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When a Raise Isn’t a Raise

A friend of mine posed an interesting question a few weeks ago. He asked, “How much of a raise should you expect each year?”

In light of what is happening with the Sonic restaurants in Ohio, that is a valid question.

The problem is that the answer has too many variables to fit into a Facebook comment.

For instance, is the employee hourly, salary, or commission-based? Does the employee get any benefits such as healthcare (and how much does the employee have to pay out of their paychecks for these benefits)? Is the company experiencing growth or decline? How is inflation (and not just the overall number, but also locally)?

TAKE HOME PAY

A salaried employee is the easiest to figure out an appropriate raise. The employee should be getting at least enough of a raise so that his or her take-home pay is larger than the previous year adjusted for inflation.

If it only equals inflation, it isn’t a raise, it is a cost-of-living adjustment. If it is less than inflation, it is a pay cut.

I say take-home pay because if the employee has to pay any portion of his or her benefits, those often go up much higher than inflation. I heard the story of an employer who gave everyone a 4% raise because inflation was 3%. Unfortunately, because healthcare premiums went up 15% and the employees paid a portion of that, they had less take-home pay than the prior year to cover their other increased expenses.

Hourly employees follow the same rule, but the issue then becomes one of how many hours do they get? If you’re keeping the hours roughly the same, the same rules would apply.

Commission-based salary is different. In theory, the increase in prices of the items they are selling should lead to higher pay through higher average tickets. But if your prices didn’t go up (even as all other expenses did) you put your employees in a position where they have to work harder just to pay their bills. You may have to reconsider either their commission or offer them a base salary to compensate.

I tell you this because I always want you to think of your employees as assets to your business, not expenses.

I had another friend of mine get told in a review exactly how much this person had “cost” the company in terms of salary and benefits. The boss made no mention of how much this person had “made” in revenue for the company. Do you think the employee felt valued after that? Do you think the employee felt like the company had the employees’ backs?

EMPLOYEES AS ASSETS

When you think of your employees as assets, you invest in them to get the kind of return you want. You educate and train them. You give them actual raises, not just cost-of-living adjustments. You focus on the value they bring to your company, not the costs. You treat them as partners, as living, breathing, full-of-dignity human beings.

Do that and your staff will never walk out on you. In fact, you’ll rarely ever have to advertise for help again.

My grandfather always said, “You can never overpay for great help.”

He was right.

-Phil Wrzesinski
www.PhilsForum.com

PS I was reading a Forbes article on 13 Employee Benefits That Don’t Actually Work. The second line in this article tells you all you need to know … “[Employees] like to feel valued and appreciated by the company they work for.” If your business doesn’t have the resources for raises, find other ways to invest in your team and make them feel valued and appreciated.

PPS If you’ve invested heavily in someone and that employee doesn’t bring you value, you need to cut him or her and move on. If you’ve invested heavily in several people that haven’t brought you value, you need to revamp your hiring and training programs. The problem is you, not them.

Upgrades Versus Shifts – Choose Wisely

Back in the 1990’s we had four big spiral notebooks on a table in the office. I’m talking huge, four-inch-wide, thick plastic covered, heavy-duty spiral notebooks. They contained our Inventory Sheets and tracked all the inventory in our store by vendor, item number, and price.

My dad created these sheets. Designed them himself and had them printed by the ream. There was a stack of blanks in the office right up until the day we closed.

These sheets were awesome for tracking purchase orders, receiving, and sales. If you wanted to place a new order, just do a quick physical inventory of that vendor, enter it onto the sheet and you could see what we had sold and needed to reorder.

That’s my dad with some old school cash registers behind him

Prior to the computer, this system was a godsend for us to keep track of 500 plus vendors and 30,000 skus. After the computer it was a relic.

When we switched to our second computer system in 1998, the inventory sheets were completely obsolete. My dad held onto them until he retired, but the computer streamlined the process so much that the sheets became a waste of time. In the old days it took my dad three days to write a Mattel order. With the computer I could do it in under an hour.

Sure, there was a learning curve to the computer. But the end result was a huge savings of time and resources. It was a major Upgrade.

I’m going through another form of Upgrade in my new job. Today I have been learning how to use Microsoft Teams. In my role I have to communicate with several people about several issues all day long. Often I have found myself sending out multiple texts and emails to try to stay in touch and get info. Teams is going to help me keep that organized and eliminate a lot of the time I spend tracking down old email threads, texts, and contact info.

Sure, there is a learning curve. But I can already see the end result being much better communication and less time spent tracking down information. Pretty soon it will be as natural to me as sending out a text or sharing something on Facebook.

Upgrades exist to make your life easier in the long run. 

That is the important distinction. If you look beyond the short-term pain and see the long-term gain it is an Upgrade. If there is no gain, it isn’t an Upgrade, it is merely a Shift.

Shifts can be dangerous. They often are sold as Upgrades because of their newness. They sometimes masquerade as Upgrades because of new features they offer that you’ll never use.

Just like the Upgrade, they take up a lot of time and money at first, causing a lot of short-term pain. Unlike the Upgrade, they have no long-term gain. They only move your resources from one place to another.

You’ll see these Shifts most often in advertising. Online advertising, social media advertising, and mobile-marketing are all Shifts, not Upgrades.

