Aug/100
A customer database turns a good business into a great one
It is often said that many small businesses fail because they run out of cash. Put simply, when your bills exceed your income, any cash you have put aside will be eaten away until there is none left. If you have no cash to pay your employees and suppliers, it’s time to close the doors for good.
There can be a fine line between a business that is generating cash and one that is burning cash rapidly. For a restaurant, one or two percent gross margin on each dish and each drink can easily be enough to make the difference. As can a few more customers each day or one more pound spent, on average, by each customer.
Similarly, the differences between a business that is breaking even and one that is making a healthy profit can be subtle. Once a restaurant is making enough money to pay the overheads, every additional pound taken, minus the cost of ingredients and tax, goes straight into your pocket. Five more customers a day can easily put another £20,000 each year in your pocket.
£20,000 with just five more customers each day! That is probably less than one percent of the people who have visited your restaurant in the last month alone. And there is a simple way to find those extra customers without spending more cash on advertising – build a customer database. Capture the contact details of every customer and reach out to them regularly with a compelling reason to come back in.
Considering the financial benefits, why do so few business owners bother to build a database? Perhaps because it is a long term strategy, which will not start to pay off until a good database has been built. If you are one of those owners, remember that there is only so much you can do to reduce costs in your business. And keep in mind that customer communication is something that your competitors may be doing.
You are paying rent so that you can invite people into your shop or restaurant. Letting them leave without establishing a way to keep in touch is one way to eventually prevent you from being able to afford that rent.
Aug/101
Restaurants lead the way online
Restaurants, above most other types of local business, have the greatest opportunity to acquire new customers through online marketing. It is not only that they are catered for by a number of online companies offering to bring them new diners. It is also that people like to research online before deciding where to eat. Your job, of course, is to make sure that the people searching in your area decide to book your restaurant.
Having recently completed a review of the various services available to bring new diners to restaurants, I’m unable to think of a good reason why a restaurant should be without one of these.
Take Livebookings as an example. They work with over 500 websites, such as Yell.com and TimeOut, where diners go to search for restaurants. That is a total of 500 million potential diners worldwide. As the UK is a stronghold for Livebookings, a significant number of those 500 million will be potential customers of yours. If you use Livebookings, any of those people can book a table at your restaurant with a couple of clicks of their mouse. And you get an online booking facility for your own website too. The price for access to these new diners? A small fee for each new customer they bring to you.
Once you have those new diners in your restaurant, it is down to you to capture their contact details, particularly email and mobile phone number, so that you can entice them back in. Good food and service is not, by itself, enough. Particularly as there are almost always other good restaurants nearby. People are busy and have lots of choice. Collecting their details enables you to remind them, by email or SMS, about your restaurant and perhaps lure them back this week with a tempting offer.
Jun/100
What is the value of your address book?
The owner of a small restaurant group recently told me about a piece of research conducted in the UK, which estimates that one customer’s contact details adds, on average, £1.50 to the value of your business. It follows that, if you have built a database of 10,000 customers, you would be around £15,000 better off when it came to selling your business.
It takes planning, time and effort to build a customer database and this research suggests that all that hard work is very worthwhile.
So what is your customer contact database worth? I would suggest that there are two key questions to consider. Firstly, what is the quality of your data? Secondly, how do you use the data?
The quality of the data is crucial. How many of your records are out of data? Have any of your customers changed their details since you collected them? If customers hear from you regularly and value your communications, they will let you know when their details change (or at least you will find out when a message bounces back).
Another indicator of data quality is the method you use to collect your data. If you use incentives such as a freebie, the chances are that a number of people will sign up even if they don’t want to hear from you. Of course, these people are unlikely to look forward or respond to your communications. The smaller the incentive, the better your chance of capturing genuinely interested customers.
Have customers given you explicit permission to contact them in certain ways? Email, SMS, Facebook, post? If their permission is explicit, they are more likely to respond to your messages. The fact that they gave you their mobile number when booking a table does not mean they want to receive SMS messages from you.
What do you know about your customers’ interests? Which of your product lines are they most interested in? What type of events would they like to hear about? Do they want to know when you have a sale or discount? When is their birthday? The more you know about them, the more you will be able to tailor your messages and the happier they will be to hear from you. Your aim should be for every message to be anticipated (see explicit consent above) and relevant to their interests.
