The Facts of Business Life

by Bill McBean

  As with Amazon, there are two basic elements to every customer retention program. The first is thanking customers for their business and providing them with contact information so they’ll know where to go if they have any questions or concerns. This is fairly easy to accomplish because all it means is setting up a process to send out a “thank you” within so many minutes, hours, or days after the purchase. The second basic element is sending customers timely reminders concerning specials, new products, or other information they might find to be of interest. Thanks to technology, setting up this kind of process is also very easy. Once you have these two processes in place, the rest is up to your creativity and imagination. It is important to remember, though, that you don’t want to upset your customers by being too aggressive, especially if you communicate with them electronically. That means you have to give them a way to “turn you off” if they want to. It’s all right if they do, but if they do, you should find another way to keep in contact with them, either by mail or phone, so you can continue to keep your company in their minds.

  Level 3: From Survival to Success

  Level 3 could be referred to as the “killing ground” because that’s where most business closures and foreclosures occur. But the reality is that while it’s at Level 3 that companies go out of business, many of these failures actually begin at Levels 1 and 2. That is, by not doing the kind of preparation that should be done at the earlier levels, or by doing it poorly, owners put themselves on the road to ruin, even if they don’t get there until they reach Level 3. Unfortunately, despite owners being told that preparation is essential if they want to succeed, this same scenario is played out day after day.

  This is particularly true for marketing. The day you open for business is not the time to start thinking about where your target market is, where to place advertisements, how competitively you should price your product or service, who the easiest customers to attract are, or what your marketing and advertising budget should be. This would be like an NFL team going into their first game of the year without any set plays on either offense or defense. The outcome of the game would be a foregone conclusion—an embarrassing loss. Even if the team had some of the best players in the league, without preparation, it wouldn’t be able to exploit its talents or attack the other team’s weaknesses. It’s the same in business. If an owner doesn’t know how to attack the market or where opportunities lie, the outcome will be equally inevitable—and equally unpleasant.

  One of the major goals for marketing at Level 3 is to make it an integral part of moving the business along the spectrum from survival to success. In order to accomplish this goal, you have to implement the marketing programs, both internal and external, you developed at Levels 1 and 2. By the time you begin Level 3, you will need to know where the “low-hanging fruit” is and be prepared to attack that part of the market. You also should have defined additional market opportunities, set up your product offering and priced it accordingly, and designed a message that will resonate with customers and move them to action. In addition, you should have trained your employees in their marketing role by teaching them to sell the way you want them to, to be knowledgeable about the product or service, and to work at developing relationships with your customers. You also should have developed internal processes to support sales both before and after the sale is made, including customer retention.

  Perhaps the most important thing to bear in mind is that, as an owner, the better you know your market—how to reach potential customers, what “hot buttons” to push, what customers like to buy, and the gross profits they can generate—the faster your business will move along the spectrum from survival to success. But there is another very important point to be made, which is that doing all these things, and doing them right, is just the price of admission. In order to consistently succeed, your knowledge of the audience and the best way to market and advertise to it will have been at least equal to that of your competitors. If this isn’t the case, your business will get off to a slow and probably rocky beginning.

  The Benefits of Marketing at Level 3

  Understanding marketing enables you to recognize the importance of the preparation done at Levels 1 and 2 and how valuable it is in making marketing decisions at Level 3.

  Understanding marketing gives you an appreciation of how important it is to develop hard data by measuring your customer traffic and sales penetration.

  Understanding marketing helps you save money by keeping the marketing and advertising focused on your market rather than learning what does and doesn’t work as you go along, and in the process miss potential valuable opportunities.

  Understanding marketing enables you to fine-tune what works so you can keep your business on the forefront of the market and on top of any market shifts.

  Understanding marketing enables you to recognize that it is essentially a process whose many aspects must be coordinated in order to effectively attract the customer, sell the customer, and retain the customer.

  Attracting the Customer at Level 3

  As I noted earlier, the first thing you have to do in marketing is attract your customers’ attention, let them know your business exists and where it is, and deliver a message that will move them to action, that is, to buy whatever it is you’re selling. How you do this depends a great deal on the kind of customer you’re attempting to attract, your creativity, and your DNA. A good example of this is the television commercials with the baby who talks about how E*TRADE’s pricing and market tools are all you need to trade stocks on the Internet. What makes these commercials great is, first, they grab your attention with the talking baby, which cuts through the clutter of the other commercials they are competing against. Second, once they have your attention, they entertain you, which means you will continue to listen to they are being said. And while you’re listening, they deliver their message and brand the business as a fun company that will meet your trading needs. Not surprisingly, these commercials have been very effective for the company.