The best way to avoid Shifts is to ask this most important question …

Will this shiny, new tool save me Time or Money?

If you cannot answer Yes, it is most likely a Shift, not an Upgrade, and probably not worth your limited resources. Now you know the difference.

-Phil Wrzesinski
www.PhilsForum.com

PS Sometimes you have no choice but to make a Shift because the old way is obsolete and no longer available (think credit card chips). Hopefully you can find a new way that also brings you a benefit (like Apple Pay capabilities.) When someone pitches you a shiny, new tool, ask yourself if it is merely a Shift or truly an Upgrade. Always wait for the Upgrade.

Make Your Lists Now (You Can Thank Me Later)

Our store had 16,000 square feet of carpeting. The original carpeting was laid in 1967. It lasted twenty years. Fortunately for me I was on a canoe trip in northern Ontario in 1987 when my parents decided to replace it.

Replacing carpeting in a store that size while remaining open was no small task. First you have to move everything from one-third of the store into the other two-thirds. All the products and all the shelving had to go. The shelves were made of steel and assembled with nuts and bolts requiring screwdrivers and wrenches and dollies and strong backs. Then the carpet guys would rip up the glued-down carpet and replace it with another glued-down, industrial-level carpet, before the staff rebuilt the shelves and started working on another third of the store.

My dad told me he would retire before he ever did that again. He was right.

Phil W Cleaning the Floor

The next carpet was over 29 years old when we rang the Birthday Bell for the last time. It had lived long past its 15-20 year life expectancy. Yes, by 2016 it looked dated and had some stains no solvent or steam could remove, but it was still in decent shape with all the seams intact. We kept it that way by vacuuming it daily and having it professionally cleaned twice a year—once on Memorial Day Weekend, once on Thanksgiving Eve.

We chose those days for two reasons: first because they offered a full day (or two) for the carpet to dry before being used again, and second because they made the carpet shine for our two busiest seasons.

I almost didn’t get the carpet cleaned one Thanksgiving. I forgot to schedule it. For whatever reason, it wasn’t on my Prep For Christmas Checklist. You know the list. The one that had …

  • Order bags
  • Check giftwrap inventory
  • Go over buying goals with all buyers

… among other things.

I also had my Thanksgiving Eve Checklist, my Christmas Eve Checklist, my Summer Fun Sale Checklist, and my Easter Prep Checklist.

The other thing I had was time. In twenty-four years I found myself adding something to at least one checklist each year because I forgot to buy coffee for the coffee pot we put out on Black Friday or I forgot to change our hours online or I forgot to call and schedule the carpet cleaning. There was always something new I forgot to do.

I was quickly becoming the expert by making all the mistakes I could and learning from them over the years.

You might not be a list person. I admit, I wasn’t. I made those lists, but didn’t always look at them or use them. Fortunately for me, making the list helped burn them into memory so that I rarely made the same mistake twice. But that’s one of the keys.

Just make the list.

The process of making the list does several things …

First, it helps you organize your thoughts. It puts you into a mode where you are thinking about all the things that need to be done.

Second, it reminds you of things to do. It helps cement all those actions into your memory. I know writing things down always helps me remember them better—even if I never look at the paper again. I have encouraged both of my boys to take copious notes in college and rewrite them daily to help remember what they are learning.

Third, it helps you delegate. When the list is only in your head you are less likely to assign other people to do things. When the list is on paper you can easily see tasks that others can do to lighten your load.

Fourth, it helps you visualize all the things that need to get done. Visualization helps with execution. We are more willing to do that which we have already seen ourselves do in our own mind.

Fifth—and most importantly—it helps you be ready to put your best foot forward for your customers. The last thing you want is to be running around Black Friday like a chicken with your head cut off because you weren’t prepared. You don’t want customers thinking this is your first rodeo.

You want them thinking you are at the top of your game.

Right now, while you’re hunkered down in your office lamenting the weather and the lack of traffic, pull out a notebook or open up a word doc and start writing out those lists. Whether you ever look at them again, just this one little act will improve your business dramatically. (Hopefully you will write it all down and then use those lists. That would be best. But just the act of writing it down is so much better than trying to wing it every year or season. Baby steps.)

-Phil Wrzesinski
www.PhilsForum.com

PS When I started writing about the carpet up above, I thought maybe I would take this blog in a different direction and talk about regular, preventative maintenance. We got an extra nine years out of our carpet and I avoided a retirement-inducing carpet replacement through preventative maintenance. We took our snow blowers and lawn mowers in for preseason and postseason maintenance every year. We took our vehicles in to winterize them and followed all the maintenance schedules to the tee. Those, of course, were all items on the Checklist along with Order Salt for the Sidewalks. (Yeah I forgot to do that once. Once!)

PPS Black Friday is November 29th. Christmas is December 25th. Neither of those dates should surprise you. You know they are coming. Get your lists ready for them now. (For those of you in industries where it matters, Valentines will be February 14th again, Easter is April 21st, and Halloween will be October 31st again—although I’d love to see it moved to “last Saturday of October” but that’s a discussion for another day.)

When to Close for the Weather

Right now the Weather app says it is minus ten degrees outside. The “real feel” is minus thirty-five. Thank goodness I don’t have any presentations or travel scheduled for today. My office is only a wall away from my bedroom. I’m going to work today.

