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Don’t Build Your Own Obstacles (Part II)

If you’re a BBQ lover in the Detroit area, you recognize this door. Behind it is the tantalizing flavors of smoked meats, refreshing liquids from the Great Beer State, and an aroma that pleasantly stays in your nostrils for hours. You know it as Slow’s BBQ. In fact, you take pride in knowing those natural-colored thin planks stacked tightly together is the actual door of entry, not the door to the right going upstairs, nor the door ten feet left of the picture covered with stickers and locked, nor the locked door leading to the patio another fifteen feet to the left and directly beneath the sign on the building telling you that you’ve arrived.

Those were the three doors I tried first before finding the actual opening.

If there hadn’t been a sign on the building telling me where I was, this would be a different post. It would be about Over-the-Top Design and Sharing Secrets. It would be about how you felt like an insider because you knew the red and black building without a sign and with a hidden doorway was home to some killer ‘cue. You only knew because someone told you, making it (and you) feel even more special.

Instead, I felt like an idiot. I felt like I was made to feel stupid before I ever set foot in the joint. That’s a big obstacle to overcome. If the food or the service had not been stellar, just average, I’d probably never go back. It would be a nagging feeling just below the surface.

As I was leaving, there was a guy outside having the same struggles I had. Apparently the design of the door wasn’t over-the-top enough to get people to talk about it, only about the food. Their fancy, hard-to-find door didn’t generate word-of-mouth, only frustration. You never want your customers walking into your establishment frustrated. Make sure they know how to get in the front door.

-Phil Wrzesinski
www.PhilsForum.com

PS The other alternative would be to remove the sign on the building altogether. Sure, it would make it harder and even more frustrating for some people to find the joint, but since most of these places get their new business from word-of-mouth, it would ratchet up the need for people to talk about the design elements and ratchet up the feeling of knowing something others don’t. It would have changed my feelings of frustration to feelings of discovery and being in-the-know.

PPS Of course, at the end of the day, if you’re a restaurant, you better have over-the-top food first and foremost. Slows brought it. I saw a few items on trays passing by that will get me back. They overcame the obstacle. Not many stores and restaurants do.

What Are You Doing to Grow?

I stood on the stage. It was small, in an awkward room with pillars that blocked sight lines. The room was supposed to hold 150 people, but I could see them setting up extra chairs in the back of the room. Even still, there were people sitting on the floor leaning back against those horrible pillars.

Phil Wrzesinski Presenting Pricing for Profit at Retail Success Summit

Three days earlier a gal who had seen this speech the year before told me how it had saved her store. That’s mighty high praise for any speaker. I was in awe. That speech had been my first to a group of retailers like this. To have that affirmation was amazing. She wasn’t the only one . Another retailer told me that the only reason he was back was because of what I taught. He took a front row seat to hear the same presentation again.

Back on the stage the microphone was hot. My voice was either a whisper or a boom no matter where I placed the lapel mic or where the sound guy turned the knob. I went with boom. The stage was too small and I was wireless. I walked the room, trying not to trip over the legs of people sitting by the pillars, all while making sure they felt acknowledged for being there.

I knew my slide deck by heart. Loved the new slides the Slide Doctor helped me create. Far better than the previous year. Everything flowed. The audience laughed at all of the jokes, went silent when I lowered my voice, and asked all the questions I wanted them to ask. If you’ve ever given a presentation, you know what I’m talking about. Public speaking nirvana.

All those A+ grades in my high school public speaking class just because I was good at improv, all those rowdy dining halls filled with 6th graders teaching them a new song, all those classes in the Toy House with expectant parents in rocking chairs waiting to be illuminated, even all those moments when the little red light went on to tell me we were on the air, none felt quite like this.

It wasn’t a standing ovation (unless you count the people sitting on the floor getting to their feet). But I can still hear the applause. One hundred and thirteen of the roughly 175 people in that room filled out their evaluations. All one hundred and thirteen gave the topic a perfect 5.0 out of 5.0. All one hundred and thirteen gave the presenter (me) a perfect 5.0 out of 5.0. The room itself got a 3.2 for lack of chairs among other issues.

