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Author: Phil Wrzesinski

Cutting Expenses the Smart Way

This past year I cut expenses at Toy House by 7.8%. And I did it without sacrificing customer service or the reach and frequency of my advertising.

Here’s what I did:

PAYROLL – Yes, I cut payroll. Had to. It is the single largest expense we have. Yet, even with all my cuts, my payroll actually became a larger percentage of expenses than before. And customer service did not diminish.

The two things I did were:

  • Schedule Smarter – By more closely tracking sales I was able to better schedule the staff to make sure I covered the busiest days and times without over scheduling the slow times. I also spent more time matching team members to make sure I had the most efficient crews working when staff was at lower levels. Put your peak staff on at peak times to get peak results for your money.
  • Divert My Own Salary – As the president of the corporation, I pay myself a salary. This year I took a pay cut, offset by a dividend on the company stock I own. This shifted my payroll expense from the Profit/Loss statement to the Business Equity. If your business has a lot of equity, this can be a great way to shore up the P/L for the short term. Talk to your accountant to see if this is right for you.

Net result – 4.8% cut in payroll and related expenses

ADVERTISING – Another big expense that I cut drastically (on paper) was advertising. In actuality, I made some smart changes. Specifically:

  • Cut Yellow Pages – They aren’t worth the money. People don’t use them anywhere near how they used to use them. Even the online Yellow Pages don’t garner much business. I get far more traffic to my website from my vendors’ Store Locator pages than I ever did from yellow pages online.
  • Shifted Radio Stations – I switched one of my stations to a cheaper station with a similar number of listeners. Same reach, greater frequency, fewer dollars.
  • Invested Time into Social Media – Time equals money. I put time and effort into building relationships through Facebook. Doesn’t cost as much money, but does take some effort.

Net result – 20.4% reduction in advertising expenses without changing the reach and frequency (and I am already spending some of those Yellow Page dollars elsewhere for a bigger reach and frequency this year:-)

Other simple cuts included:

  • UTILITIES – Made a 1 degree change in the thermostat that kept heating costs down. Customers didn’t notice, and the staff changed wardrobe accordingly. Saved 0.8%
  • INSURANCE – My insurance rep negotiated a better Worker’s Comp policy saving us 2.1%
  • TRAVEL – Made all the same trips as last year. Just stayed one less day at the trade shows. Saved 18.1%
  • SELLING SUPPLIES– Searched for new supplier of bags and giftwrap to lower expenses. Saved 2.9%
  • FREIGHT – Less sales meant less inventory meant less orders meant less freight expenses. Saved 10.2% (Consider this a benefit of a down economy:-)

Yes, those last few were smaller dollars, but every little bit adds up.

There are many ways to cut expenses without cutting services. You just have to be creative. Look for places where you can spend time instead of money. Follow the three R’s – Reduce, Reuse, Recycle. Measure, measure, measure. You can’t manage what you don’t measure.

That’s what made the difference for us. What will make the difference for you this year?

-Phil

Settling the Dust

Christmas is over. Retailers across the country are adding up the numbers to see how they did.

The media is having a field day reporting about whether Sales were up or down and using that to determine who “won” or “lost”. The problem is that the media are not looking at the whole picture.

Sales are only one number among many that tell the true story of a business. You also have to look at critical numbers like:

  • Expenses
  • Inventory Levels
  • Profit Margins
  • Cash Flow
  • Net Profits
  • Happy Customers (had to throw that one in, too:-)

To make all your decision based only on Sales is to decide what an elephant is by only looking at the leg.

My father taught me years ago that it is virtually impossible to get all those numbers to look good at the same time. But if you can get 4 or 5 of the 6 numbers going in the right direction each year, you’re doing well.

So how did you do?

At Toy House and Baby Too I was able to…

  • Cut Expenses
  • Lower Inventory Levels
  • Raise Profit Margins
  • Increase Cash Flow
  • Raise Net Profit
  • Keep Our Customers Smiling

In a year where our Sales were down, we still found ways to make money and show a profit. And it wasn’t as hard as many make it out to be.

