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.
Apr/100
10 questions that every local business owner should answer
1) How did your customers find out about you?
2) How old is your typical customer?
3) Where does your typical customer come from? How far? Here’s a clue: Ask for their postcodes.
4) What do your average customers do with their time? Are they married with kids? What type of jobs do they have? Here’s another clue: If you have their postcodes, you can buy this type of information.
5) How much money, on average, do your customers spend with you?
6) If you are a bar, restaurant or similar service business, how much time do your customers spend with you?
7) How often do they spend money or time with you?
8) How many of your customers refer you to their friends?
9) How many complain about you to their friends?
10) Who else do they spend money with when they could be buying from you?
Notice that these questions are all about the status quo. Now, for each question, ask yourself what, in an ideal world, you would like the answer to be. You may be surprised to find that, for at least one of these questions, you can change your business to achieve close to the ideal answer. And if you can do that, you may be surprised about the difference it makes to your bank balance.
Feb/100
Try not to be perfect
Sometimes it can feel like your local business simply isn’t progressing. Even though you are putting in long hours and trying to do everything right, things just aren’t going your way.
Your manager forgets to put the new menu out even though you reminded him twice. Your supplier shows up late, leaving you short of stock for a whole day. A staff member calls in sick on a busy shift. You constantly interview people just in case someone leaves at short notice, but half the time, interviewees don’t show.
Problems such as these make you feel like your hard work is getting you nowhere. It seems that, no matter how much you do, things will never be exactly as they should.
And, in a way, you are right to feel this way. Things will never be exactly as they should. Things will never be perfect. There will always be at least one small thing that goes wrong. If you are striving for perfection, you will never quite get there.
But the thing about striving for perfection is that your competitors will never quite get there either. They have many of the same problems as you do. Like you, they also have to work hard to make their business almost perfect. And you can bet that they often feel like pulling their hair out too.
So when times are tough and it feels like things aren’t working out how you planned, just remember, you don’t need to be perfect. You just need to be better than your competitors.
Nov/090
Should you reduce prices to sell more?
That’s such a huge question that I’m already regretting trying to answer it. As always on Local Marketer, I’ll focus on how this question relates to local businesses.
First of all, raise your hands if your local business is so busy that you don’t have the time or capacity to serve more customers than you already have. Ok, the lucky few with their hands raised can stop reading now – this question doesn’t apply to you guys. Your homework is to find a nice way to raise your prices.
For those still reading, how did you set your current prices? Probably by looking at your competitors, right? If your product or service is a commodity, such that your product is very similar to your competitors’, then there’s not much room to play with pricing as customers can easily get the same thing elsewhere.
However, if there is room for you to add value, perhaps in a way that your competitors don’t, then customers might be willing to pay you more than they do your competitors. Don’t assume that lowering your prices will bring you more business over the long term. Your customers may not be sensitive to your prices.
Alas, for the vast majority of products and services, consumers are sensitive to prices, particularly with the economy as it is today. If you are thinking of lowering price for the long term, you need to consider whether your new prices allow room for profit. Assuming that your number of sales does not increase immediately when you lower prices, how much less money would you make per month and how long can you afford to wait for the increase in sales? If you work that out beforehand, you’ll know how long you can afford to run the experiment for. If your sales volume eventually increases enough to grow your profit, you’ve succeeded. If not, you’ll need to go back to the drawing board.
Of course, the most common type of price reductions are the temporary ones – sales, promotions, last-minute deals and special offers. If you execute them cleverly and selectively, then they can be a great way to generate business in the short term. Although, if you have regular customers, don’t offer them a discount on a service or product that they have bought from you every month for years, such as a standard haircut – you’ll make less money and those customers won’t become more loyal. Perhaps offer those people a discount on a head massage or colour treatment, so that the offer leads to an up-sell.
The truth is that for many local companies, the ability to generate extra business at short notice is essential to survival. To fill un-booked restaurant tables, empty seats, vacant appointments, available time and unused seasonal or perishable stock amongst other things. If this applies to your business, make sure you know how to run temporary offers with style and acquire the tools to execute them quickly at the last minute. Nowadays, mobile marketing and SMS in particular is the best way for local businesses to execute time-sensitive promotions cost effectively.
And don’t kid yourself that your business is too posh or your customers are too wealthy for promotions and special offers. Most people love to save money, particularly those who have been successful in acquiring it.