But if Toy House was still open, would I be going in?

That has always been the question. We’ve done really good business on snow days when the schools were closed. We’ve also been really slow as traffic crawled to halt on the slippery roads. Sometimes we have opened only to close early so that my staff could get home safely. Sometimes I have staffed the store with a skeletal crew by volunteer. Who wants to brave the conditions to make a few bucks?

One thing I always looked at with bad weather days was that the mail was still coming, the phones were still ringing, and the email never stopped.

Today, however, we would have been closed.

Why?

The guys and gals who brave rain and snow and sleet aren’t even going out. You know it is bad when the USPS takes a day off for weather.

Another reason is that the governor declared the cold weather a “state of emergency.”

Now that doesn’t mean I wouldn’t have braved the cold to go in myself. I have been out in this cold several times before in my life (I used to go winter camping—there’s an activity for brave of heart or insanely stupid). That’s what scarves and face masks and hats and gloves are for. But I wouldn’t want to put my staff in serious danger. When the governor or the mayor declares a state of emergency for the weather, they want you off the roads.

The interesting thing about weather days in Michigan is that some people see them as a good excuse to cuddle up with a blanket and a good book. Others see it as a challenge.

(“What do you mean it was cold outside? I shoveled my walk, went to the gym, ran some errands, went to the grocery store, and came home and made French Toast with all the bread, eggs, and milk I bought. It wasn’t that bad.”)

When do you close for the weather? 

  • When USPS says Nope.
  • When your local government says Nope.
  • When it is a danger to you or your staff to be on the roads or outside. (If you can’t make it in, you shouldn’t ask your staff to come in, either.)

If you’re the kind of defiant person like I was and are going to brave the elements no matter how stupid, make it voluntary for your staff. When we would close early for bad weather I sent those who lived the farthest away or had the worst cars for snow home first. Then I’d ask, “Who wants to stay? Who wants to go?”

You can run your store on a skeletal crew on bad weather days because your traffic won’t be as busy. You can also get a lot done in the office and re-merchandising the floor. Just don’t turn your staff into skeletons by forcing them out on those days.

-Phil Wrzesinski
www.PhilsForum.com

PS One other criteria that always seemed to play into the equation was the time of year. It was a lot easier decision to close for the day in January than in December. Stay safe and warm out there.

How Much Would You Pay?

Have you ever walked through a store, saw a display, and thought, “Wow! Someone would actually pay that much for that?” Of course you have. We all have. It is the internal pricing game we all play called …

“How Much Would You Pay?”

Unless you’re the only option in town, pricing is a game of finding that sweet spot in price that matches the answer most people would pay for your product or service. The better you determine that price, the better your sales and profits.

And before you think that lowering the price is the only way to go, remember that some people will look at a really low price and think, “What must be wrong with it?” You can cheapen the perception of your products or services by pricing them too low.

I knew a guy who sang at events. He was getting tired of the gigs. He asked me if I thought it was smart of him to double his price so that he would get fewer gigs and still make around the same amount of money. I told him to expect the opposite to happen. I was right.

His bookings doubled with the doubling of his price because people figured if he charged that much he must be really good. In other words, his earlier price was too low. Fortunately, the extra bookings along with the higher price re-energized his career.

I call this concept Perceived Worth. It is something we all do when shopping. We look at an item and determine its Perceived Worth (PW). Then we look at the price. If the price equals the PW and we’re in the market to buy it, we place it in the cart. If it is too high or too low, we hesitate. We won’t make the purchase until we can justify the price discrepancy.

If we don’t need the product, our PW for that item is zero, and we move on, but we’ll still play the Pricing Game to see if what we would expect to pay matches the price.

I NEED YOUR HELP

I tell you this because I would like your help on the PW of a service I have been asked to perform.

You may recall a couple weeks ago I gave you five Self-Diagnosis Tools to help you take a critical look at your business. Those tools were:

I was asked what it would cost to hire me to come to a business for three days to perform those five diagnostics.

I would like to know what you think the Perceived Worth would be to have someone like me do a complete diagnostic evaluation of your business using those five criteria.

I would visit your business for three days. I would need access to your financials (Balance Sheet and Profit & Loss plus your Average Inventory at Cost). I would need to see what Advertising you have done (and any contracts you’ve signed for advertising). And I would need a couple hours of your time over the three days to answer questions here and there.

At the end I would write up an evaluation showing where you were doing well, where you needed attention, and recommendations for what to work on next, including a priority of where to put your resources first.

Two Questions:

  • What would you EXPECT to pay for such a service?
  • What would you be WILLING to pay for such a service?

I am curious to see your responses. You may send them to me via email or PM, leave a comment on this blog, or comment on Twitter, LinkedIn, or Facebook.

-Phil Wrzesinski
www.PhilsForum.com

PS Even if you don’t own a business I am curious to see your response. I am trying to gauge whether there is a viable market for this service or not. I’d love to know what people perceive such a service to be worth. There are no wrong answers.

The Heart of Customer Service is the Heart

I did a presentation for the City of Mason this morning. Not their businesses, their employees—DPW, Police, Fire & Safety, Bill Payment Desk, Clerk’s Office. Debi Stuart, the City Manager, hired me to talk about Customer Service. Debi recognizes that even a city office and government employees need to be constantly working on offering better services and better service. She is transforming their government into a model that every city should follow.