Over the next couple weeks, I’m going to explore how we improved 5 of our 6 critical numbers so that you can learn from our example and apply it to your business. Some of the steps to take are so incredibly easy, you’ll kick yourself for not having done them already (I kicked myself at least three times this year.)

Stay tuned…

-Phil

What Audience Segment are You Targeting?

I subscribe to a free service called Help A Reporter Out. Three times each weekday I get an email with requests from multiple sources needing quotes for articles, blogs and books.

One question recently peaked my interest. Below is the question, my answer, and some follow-up questions & answers.

Are retailers doing enough to attract new customer segments or are they putting all their eggs into one audience segment basket?

Most retailers are putting too many eggs into one basket, and usually it’s the wrong basket. The biggest mistake most retailers make is in how they define their audience. Too often they use outdated and inaccurate tools such as demographics or average customers. Defining your customer based on age, gender, income and education doesn’t work in today’s world. Customers are too diverse to be summed up neatly in one little box.

Describe some common mistakes retailers make in their outreach efforts.

The two biggest mistakes most retailers make in their outreach efforts is:

  1. Going after the wrong model of people (see answer above)
  2. Not making the Outreach consistent with the Experience.

Too many times the marketing message is at odds with the in-store experience. A classic example of this a couple years ago was Wal-Mart trying to get into fashion. The marketing talked about upscale fashion, but the store screamed ugly, dirty and cheap. When they dropped that campaign and went back to advertising really low prices their numbers improved greatly.

There is a big disconnect between how customers perceive certain stores and how those stores advertise and market themselves. Thus, those advertising messages are seen immediately as false hype and are discounted or ignored. The best marketing & advertising campaigns are those that consistently match the actual experience in the store. If you advertise excellent customer service, you better have over-the-top customer service in the store. If you advertise low prices, they better be extremely low. If you advertise friendly, helpful staff, you can’t have lots of fine print clauses in all your policies.

With new media tools added to existing traditional outlets like print, radio and direct marketing, how do they select the most effective tools?

All forms of advertising CAN work. The key is in knowing how each form works differently and then using them in the correct way. You can’t do the same thing on Facebook that you do in a newspaper. They don’t work the same. The key to selecting the right tool is to first identify the objective with clear and measurable goals. Then evaluate all the options to determine which tool most effectively can reach that goal. For instance, we use Facebook primarily as a way to fan the flames of our most loyal customers by making them feel like insiders. It is not used for reaching new people. I use radio for that purpose.

Can you offer 3-5 tips on improving their marketing messages?

First, identify the true Core Values of your business. What are the unwavering principles that guide every decision?

Second, evaluate every single aspect of the business to make sure it aligns perfectly with those core values. And I mean everything! From the message on your answering machine to the odor in your bathroom, you have to be consistent enough that any customer walking through the door knows exactly who you are and what is important to you.

Third, align your marketing message with your core values. If your store is about teaching the customer how to shop, use your marketing to teach. If your store is about whimsy and surprise, make your ads about whimsy and surprise. If your store is about efficiency and accuracy, make your ads about efficiency and accuracy.

When you follow those three steps you’ll immediately start attracting new customers to your store, customers who align their values with your values. That is the most important segment of the audience to own.

Merry Christmas!

-Phil

Doing December Differently

(Note: I know it’s already December 6th. For some of you it might seem like too little too late. But the advice is good and I didn’t want to wait 11 months before sharing it.)

Today’s sermon from Pastor Dr. James Hegedus at the First Presbyterian Church of Jackson was about “Doing December Differently.” Would it surprise you to learn that pastors take the same approach to December as retailers?

As Pastor Jim put it, “I turned the page on the calendar and sucked all the oxygen out of the room.”

Yes, big, deep sighs as we brace ourselves for the onslaught of the busy season.

Pastor Jim went on to talk about how he is preparing his way for the Lord differently this year. As retailers we need to think about how we prepare, too. Here are three things I encourage you to do differently this December.

