Who Ya Gonna Tell?

Who Ya Gonna Tell?

If you are an unhappy customer: your friends.

A new study reports that irritated customers are five times more likely to vent to a friend than a store rep and on average they will tell four friends. Why should you care? The same study reports that those told about a friend's bad shopping experience are up to five times as likely to avoid the store in question as the original unhappy customer!

Did you get that? For every disgruntled customer that walks out your door there will be four potential customers that are five times less likely to give you a try.

The solution: obviously make sure each customer experience is great and then proactively ask your customers about their experience. If they had a bad one, turn it around and do it quickly.

The study was conducted by the Verde Group and the Jay H. Baker Retailing Initiative at the Wharton School.

If you are not regularly staying in touch with your customers someone else will. How do you stay in touch? Learn more

BW's 25 Most Innovative Companies

BW's 25 Most Innovative Companies

BusinessWeek announced their annual list of the 25 Most Innovative Companies this week. Apple topped the list again. Google jumped from number 8 last year to 2 this year and 3M rounded out the top 3 (have you heard about their new Post It™ photo paper? Print a photo on the paper and stick it anywhere you like--very cool).

Anyway, the news to me wasn't who was on the list and where, but the obstacles to innovation that the companies BW surveyed identified (see chart).

My take: there will continue to be plenty of opportunity for small business which will continue to the be THE source of the majority of business innovations. Look at the top three obstacles: length of development time, lack of coordination, and risk-averse culture. Uh? These certainly wouldn't make my top 10 list of things that hinder innovation in our company. How about number 7: dearth of ideas. You have got to be kidding!

As small businesses we can innovate circles around the big companies. Sure, we have our own obstacles, not the least of which is probably funding, but wouldn't you rather be trying to bootstrap a great idea than beating your head against the wall in a risk-averse culture?

Find your happy customers and put a megaphone in their hand. Learn more

Can you buy Word of Mouth Referrals?

Can you buy Word of Mouth Referrals?

It is clear everyone is starting to get it. Word of mouth or referrals bring in business because it brings credibility. Tom Fishburne's cartoon aptly shows the power of word of mouth over other advertising.

NPR had a segment this morning about something called Buzz Agents. Marketing agencies, realizing the power of word of mouth, are signing up people to use products and then talk up how great they are. These "buzz agents" do it for free use of the product.

Business owners are sitting on a gold mine of happy customers. Their own personal buzz agents. Those happy customers could be even more effective if they were given opportunities to share and even something of value to give to their friends.

Customers who feel that you are listening to them are more likely to recommend you to a friend. How do your customers know that you are listening? Learn more

Hot franchise business growth area

Hot franchise business growth area

It seems that Americans are putting their money where their home is. The Joint Center for Housing Studies at Harvard recently reported in their 2005 report “The Changing Structure of the Home Remodeling Industry” that homeowners and rental property owners spent $233 billion in 2003 on home remodeling. Wow! Due to the long work hours many homeowners are keeping they’re looking for help, not only with renovations, but also with home maintenance chores. Following the money trail many small businesses have started up to meet these needs and some are franchised.

CNNMoney.com highlighted seven such franchises. They are:

Garage Tek
Designs of the Interior
Kitchen Solvers
Mosquito Squad
Floor Coverings International
Spring Green Lawn Care
Home Team Inspection Service

The average American consumer discusses brands 56 times a week. Are they discussing yours? Learn more

Grow your business by engaging your customers

Grow your business by engaging your customers

Do you feel like you have the “pedal to the metal,” spending all you can on advertising but still can’t get the growth of your business into the fast lane? The fact is, if your customers aren’t engaged, it may not matter how much you spend on advertising. Just like a car in neutral isn’t going anywhere (no matter how much gas you give it) until the transmission is engaged, your business isn’t going anywhere until your customers are engaged.

What does engage mean? Here are three definitions you might find in a dictionary:

  1. To attract someone’s attention
  2. To establish a meaningful contact
  3. To move into position so as to come into operation

Combine the three of them and it provides a pretty good working definition for engaging your customers:

Attract your customers’ attention with the intent to establish a meaningful relationship and move them into position to help your business grow.

Without worrying too much right now about how to engage your customers (we’ll get to that) let me propose multiple levels of possible customer engagement as represented by the pyramid model above.

At the base of the pyramid is your total available market. That is, all of the potential customers in the world. They have potential, but at least at this point no level of engagement with you or your company.

The next level derives its name from a term we have all used when asked by a sales man if we need help, “No, just looking.” The fact that we are looking means we are more engaged than the masses, but we’ve yet to make any great commitment.

Just beyond Just Looking is Just Buying. For most companies this is the height of their ambition. Get a sale, book the profit and move on to the next customer.

