Loyalty Programs

loyalty cardsI’ve been away from the keyboard for a while; it’s time to get back to this. I’ve had a lot of balls in the air, but I do enjoy writing.  I may be a bit rusty but hope you enjoy the ride.

Loyalty programs can be as simple as a “coffee card” that gets punched every time the customer places an order and allows her to earn a free coffee after a given number of purchases.  The programs can also be sophisticated programs that allow customers to accumulate points at multiple businesses and/or allow the retail partners to gain information on customers’ shopping habits.

With a loyalty program, I am sharing two things to keep in mind.  First, if you have a program commit to it.  Encourage your customers to participate and promote the program at every opportunity.  My personal experience here needs a little background.  Over the past few years I have been purchasing a lot of building material. We are seasonal campers in a family run campground an easy drive from our home.  We’ve been building decks and fences at our campsite. The initial purchase was for a substantial amount of the material. We’ve since been back for odds and ends. After several trips to the same store, on a rather small purchase the clerk asked if I had Aeroplan. Well, I do, and now I am annoyed that I wasn’t asked when I was making the large purchase at the beginning.

If your company participates in a loyal program, instruct staff to ask every time. The reason you participate in these plans is to encourage loyalty. Every time you ask, you are reminding your customer of another reason to keep coming back.

The second point about loyalty programs; view the program from your customer’s point of view, not your own.  A coffee shop owner made a mistake, in my opinion, when he cancelled his coffee card program.  His reason?  He felt he was giving away product he was going to sell anyway.  His concern, he was loosing a sale (which might amount to a couple of dollars) every time he gave the loyal customer the “free” coffee they had earned by being loyal.  After all, these were his regulars, they would have purchased the coffee anyway, right?  Wrong-headed!  I’ve mentioned him earlier, car dealer Carl Sewell says, anything you would do for your best friend your do for your customer because in retail your customer is your best friend.

I hope you find value here and become a loyal visitor, until next time — be outstanding.

Starting a Business

Kid's lemonade stand is a classic business.
The perfect business. Photo credit “The Citrus Report.”

Anyone can start a retail business.  Two words . . . Lemonade Stand!  Am I right?  All retail business is pretty simple, it’s exactly like your childhood project, just scaled up.  Open up for business with a popular product, in a location with some traffic and charge a fair price, badda-bing-badda-boom.  Let’s analyse a bit, let’s see, rent – zero, wages – zero, input costs – zero, advertising costs – zero, taxes – zero, profit margin – woohoo!!!

Wayne Huizenga made several fortunes consolidating businesses.  He first did it in garbage building Waste Management inc., he then did it in video rental building Blockbuster and then did it with Auto Nation.  Let’s take Huizenga’s template and consolidate the lemonade stand business . . . then we’ll do an IPO and be rich.

Lessons From the Car Lot

Carl Sewell, author of "Customers for Life"

One of my top ten favorite business books is “Customers for Life” by Dallas car dealer Carl Sewell.  He’s one of the business owners I respect because he understand Retail DNA.  I will refer to this book from time to time to discuss lessons for all of us in retail.  For today’s post I will just share two ideas from Sewell.

The first comes directly from the title of the book.  The subtitle is “How to Turn That One-Time Buyer Into a Lifetime Customer.”  Sewell calculates what a typical customer spends with his dealership over their lifetime.  Without digging up my copy of his book, the number is approximately $330,000.  The specific number is perhaps not important as the book was originally published in 1990 and the numbers are going to be different for your business.  The point here is, when Sewell is dealing with a customer complaint, he judges what they are prepared to do. not by how much they just spent but how much they will spend over their entire lifetime as his customer.

The second concept is very simple but has a profound impact on what the dealership will do for a customer.  Sewell says, whatever you would do for your best friend, you should do for your customer because in retail your customer is you best friend.  For example, he says if your best friend would phone you in the middle of the night because they broke their key off in the door lock, then his customers can call him.  Well, not him directly, his dealership has its own service truck on the road 24 hours a day.

 

Do you love your customers enough to go to these lengths?  What one thing can you implement in the next 30 days to start turning one-time buyers into lifetime customers?

