to order????  You’re kidding, right?]

Do you ship outside the United States?
No.

Due to the rise in international shipping costs and fraudulent orders,
we are no longer shipping outside the United States.  We suggest having
your order shipping to someone in the US who can ship it to you.

[If I’m paying for shipping, what difference does it make if shipping costs are rising?  If I have to pay in advance, how can my order be fraudulent?  Besides, do you really want to use the word "fraudulent" when you’re talking to a customer?]

I do not want to place an order online, help!
Unfortunately, we can no longer take phone orders. Customers forget to tell us something and after
the order is placed and processed they claim we wrote down incorrect
information. By placing an order online we have a record of exactly what you want, especially for custom-designed items, leaving no room for error.

[Translation:  Sorry, no help.  We don’t make mistakes, but you do.  We don’t trust you enough to get it right.  Besides, if we let you order by phone, we’d have to give out our unlisted number (see below).]

Why can’t I pay with a check?
We are no longer
accepting checks or money orders as a method of payment. Over 90% of
people who want to pay by check forget to. This ties up merchandise
that would otherwise be sold immediately, especially during the busy
holiday season.

[Translation:  Only one out of ten of our customers are smart enough to remember to send us a check for something that they went to the trouble of ordering.  Man, our customers are D.U.M.B!]

Why don’t you list your phone number?
Like you, we do not want telemarketers calling us!

[How do you know that I don’t want telemarketers calling me?  Maybe I AM a telemarketer.  Besides, as a customer, do I really care what you want?  What about what I want?]

What if I need to contact you about my order?
We are online 24 hours a day, 7 days a week, 365 days a year. As soon as you email us, we usually respond immediately.

[Usually?  What does that mean?  When "Fluffy’s" custom doggie bisquits don’t show up in time for her birthday, I don’t want to depend on your "usually" responding immediately.]

There are more, but you get the idea.  There are plenty of places for me to shop that will "allow" me to buy as much as I want, that will allow me to pay the way I want to pay, and that won’t treat me like I’m stupid, or that I might be out to rip them off. 

Of course, the best way to shop is in a bricks and mortar store, not online.  But, online or in person, if you make it hard for me to do business with you, someone else will make it easy.

Employee Health Insurance

In an article entitled "Health Insurance Costs Soar for Small Businesses", in the Kansas City Star, author Julius A. Karash discusses the growing problem of providing this important benefit for employees.  While it’s a problem that touches businesses of all sizes, it’s a bigger problem for the independent business because rates for smaller businesses tend to be higher.   Employers with smaller numbers of employees lack the bargaining power
of larger companies.  To make matters worse, insurers consider smaller
employers a greater risk, causing rates to be higher.  If just one employee of a small company develops a serious health problem, rates can go through the roof.

According to the Kaiser Family Foundation, the average premium for employer-sponsored health coverage rose 9.2 percent from 2004 to 2005 compared to an overall inflation rate of 3.5%. The 9.2 percent figure was for all employers. 

A recent article on CNNMoney.com reported that almost all employers with more than 100 employees (94.3%) offer health insurance; only 34% of companies with fewer than 10 employees offer coverage.  According to one payroll provider for small businesses, 11% of small companies currently offering health benefits may drop them next year.  For companies employing from three to 199 workers, the number offering health coverage is 59%.  The US Chamber of Commerce reports that almost 6 in 10 Americans who lack health insurance are employed by small firms.

So, is there any relief in sight?  The answer is a definite maybe.  Some insurers are offering creative solutions which combine employers in a single group, creating greater buying power and spreading the risk over a larger number of people.

The health savings account, which works on the same principle as an IRA, is becoming more popular.  With an HSA, the employee has money deducted from their paycheck before taxes.  It’s put into an account and can be used to pay medical expenses.  The plan works best for people who know how save and who have predictable, but not major, medical expenses. 

