Don't Battle over Price

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Thanks to the influx of discount store, it seems like everyone has reduced themselves to trying win customers over price. How many times do you see that someone has the lowest prices, guarantees the lowest price or will match any price.

The Small Business Branding Blog points out that if you try to fight on price, then you reduce yourself to a commodity and as a small business you will loose against the big boys.

Lowest Price Guaranteed – All The Way To The Bottom

As the blog points out, instead of battling on price find ways to create value with your customers. Now there is always going to people who only look at price (but these are the same people who complain about a lack of service and the poor quality of products they buy). As a small business owner you want to concentrate on the customers that can see value in doing business with you.

As a small business owner the biggest advantage you have is to provide better service and better services than someone could receive in a big box store. What kind of services you can provide your customers will depend on what type of business you are in.

One way to find out what your customers would like to see is to ask them. They will be glad to tell you what additional services would make you stand apart. Also look at the business news and find out what the big retailers are dropping such as Layaway programs.

Once again it comes down to finding your niche and making sure you are setting yourself apart from the competitors, not on price but on service and services.

Can you Change your Niche?

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You have your niche in the marketplace, but you decide that you want to head a different direction in order to capture a different part of the market. However, if a major corporation such as Wal-Mart and Nordstrom’s failed at changing their niche, is it possible for the small business owner to change their niche? Yes, it is possible but you have to do it very carefully.

First of all let’s take a look at what happened to Wal-Mart and Nordstrom’s.

As anyone who has been alive for the last 20 years knows, Wal-Mart’s niche has been the lowest common denominator, the lowest price shopper. Not the smartest shopper who wants value for the dollar but the customer who only looks at the price and not what is in the package.

The problem with having this niche is that there is not a lot of margin in this market. Realizing that they are quickly hitting market saturation in the United States, they knew that they would have to make more money off of their products in order to continue improving income.

Seeing the success that Target was having, they decided to move that direction. However, in the stores that they tried to upscale, they lost their core market and sales begin to flounder and the experiment was stopped. Wal-Mart is now moving more upscale but doing it much more slowly and not trying to alienate its existing market.

Nordstrom’s has always been known as the customer service retailer. You did not go into Nordstrom’s for low prices or the hippest fashions; you went in there if you wanted good service. Seeing that their core market was aging that they were not brining the younger market Nordstrom’s decided to change their focus by bring in the hip and trendy. Once again it failed as Nordstrom’s core market was alienated and sales went down not up.

The lesson to be learned is that you can change your niche but you cannot alienate your existing market. You can slowly bring in or start building new items, but you also want to keep your existing customers happy with the products they have been buying all along.

Take time if you want to move your niche and don’t alienate the people who have kept you in business.

Returns, Returns, Returns...

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On several occasions I have mentioned how important it is to have a good return policy. Too many small retailers fear the thought of returns and institute somewhat draconian measures to deal with that fear. While this may result in fewer returns it also results in fewer sales because the competitors have better return policies.

Many times a small retailer will only offer in store credit on returns and some even add a restocking fee on some transactions. This type of policy will only send customers to competitors because the big box stores and many on line retailers will give refunds on purchases.

Now lets take a look at an extreme example. Say a customer purchases $150,000 in product, and the needs to return $20,000 of that product. While this kind of return would seem to be devastating in its amount, it is close to the 10% mark that I suggest you keep out of your sales to compensate for possible returns.

While the return amount may be hard on you to deal with, your customer invested a great deal of money with you and it is important that you take care of them. If you are hard nosed about the return, how do you think that person will react and tell their friends? On the other had if you take care of the customer how will the customer react and what will be the information conveyed to the friends?

Remember, word of mouth advertising is one of your most important marketing tools at your disposal. Word of mouth can make or break a small business so it is important to keep it positive. While it is impossible to please everyone, making your return policies reasonable will go a long way to keep your customers coming back to you instead of going somewhere else.

Adding On...

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Are you adding on to the services you are providing?