It was Mary Lou Retton at the Olympics. It was Michael Phelps in the pool. It was the 1972 Miami Dolphins. It was seven years, dozens of presentations and eight perfect scores ago.

That’s why I’m signed up for a one-day Speakers Workshop in April.

Confused?

The point is this. No matter how good you (think you) are, no matter how experienced, you can always get better. Every year I hear business owners say they want to grow, but then they go watering the wrong plants. Your experience and training got you this far. If you want to grow your business farther, you need to grow yourself first.

You’re already reading this blog. That’s a good start. I encourage you to spend some of your precious time and energy strengthening your own roots. The more you grow, the more your business grows with you.

-Phil Wrzesinski
www.PhilsForum.com

PS Read books. Read blogs. Watch YouTube videos. Listen to podcasts. Sign up for webinars. Go to seminars and workshops. Hire a coach. Find a mentor. There are many ways to fertilize your growth. Ask me if you’d like suggestions. (I just did the same thing – asked a bunch of my peers for new reading material for 2017 and got a list started.)

PPS Pricing for Profit (I knew you’d ask.)

 

 

 

How Will You Measure 2017?

The New Year is here. Your New Year’s Resolutions are gone. The inventory has been counted. The mail carrier is complaining about all the catalogs weighing down his bag. You’re trying to make sense of what just happened in 2016. (Or just trying to forget what happened in 2016.) 2017 is here whether you’re ready or not.

The only real question you need to answer right now is…

How will you measure 2017?

Will it be by growth in top line sales or bottom line profits? Will it be by management of cash flow or expenses? Will it be by the number of days you actually take off? Will it be by the number of human resource headaches you have (or don’t have)?  Will it be by “likes” and “shares” and “comments” on social media?

You get to choose. You have to choose. You have to decide where to put your limited energies and resources. If the bottom line is good, you work on cash flow. If the money is good all around, you work on HR. If the staff isn’t giving you any hassles, you work on PR and social media. If all of them need a hand, decide which one is most critical (hint: cash flow) and go there.

PICK A PROBLEM, SET A GOAL

The key is to determine what you want to measure and – most importantly – how you’re going to measure it. It is that second part that gives you the  map to guide your decisions for the year.

Most businesses fail to set specific goals. They set vague ones like “grow profit”.  Then they forget all about those goals the very next morning as the day-to-day running of the business takes hold. But if you say “grow profit by $5,000” then you know you need to increase sales, decrease expenses, and/or increase profit margin. If you say, “grow profit by $5,000 through better control of expenses” you have an even clearer path.

The more specific your goal, the easier to plot the course. The more you make it known and talked about with your team, the more accountable you (and they) will be. The more you reward the team for reaching the milestones you set throughout the year, the more they will help you.

Roy H. Williams said it best, “What gets measured and rewarded, improves.”

The more specific you make your goal, the easier it is to draw a map that will get you there.

-Phil Wrzesinski
www.PhilsForum.com

PS Once you’ve set your destination, do yourself a favor. Print it out and paste your goal somewhere in the back office area where you will see it daily. Tell your staff the goal and ask for their input on how to get there. Talk about your goal in every single meeting. Research new ways to reach your goal. Set up milestones to measure your progress. Hold yourself accountable to your goal. Reward yourself and your staff as you reach each milestone along the way.

PPS Not sure how to set your goals or need help with your map? Send me an email. As always, I’ll do whatever I can to help.

When It Is Time to Move

Maybe it is declining sales in your current location, or maybe you’ve peaked out your sales and don’t have the room to expand. Maybe the demographics of your location have shifted or maybe your store’s product mix doesn’t fit in with the surrounding stores. Maybe a new development has made you an offer too good to be true.

There are dozens of reasons you can justify for moving your store (and just as many for staying put – too costly, lost sales during the move, will the customers still find us? can we afford it? is the grass actually greener? etc.)