The Butterfly Effect in Business

The Butterfly Effect is a popular term used in discussions of Chaos Theory.  It refers to is the seemingly insignificant actions that have a dramatic impact in systems like weather and climate.  In business we often don’t look at an insignificant action and connect it to the resulting change in business.  You must keep in mind that dots aren’t always connected by a straight line.

I have to add a small aside here.  I was going to tell the story of fictitious restaurant, the story is true but I didn’t want to use the actual name of the restaurant so I thought I would use the name of a small Mexican restaurant that was located in my home town which closed over 40 years ago.  To be safe I Googled the restaurant name and there are a bunch of them with this name in Virginia.  My next choice was a take off on a restaurant we visited in San Diego many years ago.  The restaurant was Tio Leo’s, we had a wonderful meal and enjoyed the experience.  So my idea was Tio’s Taco and it turns out a restaurant by that name is located in Riverside California.  Well then how about a name that isn’t Spanish sounding like Rocky’s Taco, oops Chicago, Taco Train, McFishy’s . . . let’s just say Restaurant X.  Nope, that’s located in Congers, New York and it’s part of the Xaviars Restaurant Group.  Well let’s go with it but name a different town.

Restaurant X is a successful little restaurant in the town of Bentley, Alberta.  Bentley is in central Alberta near popular Gull Lake.  In the winter months the town businesses cater to locals.  Summer brings an influx of tourists and cottage owners that spend time at the lake during the warmer months.  The owner of Restaurant X hires a new manager that comes with what appears to be a great track record and a promise to increase profits.  This new manager starts in April just before the beginning of the busy summer season and he slowly makes changes to reduce costs.  First, it’s a change in a few suppliers from the meat supplier they have used for the last four years to the paper products.  At first things look great.  The cost reductions quickly show up on the bottom line.  But there’s growing dissatisfaction with the local patrons.  The food quality and serving size has gone down.  Heck even the toilet paper leaves a poor impression on these good folk.  They don’t frequent the restaurant as often, and they talk about their disappointment with their friends and neighbours.  Before this becomes apparent, the summer patrons arrive.

Time goes by and after the influx of summer traffic goes away Restaurant X struggles through the following winter.  The owner wonders what happened to his successful little restaurant.  What are the other restaurants in town doing?  Maybe it’s the economy, people aren’t dining out as often.  No one connects the dots and Restaurant X closes.

It’s important to look at your businesses “big picture” and make sure your customers are happy.  Analyse everything about the business especially the guest/customer experience.  Think like a customer, talk with your customers, or hire someone to survey.

Location-Location-Location

     Today’s post is about that all important decision on the part of a retail business owner, where to hang the shingle.  It’s one that has such far reaching consequences and I’ve seen struggles that have resulted in making a poor decision. Location by itself isn’t the whole issue however. The location needs to fit within the overall approach of the business.

 

There are two basic options.  One is to locate in a high traffic space and rely on that traffic to develop into a customer base.  The second option is to choose a location that doesn’t deliver traffic; the retail business sets out to bring their own traffic and become a destination store.  Think of this dichotomy as opposite ends of a continuum with high rent at one end and high marketing costs at the other.

 

     Option one, high traffic locations must be chosen with care.  Is the traffic desirable?  If you are locating a craft store, do you want to be locate in a fashion mall?  The two aren’t mutually exclusive but they also aren’t complimentary.  The primary advantage of this option is that a well run retail business can get up and running more quickly if it captures the wallets of the people that make up the existing traffic.  The disadvantages are that the retail store is at the mercy of changes in traffic patterns and if the economy slows the rent remains high.  Another common mistake is assuming that by paying for the traffic, that nothing else needs to be done.  This issue will be addressed in future posts.

 

     Option two, becoming a destination and marketing to bring traffic to your business takes longer, and in some cases takes too long.  I have seen businesses fail, waiting for the business to come.  The classic in this regard is the business that the owner is passionate about but is started on a shoe string.  The owner chooses the cheapest space they can find, due to inexperience they don’t do a very good job of merchandising, make use of hand made signage and has no money left for marketing.