If you are a fan of Jeff Foxworthy you probably think of his number about McDonalds and their attempt to add the Hot Apple pies to people coming through the drive thru. Adding on to products and services can also have a negative cogitation because of the way some companies push extended warranties.

So why would companies push an add on even though it might be considered pushy by the customer?

Let’s take an electronics store for example. It may surprise some people that there is little to no mark up in electronics. A store selling a business laser printer may make anywhere from 2 to 10% of the sale of that machine. It is a big sale but it is not making a lot of money. Now if an extended warranty is added to the transaction that could be anywhere from 50% mark up or more, you can see why some companies can get really pushy about getting those warranties.

However, you as a small business owner is trying to build customer loyalty, so pushing products that the customer may not think is necessary will only alienate them and cause them to shop elsewhere.

So how do you get additional items added to the sale without upsetting the customer?

First of all, you need to use proper salesmanship. I have gone over sales presentations in the past and will refresh that information in the near future. You need to ask your customers questions and listen to their answers and they will tell you what they need.

Let’s use the example of selling a printer. Most printers do not come with USB cables because the manufacturer doesn’t make any more money building the printer than the electronics store makes selling it (the manufacturers make their money selling the ink).

One of the questions you can ask your customer is if they already have a USB cable and is it long enough. Another example is that they may tell you during the conversation that they will be printing brochures so a natural add on would be to ask them if they will need any brochure paper.

So how does this build customer loyalty? You are finding out exactly what the customer needs to insure that they do not have to turn around and come back to your store or more likely go to another store to get needed supplies. I cannot tell you how many times people came into my store and said they bought a printer and the salesperson never mentioned that they would need a USB cable so the had to come to our store to purchase one. Do you think they were happy with the salesperson at the other store?

There is other ways to get additional sales.

Service businesses can also benefit from this and since I have several friends who are professional photographers, I will use them as an example.

During my wedding, our wedding photographer mentioned to several families that he also takes family portraits. He ended up doing some shots of families at the wedding in addition to the pictures of us. Since he was already at the wedding, this extra business only cost him a couple of rolls of film.

If the photographer did one wedding per week, think about how much additional revenue he could make by just getting one family per wedding to do a portrait session.

Getting an add on to a sale not only can help your revenue but it can also help you build customer loyalty by ensuring your customer leaves your store with everything they are going to need in order for the product to solve the customers problems.

Also, be on the look out for additional ways to increase your revenue stream to make your business more profitable and successful.

Building Customer Loyalty

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How loyal are your customers to you?

The answer to the question could be what stands between success and failure of your small business. Today you see many major retailers trying to build customer loyalty through their so called rewards cards. It is the latest attempt to keep customers coming to their stores as opposed to their competitors.

But what can you do to create customer loyalty?

The Freelance Folder blog has several ideas to build your customer loyalty.

The first idea they mention is to add a human touch to your service. When is the last time your tried to call a company on a 800-number and have been totally frustrated with the results? Make sure that your customers are able to reach someone that can answer their questions.

While I have said it is OK to outsource some projects, you should never outsource anything that will affect the service that your customer receives. These days too many companies are outsourcing their customer service functions which in the long run will only harm the experience the customer has when they call.

An outsourcer can provide the same level of customer service that you can because it is your business and to them it is just another account.

Another important way to build customer loyalty is to take care of the customer no matter what. To often small businesses have return policies that are too restrictive and cause them to loose customers in the long run. While a return always hurt, a customer that is able to return a product without problems is more likely to come back and buy more than a customer that cannot return a product.

The best way to deal with returns is to set aside a certain percentage of your sales to compensate for returns. This way you are not being caught by surprise with a really big return that you are not expecting.

Building customer loyalty should be one of your biggest priorities. It will mean the difference in the long term future of your company.

Networking and Marketing Partners

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In my last entry I mentioned how important it is to get the word out about your business and the importance it plays in the economy.

However, you also need to build a network that will not only help you and your business but also be beneficial to other small business owners. Look for small business owners that own complimentary businesses of yours so that you can work together to promote each other’s business.

As a small business owner you do not have the money to go out and plaster the television with ads like your big time competitors. Therefore you need to look at less expensive ways to promote your business and creating a network is the best, least expensive way to do it.