Let’s say that your customer database meets all of the above quality criteria. So what is it worth? Well, that depends entirely on how well you use the data to entice customers to spend money with you. Let’s take a simple example. If you send an email to 1,000 customers in your database and, as a result, 20 customers visit you and spend £300 between them, simply subtract the cost of the campaign (say £50 for the email to be built) from £300 and divide by 1,000 to calculate your average value for that campaign (£0.25). But what if you do this once per week and achieve the same results on average? That means the average return on one of your customer records over a year is £13 (£0.25 x 52). Someone who buys your business should be able to generate an extra £13,000 over the next year using your customer database. So ask yourself, what should they pay you for it?
Of course, the other question you should ask yourself is how to find out more about your customers and how to create more compelling communications so that you can increase the average value of your contacts. For hints, look at the customers who respond most often. Their contact details will already be worth far more than your average.
Mar/100
You can be successful without marketing
If you have a good product or a good service, isn’t that enough to ensure customers return? To ensure that people buy from you again and become loyal fans of your business? Can’t you rely on your product or service to generate loyal custom, without having to advertise, build customer relationships, collect data and all of the hard work that goes with it?
A good product or service is necessary to ensure people return, but it is not sufficient. Why? There are two main reasons. First, you have competitors, some of whom also have a good product or service. In other words, your customers have a choice and you need to give them a reason to choose you. Second, life is busy. Most people have a lot going on. They have lots of different things competing for their attention every day. Combine this scarcity of attention with the fact that you have competition, and it becomes critical that your product or service is memorable.
Of course your product needs to be good. Without that, you have no business. But you must also find inventive ways to remind customers about you and entice them back. And you can’t do that unless you have their contact details. Who ever heard of a fan club where all the fans are anonymous?
However, all of this changes if you are exceptional. If you are outstanding, the rules are different. If your service is truly remarkable and stands out from the crowd, your customers won’t need to be enticed back. There are very few such businesses and if you are one of them, you have a terrific marketing strategy and won’t need to work so hard to be memorable. Otherwise, get to work on building that fan club!
Mar/100
Groups can harness the power of local too
If your local business is a shop, pub or restaurant, you undoubtedly compete with similar businesses in your area. A number of your competitors may belong to a group or chain of anything between a few to several thousand outlets.
Group businesses enjoy some substantial advantages over your business. For example, owing to the volumes they purchase, they get better prices from suppliers. Also, they have larger marketing budgets so can afford to entice local people in with press and radio advertising, perhaps even national press or TV. They offer predictable products and services and most people love the fact that they know exactly what to expect.
However, as an independent, you have a very powerful advantage over your group competitors. That advantage is you. You are more interested in your business than the manager of the local Starbucks or Café Rouge. You are far more motivated. You keep thinking about your business in the evening and it sometimes keeps you awake at night. You put far more energy into it. If a group could have one of you running each of their branches, they would be the most successful business in their sector.
For obvious reasons, it simply matters more to you and, crucially, it usually shows in your interactions with customers. For you it is a very personal matter that your customers are satisfied. If not, you will feel their discomfort in your pocket sooner or later. For you it is natural to remember your customers’ faces and names, their likes and dislikes. Most chain store managers don’t think this way.
And this is the best thing you have going for you when it comes to beating large competitors. You have the motivation and energy to take every person that walks into your store and work to convert them into a loyal customer. Today, most groups and chains underestimate the power of building local audiences, choosing instead to build central marketing databases where consumers interact with the HQ of Restaurant Group PLC rather than their local branch or store.
However, new technology is making it easier for groups and chains to build local fan bases quickly and inexpensively. They will never replicate the dedication of an owner at the branch level, but it is becoming easier for them to leverage their local premises and staff to convert footfall into loyalty more quickly. If they wake up to the power of local, your fight will become a little more difficult.
Feb/100
Worried about using your customer data for direct marketing?
Several local business owners have recently expressed to me their concerns over collecting and handling their customers’ data. They don’t want to annoy their customers and they want to make sure they don’t break any laws or regulations.
As more local businesses take advantage of mobile and internet technology to grow their own audiences, these concerns will become increasingly common. If you are a concerned business owner, here are the key points to keep in mind.
