Did I ever post this one?
D.Scott Elder's
Strategies For Success
Business Development Strategies For the Independent Retailer
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Special Report: "The Ten Things You Must Do to Compete Against the Retail Giants"
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Competitive Advantage #1:
Develop a True Customer Focus
All businesses, regardless of types, have one common objective: to serve and satisfy their customers. Neglecting or losing sight of this objective is a primary cause of the failure of millions of small businesses.
Your customers know when you have a true customer focus. All customers go where they are treated best and stay where they are appreciated. Developing a true customer service focus will win your customers' loyalty. In analyzing the assets of a business, the only asset with lasting value isn't even listed on the balance sheet. The only asset with lasting value is the customer.
Understand the Three Customer Laws
There are laws of nature that are fixed and absolute. These laws exist whether you believe they do or not. For example, the law of gravity is at work despite whether you believe it is or not. The fact is, the law of gravity is going to continue in force no matter what you think. You can't change that. What you can do is to choose to ignore it - and suffer the consequences -- or to acknowledge it and use it to your benefit.
It's the same for the three customer laws. These laws exist and are at work -- whether you believe they are or not. You can choose to apply them in your behalf, or you can choose to ignore them at your own risk.
1. Customers always go where they get good value. Value is the perceived relationship between quality, quantity, and price. Value is your customer's perception. It's not what you think, but what your customers think.
2. Customers always go where they are treated well. Developing a true customer focus will increase your customers' perception of value and improve their shopping experience at your business. (An excellent book on how to do this is Raving Fans, by Ken Blanchard. Read it and have all of your employees read it.)
3. When the value isn't obvious, or when the level of service slips, the customer slips away.
Your customers simply walk out the front door and take their business elsewhere. They don't tell you that they are going -- they just disappear. Successful business owners understand these laws and use them to maintain a strong customer focus.
Here are some customer statistics from Michael LeBoeuf's book, How to Win Customers and Keep Them for Life:
1% die, 3% move away, 5% develop other relationships, 9% for competitive reasons, 14% dissatisfied with the product, and 68% quit doing business because of an attitude of indifference toward the customer by the employees.
Always keep this fact in mind:
It can cost Five Times as much to attract a new customer, as to maintain the goodwill of an existing customer (Marketing Science Institute Review, 1991)
Get Acquainted with Your Customer
A continuing lack of customer contact by a business can be fatal. Owners learn what's going on in their stores by walking the aisles and talking to customers. Successful owners operate their business from the floor, not from the desk. Customers like that the owner is in the store, and it also keeps employees on their toes. You can't run a business from the desk and be successful. You need to get out onto the floor and talk to your customers.
Vice presidents, buyers, managers, and CEOs alike should constantly talk to customers and find ways to please them even more. This tactic helps them grab market share from others who know less about the people they serve. As an independent business owner, you have a distinct advantage in these areas. Because your customer base is smaller, you can and should be personally acquainted with many of your customers. As pleasant as Wal-Mart greeters may be, there is nothing as nice as being personally recognized by a friendly owner. Smart owners take time to learn customers' names, and other personal information too. You can turn your knowledge into market share.
Identify a Target Customer
The successful business owners begin by determining who their target customers are. You can start this process by analyzing your present customers. The most likely customers' target for future sales are those most like your present customer base. By using demographic information such as age, sex, income level, and buying habits, you can draw a portrait of your current customers.
To get this information, you can ask customers to fill out a one-page questionnaire in return for a chance to win a gift certificate. From the responses, you should be able to learn everything you need to know about your target customer. You can then use this information to mount a very effective direct-mail campaign The more you know about your customers, the easier it is to serve them well. (And turn them into "Raving Fans.")
Know What Your Customer Wants to Buy
Get to know your customers and focus on their wants and needs. Then you can predict what they will want to buy in the future. Keep in mind that customers buy on two things -- "good feeling" and "solutions to problems." (When a person buys a ½ inch drill bit, they don't want a ½" inch bit, what they really want is a ½ inch hole.) When you stay close to your customers every day, you'll know what problems they are trying to solve and what makes them feel good.
Know Why Your Customer Wants to Buy
Consumers have many motivations. These motivations are traditionally classified as needs and wants. Basic needs have been classified by psychologists and sociologists as food, clothing, and shelter. Wants are defined as products or services not required for survival, but advantageous to an improved quality of life.
As our standard of living increases, things once considered luxuries become more the norm. Now, most Americans would not consider electricity, indoor plumbing, and telephones as luxuries. Most people would tell you they need those things. As needs and wants become more difficult to separate, motivation becomes increasingly difficult to predict.