My usual Customer Service presentation is to take a look at every interaction a customer has with your business through the eyes of the customer to see what she expects, what you’re actually doing, and how you can raise the bar. Unfortunately with five departments, three distinct customers for each department, and several different types of interactions per department, we didn’t have the time to explore each of those interactions.

(Yes, I did say three distinct customers—the Citizens, the Business Owners, and the other Departments within government. Make sure you are identifying all the different customers you have for your business.)

Because of the time limitation, instead we focused on feelings and emotions with goal of getting the “customer” from Grumpy Cat to Happy Cat.

When you stop and think about the average citizen’s interactions with the different facets of government, more often than not, the citizen’s default mode is Grumpy Cat. If I tell you that you have to go to the Department of Motor Vehicles (or SOS office here in Michigan), you instantly go Grumpy Cat.

If you are pulled over by the police, have to call for a firetruck or DPW, or have to go in to pay a bill, you are a far distance from Happy Cat. The goal of customer service in most of these situations is to change the customer’s feelings. (Okay, maybe you won’t change their feelings for the better if you have to arrest them or write them a ticket, but there are still better ways to handle those interactions.)

This approach is no different than it is for a retail or service-based business.

Your goal is to make the customer happier than they were when they first entered your business.

And you have to do this while making them part with their money.

George Whalin was the first to teach me that a sale only happens when the customer decides she wants the product more than she wants the money. The customer only gets there, however, when she feels that her life will be better with the product. That is an emotional response.

The heart of Customer Service is your ability to touch her heart and make her feel better. Products are simply the means we use to make our customers feel better. We weren’t in the business to sell toys. We were in the business to make people happier (“We’re here to make you smile.”)

  • If you sell shoes, you’re doing it to make people feel better about their appearance and/or their health.
  • If you sell jewelry, you’re doing it to connect people to each other, to build lifetime memories and moments of nostalgia.
  • If you sell pet supplies, you’re doing it to bring joy and comfort to people.
  • If you sell cameras, you’re doing it to spark creativity, preserve memories, and bring joy.

This morning we looked at the emotions of the typical customers each department interacts with the most. Then we looked at how to change those feelings from Grumpy Cat to Happy Cat. I could already tell that this was going to be an easy transition for the employees of Mason based on the answers they were giving me.

Wanna live in a small community where the government really does care about the citizens and shows it through their interactions with you? I’d recommend you look at the City of Mason, MI.

-Phil Wrzesinski
www.PhilsForum.com

PS It was an interesting exercise looking at the emotions of the different customers for each department. For instance, some people who interact with the police are Angry while others are Relieved. Identifying the emotions and looking at each one differently, however, gives you the chance to explore how to make that particular customer feel better. Have a discussion with your team about emotions and what it takes to make people happier. When you get into the mode of looking at the customer’s emotions, you will find yourself adapting to their needs more quickly and easily, which will help you change their hearts. We had Listen, Show Empathy, and Treat Them as People (because they are) as our responses quite often today.

Don’t Make the Simple Things Difficult

I borrowed my buddy’s Ford Transit Van. You’ve seen these vehicles. Big, tall, lots of seats, or in my case, lots of room for hauling stuff when the seats are removed.

When I got to my first destination a warning light came on telling me the tire pressure was low. It didn’t say which tire, but no problem, right? I’ll just check them all at a nearby gas station.

Unfortunately the tires on this vehicle required 86psi and $1.50 later I found out the little silver box at the far side of the gas station parking lot didn’t have the power to get me more than halfway there.

Again, no problem. My Honda dealer where I take my Pilot for service has air hoses right inside their service bay drop off. The Ford dealership is right by my house. I assumed they would have the same.

At 4:15 pm I pull into the Ford dealership’s service bay. No hose. I get out of the van and head to the service desk just in time to watch three people walk out of the room, leaving me all alone.

I look for a bell. No bell. So I wait.

Five minutes later I am joined by a lady with a white Ford Taurus. We stand there wondering where everyone went. She mentions the lack of a bell. Just then a guy in a Ford shirt walks in with his head down, goes over to the desk where I am standing, picks up a brochure and starts thumbing through it. I didn’t want to disturb him while he was deep in thought, so I waited to speak.

I never got the chance.

Without ever looking up—as though he was trying to avoid eye-contact—this guy took the brochure and a stack of papers off the desk and walked out of the room. He was gone before either of us could utter a word.

At 4:23 pm another guy walks into the room and starts shuffling papers. I say, “Hello,” for fear he might walk out before speaking, too. “Hello. What can I do for you?”

“I just need to get air for my tires.”

“Oh, you need to go around the corner to the other side of the building to our tire department.”

“Oh, okay.”

As I head to the van I see him exit the room, having never acknowledged the lady with the white Taurus.

I pull the van around the corner. There are several bays, but none that you enter like the service bay, so I find a parking spot and enter an office/waiting area. There is a gal at the counter with the employee.

The employee has the customer sign several papers and they leave together with paper floor mats and a mirror hanger with her service number. I wait.

The employee returns, starts shuffling papers, places them in a folder, then places them in a filing cabinet, not once looking up at me or even acknowledging my existence at the counter. I wait patiently. At least—unlike the service area—someone is actually there.