The decision to move your store has to be something you research and consider the issues carefully. A bad move will sink you. A great move will grow you. A lateral move will wear you out.

Here is the short version of this blog…

  • Don’t move unless you have to – if it ain’t broke, don’t fix it
  • Prioritize what you need from your new location – More Traffic? Parking? Accessibility? Visibility? Better Demographics?  Do your research
  • Plan for extra expenses – moving costs, lost sales, etc. all add up quickly
  • Buy what you can afford – yes you expect your business will grow eventually, but make sure you can afford it on day one.

NO LONGER SUITS YOUR NEEDS

The first decision is the desire to move. You move when your current location no longer suits your needs. Your business model is working but your location isn’t the ideal spot. It’s too small, too big, too quiet, too expensive, too hard to find, wrong demographics, wrong part of town. There was an auto dealer in San Diego that was constantly advertising that if you would work with their location, they would work with your price. It became their gimmick, but at a great advertising expense. That low overhead from the lousy location was instead spent on advertising and profit margin.

Moves are risky. There are no guarantees your move will grow your business. If your current location suits your needs, the risk factor for moving goes up exponentially and it is often better to stay put.

WHERE DO YOU GO?

Just making the decision to move is huge, but you have to also know where you want to go. What are you lacking at your current location? Is it traffic? You’ll likely have to pay more in rent to get better traffic. Is it space? You can find bigger spaces, but you might have to give up something else like traffic or parking.  Is it better demographics? Do you know your demographics well enough to know what “better” demographics look like? The most important question is this…

Can you afford the new location with the money you’re making currently?

We all would like to think our business will grow hugely at the new location. But that isn’t always the case. Plus there are a lot of costs involved in moving that eat up any extra sales and profits. You have the lost days of sales while you move. You have the build out of the new place. You have the changing of phone and address and lost mail and lost shipments. You have the revving up of the new location as your regulars try to find you before the newbies have discovered you. You have the advertising of the change of address including the banners at the old location, the grand opening banners at the new location, the advertisements and the big grand opening event itself.

PRIORITIZE YOUR NEEDS

We moved once in our 67 years in business. The store started in a house. We bought neighboring houses and tore them down for a parking lot and a couple expansions. But we maxed out our location at about 10,000 square feet. My grandfather wanted three things in his move. First he wanted a larger building. He drew up two plans for a 20,000 sq ft building and a 24,000 sq ft building. Second he wanted to be along the busiest road in the downtown district (suburban shopping malls were not yet a thing in 1967.) Third, he wanted his own parking lot.

He found his location – an easy right hand turn off the busiest road in the downtown with plenty of room for parking in both the front and back of the building – and opted for the 20,000 sq ft building because that was all his current level of business could afford. He also had the expenses of moving. Even as a big fish in a small town, the newspaper didn’t cover our move. He had to take out his own ad in the paper. He used this picture with the headline,

“But Grandpa, Momma Won’t Like it if We Play in the Mud”

Yes, his business grew – fast enough that he needed that extra 4000 sq ft only five years after moving. Fortunately he also had the foresight to buy a piece of property that would allow such growth, and he now had the money to pay for it.

That location served us well for many decades even as new competition came to town. But when the demographics of the whole county changed, so did the options for moving. The criteria that served us well before were no longer the criteria we needed. Our options were downsizing greatly or moving to a new community, neither of which we wanted to do.

Moving is a big deal and can be a huge benefit for your business. It can also sink you. Make sure you are moving for the right reasons.

-Phil Wrzesinski
www.PhilsForum.com

PS I didn’t discuss renting versus owning. That is a topic worthy of its own post (or three).

What I Learned in 2016

2016 was a learning experience for me. I went through two life-changing events that taught me a lot about myself and about business. I got a divorce and I closed my toy store. Although they weren’t the kind of things one typically wishes for, they were incredible experiences filled with lessons I will share in 2017.

