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.