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.
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!
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
Write to sell
You will sometimes communicate with your customers or prospects in writing. This could be by email, text message, your web site, a printed brochure or, increasingly less often, a letter.
If you are writing to create a defined response, such as to increase sales or engender loyalty, there are things you can do to get best possible results. Read on to find out more.
If you are not writing to create a defined response, you are probably wasting your time. More to the point, you are squandering a valuable and limited resource – your customers’ attention to you.
Having just read ‘Write to sell’ by Andy Maslam, I strongly recommend it to you as a quick and easy guide to selling using the written word.
In my opinion, these are Andy’s top five tips for great copywriting. If you are serious about writing to sell, I suggest you read the book.
- Above all else, people are interested in themselves. As Dale Carnegie wrote, a headache is far more important to most people than thousands dying of starvation on the other side of the world. You cannot write effectively unless you understand your audience. So it pays to spend time getting to know your reader and working out what interests them.
- Write about benefits not features. In other words, tell your reader why they should buy, not what they’re buying.
- Make a plan. What do you want people to know after reading? How do you want them to feel? What do you want them to do? Close your laptop and sketch your ideas on paper. Start typing only when you have a plan and a bunch of ideas you are happy with.
- Make your writing simple to read. Make sentences short and never use a long word when a short one will do. Write as you would speak because people, even business people, will relate more easily to you.
- Draft, edit mercilessly, redraft, edit some more. Repeat until you are satisfied that you have achieved what you set out to. Take a break before proof reading.
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