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Give Your Business a Physical – Track These Numbers, Too

There are many different metrics you need to measure to determine the health of your business. Two of the biggest are Profits and Cash Flow. If both of those are good, your business is probably doing well.

But that doesn’t mean you don’t look at other numbers, too. That would be the equivalent of a doctor checking your temp and blood pressure and determining you are completely healthy without looking at anything else.

Here are some other numbers you should track to keep a check on the pulse of your business.

Traffic – Number of transactions you had this year compared to last year. Did that number go up or down? If it went down, why? 
  • Did your location get worse? 
  • Was there a change in the types and numbers of stores around you? 
  • Was there a drop in population? 
  • Did you cut back your offerings and categories significantly?
If your traffic was down, but none of these other factors were negative, you have a hole in your Customer Service (repeat and referral business) and/or Advertising (first-timer business). You need to find that leak and fix it fast.

Average Transaction – Take your total sales and divide by # of transactions. Compare to last year. If this number went down, why? 
  • Did you carry fewer high-ticket items? 
  • Did you add more low-ticket impulse items that people might run in and grab? 
  • Did you do anything to attract more youth? 
If none of those factors were in play but your average ticket went down, you have a hole in your staff’s ability to sell. You need to fix that fast.

Market Share – This is a little harder to calculate, but an incredibly valuable piece of information that can pinpoint problems – even if you had a great year on paper!
  1. Find the national sales figure for your industry. 
  2. Divide that by the population of the United States to determine sales per person. 
  3. Multiply that times the population of your trade area to determine the market potential for your area.
  4. Divide your total sales by that market potential to find your percentage or share of the market.
  5. Compare it to last year’s number.
You can have an awesome year with solid sales growth and decent profits and cash flow, but still be in potential trouble if your market share is slipping. If all your growth was fueled by huge growth in your market, but you aren’t holding onto your share of that market, then you are ripe for being picked off by a better competitor entering your market. You need to figure out why your share is decreasing and fix that problem now.

You can also have a lousy year with declining sales and profits, but mostly fueled by a change in the market. Maybe your industry is in decline (smaller sales per person). Maybe your trade area is shrinking. But if your market share is growing, then your big issue is determining whether to cut expenses and inventory and hope the market comes back or move to a new market.

Make sure your Profit and Cash Flow are good. Those are immediate life threatening problems for your business. If those are good, it buys you time to check/fix the other problems.

Give your business a full physical. An ounce of prevention is worth a pound of cure.

-Phil Wrzesinski
PS Be honest in your evaluations. Even if there are circumstances beyond your control, there are always circumstances you can control and improve while you ride out the storm.

Praying for Customers

I know it was tongue-in-cheek (kinda), but when a fellow store owner asked a group of us on FB what we were doing to attract customers, the first response was “Praying”.

This might seem like a religious post. If I offend anyone, so be it. But I found the answer to be not only funny, but also appropriate. Yes, praying can have a place in your business.

Remember what I have said over and over about being true to your Values? If religion and faith are part of your values, praying should be a regular event. Include your staff in a holy huddle. Make sure your policies also reflect your faith. It can be a powerful attractor of customers who share your faith. (See Chick-Fil-A and how they share their faith.)

Here are some prayers you can say.

Pray that your advertising will be effective.
Pray that your staff will have a good day and take care of your customers.
Pray that you will accomplish your to-do list efficiently.
Pray for thanksgiving of the blessings that have allowed you to be in business.
Pray for the blessings of your wonderful staff and all that they do (and have done) for you.
Pray for your wonderful evangelists who tell your story to all their friends.
Pray for your vendors who supply you with the products that solve your customers’ problems.
Pray for your government leaders that they have the strength and will to do good for your community.

If faith and religion are part of your Core Values, then you should be Praying for Customers.

-Phil Wrzesinski
www.PhilsForum.com

PS I say a modified version of the Jabez Prayer every single day…
Oh that you would bless me indeed
And enlarge my territory
That your hand would be with me
And lead me to good

The Five Drivers of Traffic – Delight

I posted that JC Penney was struggling because it was losing in all five of the main drivers of traffic… Price, Product, Convenience, Trust and Delight.  Let’s look at each one of them separately.

DELIGHT

Delight is probably both the easiest and most difficult of all the drivers to own. 