  1. Schedule some white space
  2. Empower your staff
  3. Focus on one customer at a time

The hardest thing we face in December is the way everything seems to grow and speed up exponentially. The fires to put out, the to-do lists, and the pace of business whirl around faster and faster until we are sucked into the stress and craziness of the season. Soon we aren’t eating or sleeping well, we’re losing our patience faster and we become a different person than we were the other 11 months of the year. I know. Been there, done that.

But it doesn’t have to be that way. You don’t have to take a deep sigh as though holding your breath while you plunge into the icy waters of December. You just have to do things a little differently.

Do these three things and it will make a huge difference in how well you feel (and how well you do) at the end of December.

Schedule some white space. Just as the white space in a newsprint ad makes the message stand out more powerfully, white space in your life makes you more powerful. Schedule at least 30 minutes per day for quiet time. Use it to read, write or reflect, but don’t use it for anything relating to your business. It will recharge your batteries and give you a fresh outlook on your life and your business.

Empower your people. Teach your employees how to do what you do and let them do it. Reward and praise them when they do it right. If they do it wrong, first support them, then show them how to do it right. Soon they will be doing more so that you can do less. Will they do it as well as you? Probably not at first. But if you’re rewarding their behavior, they’ll do it well enough to make a difference. And you’ll immediately have more time on your plate.

Focus on one customer at a time. As the boss it is hard not to look and listen to everything happening around you. But the more you can learn to focus on one customer at a time, the more the world slows down for you and the bigger impact you can have on that one customer. Give her your full attention and win her over as a fan. She deserves nothing but your best. And don’t worry about those waiting customers. When they see you giving your all to one customer, they’ll want some of that kind of service, too.

Do things a little differently this December. Give yourself a break. Empower your staff. And take it one customer at a time. You’ll see the results before the champagne pops New Year’s Eve.

Merry Christmas!

-Phil

What Chris Brogan Can Teach You About Retail

Chris Brogan, author and power blogger, just posted a blog about a horrible shopping experience titled What Timberland Taught Me About Retail.

There are many lessons in there for independent retailers. I’m going to talk about two of them.

The gist of the story – he saw a Timberland boot advertised on TV and went to a few brick & mortar stores to find it, make his purchase and move on. Unfortunately, the stores were ill-prepared for his visit. Some didn’t even know about the product. Others knew the product but didn’t have it. Others had it but not in the color or size he needed. Overall, he was frustrated that he could not find anyone with credible information – let alone the actual item – about a product he saw advertised on TV by a major vendor.

This happens all the time in retail. Customer sees product in advertisement, customer wants product, customer goes to store, store doesn’t know product, customer goes away frustrated.

But it doesn’t have to happen in your store as long as you are proactive about the situation. To do that you have to know the answer to two questions.

The first question is whether or not the company ever gave such information to all the retailers or whether this was an exclusive channel distribution product.

The best retailers know not only the products they sell, but also the products they don’t sell (and why). Do you have major vendors that also sell exclusives to big-box stores and Internet sellers? Have you asked them for info on the exclusives you can’t get?

If you want to be the product knowledge king, that is information you need. And don’t wait for your reps to give it to you. Ask them right up front to get that info. Start with your top vendors and work down until at least you have a working list of products customers might request that you don’t have. (And know why you don’t have it – by your choice or the vendor’s choice.)

If you choose not to carry an item available to you, there is a reason you didn’t buy it. Does your staff know that reason?

Just imagine the different type of experience Chris would have had if an associate said, “I know the boot you saw. We chose not to carry it because we like model x better. It has… which means you’ll…”

Or if you couldn’t get the product… “I know the boot you saw. We don’t have that style, it is only available online, but let me show you this one. It is similar because…”

Can you see the difference between either of those scenarios and, “Nope, never heard of ’em,“?

The second question is whether or not the sales staff even cared about knowing that information.

Maybe the information did come down the pike. What did you do with that info? What did your staff do?

This is a training issue.