Above just buying is buying again. This is a level that in general assumes that the customer was pleased enough with their first purchase to be willing to come back and purchase again. I say in general, because it is possible that they have no other options and therefore they have no choice. For you as the business owner, this is a very good level. Serving a repeat customer costs less because you don’t have to pay to acquire them and they are less expensive to serve in most cases because they are already familiar with you and your operation. The more customers you can get to Buying Again , the more profitable you will be.

But there are customer engagement levels even higher than Buying Again. The first is Giving Feedback. This refers to customers that are willing to invest more of themselves in your company than just their money. They do this by making the effort to tell you how you can improve your offerings. In effect, they go beyond the typical definition of customers and become co-producers, helping to ensure that your offering is exactly what the market wants and needs. Two great things happen in the process: 1) As your offering improves so will your sales and, 2) As the customer invests their ideas in your company they will become even more loyal and move to the next level.

At the top of the pyramid is Telling Others. At this level your customers are so pleased with your offerings they can’t be stopped from telling others. They become co-promoters, a very powerful sales force willing to tell perfect strangers and best friends how wonderful your company is. As consumers in general become ever more jaded and less trusting of traditional advertising, the growth of your company will be largely dependent on how many of your customers become promoters.

Having described the model, let me hasten to add that I know it is oversimplified. Not all customers will move through each level. Some will become promoters without ever providing feedback. Some will provide feedback and then go away and never return. Despite its simplicity, I believe the model can be helpful in understanding the concept that customers can become much more valuable to a business than just the value of the purchases that they make. Consider the following:

This chart attempts to show in relative terms how much a business benefits financially from a customer at each level of possible engagement. At the far left, Just Looking, expenses associated with a customer typically exceed income from that customer. For example, you spend money on advertising and attract the attention of a customer willing to take a look. At that point you have paid out (for advertising) more money than you have brought in ($0 purchased by the customer).

For those customers that take the step and buy your offering, chances are you will cross over into positive returns. If the customer returns to buy again and again your profit from that customer will increase. Note that the slope of the line becomes steeper in the buying again phase. That is due to the fact that it is less expensive to sell to returning customers than it is acquire new customers. In fact for most businesses it costs five to ten times more to acquire a new customer than it does to sell more to current customers. The obvious difference is the acquisition cost associated with attracting new customers. The less obvious reason is that a regular customer already knows how your product or service works and doesn’t require as much “hand holding” throughout the process.

As the curve continues into the higher levels of engagement, Giving Feedback and Telling others, its slope becomes even steeper indicating that significantly higher returns are possible. Two reasons for this: 1) The additional costs required to move customers into these levels is relatively small and 2) The potential returns have a built in multiplier effect—that is, one customer’s actions can influence many other customers.

For example, feedback from one customer that helps you improve your offering not only benefits that one customer and brings them back again but benefits all your customers and increases the likelihood that they will return more often. Even more obvious, a customer who begins telling others about your business brings not only her purchases but the purchases of several new customers to your business.

In conclusion, engaged customers will help you improve your offering, they’ll actively promote your product, they will improve your bottom line, and, to a large extent, they will determine how fast your business will grow. As you consider the growth of your business, look not only at how many “Just Looking” customers you can bring in and move to “Just Buying,” but also consider how you can get your “Just Buying” customers fully engaged in your business.

Find your happy customers and put a megaphone in their hand. Learn more

Seeds from the blogworld
We search the business blog world looking for posts that illustrate principles, or "Seeds", that if followed, or "planted", will help small businesses grow. We list them here for your convenience. Enjoy.
I grew up in the west and now live in Arizona. There is a simple rule for growing things out here (this rule applies everywhere but is more obvious in the arid west): if it doesn't get water it does ...more.
After describing modern consumers and their desire to watch or read what they want, when they want, the current issue of Business Week concludes: The result: a serious case of attention deficit for ...more.
What is the most compelling thing about your business from your customers' perspective? Is it remarkable? ...more.
Another example of the power of promoters. Shade Clothing sells undershirts for women that are longer than normal for those that aren't interested in showing the world their belly button. It was fou ...more.
I read recently about a musician--a cello player to be exact--that moved to New York City. She didn't know anyone in the city and was looking for opportunities to play her cello. Her solution? She ...more.
I read a great article recently about George Washington. As I read about his amazing leadership characteristics it occurred to me that they are the same characteristics any entrepreneur or business l ...more.
On the company the effect is like being assimilated into the Borg, but for users of their software it's like having a friend with a malignant brain tumor. You're going to have to say "goodbye" soon t ...more.
What says summer more than traveling carnivals? Cotton candy, hot dogs, rides that go around and around until you puke! Does life get any better than that? I submit that it cannot! The blog worl ...more.
Remarkable is the key here. These native american kids are remarkable in and of themselves. Their product follows suit. They have figured out government issues, food serving issues, product, marketi ...more.
In the cluttered marketplace we compete in, I don't think the power (and necessity) of staying in touch can be overemphasized. I learned the lesson again last week--thankfully in a good way. It had ...more.