  Another good example is the television commercial for the “Gears of War” video game that features a machine gun chainsaw. The commercial is obviously aimed at gamers, and its graphics and the violence they display—along with the audio—draw the gamers’ attention. One of the things that’s particularly interesting about this ad is that it tells viewers only when the game will be available, not where it can be found. The company that makes the game can do this because they know their customers already know where to find it, and they don’t have to waste time and money giving them information they don’t need. Instead, they use the time to whet their audience’s appetite and let them know when the game will be available.

  As these examples show, marketing and advertising are not, or at least should not be, based on guesswork and assumptions. They should be based on facts about your product and your customers. One of the ways of making sure this happens is to measure the effectiveness of your marketing, that is, determine if you have made good decisions about your message and the media you selected. You do this, first, by determining exactly what you want to measure, such as sales and gross profits, gross profit per sale, same period year-over-year increases, number of customer contacts, and the like. Then, after you have launched a marketing program, you continuously ask yourself questions like these to monitor your results:

  Was the goal we set realized? Why or why not?

  What was the traffic like? Did it attract buyers? Did everyone buy? Did some buy? Did just a few buy?

  Did our internal processes work? Could they be improved?

  Did we do particularly well in selling some products and services? Did we miss the mark on others?

  In marketing, knowledge is king, and knowing the answers to questions like these gives you the kind of information you can use to your advantage in helping move your company faster along the survival–success spectrum. It also enables you to avoid wasting time and money by focusing your message on what the customer cares about and what works be
st for your business.

  Selling the Customer at Level 3

  Selling the customer is something that can never be left to chance. Of course, nothing you do can ever entirely guarantee a sale, but the way your company presents itself and the processes you develop for your employees to follow can make the difference between staying on the survival end of the spectrum and becoming successful. It’s particularly important to remember that, whether you’re selling a product or a service, selling begins with your customers’ first impressions—what they see, how they feel about what they see, and how they feel about the way they are welcomed to your business.

  Let’s say, for example, that you own a furniture store. If customers come in and find a dark, unorganized display with a week’s worth of dust on the furniture, they are not likely to have a very positive impression. Nor are they likely to be pleased if the person who greets them is unkempt or uncooperative. But the opposite is also true. If customers come into your store and find it neat and clean, and your salespeople friendly and helpful, they will be much more inclined to buy something from you because what they see is a business they feel they can trust. For example, Ashley Furniture and Dillard’s Department Stores are all well lit and well organized and have knowledgeable, professional salespeople, so customers get the impression the salespeople know what they’re talking about and, accordingly, have confidence in what the salespeople tell them.

  Keeping the Customer at Level 3

  Customer retention is essentially making sure that the customer comes back for more of whatever you’re selling. But if you asked 10 different entrepreneurs how to keep customers, you would in all likelihood get 10 different answers. That’s because, in at least some respects, every type of business is different, and every type of customer is different. If, for example, you owned a business that catered primarily to the older generation, you would probably find that what they respond to best is competitive prices and a place where they are remembered and appreciated. However, if your clientele is made up mostly of college students and recent graduates, you would likely discover that they are attracted to places where they are made to feel comfortable and can be with liked-minded people. The television show Cheers featured a bar “where everybody knows your name,” where Sam, Woody, Diane, Carla, and Coach all added to the experience of having a beer, which in turn kept Norm and Cliff coming back. That’s customer retention.

  Ray Kroc, the brains behind McDonald’s, understood customer retention well before almost everyone else, and he defined it in his own way. He believed that if his customers could have the same experience regardless of which McDonald’s they visited—that is, if they could have the same burgers, the same fries, and the same milkshakes—they would keep coming back. And, needless to say, he was right. Kroc was the process “King.” He didn’t rely on people, he relied on people following processes, and it’s because of these processes that people have bought billions of meals from McDonald’s all around the world. The point is that you have to define exactly what customer retention means to you in order to make sure that it fits your business’s demographics and what you’re offering your customers.