At 4:35 pm, after doing something on her computer, she finally turns to me and asks brusquely, “What do you need?”

It took every ounce of restraint by now to not blurt out, “Someone who gives a shit?”

Instead, I explained I just needed air in the tires of my van.

“I don’t have an open bay right now. Have a seat and we should have one open in the next hour.”

“No thanks.”

I drove the van down the road to the Honda dealership.

At 4:42 pm I pulled into the service bay. Brad looks at me quizzically in the Ford Transit Van and says, “Hi Phil. What are you doing with this vehicle?”

“I’m borrowing it from a friend. Had to move some furniture. I just need some air in the tires.”

“Give me one second to finish up with this customer and I’ll be right there.”

I knew how to pump air, so while Brad finished with the other customer, I grabbed the hose. I was on the second tire when Adam, one of the other service folks, came over to check on me.

“Hey Phil. Are you trying to take our jobs here?” he joked.

Two minutes later the tires were all filled to 86psi. Brad, Adam, and I had a nice laugh about my trials down the road at Ford. I thanked them. They thanked me. And I drove away.

Wait, did they just thank me for coming in to their building to get free air? Yes. They. Did. And they were upset that they didn’t get to inflate the tires themselves.

The Ford dealership …

  • Didn’t greet me.
  • Didn’t have a way for me to let someone in service even know if I was there.
  • Didn’t acknowledge my presence on three occasions.
  • Didn’t have an easy solution to an easy problem.

I left twenty-two minutes after I arrived without solving my problem.

The Honda dealership …

  • Greeted me immediately (and by name)
  • Told me when they would help me
  • Allowed me to help myself
  • Had an easy solution to an easy problem.

I left five minutes after I arrived with problem solved and some friendly banter on the side.

Which dealership would you rather visit?

-Phil Wrzesinski
www.PhilsForum.com

PS I told this story to a friend of mine who drives a Ford. He started defending the dealership saying it was probably just a perfect storm of timing. I told him he was probably right, but they still lost a potential customer because of their inattention and poor attitude. Whether you like it or not, you are often defined by your worst moment—at least on Yelp. If you greet customers and keep the easy stuff easy, you’ll have far fewer “perfect storms.”

PPS I actually liked driving the Transit Van. In fact, I’ve driven several Ford vehicles in the past. I left Ford when this same dealership screwed me over with no remorse on a service call twenty years ago. Doesn’t look like things have changed. Brand loyalty only goes so far.

Self-Diagnosis Tool #5 – Marketing & Advertising

My favorite class segment in the Jackson Retail Success Academy was always the Marketing and Advertising Segment. One portion of that segment was dedicated to Media, Myths, and Money. We would discuss all the various forms of media and how/when to use them properly. We also discussed several myths about advertising. One of the biggest myths was this …

Advertising will fix your business.

No it won’t.

If your customer service sucks, advertising will only draw in more people to find that out and tell their friends to beware.

If your product selection sucks, advertising will only find you more disappointed and empty-handed customers.

If your market isn’t big enough to support your business, advertising will only drain your coffers faster, and hasten your demise.

That is why, of all the Diagnosis Tools, this one is last.

Abandoned Boat on the Pond by the House

Think of your business like a boat. Your Core Values are the hull and body of the boat. Your Market Potential is the size of the body of water. Customer Service is the driver of the boat. Inventory is the engine/oars. Advertising is the launching of the boat. Would you launch if you knew you had a leak, didn’t have a driver, or had an engine not working? Of course not.

You need to make sure your boat is rock solid and ready to go before you launch. (Check out Tool #1 Core Values, Tool #2 Market Potential, Tool #3 Customer Service, and Tool #4 Inventory Management if you think your boat has even the tiniest of leaks.)

Advertising will not fix your business, it will only speed up what was going to happen anyway. If your boat is leaking, advertising will just sink you faster.

DEFINE THE TERMS

First, let’s understand the difference between “Marketing” and “Advertising”. Marketing is everything you do to attract customers to your store. Advertising is a subset of Marketing. It is the paid marketing you do through a form of media.

MARKETING

Marketing includes your building, your signage, your front door, the “Open” sign on your building, the events, activities, and classes you hold inside and outside your building, the networking you do by joining clubs and being involved in your community, the free publicity your garner, etc.

One of the first steps in this self-diagnosis is to list all of the ways outside of Advertising that you are Marketing your store. For some ideas of different things you can do, check out the FREE eBook Main Street Marketing on a Shoestring Budget.

You should have a healthy list of ways you are marketing your business outside the realm of traditional advertising. Fortunately most of these ways cost more time than money. If you don’t have enough customers—the whole reason you’re marketing your business—then you should have the time.

Once you have that list, see which Core Values are evident in each activity. All of your Marketing efforts must be aligned with your Core Values to be most effective. If there is anything you are doing that doesn’t speak to your values, change it or drop it for something else.