Sep/090
Using special offers to increase sales without upsetting regulars
Customers love a bargain, yet few people like to buy from a business that constantly has a ‘SALE’ sign in the window. Getting this right can make the difference between increasing sales and acquiring a costly ‘bargain-basement’ image.
All businesses have their ups and downs. During periods of low demand, a business owner needs to find ways to bring customers in or generate sales. Often, this needs to be done at short notice. When it comes to motivating people to buy, a special offer or incentive is a powerful tool. If done properly and regularly, the additional sales that can be generated over a year using offers and promotions can make the difference between scraping a living and making a handsome profit.
The most common concern I hear from local businesses with regard to special offers is ‘I don’t want my regular customers to find out’. This is a genuine concern. If you have a base of customers that use your service every week or month at the current price, won’t you lose money by offering them a special? However, this is not a reason to deny yourself the extra money you could make. Let me explain:
Can you think of even one customer that could not spend a little more money with you than they do now? My point is that, no matter how good a customer, there is always an opportunity to sell a premium service or to add another product to their shopping basket. A salon can offer their regular ‘cut and blow-dry’ customers an incentive to try a colour ‘25% off all colour treatments next Tuesday’. The salon should send this only to customers that don’t usually have colour treatments.
Is that unfair to those good customers that regularly pay for both cuts and colour treatments? Of course not, because the salon can offer those customers a different incentive, such as ‘Book your next colour treatment this week and get 30% off our new advanced conditioner for coloured hair’.
To make special offers work without appearing cheap, a business needs to separate customers into different groups according to what they buy and prefer, then send special offers that appeal to those groups. This does not take a great deal of effort and the benefit is that those customers will spend more. Plus, your quieter periods will get a little busier. Quiet periods not only hurt your pocket, they are also bad for staff morale.
In addition, running offers and promotions in a targeted way is appreciated by customers. Your customers receive offers that interest them rather than blanket discounts that make you seem like a bargain-basement operator.
So don’t shy away from using special offers and promotions. They are an essential money-making tool for all local businesses.
I’ll end this post with a shameless plug for my own business. Many local business need to bring customers in at short notice. For example, to fill empty tables in a restaurant this weekend or to sell produce that has a limited shelf-life. To generate sales at short notice, there is no better way to deliver special offers than to the mobile phones of your customers. And there is only one service that is 100% dedicated to helping local businesses do that: Visit Sendster.co.uk to find out more.
Sep/090
How customers can help grow your local business
If you have been trading for any length of time, at least a few people will have bought your product or service. These are your existing customers. In one way or another, whether it’s time, money or some other resource, you have invested something in acquiring those customers. So, it’s worth thinking about how to get the most out of that investment.
Most businesses have some great customer and some, well, not so great, with plenty in the middle. Who spends the most money? Who cost the least to service? Who most often talks about you to their friends, thereby creating new business? Customers that love your business will grow it for you each time they talk about it. In short, who are your most profitable customers? Take a look at these customers and provide incentives for them to reveal some personal information.
Once you have worked that out, ask yourself what this group of customers have in common. It’s easier said than done, but if you can work out which characteristics define your best customers, you can look for similar people locally. The answer could lie in simple things such as age and gender or more complex factors such as occupation, education, and family status.
It’s worth looking at your worst customers too. Do you have customers that spend little and demand a lot of attention? Customers that ultimately cost you money? In deciding who these people are, do you want to consider opportunity cost? For example, if you own a restaurant that is over-booked every Saturday, are many of your tables occupied by people spending too little? Perhaps your biggest spenders are also the busiest, so they never get round to booking until there are no tables remaining. It’s a difficult thing to do, but it can be worthwhile finding polite ways to filter out your worst customers.
Another thing you can figure out by studying your best customers is how to improve your service to attract more people like them. When your bank balance demands that you increase sales, it can be very tempting to continually change and tweak your product or service to bring more money in. If you don’t know who your best customers are and you make the wrong changes, it’s easy to alienate the very people you need to keep.
My advice is this. Know who your best customers are. Invest in finding out why and then finding more people like them. Evolve your business over time to suit those types of people. And be patient – if your business appeals strongly to a part of the population, such that those people are true fans, they will help grow your business through word of mouth, but it takes time. Changing your business because you need to grow is natural. But doing so without understanding the impact on your customers can lead you into a spiral of decreasing sales or profit.
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