Nothing can help you more than having daily conversations with your customers. Part of developing a true customer focus is learning to listen to your customers and understanding why they make the buying decisions they do.
What motivates your customers will vary from business to business and will change from generation to generation. Talk to your customers every day to find out what motivates them to buy. Remember, all customers want value, convenience, recognition, to be made to feel they are important, solutions to their problems, cleanliness, and security. (Ray Kroc built the McDonald's empire on the conviction that people wanted Quality, Service, and Cleanliness (QSC) in a fast-food establishment. His "QSC" philosophy was drilled into the heads of all franchisees and helped to distinguish McDonald's from every other fast-food restaurant in business.)
Know When Your Customer Wants to Buy
One reason Wal-Mart stormed through many rural towns in the 1970s and 80s with great success was it offered many choices to its customers. One of the more attractive options was extended weekend and evening hours. As more women entered the work force, the traditional retail hours of eight to five Monday through Friday and a half a day on Saturday became an inconvenience. People who were working eight to five didn't have many shopping options.
A retail traffic study done in 1991, by Richard L. Mistele of the University of Wisconsin, revealed that if shoppers are given a seven-day shopping option and have access to stores during extended evening hours, they will follow these general patterns:
1. Some 30% will shop from 8:00 a.m. to 5:00 p.m., Monday through Friday.
2. Another 30% will shop from 5:00 p.m. to closing, Monday through Friday.
3. The remaining 40% will shop on Saturdays and Sundays.
In 1994, a Kansas Kmart store confirmed that this research mirrored its store's sales volume patterns. The implications are startling for independent business owners. Consider this -- if you're only open traditional retail hours, even if you're open a full day on Saturday, you could miss as much as 50% of your potential traffic.
The most significant impact may be that owners who aren't open when customers want to shop, force their customers to do business with the competition. Traffic patterns, once they are established, are hard to break. (Remember, it can cost Five Times as much to attract a new customer; as to maintain the goodwill of an existing customer)
Know Where People Like to Shop
Customers love new, clean, convenient, well-lighted stores that offer many choices and extended hours. When given a choice, customers will choose stores that offer as many of these options as possible. They will avoid stores with limited parking, difficult access, unattractive merchandising, limited business hours, and unfriendly personnel. This doesn't mean you must move into a new facility, however, survival may require changes such as remodeling and upgrading fixtures.
Competitive Advantage #2:
Study the Success of Others
This may sound obvious, but it is often overlooked: If you want to be a smart business person, study smart businesses. Most successful companies learn from the good business practices of other successful businesses. Ask a lot of questions, keep your eyes open, and adapt good ideas whenever you can. You can model good ideas from many sources and adapt them to your situation. Three of the best sources are your competitors, your peers, and everyone else.
Study the Competition
Today's successful owners are constantly learning about and from their competition. If you're faced with stiff competition from Wal-Mart, Walgreen's, or Home Depot, etc., learn from them. Sam Walton studied his competitors. He read their annual reports and spent time in their stores. He observed, he borrowed, he adapted, and he succeeded. You can do the same.
To learn about your competitors, study all published information. Review their annual reports, SEC 10-K filings, and industry evaluations. Call a librarian or stockbroker for specifics. Remember to visit competitors' stores. Look at the way they merchandise different departments, see what they display in high-traffic areas and near the checkout areas, and observe the type of customers who are shopping there.
Learn from Your Peers
Join or become active in a trade association for your industry. Attend markets, buying shows, and trade meetings. Ask questions, take notes, and listen. Most successful owners use these techniques. They also take time to visit merchants in other parts of the country. By viewing the operations of others, you can gather great ideas for merchandising, promotions, purchasing sources, and pricing for your own business.
Gather Good Ideas from Everyone
Tom Peters said, "Listen to everyone. Ideas come from everywhere." Not all good ideas come from competitors and merchants in your industry. Every person you know is a source of good business ideas. Everyone you come in contact with is a potential idea person.
You must adapt a mind-set wherein you consider every situation you encounter as an opportunity to gather ideas to use in your business. When you're looking for ideas, they will come. Adapt the ideas of others and make them your own.
Competitive Advantage #3:
Gather and Analyze Management Information
The new breed of mass merchants have all invested heavily in technology. The advantage they get from their investment is management information at their fingertips. They know sales figures from yesterday, last week, and last month. They know their current level of orders in progress, inventory in transit, and inventory on the shelves. Their computers allow them to know what's going on so they can make wise decisions based on accurate, timely information.
Contrast that with many smaller independents who, for the most part, don't know their status from month to month. Many business owners look at financial statements only once a year, and often they do not understand exactly what the numbers mean. By the time they get the information, most of it is out of date and is of little use other than to offer some historical perspective.