ADVERTISING

The next thing to do is to look at your paid advertising through the same lens as your other Marketing efforts. Pull out all of the ads you ran last year. Look closely at the message you sent. Ask yourself these six questions …

  • Does it look or sound like an ad? Chances are good that it does. Did you know our brains are hard-wired to ignore advertising? Maybe you should create something that doesn’t look or sound like an ad to keep from being ignored.
  • Does it tell a story? Stories are more interesting, get people to pay attention, and are more memorable than facts and figures. Your ad needs to tell a story if you want it to work best.
  • Does it make only one point? The person seeing or hearing your ad will only remember one point at best, so only give her only one point to remember.
  • Does it speak to the heart? Emotions always trump logic. Always. What emotion does your ad invoke?
  • Does it speak to your tribe? Does it align with your Core Values? If you want to attract better customers, speak more directly to those people who share your values and ignore everyone else.
  • Does it make your customer the star? Ads about you will be ignored. Ads about your customer and what you can do to help her will gain her attention.

The message is more important than the media. Here is another big myth in Advertising …

You must reach the right people.

Nope, nope, nope, nope, nope. You can reach all the right people but if you don’t say the right thing, all is for naught. Also, everyone you reach is potentially the right person because even if they aren’t your customer, they know someone who is your customer.

It isn’t who you reach that matters. It is what you say to the people you reach.

Get the message right and everything else will follow.

(Note: to help you choose the right media for your business, go to the Advertising Media Reference Guide and check out your options.)

BUDGET

The last thing to check is your budget. How much should you spend on Marketing? Notice how I said Marketing, not Advertising? Part of your Marketing is your location. If you spend a lot in rent to be in a high-traffic area, you don’t have to advertise as much as the guy under the bridge on the wrong side of the tracks. The Cinnabon store at the airport doesn’t spend a penny on Advertising. He just bought a fan to blow that cinnamony goodness out into the terminal. That’s his Marketing Budget.

There are many formulas for calculating a budget. The one I like best came from Roy H. Williams, aka The Wizard of Ads. He suggests you take 10-12% of your Gross Sales as your “Total Exposure” budget. Then multiply that by your Percent Markup (this is different than Profit Margin – the formula looks like this Percent Markup = (Gross Sales – COGS)/COGS) to adjust for your pricing and profit. Then subtract your rent from that number to find out what you should spend on Advertising.

For many businesses, however, that leaves a budget close to zero as rent is often 10-12% of your budget.

I will tell you to push that upper limit to 15% of Gross Sales, but only if you can find that money without taking it out of Payroll. If push comes to shove, Great Customer Service is always more important than Advertising. It is what drives your boat. You can still get across the lake from a bad launch if you have a strong rower and good oars.

-Phil Wrzesinski
www.PhilsForum.com

PS There you go … Five tools for evaluating your business to see where you need to improve as you sail into 2019. Take a critical look at all five in the porper order and you’ll find your silver bullet for success. If you don’t think you can be those critical eyes because you are too busy trying to drive the boat yourself, call me. I’ll come do an analysis of your boat using all the criteria in these five Tools and show you where the boat needs work.

Self-Diagnosis Tool #3 – Customer Service

My favorite Smile Story was actually told to me by a customer, not my staff. Dawn had three grandchildren coming to visit her for five days. She wanted to have a different gift to give each child each day they were there. Fifteen gifts in all. Lakisha said, “I’m on it,” and led Dawn all around the store.

A few weeks later Dawn called me. “Phil, I have to tell you that gal of yours was fabulous. My grandkids loved the gifts. My grandson, he’s seven, turned to me and said, ‘Grandma, these gifts are better than if we had picked them out ourselves!’ Thank you, thank you, thank you! And thank Lakisha, too!”

That’s the phone call every store owner and manager dreams of getting.

If you’re regularly getting that call, you’re doing the right things with your staff and with your customer service. Go back to Tool #1 Core Values and Tool #2 Market Potential or wait until tomorrow for Tool #4 Cash Flow.

If you’re not getting that call at all and would be totally shocked if you ever did get a call like that, read on.

NOT AS UNMEASURABLE AS YOU THINK

Many people say Great Customer Service is not quantifiable, therefore it cannot be measured. I disagree. There are numbers you can run to see whether you and your sales staff are doing right by your customers.

I showed you two ways to measure your Customer Service in the post The Right Measuring Cups – Repeat & Referral Business and Units per Transaction. They are good starting points even though neither of those is completely perfect.

Sometimes your Referral Business is because of a product you sell that is hard to find. Sometimes it is because of some Over-the-Top Design element in your store your current customers tell their friends they have to see. I knew a jeweler who had a $30,000 diamond ring, way out of the league for that sleepy summer tourist town. She had tons of traffic right up until the day that ring finally sold. Once the ring was gone, her Referral Business dried up.

Sometimes your UPT grew because the hot item that year had several accessories or attachments. The following year the hot item had all those things included so your UPT fell.

I would still start there and see what you learn.

OTHER PLACES TO LOOK

If I were to come in to your store to do this diagnosis, here are some places I would look to get a handle on your levels of customer service.

  • Team Member Handbook – Do you have one? What does it cover?
  • Training Videos – Do you have them? If not, how do you handle new employee training?
  • Continued Training – How often does the staff meet for training purposes? What are you covering? How do you measure results?
  • Your Store Policies – Are they Customer-Centric or Business-Centric? Who do they protect?
  • New Hire Process – How do you find new employees? I want to see your Help Wanted Ads, Job Descriptions, and Interview Questions

If you don’t have a Handbook, you should make one. Write out all your policies. Write out all your philosophies. Write out how you will measure their employment. Have an HR professional and an HR lawyer proof it to make sure it is legal. Then give a copy to everyone and use it as your guide. It puts everyone on the same page and helps eliminate confusion from different team members saying, “That’s not how I was taught to do it.”