Firstly, you are right to be collecting your customers’ contact details and preferences. It is no longer viable to rent an audience from your local newspaper or radio station. Your competitors may be saving money and winning their customers’ loyalty by building their own audience. So should you. Don’t let your concerns put you off.
To succeed in building your local audience and converting them into true fans of your business, here is the most important thing to do. Get their explicit permission. Without that, their interest in your marketing messages will be minimal. Your response rates will be low and you may even upset some people. How often do you welcome a mailshot or email that you did not ask to receive? Invest time in finding good reasons for people to ‘opt-in’ to receiving your marketing. This is the best way to get high response rates. And responses lead to sales.
If customers give you their details as part of buying from you (for example, a salon takes your name and number when you make a booking), don’t assume that they want to receive your marketing. When you take their details, ask them if you can get in touch now and then when you have something special to tell them about. This is not only good practice, it is also an EU requirement for anyone that conducts marketing by electronic means. Oh, and don’t give their details to other businesses. At least not if you want to keep your customers.
Your next aim should be for customers to look forward to receiving your messages because this will generate the best response rates. To achieve this, you’ll either need to send very tempting marketing offers (very expensive for you) or send offers that are very relevant to people’s interests. If you are an off-license, is your customer interested in white wine, red wine, beer or champagne? This is where you’ll need to get creative about giving people reasons to tell you their interests and also making it easy for them to tell you.
It’s natural to be concerned about conducting business in a new way. The best way forward is to think it through, make a plan, then get stuck in. Treat it as a trial. Expect some error. When you get it right, you will enjoy a well deserved advantage over your competitors.
Feb/100
Do this and you will succeed
What would you say if I told you that there is one thing so powerful that, if you did it, your local business would succeed? Not only make more money, but become a resounding success. Far more successful than your competitors.
But that’s not all. If you do it right, you can tear up most of your to-do list, because it will soon become apparent that there is little else more important than this. Traditional marketing and advertising will become increasingly less useful and you will be able to fire all but your best customers. You will focus on this because it works and you will worry less about other tasks. Your priorities will be clearer and you will have more time and less stress.
Well, such a thing does exist and it is no secret. What you must do is find your 1,000 true, local fans. The 1,000 local people that love your business, trust you and talk about you to their friends and colleagues. The 1,000 local people that come back and buy from you regularly and enjoy giving you their money. These are the people that you must talk to and find out more about. These are the people you must communicate with and focus on.
Stop for a moment and think about the power of this. What is your average spend per customer? What do your best customers spend per visit? What if you had 1,000 customers that liked your business so much that they came back as often as they could? How much would you make in a year? Just from those 1,000? What do you think their lifetime value to your business would be? And what about all of the friends they would drive to your business?
Do you think you would still need to advertise? Wouldn’t it be great to focus all of your attention on making those 1,000 people happy? That would be the single most important marketing activity and it is quite likely that no other marketing would be necessary. When you get 1,001, fire you worst customer to make sure you have enough time to focus on your 1,000 true fans!
You don’t have 1,000 true fans? So start today. If you own a shop, pick a customer today that you think has the potential to become a true fan. Capture their contact details before they leave and think about how you will entice them back in and delight them when they arrive. If you do this each day, you will have 1,000 true fans within around 3 years.
You can start simply by inviting a person to receive your special offers by email or SMS. Then let them tell you what type of things they want to hear about. Next, tailor your offers to their preferences. And when they use your business, give them a simple way to praise or criticise without fearing confrontation or reprisal.
The magic of this approach is that it will make you focus on the important things, the products and services. In order to delight people and convert them into fans, you will need to do this. In addition, you will be forced to focus on the customers, creating a dialogue, finding out what interests them about your products and what they really think about your service.
The alterative is to follow the traditional path. Pay somebody else to rent their fan club, perhaps the local newspaper or radio station, in the hope that you can shout your message at them and that 2 or 3% of them might be remotely interested in you. This is not only hard work, stressful and distracting but it is also completely unaffordable when you consider that your competitors may be building their own fan club for little cost. The traditional path will make you feel like you’re progressing because it consumes so much of your energy and mind space. But if you want to succeed, you’ll need to take a different route.