The government has been looking at this issue for quite a while, but hasn’t been able to come up with a solution.  So-called small business health plans or association health plans would pool independent business coverage, resulting in lower costs.  These national plans have been opposed by state insurance departments who would have no oversight over them.  Federal legislation has been passed several times by the House, but the Senate hasn’t gone along.  A current proposal by Sen. Mike Enzi (R, WY) may have a chance.  It retains state control over the program.  Sen. Enzi claims that his proposal would actually reduce small business insurance costs by about $1,000 per employee.

With small businesses (less than 500 employees) making up more than 99% of all employers, this isn’t a problem that’s going to go away.

Question:  Do you offer health insurance to your employees?  Please take a moment to answer the poll question on the left.  Results will be tabulated only as a percentage of votes only.  Your answer is anonymous.

Apple Picking

Apple_tree
Over the weekend, my wife and I made our first trip of the
year to a nearby orchard to pick apples. This is something we’ve been doing for many years. We used to take our kids, but since they’re
grown, it’s just the two of us.

It’s about a half hour drive from our house to the
orchard. When you get there, they put
you on a tractor-drawn wagon and take you to the part of the orchard that’s
open for picking. They give you some
empty bags and off you go. When you’re
done picking, the wagon takes you back to the starting point where they weigh
the apples and you pay for them.

Considering the price of gasoline, why would someone drive
to an apple orchard to pick their own apples? Is it the price? They’re a little
cheaper than apples at the supermarket, but unless you buy a LOT of apples, the cost difference doesn’t justify the time or the expense.

Is it fun to pick apples? It’s fun for kids, and there were a lot of kids there Saturday, as there
are every weekend day during “apple season”. As an adult, the older I get the more it seems like work, but the Eckert
family, owners of the orchard, have found other ways to enhance the experience,
making apple picking an event for the whole family.

During the busy season, they have live music on the weekends. They have hamburgers and hot dogs and
corn-on-the-cob cooked over a fire. They
have games for kids. They have a
sit-down restaurant and an “old country store” that sells produce (including
apples that sell for about the same price as the ones you pick yourself), fresh
bakery goods, gifts, and other impulse items. Including the hot dogs and drinks and the general store, our three bags
of apples set us back almost $100.00!

The Eckerts have been doing this since long before event
marketing became a  buzz word. They’ve turned their business into a
destination; a place people go for entertainment. Instead of a ten minute trip to the grocery
store to buy a bag of apples, their customers spend half a day getting their
apples and look forward to it.

Local schools even take apple picking field trips to Eckert’s. Think about that for a minute. All over the metropolitan area, school kids
are coming home with their little bag of apples. They can’t wait to tell mom and dad how much
fun they had. What comes next? “Please, mommy. Can we go again? Please. It’s soooo much fun.” What parent
could resist? Eckerts has thousands of
little word-of-mouth marketers all over town selling mom and dad on a trip to
the orchard.

Since apple picking only lasts for a few weeks, they also have a pick-your-own season for peaches, pumpkins, and Christmas trees, keeping them busy for a good part of the year. Notice I said at the beginning that this was our first trip.  See, different varieties of apples don’t all get ripe at the same time, and these folks have lots of varieties.  You have to call the "Harvest Hotline" or visit their web site to find out what kinds of apples you can pick this weekend.  A lot of people go back two or three times.

Of course, the lesson here is that a little imagination and
planning can turn shopping into an event. There’s no reason why you can’t do the same thing. What can you do in your store to create an
event? In some cases, the product itself
can drive the event. For example, how-to
classes are an excellent place to start. But there are other events that can also be fun and drive traffic.

People love sidewalk sales. If you have retail neighbors, you can work together to make it a big
event and share the costs of promotion. Have
music, free gifts, contests, games for kids, or
anything that attracts attention and draws people.   A side
benefit of a sidewalk sale is that it lets you move some slow stock that might
not sell otherwise.

Another possibility is a charitable fund raiser. Sponsor a car wash, or a barbecue, or another
activity on your parking lot. Both you
and the organization that benefits from the event will promote it, making it a
win/win for both of you. Make sure to
have other things going on in your store to draw potential customers in from
outside.  Consider having the organization give their customers a gift certificate to your store.

Events are fun and if you do them right, they can be very
profitable.