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.
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
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.
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.
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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