Jan/100
Hope is not a strategy
Just as you were reeling from the blow dealt to your local book shop by the internet, the hammering your grocery shop received when Tesco opened nearby or the kicking your pub was dealt at the hands of the smoking ban, along came the credit crunch. In case you haven’t noticed, it’s no longer good enough just to open the doors and wait for customers to hand over their cash. There is just too much competition and not enough custom to go around.
It’s clear that you need to find new customers and it’s tempting to start placing ads in your local newspaper or paying for prominence in a directory such as Yell. The problem with doing those things is that you are taking the easy option. You are giving your money to the local paper and saying “here’s some cash, now go find me some customers”. Then you are sitting back and hoping.
There is nothing wrong with paying these companies to look for new customers amongst their audience, so long as you are convinced that the money is well spent. The question is, do you want to rely on them to make you a success?
The alternative is to realise that you can make yourself a success. Look around you. Do you have a shop? Do you have footfall? Do you have a van? Do you have a list of customers that have bought from you in the past? Then, you have your own audience. If you have not already collected their personal details, now is the time to start.
Why should they give you their details or tell you their preferences? How can you entice them in to your business, again and again? These are questions that you will need to answer. Once you have answered them well, you will not need to hope for success.
Dec/090
Extend the Christmas rush into January
Many businesses, such as bars and restaurants, become extremely busy at Christmas time. They make far more money over Christmas and New Year than at any other time of year. They and their staff are completely flat out, their venues bursting at the seams. Then, very suddenly, it’s the 2nd of January and one of the year’s quietest periods commences.
What can be done to extend some of the seasonal rush past December into January and beyond?
For these types of businesses, the premises or venue is perhaps the most significant and costly business investment, as well as the most valuable. The value of a place of business is that it gives direct access to passing trade – prospects that can be converted to customers. A venue makes it possible to build sales from a standing start. Then, once the business is up and running, it provides the opportunity to build relationships with customers in person – something that many web-based businesses can only dream about.
Like any investment, it’s important to extract every bit of value from a place of business. If 8 out of every 10 people who walk into a shop are converted into regular customers, how long do you think it would be before that business would have to start turning people away or extending the shop to cope with the demand? A great problem to have!
This ideal scenario is altogether possible but it is not enough merely to engage with customers who walk in, although that is a great start. You also need to capture their details and preferences so that it is possible to reach out to them and entice them back in future. When you reach out to customers with a relevant and compelling reason to visit your business, some will respond. The more people you reach out to (always assuming a relevant and compelling offer), the more who will respond.
To start with, you need to seize every opportunity to collect your customers’ contact details and learn a little about them. There is no better opportunity than when they have chosen to walk into your premises. And, for the businesses in question, there in no other time of year when more people walk into their premises than at Christmas time.
Nov/090
Go get em Tiger
Are you a passive marketer or an active marketer? Do you go out and get customers or do you let them find you?
Being passive means waiting for people to walk past your shop, find you in an online directory or search engine, be told about you by friends, come across your advert in the local paper. This is less effort than being an active marketer because you simply pay some money and then hope customers find you.
Once you have some customers, you automatically have the opportunity to become an active marketer. Being active means reaching out to your customers and bringing them back to you again and again using methods such as direct mail, email or SMS. This requires some effort.
Firstly, you’ll need to collect the details of every customer you meet. But shouldn’t you be doing that anyway? You have invested money in premises, equipment, advertising or other things to get those customers in the first place, so surely you must keep in touch to make the most of your investment? Otherwise, wouldn’t it be like buying a box of matches and throwing the whole box away after using just one match? Just as a box will provide you with many matches after the first one, many customers will potentially buy from you several times. That is, unless you let them forget about you.
Secondly, you’ll need to keep customers interested by sending offers that they find compelling. There must always be something in it for them. Yes, it may cost you something to make offers compelling but you are building long-term sales potential, which is no less important than any of your other expenses. If you do this, you will be rewarded with a good response rate each time you actively reach out to your customers.
This is when active marketing really starts to pay. If customers have given you permission to contact them and you have learnt enough about them to send compelling offers, such that you always get a significant response to a campaign, you have effectively built a money-making machine. You have the power to generate sales whenever business is slow, when you have a special event or when you launch a new product. In fact, any time you like.
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