  Although there has been more attention paid to customer retention over the past decade than ever before, keeping your customers isn’t anything new. In fact, successful owners have always known the value of retaining customers—it’s one of the reasons they are successful. What has changed, though, is that because of today’s increased competition, the bar for after-sales contact has risen substantially. One of the most obvious examples of the increased interest in retaining customers, and one of the most successful, is the airline industry. Concentrating on their best customers, airlines offer programs that enable customers to earn miles toward future travel, as well as enjoy other benefits. Other industries have followed suit, offering reward programs that provide cash back or credit, including credit card companies, drugstore chains, department stores, and other kinds of businesses. Of course, maintaining contact and thanking your customers for their business is always smart. But the goal for these companies isn’t just to stay in touch with customers—it’s to have customers return time and time again rather than going to one of their competitors.

  It’s important to remember that customer retention doesn’t begin when you sell a customer, it begins when you start to market to them. That means that the goal of marketing at Level 3 is not just selling a customer but selling him or her again and again. It’s this understanding of marketing that has always separated those who remain at the survival end of the spectrum from those who reach the success end. The way you attract your customers; your business’s DNA; the sales processes; and the courtesy, professionalism, and knowledge of your employees should all add up to customer retention. As I mentioned, however, since every business is different, it is essential that you find the most appropriate ways to keep customers for your company, and no one can do that better than you.

  Level 4: Maintaining Success

  By the time a company has reached Level 4, the success goals the owner defined years before will have been reached, the business will be firmly planted on a solid foundation, and it will in all likelihood be a force in the marketplace. The goal at Level 4, then, is not to become a successful company, as it was at Level 3, but to become even more successful, and thereby maintain and secure the business throughout the owner’s tenure. But Level 4 contains a trap for the unwary owner, one in which past success can become the enemy of future success. This happens for a variety of reasons. Sometimes the owner becomes tired, bored, or both. Sometimes he or she becomes satisfied with the status quo of sales and profits. And sometimes the owner fails to define the new destination for success that Level 4 demands. Regardless of why it occurs, when it does, the company’s competitiveness begins to fade, it begins to lose its competitive edge, and company-wide apathy slowly sets in, led, at least in part, by the owner.

  Because of its prominent role in any successful business, marketing is far from immune to this apathy. The aggressiveness the owner and the company’s employees once exhibited in finding new opportunities or increased market share begins to fade. Internal improvement of employees and processes becomes less important than it was in the past. Marketing and the money spent on it become routine decisions, especially when compared to what it was like when the business was starting up and every dollar spent was well thought out. As a result, marketing and its many components go on cruise control, and the company begins to rely on what has worked in the past. The problem, though, is that what worked in the past won’t necessarily work in the future.

  All of this happens because once apathy sets in, you essentially create a void in the market, and that void will be quickly filled either by your more aggressive competitors or new competitors who see an opportunity where you have stopped looking. When this happens, your marketing dollars stop generating the business they once did, usually because your marketing isn’t keeping up with the market. Your first reaction is likely to be frustration, because even though you’re spending the same amount of money, you’re getting a smaller return and your market share is being reduced. But that isn’t really the big expense. The big expense is in losing your customers and your connection to them.

  As bad as this sounds, however, there is some good news. First, when your sales and profits decline at Level 4, getting back on track lies, for the most part, in your control. So as long as you recognize the signs of apathy and take steps to overcome it, you have an excellent chance of meeting the challenge. Second, as far as marketing is concerned, you’re not starting out, as you did at Level 3, at the survival end of the spectrum but closer to the success end. Your business has customers, is well known in the market, and has been a consistent performer. You’ve also gained valuable market experience and intelligence. So if you rework your marketing model, that is, go back to using market facts and your experience to attract new customers and keep the ones you have, you will be able to regain your marketing momentum, capture lost
market share, keep up the attack on the overall market, create market opportunities, and, hopefully, become an even stronger competitor.

  The Benefits of Marketing at Level 4

  Understanding marketing enables you to refocus your efforts and recreate the competitive edge the company had before the apathy of success worked its way into the company.

  Understanding marketing helps you recognize that you have to define a new destination, with various success points along the way, and develop a new marketing model to help the company meet its new goals.

  Understanding marketing will enable you to realize that you have to become more creative than your competitors and that this creativity will entail taking ideas from other industries or competitors outside the local market and experimenting with them in order to improve your company’s internal and external competitiveness.