The best retailers are motivating their staff to know more about the products than the customers. In this day of endless information on the web, it is vital that your staff are constantly researching product info. Yes, the customers are already coming in armed with more info than ever before. But now it is your job to sort that info for them and give it relevance. Tell them why a certain feature is included and what it will do for them (benefits). Let them know why one item costs more than another and help them figure out if the extra expense is worth it.

How much product knowledge training have you offered to your staff? How much time do you spend on teaching the benefits of every product you sell? How much time is devoted to continually updating that info? If you’re not doing this, you’re letting customers like Chris get away.

Chris Brogan just told a few hundred thousand people not to go shopping in brick & mortars because they were basically clueless. The only way we can combat messages like that is to constantly give our customers the kind of service that would have made Chris a loyal follower.

Can you do that in your business?

-Phil

Don’t Make Your Customers Mad

Why would I want to make my customers mad? Apparently some retailers think it’s okay to piss off a few people.

This Thursday the fliers hit the door with all the early bird doorbuster specials for Black Friday, and some of them are going to make customers mad.

Look at the fine print in these ads and you’ll see what I mean.

Some of the best deals say “minimum 2 per store” meaning that stores in smaller communities (like Jackson) may only have 2 of those great items they’re using to draw a big crowd. If you’re standing in that line at 5am you gotta ask yourself… Will you be one of the lucky two? Or will you be one of the mad?

Some of those deals aren’t deals at all. Read the model numbers and compare them to what the stores currently sell. Some of those doorbusters are what we call derivatives or one-offs. They look the same as the original, but some features have been stripped out to make it cheaper. Will you be one of the shoppers who did the research and is happy with what you gave up? Or will you be one of the mad?

Some of you will give up sleep, fight crowds, and wait in long lines. Some of you will find that fun. Some of you will be mad. (If you ever wondered why some people love Black Friday and others hate it, click here.)

And think about the staff. They had to give up spending time with their families. They got too little sleep. They’re overworked (and underpaid). They’re on the front lines having to deal with all these unhappy customers. Some of them aren’t all that happy now either.

I’ve never quite figured out why these stores go through all this hassle knowing the outcome is that they will anger as many customers as they please, and not make many friends with their staff, either.

If you’re offering any Black Friday specials, do your customers, your store, and your staff a favor.

  • Make sure you have ample supply of anything you advertise.
  • Be honest about the deal. If it’s a derivative or one-off, let people know up front.
  • Train your staff to learn how to show empathy with unhappy customers and empower them with tools to solve problems and make the customers happy.

This Black Friday most every major retail chain will make a whole bunch of their customers mad by design.

You don’t have to play that game, too.

Happy Thanksgiving!

-Phil

Currencies That Buy Credibility

I’m reading a brand new book on marketing. Well… okay, I just read a brand new book. I read it in one sitting. And I’m planning to read it again – probably tonight.

Yeah, it was that good.

The book is called “Currencies That Buy Credibility” by Tom Wanek.

Too many times we hear lines in marketing & advertising that just don’t ring true. Things like…

“We won’t be undersold!”
“The best sales staff in town!”
“The world’s largest selection!”
“Lowest prices guaranteed!”

Maybe some of them are true, maybe they aren’t. The key is that without something to show us how they are true, our cynical nature leads us to disbelief every single time.

Tom, however, teaches you how to give credibility to your statements, whatever they may be, through six different currencies such as your time, your money, or your control. With credibility you grow trust. And with trust you grow your business.

The book is easy to read, has great examples, and makes perfect sense. You’ll be applying his principles almost immediately. I know, because I have. I started reviewing and rewriting my radio ads this morning based on what I’ve learned.

If you’re involved in the marketing of your store, this is one book you should add to your library.

(Full Disclosure: Tom is a Wizard of Ads partner I met 2 years ago. As an acquaintance, I planned to read his book from the moment he announced it being published. But I wouldn’t be promoting it here unless I believe it can help you. And, no, I’m not getting anything for promoting his book – except maybe a heartfelt thanks.)

-Phil

The Three People to Solve the Problem

If you’re in retail, at some point you will have a customer with a problem. And your success will depend on how well you solve that problem in the customer’s eye.