This blog is back. You will be getting posts on a regular basis filled with thought-provoking ideas and simple things you can do to make your business better.

 

Although I cannot put all the lessons from 2016 into one blog, I can sum them up for you in one sentence.

“Life and business is all about the relationships.”

We’ll explore how to build better relationships for 2017.

-Phil Wrzesinski
www.PhilsForum.com

PS My first goal will be to rebuild my relationship with you. Sorry for not blogging in 2016. With the store closed you are my main focus for 2017. Let me know your fears and obstacles and challenges. We’ll find ways to overcome them.

You Don’t Make it Up in Volume

(Warning: this post contains math. Proceed with caution.)

“We lose a dollar on each one we sell, but we make it up in volume.”

Yeah, we all know that isn’t right, but there is a mistaken belief that if you lower your prices, you can easily make up the lower margins through higher volume.

Warehouse Melissa and Doug 2

Let me show you why that doesn’t necessarily work.

First, we have to make an assumption together. Your business has fixed costs that do not change as your sales change (utilities, rent, etc), and your business has variable costs that go up as you do more volume (credit card fees, payroll, freight, advertising, etc).

Agreed? Good.

DOING THE MATH

Here is some simple math…

You have an item you purchase for $10 and sell for $20. Let’s say you sold 24 of this item last year. That gives you a gross profit of $240 (24 units x $10 in profit per unit = $240 gross profit).

But you have the grand idea to lower the price 10% to $18, figuring you’ll make it up in volume.

 

To get the same $240 in gross profit, you now need to sell 30 units (30 x $8 = $240). That’s a 25% increase in units sold. With more units sold, however, your variable costs will go up. Maybe it is advertising because you had to spend more to get the word out about your lower price. Maybe it is extra sales people needed to help boost sales. Maybe it is more credit card transaction fees.

Realistically, just selling 25% more units won’t even break even because of the rise in variable costs. You’ll probably need closer to 30% more in units sold to cover your 10% discount.

Do you think 10% Off is enough to sell that many more units?

GOING LOWER

Okay, maybe 10% isn’t enough to move the needle. Let’s go 20% Off and sell them for $16!

Here’s the math…

40 units x $6 = $240.  Yes, you now need to sell 67% more units just to get the same gross profit! More than likely, as your variable costs go up, you’ll probably need to sell about 70-75% more units to truly break even.

How about 30% Off?

60 units x $4 = $240. If you go to 30% Off, you better be able to sell 250-300% more units to make it up in volume.

That is a lot of extra traffic you’re going to need to draw, and a lot of staff you’re going to need to handle those sales.

GOING HIGHER

When you do the math, making it up in volume isn’t the answer. But ask yourself this question…

If I raise my prices a little, how many sales might I lose?

A 10% price increase could handle a 17% drop in units sold and make you the same amount of gross profit.

See? Those math classes in high school can pay off!

-Phil Wrzesinski
www.PhilsForum.com

PS Yes, you can raise your prices. With the way insurance premiums, taxes, utilities and other expenses keep rising, you have to find ways to make more money just to stay in business. But just a straight increase across the board isn’t the strategy. Download my FREE eBook Pricing for Profit in the Free Resources section to see smart ways to raise your prices (that won’t cost you a single unit sold).

 

Changing Your Thinking on Coupons

I’m not a fan of coupons. There. I said it.

If you’ve downloaded my free eBook Main Street Marketing on a Shoestring Budget, you know I prefer giving away gift certificates with no strings attached – instead of coupons – to attract new customers.

I also fear that using coupons too much trains your customers to wait for the next coupon before they shop.

Lastly, I believe coupons are more geared toward the Transactional Customer than the Relational Customer (the latter whom should be your primary target in your advertising and marketing).

With all that said, coupons done right can be a valuable part of your tool box.

Retail Toolbox

DOING COUPONS THE RIGHT WAY

As I told you yesterday, the real key for coupons is to make them Rare and Special. Rare so that people jump on the deal when it happens and aren’t trained to wait for the next one to make their next purchase. Special so that the customer isn’t anticipating the next coupon and is more likely to act on the current one.