 

     One of my favorite examples of a business that is out of the way but very successful is the Salt Lick BBQ in Driftwood Texas.  In 2004 Driftwood had an estimated population of 21.  Over the years the population has never exceeded 0ne-hundred.  I’ve had the pleasure of dining here.  The Salt Lick has a seating capacity of 150 (keep in mind the population of the town) and on a Friday night, even with a reservation, and it took our group over an hour to get a table.  It was worth the wait.  Patrons wait in the garden.  This is a dry county, so the restaurant isn’t making customers wait just to sell alcohol.  The restaurant is so popular that they have parking lot attendants directing traffic.  The food is excellent and patrons can choose to eat “family style.”  The food is served in bowls, a bowl of potatoes, a bowl of beans, a platter of meat, and when one is emptied, staff bring another.  It’s a pleasant way to dine.

     You need to do some serious planning before you decide on your location.  Don’t decide on the cheapest space you can find unless you are prepared to do some serious work on delighting customers and great marketing.

Are you Saving any Money?

I’ve noticed that some retailers are seriously understaffed.  I have gone into stores with the intention of making a purchase and left without the item(s) I needed.  I was unable to find the item and was also unable to find any help on the floor.  A few years ago when the economy was very strong it was hard to find staff.  Today, since the economy slowed, staff are available.  Why can’t I find help?

Some of my retail clients tell me they have benefited from the downturn.  They are able to get and keep good staff.  If a store has no staff on the floor they are cutting expenses which is false economy.  Good staff on the floor help customers find the things they need.  Well trained staff can also interest customers in additional purchases.

Your people are a critical component of your success in retail.  They are the point of contact with your customers and therefore they are the face of your business.  Jan Carlzon calls there interactions between customers and staff “Moments of Truth” which is the title of his book.  Carlzon was the CEO of Scandinavian Airlines (SAS).  He empowered his front line staff to deal with a problem in the way that they would want the problem dealt with if they were the customer.  Under his leadership the airline experienced a dramatic turnaround.  When a store has no staff they sacrifice not only sales but the opportunity to make connections with customers.

Zagging

It is important in business to know what your competition is doing and anticipate how it might affect your business. A key strategy is to Zag when everyone else is Zigging.
Here is one of my favorite examples. In clothing retail, most businesses concentrate on their change rooms as a vulnerable point with respect to theft. To minimize theft they develop a strategy around this area. the rooms are small and uncomfortable which discourages people from spending time. They also impose rules that dictate the number of garments that a person is allowed to take into the change room.
Donald Cooper, founder of Toronto area clothing retailer, Alive and Well saw this in an entirely different way. He reasoned that the people that steal from you will find a way. The conventional approach inconvenienced the 95% per cent of customers that are honest to protect against the few that are dishonest. He designed change rooms that were spacious, and there was no limit to the number of garments a customer took in to try on.  Cooper is an example of someone who has what I call Retail DNA.
Look at your industry and identify one or two areas where everyone is Zigging. How can you Zag? Don’t Zag for the sake of Zagging, make it in an area that has meaning for your customers. Happy Zagging.

Little Things

     The only way to get out of my community is to go north. We have a Provincial Park to the south which is a wonderful feature for residents but it cuts off access to and from the community to the south.  There is a community strip mall which is located south of my home. It’s a fairly typical retail center with convenience store, liquor, dry cleaner, veterinarian & doggie daycare, dental practice, barber shop, hair salon and a neighbourhood pub. The people that run the convenience store and the dry cleaner call me by name. I don’t do a great deal of business with either retailer, but they still make the effort to remember and use my name. If I were to choose strictly on convenience I would stop at another location on my way north, but I make an effort to patronize these businesses.  Dale Carnegie says “No word sounds as lovely as our own name.”

     It’s a little thing that can make a big difference.  I am just one customer.  Imagine how much of a differnce this small gesture makes to the well being of this business.  Sometimes business owners are so focused on the big issues and the small things are ignored.  Take some time to look at small things that might make a big difference.