Training Videos are another way to make your staff training consistent and thorough. They don’t have to be fancy or even perfect. You can shoot them fast and simple on your phone, post them privately to YouTube, and provide the links to your new hires. If you don’t offer Training Videos, how else can you ensure that training is consistent and thorough? One way is to have the same person do all the trainings. Another is to include a checklist of everything to be covered. No matter which method you use, there also has to be a final check. One person who will verify what the new hire has learned and send him or her back for further training if necessary.

Continued Training is a must. Back in third grade I may have learned how to golf, but I’m still a few million hit golf balls shy of going pro.

“An amateur practices until he can do it right. A professional practices until he cannot do it wrong.” (source unknown)

One way we measured the results of our continued staff training was through Smile Stories. Every staff meeting began with Smile Stories where my team would share the different ways they made customers smile. Those stories not only reinforced the culture and the goal of the store – “We’re here to make you smile!” – but they also encouraged the team to actively seek out opportunities to make customers smile.

Store policies should be Customer-Centric, meaning they are in place to protect and help the customer. Liberal return policies, easy layaway plans, and helpful services that make less work and less thinking for the customer are the hallmarks of Customer-Centric policies. If you limit what forms of payment or how much someone has to spend to use a credit card, you’re telling the customer that your nickels and dimes are more important than them. Once your product is no longer exclusive or hard-to-find, they will leave for someone who treats them better.

If you have aligned your business with your Core Values in a market with a lot of Potential, and are taking care of your customers the right way, you should see your Share of the market steadily climbing upward. Rarely does a company get through all three of these tools without recognizing areas that need shoring up. Start working on those.

Tomorrow we do math. (Just giving you fair warning.)

-Phil Wrzesinski
www.PhilsForum.com

PS If Cash is King, why does it fall all the way down to fourth on the Self-Diagnosis priority list? Because all the cash in the world won’t help you in the long run if your business model is flawed. Those first three priorities are all about your business Goals and Strategies. Buying and selling product is simply a means to the end. Notice how I didn’t say, “We’re here to sell you toys!”? Our goal was much bigger than that. Sometimes your Cash Flow problem is because you aren’t attracting the right customers (Core Values), don’t have enough customers (Market Potential), or are driving customers away (Customer Service). Make sense now? Get those three areas right first. Then you’ll know if your Cash Flow problems are truly Inventory Management problems.

Go here for Self-Diagnostic Tool #4 – Inventory Management

Self-Diagnosis Tool #2 – Market Potential

When my son was in Cub Scouts, his Den Master was the manager of one of our local Kmarts. He gave me some amazing insights into the world of big-box retail including numbers of what the big-box stores in Jackson were doing in sales both overall and for toys.

It was an eye-opener, especially when I learned we were doing more in toy sales than both Kmarts in town combined.

Knowledge like that is game-changing. Knowing where you stand in your market, and what is happening to your market is critical to your success. Heck, just knowing if your market is even viable is quite important.

If you were a start-up looking to get into business, I would actually put this Tool ahead of Tool #1 – Core Values. Let’s go find a viable market before we even begin with the other stuff. As it is, if you’ve made sure your business lines up with your Core Values, the next step is to look at what is happening with your market. How big is the pie and how big is your slice of it?

CALCULATING MARKET POTENTIAL

The best way to find the potential amount of sales in your area for your industry is to follow this step-by-step formula.

  1. Find the total dollars spent in your industry in the US. Usually a quick Google search can find you this number. For instance, in 2015 the Toy Industry was $19.1 billion.
  2. Divide that number by the US Population. In 2015 there were 322 million people in the US. $19.1 billion divided by 322 million equals $59.32/person
  3. Multiply that number times the population in what you consider your Trade Area. For instance, we considered Jackson County our Trade Area. Population 158,000 people times $59.32 equals $9.4 million Market Potential

For years I did the calculations and stopped right there. It is a close approximation. But it isn’t accurate. I needed to add two more calculations to get a true picture.

ADJUST FOR HOUSEHOLD INCOME

We didn’t sell groceries. We didn’t sell commodities. We didn’t sell basics like clothing. I needed to adjust the Market Potential based on the local economy. The number I used was Average Household Income (AHI). Find out the AHI for your Trade Area and compare it to the national average.

Back in 2015 the national average was $55,775. Jackson County was $43,170 or 22.6% less. (The city was much lower, but I used the county because we considered the entire county our trade area.)

That adjusted our Market Potential down to $7.3 million.

If you sell luxury items, this is a critical step for understanding your Market Potential.

ADJUST FOR INDUSTRY DEMOGRAPHICS

You may also need to adjust your numbers based on a demographic specific to your industry. Since we started with total US sales and total US population to get a sales/person amount, you might get a number that is skewed for your area.

For instance, if you sell boats, your market is much bigger in Michigan, with the Great Lakes, or Minnesota, with ten thousand lakes, than it might be in Nebraska or New Mexico. You might look into average boat ownership per population and compare your Trade Area to the national average.

If you sell books, you might want to look at the educational level in your Trade Area compared to the national average.