The key is knowing the three people who can solve the problem. Those people are (in no particular order):

  • The person Most Capable of solving the problem
  • The person Closest to the problem
  • The person Least Busy at the time of the problem

The problem for most businesses is the order in which we prioritize that list. From a business owner’s standpoint the ideal priority would be:

  1. Most Capable
  2. Least Busy
  3. Closest

From a customer’s point of view, however, the order would be:

  1. Closest
  2. Least Busy

Notice that I left off “Most Capable”. The customer expects that everyone will be Most Capable. And that’s where the smart retailers succeed. They equip their front line staff with the tools to solve problems so that customers get satisfaction right from the start.

There is nothing more frustrating to a customer who already walked through the door loaded for bear than having to wait around while incompetent fools run off in search of an already over-worked manager to approve a return or refund or some other simple issue.

Conversely, there is nothing so satisfying as a customer than having the first person who greets you being able to fully take care of your problem.

The best thing you can do for your staff is walk them through the basic problems that arise in your business. Show them your thought process and the criteria you use to make decisions. Then empower them to make those same decisions for the customers.

Sure, they might make a mistake or two. Sit down with them when they do and talk through their decision-making to see their process. Use that time to show them (again) how you would handle it. The good ones on your staff will get it quickly. Plus, they’ll feel more ownership for the satisfaction of the customers in the first place.

There will still be a time when the person closest to the situation can’t solve the problem. But the more often they can, the better your customers will feel about you and your business.

And isn’t that the whole point?

-Phil

The Christmas Tree Lesson

My son gave me the coolest gift for my birthday – a Charlie Brown Christmas Tree.

Now some of you might wonder why I think that is so cool. I mean, it’s a lonely, bare tree that represents the ultimate failure of a blockhead child. Charlie was laughed out of the auditorium when he presented it to the Peanuts Gang.
Yet, there are lessons in that tree that all independent retailers can learn.
Think about what happened next to Charlie’s tree. (I know you’ve all seen the Charlie Brown Christmas Special at least a dozen times – this should be a simple exercise.)
Linus wrapped his blanket around it to give it support.
What have you wrapped around the foundation of your business to give it support?
Have you secured your financing? Have you bolstered your training program to make sure your staff is fully trained and ready to deliver excellent customer service? Have you checked to make sure your inventory includes an ample supply of the “must have” items – the stuff you can never be out-of-stock?
These are the foundations that give your business support, no matter how simple or bare your business might be.
Back to the tree… After Charlie Brown left, the other kids gathered around and decorated the tree with stuff from Snoopy’s dog house. The finished product looked as good as any tree ever did. But it wasn’t the decorations that made the tree special, it was the love they poured into it.
You don’t need the budget of Nordstrom’s to dress up your store to look its best.
You only need to add in some Love. Pour some love into your business. Show your customers how much you love what you do, and you’ll look more special than any overspent, over designed, cold, heartless big box store. Show passion in your design, passion in your policies that serve, and passion in your interactions with the customers and you’ll be the best tree on the block.
Even a simple tree like Charlie Brown’s can become something special. So, too, can your business.
Merry Christmas (and Happy Birthday to me:-)
-Phil

What Are You Tracking?

You can’t manage what you don’t measure. Here are two numbers you should be measuring this holiday season.

Traffic Count: How many sales do you have per day (Monday, Tuesday, Wednesday…)? Per day part (morning, afternoon, evening)?

Knowing this can help you schedule your staff to better meet the peaks and valleys of your daily & weekly sales. It also helps you measure the success of your marketing and your customer service. If traffic counts are up, you’re doing something right. If they are down, you better figure out why (and it isn’t just the economy).

Average Ticket: How much is the average transaction or sale? Which employees have higher or lower averages (if applicable)?

This number helps you measure the effectiveness of your sales staff and promotions. It also helps you understand your merchandise better. Are you getting the add-on sales? If not it could be that you don’t have the right products to complete a customer’s purchase. If you sell dolls, you better sell doll stands. If you sell electronics, you better sell batteries.

Measure these two numbers. They have a lot to say about your success.

-Phil