Independent retailers who are thriving and prospering share this in common: they know a lot about their business. For them, knowledge of their business is a top priority. They have developed systems -- sometimes manual, often automated - to monitor the following four areas:
1. Financial information
2. Customer information
3. Industry information
4. Market trends
In terms of collecting the information, there is no long-term substitute for technology. We're in the information age now, and for independent retailers to successfully compete with the new breed of mass merchandisers, computerizing is a must. It will take commitment, capital, and time. However, it will pay for itself and the benefits will far outweigh the effort.
Competitive Advantage #4:
Sharpen Your Marketing Skills
"Marketing is everything and everything is marketing." Marketing is every activity aimed at attracting and satisfying customers. Marketing spans nearly every aspect of business operations from Advertising to Zeroing in on your target customers. Like all other parts of small-business management, marketing must be focused on the customer.
There are six basic elements, often called the marketing mix, that dictate overall marketing success. They are the six Ps of price, product (or service), place, promotion, people, and positioning. These key elements, in the proper relationship, are a necessary foundation on which you can build an effective marketing plan.
The Price Factor
Price is one of the most critical of the six elements. Everyone wants to purchase the highest quality and/or largest quantity at the lowest price. Although not all products are price sensitive, usually the price is more visible than the quality.
The Product Factor
The product element refers to either the tangible products or the less easily defined service your business provides to your customers. If the product element is off, you won't have anything to sell that your customers want to buy. Therefore, you won't have any reason to be in the marketplace. This is why many small businesses are either barely hanging on or going out of business. Regardless of the level of customer support you provide and the low, low price you offer, your products and services must be wanted or needed.
The Place Factor
If your business is like most retail businesses, the customer must come to you. Therefore, having the right site may be the difference between long-term survival and failure. Great locations have kept poorly-run businesses in operation for years, while well-managed operations have struggled due to poor site selection.
Picking the right location is not an exact science, but you can learn from the experience of others. As you evaluate your location, consider items such as actual traffic counts, proximity to competitors, construction trends (growth patterns), cost of land or space, zoning restrictions, tax abatement potential, and insurance costs.
The Promotion Factor
Operating a business without proper promotion is like winking in the dark. You know you're doing it, but no one else does. All businesses -- large or small, home-based or at the mall, cash rich or up against the wall - can gain customers from good promotion.
The good news is you don't have to spend a lot of money to grow your business. In fact, there are many effective ways to promote your business for next to nothing -- or even nothing. These low-cost and no-cost strategies work because they are focused on the customer. The main purpose of all promotion is to get the right message to the right person at the right time. Here are the three Rs of promotion: the right message, the right audience, and the right time.
Dan Kennedy, one of the top direct marketing consultants in the world shares this promotional strategy with his clients:
"This type of promotion I'm about to reveal to you can literally turn pennies into dollars. It's the promotional strategy that never wears out and never loses its power. Even though logic rejects it, we all love to get 'something for nothing.' Use the 'something for nothing' theme to -- attract new prospects to your store... to commend attention for your sales letters... to motivate action on special offers... and to reward customers -- and you gain enormous competitive advantage. I favor the use of premiums and bonuses rather than discounts. I know bonuses can drive sales."
Here's where Dan says is the best place to get your premium promotion items:
"The place to get great premiums you can afford to give away free and give away generously is the ‘close-out industry' It's a business that savvy insiders have quietly kept to themselves for years. Find someone in this industry, so you can buy at far-below-wholesale, even without buying in quantity, and pick from thousands of gift, jewelry, electronic, toy and variety merchandise, books, even 'hot' As Seen On TV products."
The People Factor
People are another important factor in the marketing mix. Whether you call them employees, coworkers, or associates, people can add to the value perception of your business -- if they are friendly, well trained, and customer focused.
If you truly want to distinguish your business from the retail giants, people can make the difference. The successful retailers are people smart. They pay above-average wages, teach in-depth product knowledge and customer service skills, and provide a challenging environment to work in. They empower their employees to solve customer problems and make decisions.
The Positioning Factor
Positioning is the art of locating a niche that matches customer needs with the unique skills and abilities of the business owner and associates. It means finding a place or position where you can excel. Positioning is also the image of your business you create in the minds of your potential customers. Your goal is to create unique, positive pictures in your prospect's mind. Positioning separates your business from all others. It emphasizes your uniqueness and differentiates your benefits from those of all others.
Every business has a market position or image. How you place yourself in the mind of the customer is critical. Paying close attention to all factors relating to your marketing mix can take pressure off any single factor. For example, you may be able to skimp a little on the quality (provide less product) if you keep the price low. You may be able to reduce promotion costs if you locate conveniently and provide good value.