One of the ways to build your network is to check with your locally owned business association for complimentary businesses. If you do not have that type of organization in your area check with the chamber of commerce, SCORE plus friends and family that may have suggestions for you.

You should be able to find many businesses that compliment yours. For example if you run an appliance store, you could work with repair people, stores that sell furniture but not appliances, home decorators and so on. You can refer clients to them with them referring clients to you.

Make sure that you feel comfortable with the people you network with. If you do not feel they will provide excellent customer service, consider finding someone else because you are putting your reputation on the line with a referral and joint marketing. Also make sure that the referring and the marketing are a two way street. If you find that you refer many clients over to your network but you never see any referrals from them then look into it. Sometimes it could be that you just have more people to refer than they do but you also don’t want someone to take advantage of you either.

Networking is an important marketing strategy for small businesses. Be sure to network with complimentary businesses that will fit your niche and your comfort level.

Learn lessons from the failures...

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Previously I have discussed how important it is for you to know thy enemy and to keep appraised what they are doing right and wrong in order for you to be more competitive. However, it is also important for you to learn from those that fail since as the old saying goes "Those who do not learn from history are condemned to repeat it".

In the retail sector there has been many failures over the last year including such names as Steve & Berry's, Circuit City, Mervyn's and others.

Today I am going to give a couple of examples of things you can learn of what went wrong at Circuit City and how to use those as lessons in your own business. By studying your own competition including those who don't make it, you will learn valuable lessons to improve your business and insure the same thing doesn't happen to you.

Among the issues that Circuit City faces was the lack of a niche, customer service, and the layout of their newer format stores.

While I may start sounding like a broken record, it is critically important that you have your own niche away from the major competitors. In the case of Circuit City, it could not separate itself from its major competitor Best Buy. The only major difference between the two stores was that Circuit City eliminated appliances several years ago which seem to contribute to their problems, not help them. Otherwise, they seem to try to emulate Best Buy not set themselves apart from Best Buy.

Following up on their attempt to emulate Best Buy, Circuit City eliminated their commissioned sales staff a few years ago and put them all on hourly. At the time Circuit City said it got rid of the top of sales ladder because they would have wanted too much money and in my experience it was clear that they kept the mediocre people and that led to poor customer service.

Let me give you one of my personal examples. I wanted to buy and item and the only store to have it in my state was Circuit City (otherwise I would have gone to a local competitor). I walked into the store and immediately found it in a looked up case. There was two employees standing just a few feet away but neither one of them would come over to help me. Finally I went over to the customer service counter to ask for a manager in order to get some help.

Instead of coming up to the counter and helping the customer personally which should have been done, the manager calls on the phone, tells the customer service person to find someone to help me because he had better things to do. Finally someone did respond to the calls by the customer service counter and I got the item I needed.

Clearly Circuit City failed from management down to take care of the customer. While in many cases this could have been an isolated incident, I heard many similar stories from other people which showed that Circuit City was failing in this area.

Finally, Circuit City also had problems when it came to their new format stores. The last new Circuit City store to open near me was in their newest format and I took a drive over to check it out one day. While the store was nice and new, the whole layout of the store was confusing. There was one department that was spread over three different areas of the store. How confusing would this be to the average customer? Stores need to be logically set up so that people can come in to them and find what they need easily.

That is just three examples of what where major problems at Circuit City. These are valuable lessons to learn so that you do not suffer the same problems as they did.

Learn from your successful competitors and learn from the failures so that you do not make the same mistakes they did.

Finding your Niche

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In my last entry I talked about staying ahead of the competition and the importance of having a niche. Since it has been some time since I talked about your niche today I will go over what a niche is and use an example to hopefully get your mind working on ideas to find the right one for you.

Basically a niche is the part of the market you go after.

Using the big retailers for example, Nordstrom’s niche has always been its customer service and return policy. People do not go to Nordstrom’s for low prices but for the service and the outstanding return policy. Target’s niche is being a step above Wal-Mart in quality.