If you sell toys, you might want to look at the youth population in your Trade Area.

This number may be harder to find. I was able to cross-reference the US Census to find that Jackson County had 6% fewer children than the national average. That dropped our Market Potential down to $6.8 million. 

Notice how those two adjustments really changed our Market Potential?

CALCULATE YOUR SHARE OF THE MARKET

Once you know your Market Potential, it is easy to find your Market Share. Simply divide your sales by the Market Potential. In 2015 our sales were 15.7% of the Market Potential.

I used a spread sheet for all of these numbers. I put in the formulas for calculating percentage differences. All I had to do each year was find the raw numbers and plug them in.

The power of doing this math is two-fold.

Not only do you know exactly where you stand in your market at any given time, you also know how your market is changing.

WHERE YOU STAND

Walmart has 25% of the grocery market and around 10% of the entire retail market in America. As sobering as that may sound, at one point back in the 1950’s Sears had over 50% of the appliance market. That’s a mind-blowing number—especially when you consider where Sears is today.

The real Gold Standard for any retailer is to achieve 30% of your Market. It will likely take a perfect storm to get any higher than that. Back in the early 1980’s before we got a second Meijer, a Target, a Toys R Us, and a Walmart, we were pretty close to that mark. For most independent retailers the more likely expected number is 3-5%. Our 15.7% was a combination of store size and longevity in the market, along with all the other things we were trying to do right.

The interesting point here, though, is not in how many people shop with you but in how many people don’t shop with you. Almost 85% of our Market didn’t shop with us. That’s a lot of potential customers. If I wanted to grow my business by 10%, I only needed to convince another 1.57% of the 158,000 people in the county (2500 people) to walk through our doors. If you only had 5% of your Market, you would only need to convince another 0.5% of those people to shop with you to achieve 10% growth.

Trying to convince 2500 people is far easier and much different than trying to convince 158,000 people. You only need to find 2500 people who don’t yet know you, but share your Values.

CHANGING MARKET

The other critical piece of information you can gain is by doing this calculation year after year and watching how the numbers change. Is your Market Potential growing or shrinking? Is your share of the Market growing or shrinking?

We watched two critical numbers during the Great Recession. One was Average Household Income. One was Youth Population.

From 2007 to 2016 our Youth Population for Jackson County dropped over 40%. I drilled down into those numbers and saw even worse news. While national birth rates were dropping during that time, our birth rates were even lower than the national average except for one glaring segment—teen births. The city’s birth rates, thanks to this segment, were similar to national averages while county birth rates were well below average.

Average Household Income didn’t fare much better. At one point the AHI in the city limits was hovering around the poverty line at $27,000. Our closest customers had no money for toys. The outer areas of the county where the money was had no children. Not a good recipe.

Add into that mix, we watched the Sales per Person of toys in the US also decline from a peak of $75.17/person in 2004 to only $59.32 in 2015. People were spending their money on electronics like smart phones, tablets, and computers.

Over the years our Market Share didn’t change a whole lot, but our Market Potential did. In 2007 it was $11.9 million and we had 16.5% of it. In 2015 it was down to $6.8 million and we still had 15.7% of it (even though Amazon had become a major player in toys around 2011-2012). 

COMPETITION

The other barometer Market Potential and Market Share gives you is your own business’s health compared to the competition. While top line sales are nice, the true question you need to ask is whether your Market Share is growing or shrinking. You could be up 10% in top line sales, but if your market grew by 15%, someone else is eating your lunch.

If you have done your spread sheet and have several years of data to analyze, plot into the data when major competitors came to town or made major changes to their businesses. See how that affected your numbers. For instance, I can see that when Walmart opened in Jackson in 2005 our share dipped from 16.5% down to 15.9%. I can also see how we jumped back up to 16.4% the following year after the novelty of the new store wore off. I can also see how we dipped down to 16.1% in 2011 and 15.8% in 2012 when Amazon became a serious player in the toy market.

All of these numbers tell a story far more compelling than whether your store’s sales are growing or shrinking. They help you understand your business on a far greater and more important level.

If your Market Potential is growing, there is money to be made, but be cautious. The big guys are tracking that number, too, and might be looking to expand into your market. If your Market Potential is shrinking, you might need to look at moving, changing, or finding an exit strategy.

If your Market Share is growing, you’re doing things right. If your Market Share is shrinking, you have work to do.

That’s why you should make this your second priority to diagnose and understand.

-Phil Wrzesinski
www.PhilsForum.com

PS Where does that 3-5% number come from? This comes from looking at average store sales for several different industries including toys, pet supplies, shoes, jewelry, photographic supplies, and flooring. While there are many outliers and the range is quite broad from large to small, the average store for most of these industries has enough sales to grab about 3-5% of their market. I use it purely as a benchmark for start-ups to be realistic about their business prospects in the first few years. Getting to 3% within two to three years is a realistic goal. If you’re in a town with a strong Shop Local movement that might be easier, but you might also have more indie competition. If there are no indie competitors, you have an unusually large store, and you’ve been the fixture in town setting the bar of expectation for over sixty years, your numbers should be much higher.

The reality, however, is that the number itself doesn’t matter nearly as much as what is happening with that number. Is it going up or down? If it is going down you need to find out why.

Go here for Self-Diagnostic Tool #3 Customer Service