Competitive Advantage #5:
Change the Value Perception
Your customers define value in their own ways. They weigh the quality or quantity you offer in exchange for their dollars. If you provide a superior product or a large quantity, your customers perceive more value. As customers ourselves, it is a judgment each of us makes every time 'we shop.
Most local independent retailers have a reputation for charging higher prices than the mass merchandisers. Usually this reputation is justified. Their prices on comparable items are often higher. This perception of higher pricing is often created by the local retailers themselves as they complain that Wal-Mart is selling at a price lower than their cost for the very same items.
There is no easy solution to an issue as complex as value perception. One thing that is for certain: The days of taking an across-the-board markup on products are over By using a variable pricing strategy you can match the discounters' prices on price-sensitive items and regain that profit margin elsewhere.
You don't have to have the lowest price, but your prices must be close. You cannot compete on price alone. You can earn a profit by staying focused on what customers really want and need, and giving it to them. Hundreds of small independent retailers are finding ways to stay close on price, and making up the difference by providing a package of values the giants can't match.
Competitive Advantage #6:
Position for Uniqueness
The retail giants have their weak spots. By positioning your business well, you can carve out a section of the market where you are able to deliver better than your competitors. To position effectively, you must be different, stand out, and be memorable. You aren't Wal-Mart, so don't try to be just like it. Study its success, learn from it, but position your business in those areas where the big stores can't compete effectively with you. Look for areas where you can say you're better because...
Competitive Advantage #7:
Eliminate Waste
One of the keys to controlling waste is to plan your spending. Create an annual budget and analyze all expenses against your budget. Constant comparison of actual and budget expenses will allow you to pick up unexpected increases early on. Then you can take immediate steps to control the waste.
There is one area where you should try to be like Wal-Mart. Its operating, selling, and general and administrative expenses as a percentage of sales has always been low; as low as 15 percent in fiscal 1994. Many small retailers carry operating expense loads of as much as 40 to 45 percent of sales. Here are seven ways to eliminate waste:
1. Remember that every dollar saved from current operating costs goes directly to the bottom line.
2. Justify every expense -- every day, every month, every. year.
3. Eliminate nonessential expenses as soon as they're identified.
4. Analyze your five largest expense categories to see if you're getting the maximum return on your investment.
5. Time is money. Eliminate time wasters to save money.
6. Carefully evaluate any inventory that turns at 50 percent or less than overall average turns. Clear out slow-moving items unless the profit margin is high enough to justify the slow movement.
7. Remember that when you waste one dollar, it's really two -- the dollar misspent and the dollar that could have been spent well.
Competitive Advantage #8:
Constant and Never-Ending Improvement
In today's rapidly changing economy, you cannot afford to get comfortable with the way things are. No matter how good business gets, you need to always be looking for ways to make it better. This goes for your own personal development as well. You must constantly be improving your business and yourself. In his book, The E Myth, Michael Gerber states:
"The question is often asked of me, 'What does the successful business person know that the unsuccessful business person doesn't?' The answer is lots. But, in my view, that's not why he or she is successful. My experience has proven to me that despite common belle!, the people who succeed in business don't do so because of what they know, but because of their insatiable need to know more." >
Competitive Advantage #9:
Embrace Change with a Positive Attitude
You are in control of your attitude. You are in charge of how you choose to compete. The most successful independent retailers are keeping a positive attitude. In fact, a positive attitude is a common factor found among smaller retailers successfully competing in the shadows of the giants.
If you don't stay positive, your employees know it and your customers will see it too. But having a good attitude won't keep you in business if you continue to do business in the same old way If you are not happy with how your business is doing, you have to make changes.
The longer you've been doing something the same way, the harder it will be to change it. However, the independent retailers who are prospering today have all made changes. Many change their product lines, pricing strategies, store layouts, merchandising tactics, and open-for-business hours. Others expand services offered, raise the quality of inventory, and step up promotion activity. The key to survival is change. Change is constant and ongoing.
Competitive Advantage #10:
Take Action
Knowledge atone is not power. Acting upon what you know is power. Most successful small business owners are people of action. You don't need to have all the facts before you take action. In fact, waiting for everything to be in place before you take action can be more dangerous to the survival of your business than taking action and making adjustments afterwards. There is a point, after you've analyzed the situation, where you have to take action. Don't get caught in the paralysis of analysis.
Find a few key tactics to implement and put them in action. Don't be afraid to try something new. If it doesn't give you perfect results, make adjustments and try again. Remember, today's decisions are tomorrow's successes. Take action and be responsible for your success.
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