Now look at the office supply market. The three major competitors are Office Depot, Staples and Office Max. So what sets them apart from each other? Well you could say that Staples with their “easy button” but many people don’t even remember which store that comes from. The problem with these three stores is that they are not separating themselves from each other so most people either shop at the most convenient location or the one that they have the best experience in.

So let’s assume that you want to open an office supply store and you have to figure out what your niche is going to be. First of all, if you are going to carry the same things the other three stores do you are not going to be very successful because there is no reason for people to shop at your store instead of the others except for convenience or if there is neither of the big competitors in the market.

Now let’s look at the three major areas of the office supply store and see where you can set yourself apart.

One of the big departments in office supply stores is electronics. However, consumer electronics is extremely competitive and there is very little money to be made in them. In fact you may sell a $500 all in one and make $20 dollars profit.

However, instead of selling the basic consumer electronics all the office supply stores sell, you could look at items they do a poor job selling and don’t have much of and that is higher in electronics. If you are looking for a good business copier, specialty printers, or other similar items, the big office supply stores just do not have the inventory or the ability to service this market. However, something you would need to take into consideration is that people who buy these items need excellent serving so how are you going to offer that?

While there may be more mark up in furniture, the big stores have the advertising dollars to pull people in. A majority of people rather get a cheap price than buy something quality by paying a few dollars more. But there is the market for quality and you may not sell as many pieces as the big boys, but you could go for a market that makes you more money in the long run. Once again people spending the money want service, what are you willing to provide? Design services? Set Up and building? That is something you would want to consider.

Finally there is the main office supply area of these stores. Once again you cannot compete by offering the same products they do and in general it is hard to look at having higher end products. However, if there is a big enough market you could consider selling the items that the other stores don’t carry in their inventory but have to order. You could find out from local businesses what items they cannot find in the big stores and work on bring customers in on those items plus having the everyday items.

What it all comes down to is what part of the market you are going to go after to set yourself apart form the competition. It does you no good to try to fight them head to head because you will loose. Find out what the customers need and what the big boys are not doing to satisfy their needs. The better you set yourself apart from the competition the more successful you will be.

To Do or Not To Do Political Signs...

With election time coming for many areas the decision comes whether to put of signs of political support or not.

This comes down to what kind of market you are in and who are your customers. If you live in an area that supports primarily one party and you support that party then you may be OK. However you could also be putting off potential customers by your choices. You need to decide if its worth the risk to alienate a portion of your customer base by supporting certain persons, parties, or positions.

If you do want to be involved there is plenty of ways to get involved without making your business a home to political signs. Look to others way to show support than what might cost you your best customer.

Be Consistent

One of the most upsetting events that customers encounter is inconsistent policies especially toward returns. If you are a chain and have multiple locations, this can be created by different managers having different policies. This can also be created in a single store if all managers and the supervisors are not on the same page.

Here are some suggestions to improve this situation:

1. If you are a chain make sure that all your stores follow the same policy. Put the policy in writing and make sure all the management follows the policy.

2. If you are a single store make sure all the people in the store that make return decisions are on the same page. Write down the policy and ensure that all employees are trained properly on the why, what where of the policies.

3. While you do want to protect yourself against fraudulent returns, make sure that your return policies are not so stringent that you are sending customers to your competitors.

4. Go to all of your competitors and find out what there return policy is. Go even further and buy products from the store and see of they follow their policies. See how they react to the returns and if they try "save the sale".

5. Make returns seamless whether the customers has purchased in your bricks and mortar store or purchased on line. Nothing is more frustrating for a customer than to buy something on line and not being able to return in the local store or worse, the store telling the customer there is nothing we can do or there a separate operation.

6. Many customers think that if they go "over the heads" of regular employees management will do what they want. Once again you must have a policy in place that not only allows the customer to fell as though they are being treated right, and gives the employee the knowledge that management is behind them. Once again the best way to make this happen is have a customer friendly return policy.

Once again, one of the biggest frustrations customers have with stores is inconsistent policies. Work as a team to build workable policies that will work for the company but also work for the customer.