Rare and Special will increase your ROI because they will get more people to act on the current coupon. Your other big issue is delivery. How do you get those coupons into the right hands?

  • Newspaper Inserts – this is the preferred method of the big bog stores because they have the economy of scale for printing and delivering to get the best rates, and they don’t care who gets their coupons
  • Direct Mail – you can buy a list (and hope it is okay) or build your own. One takes money and has little return. One takes time but has a better return.
  • Postal Zip Codes – you can target zip codes instead of direct addresses for a little less per piece than direct mail
  • Email – easily the cheapest, easiest to share, but also most easily duplicated

Let’s look at that last one a little more closely…

KNOW YOUR GOAL

If your goal is to limit the coupon to “one per customer”, email can be tricky because it is easy for a customer to print out multiple copies and use them herself or give them to her friends. That’s the big question I always get about sending coupons via email. “But how will I track if a customer uses more than one?”

I always ask back, “Does it matter if a customer uses more than one?”

Your goal for any coupon should be to Drive Traffic and Increase Sales. That is what coupons do best. Where is the harm if a customer shares your coupon with others? Where is the harm if the customer makes multiple trips using multiple coupons? Don’t both of those Drive Traffic and Increase Sales?

If your goal is to Increase Profits, then a coupon isn’t your friend in the first place. Coupons won’t help your profit margin (I’ll show you the math later why “lower your price and make it up in volume” doesn’t really work), but they can increase your traffic and cash flow and give your sales staff the chance to increase average ticket sizes and items per transaction.

CHANGE YOUR THINKING

If you send out a coupon via email, you have to consider two things…

  1. It will be shared
  2. It will be printed/used multiple times

If your goal is to Drive Traffic and Increase Sales, sharing and printing multiple copies are both GOOD things. In fact you want to encourage that.

Encourage your email list peeps to share the coupon with as many people as they can. It increases your reach to people who might not yet know you and it gets your fans to promote your business for you. In fact, take it a step further and encourage social media sharing, too. Your goal should be to get the coupon to as many people as possible as cheaply as possible. That’s how to get the best ROI.

Encourage your email list peeps to use the coupon early and often, too. Every trip they make means another chance to deepen your relationship with them and turn them into fans. (If you sell a commodity item like food that people are buying weekly, simply put a tighter time limit on the coupon to keep the coupon Rare and Special). The reality is that you won’t get that many multiple trips. Unless your offer is incredibly compelling and you’re giving away half the store, the likelihood that a customer is going to shop your store twice in one week is fairly low to begin with.

Email is the cheapest way to deliver coupons. It also is one of the most powerful ways to get your fan base to help you reach more and more people. You just have to change your thinking from one of scarcity (“limit one per…”) to generosity (“use it early and often and share it with the world…”).

-Phil Wrzesinski
www.PhilsForum.com

PS My final tip is to keep the coupon as simple as possible with as few rules and exceptions as possible. The easier it is to use, the happier your customers will be.

Coupons Aren’t Bad (When They are Rare and Special)

Back in the 90’s we started a direct mail newsletter for Toy House. We sent out a mailing every other month.

Conventional Wisdom at the time said we needed to include a coupon with each mailing to help us “track the effectiveness” of the mailing. So we included a $20 off a $100 purchase coupon in each mailing.

Coupons

Two things happened…

First, we never really were able to “track the effectiveness” of the newsletter, only the effectiveness of the coupon (which grew considerably in November, but waned in other months). It was hard to say whether the other articles were even read, let alone acted upon. In theory, we were told the coupon would mean that people would at least read the newsletter without throwing it away (although today I’m not sure if that was the case).

Second, we were training customers to save their big purchases until another coupon arrived. I would be showing a customer a new car seat and the first question was always, “When does your next coupon come out?”

Bed Bath and Beyond just announced that their coupon program was backfiring and causing them to lose profit as people just waited for the next coupon before they shopped. We learned that from sending out six a year. They send out one or more a week.

