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Mine for Gold in the Right Places

Guest post by: Sam Allman

Article Overview: “Where are my customers?”…“Why isn’t my usual advertising working?”… “What can I do to turn this around?” These are among the questions being asked as many businesses face a falloff in the number of customers. It is no secret that many companies struggling these days. There may be reasons related to the economy, but I am convinced it’s also because many businesses are looking for customers in the wrong places.

Mine for Gold in the Right Places

Peter Drucker, the American management guru, brilliantly perceived that a business’ essential purpose is not to create a job or profit, but a customer. Businesses grow only as they create more customers. Logically there are only two ways to do this: (1) Capture new customers; (2) persuade past customers to come back. On which area do you devote most of your efforts? Most retailers devote their resources—most notably advertising—to luring new customers. This is the more difficult way to grow a business.

Traditional advertising has clearly become less effective. Old marketing approaches are failing. Yet many of our retailers continue to invest in ads that used to work. (They also waste ad money when they do not question shoppers to determine which ads drew them in.) An old adage supposed, “If you build a quality mousetrap, customers will beat a path to your door.” It was, and is, a myth.

We consumers still seek solutions to our problems, and advertising provides solutions. So, why aren’t conventional advertising methods working? These days more ads bombard our minds than we can comprehend, and our hectic life-pace prevents us from attending to them. The ads become babble in our minds and we dismiss them. In sum, the adage “It pays to advertise” is being replaced with “Nobody is paying attention.” And if most customers aren’t listening, your ads are digging for customers in the wrong places.

This misdirection reminds me of the old story about a man who dropped his keys in his garage one night. When his wife saw him searching for the keys in the living room she asked why. “The light’s much better in here,” he responded. Duh!!!! Are you that guy? Have you been searching in only the well-lit places, while new customers out of view never see your message? Where might you mine for customers more effectively?

Let’s start with capturing new customers. It is a difficult but necessary endeavor. You are trying to reach shoppers who have no prior history with you and no trustworthy recommendation. They have no reason to trust you and will brace themselves against your offer. Customers like to buy, but are wary of being sold. Many have been burned by slick, pressuring salespeople. They want the “perfect product” and need expert advice, but they are cautious. They often respond with off-putting remarks like, “Just looking” or “Your price is so high. Can you do any better?” or the ever-discouraging “This is the first place I’ve looked. I’d like to shop a couple of other stores.” You fight an uphill battle.

Contrast these shoppers with those who have been referred to you by someone they trust. These shoppers feel a much higher comfort level. They are half sold before they walk in. This is why many retailers, myself included, have thrived on word-of-mouth advertising. During boom periods, we didn’t need ads. New customers streamed in by virtue of recommendations from friends and family. However, during leaner times, the flow of new customers slowed w-a-a-y down!

I learned you can’t grow a business in hard times by waiting! Also just as you cannot turn over to a shopper the responsibility for closing a sale, you cannot expect the customer to refer friends to you. Even if they are very pleased with their experience at your store, in tough times, they will not refer enough customers to you, at least not entirely on their own. A client of ours recognized that customers refer more friends if there is an incentive so he started a reward and recognition program. Every customer is asked, “Do you have any friends whom I might help, just as I have helped you?” He gives them a business card and says he will pay the customer for referring a friend. The program has become very effective. His retail location is only fair, yet he claims that 80% of his business comes from referred customers. He is digging for new customers in the right places.

From the harder to the easier way, what are you doing to persuade your past customers to buy again? The easier way consists of two methods: (a) persuade a higher percentage of your past customers to return and shop your store again; and (b) persuade these returning customers to buy more frequently and to spend more each time. The first method increases your market share, while the second increases your “wallet share”—your share of each customer’s flooring expenditures.

Both methods require that you or your staff deeply mine customer records. Look for potential “gold” customers who still live in your market area. Then, work on method (a): devise ways to persuade more of them to return and buy again. You will succeed if you can convince them that their desire for new flooring is really a need to shop your store now; and they will get a better deal from you than from any competitor.

Recapturing past customers is the most neglected place to mine for gold. As you persuade them to return, your burden of proof is far lighter than when enticing consumers who don’t know you. Most of your past customers love you because you delivered on your commitments and delivered a value higher than what they paid. Too often, dealers neglect these gold customers once we sell them. We get on with “doing business.” In surveys we conduct for clients, too often we here these “gold” customers lament, “Before I purchased, they treated me like the most important person in the world. After I paid, I never heard from them again!”

How have you been keeping in touch with your customers? Do you send cards on their birthday or the anniversary of their flooring purchase? Do you remind customers with texture-retention warranties to have their carpets deep cleaned regularly? A major retailer I know consistently promotes private sales by sending promotional material to selected zip codes. The best return on a promotional mailing like that is usually no more than 2%. His typical return is 12- 13%.

Moving your location? Why not have a “customer appreciation night” and invite established customers to browse your new showroom? Do you have a monthly or quarterly newsletter? Are former customers aware of your new product lines in hardwood, ceramic, laminate? (As I am sure you know, many of these new flooring products are delightful.) I could go on.

My big question to you: “Are you staying in touch with your old customers?” As someone has said, “There’s gold in them thar hills.” I say there’s gold in “them thar databases,” too. Don’t neglect the most lucrative place to dig for gold: your recent, most satisfied and loyal customers. Ask them, after they buy, “What will be your next project? Would you like for me to watch for products of great value for you?”

At a time when many retailers are struggling, refuse to let hard times victimize you. Start digging in the right places. Not under the lights, where competition is keen, but in your own backyard.

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Article Tags: advertising methods, american management, consumers, hectic life, job, living room, management guru, marketing approaches, misdirection, money, mousetrap, myth, necessary endeavor, old adage, pace, paying attention, peter drucker, shoppers, traditional advertising, two ways



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