BEING RARE

We decided over a decade ago that sending out multiple coupons wasn’t the answer. We shifted the direct mail newsletter to email newsletters (no coupon) and shifted the coupon to a postcard mailed only in November. Our response to that direct mail piece doubled the ROI of any previous mailings because it was Rare and Special.

BEING SPECIAL

Even with that shift to a once-a-year coupon, we have seen our annual mailing become less and less effective over the years. Although it is Rare, it is no longer Special. It is a foregone conclusion.

Until this year.

We’ll be doing a different type of coupon this year for two reasons.

  • First, we need to make it Special again.
  • Second, we want to shift away from the expenses of direct mail, so it will be an email coupon.

We have already begun marketing to our customers the importance of being signed up to get our emails. We have already begun prepping them that something new is going to happen this year. We have already begun the buzz and excitement as our customers are wondering what will happen.

You can use coupons in your marketing tool box. Just remember that to be most effective, they have to be both Rare and Special.

-Phil Wrzesinski
www.PhilsForum.com

PS I’ll tell you how we are going to manage an email coupon in an upcoming post. Make sure you and your fellow store owners have signed up to get this blog in your inbox.

The Need to Keep Raising the Bar

Bed Bath and Beyond just announced that their coupon strategy is backfiring and that their profits are hurting because everyone is waiting for the coupon to do their shopping.

Umm… yeah. When you send the coupon out every week and never enforce the exclusions or expiration date, you pretty much send out the message that everything in the store is always 20% off. Anyone paying full price in that store is either lazy or an idiot.

What used to be special is now considered the norm.

BBB faces a dilemma. They either have to drop the coupon program and wean customers off the 20% discount (a daunting and dangerous task), or raise the bar on the coupon program to make it special again.

They said in the article, “Bed Bath and Beyond says it plans to draw in more customers through marketing.”

Okay, but how? A bigger, deeper coupon every so often? (further eroding profits) or something else?

THE LESSON

If you are doing something special for your customers, eventually it goes from special to expected and the marketing pull from it will taper off. If it is a discount, that discount will have to grow over time to remain equally effective.

If you consistently go above and beyond your customers’ expectations, eventually they will come to expect it, meaning you’ll have to raise the bar even farther.

As you choose your marketing strategy, remember that the special things you do today will become the norm tomorrow. Make sure you have room to raise the bar when the effects start tapering off.

-Phil Wrzesinski
www.PhilsForum.com

PS Surprise and Delight are the best tools for attracting new customers because you’ll never run out of new and fun and inexpensive ways to surprise and delight your customers. Check out these two Free Resources to get some ideas of things you can do to raise the bar and attract more customers – Generating Word of Mouth and Customer Service: From Weak to WOW!. I doubt either of these will be strategies employed by BBB (although they should).

Newly Redesigned PhilsForum.com Website

I told you I was working on a new version of my PhilsForum.com website.

It just went live a few minutes ago.

Everything is up and running except this blog (which should be migrated over by late Thursday).

In an effort to make it more search engine friendly, some of the pages you’re used to seeing have new names.

  • Freebies is now Free Resources and still includes links to free pdf’s you can download on a variety of topics
  • Speaker for Hire is now Hire Me to Speak and focuses on the top programs I am most often hired to do
  • Products is now Phil’s Books and focuses on my two books, Hiring and the Potter’s Wheel and Welcome to the Club Daddy
  • Media is now About Phil and yes, it is about me

You’ll also find a few fun things hidden here and there on the site including a page of radio ads I have run for Toy House and Baby Too.

Check it out and let me know if there are any issues with the site (tell me what browser/platform/device you’re using, please).

Every time an independent retailer grows, we all grow.

-Phil Wrzesinski
www.PhilsForum.com

PS Supposedly all email subscribers will be migrated over, but I will be looking into it directly. You may get an email from me asking you to resubscribe to the new blog site. Just giving you a heads up.