Easy because so few companies even try to own it. Sure, they give it lip-service, but outside of a handful of retailers (Apple? Zappos?) and companies (Disney?), few major chains or national businesses really even try to delight anyone other than the shareholders and owners.

Difficult because the bar of expectation is constantly shifting and changing. What delights the customers of today might seem ordinary tomorrow.

You can increase your Delight Factor a number of ways…

  • Sell things that make people happy. The more whimsy and uniqueness you bring to the table, the higher the delight factor in the customers’ minds. The more fun and interesting your product selection, the more you will delight customers.
  • Sell things that solve problems. Customers buy items to solve a problem. Identify the problem and you can delight the customer by solving it.
  • Host Events. Bring in authors, experts, and celebrities. Teach classes. Host parties. Play games. Show movies. Serve food and beverages. 
  • Bend over backwards to help. When you put the customer’s needs above your own, you raise the delight factor exponentially. The easiest way to do this is to say “Yes!” every time a customer asks, “Can you…?” and then go figure out how to do it.
  • Exceed expectations. This may seem simple enough, yet once you consistently exceed the expectations of today, you raise the bar for the expectations of tomorrow. Keep raising the bar, though, and you’ll continue delighting your customers in new and exciting ways.
  • Do something no one else would even think of doing. How about a downtown toy store offering Valet Parking at Christmas? How about a clothing store offering free dry cleaning for a year? How about a bookstore that gets you a signed copy every time you buy a book from a living author?

The advantages of delighting your customers are numerous.

  • They become more loyal.
  • They bring you more customers like them.
  • They do your advertising for you.
  • They make your job more fun.

You can do Delight. In fact, you need to do Delight! It is the one driver you can consistently do better than any of your competitors. It is the one driver you are expected to do better than the chains and online stores. It is the one driver you can most easily own all to yourself.

-Phil Wrzesinski
www.PhilsForum.com

PS Want to know which driver (if any) you already own? Check out this free download – How to Measure the Strength of Your Brand. When you do your survey, be sure to use the five drivers as part of your word association. You’ll know exactly which of your competitors owns which driver and what you need to work on.

The Five Drivers of Traffic – Trust

I posted that JC Penney was struggling because it was losing in all five of the main drivers of traffic… Price, Product, Convenience, Trust and Delight.  Let’s look at each one of them separately.

TRUST

Trust is earned. You don’t get it automatically. Trust is earned one transaction at a time.  Trust is fragile, too. Trust earned over a period of years or even decades can be blown up by one single encounter.

How do you earn Trust? Through consistency and honesty. Do what you say you are going to do time and time and time again. Yes, it is that simple. 

Fast food restaurants are built around the model of consistency. A McDonald’s Big Mac tastes the same all over the world so that you know what to expect and get what you expect every single time. Franchises and chain stores in general are designed to offer consistency. Time and time again, the same experience (at least that’s what they hope).

More importantly than discussing how to build trust, it might be better to look at how easily you can break that trust.

You can break trust in any of the following ways…

  • Play games with your pricing. Mark it up to mark it down. Hide the real price through some fine print. Change your prices all the time. Dicker and deal on price.
  • Don’t deliver. Don’t do what you say you will do. Make promises to get the sale that you know you won’t keep.
  • Lie. Be dishonest about mistakes you have made or things you have done that you don’t want customers to know about.
  • Change your policies. Making up policies that favor the company over the customer on the spot are quick trust slayers.
  • Be rude or apathetic. If you don’t treat your customers well, they won’t trust that you do anything well.
  • Load up on Fine Print. Sure, there always seems to be fine print. There always is an asterisk, an exception. Of course, the more fine print, the more exceptions, the less trustworthy you become. Just sayin’.

Here are some simple things to help you maintain trust with your customers.

  • Admit your mistakes. We all make them. Be honest and up front when you make a mistake and say, “I’m sorry. We screwed up. What can I do to make it better?”
  • Fulfill your promises. if you promise something, you better move mountains to make it happen. Period.
  • Be Professional and Kind. As my friend Tim Miles says, these are the two cornerstones of Shareworthy Customer Service. Do both and your customers will notice. Your customers will trust you. Your customers will tell others about you.

If you want to drive traffic on the basis of Trust you need to be honest and consistent. You need to do the right thing all the time, regardless of how much it hurts you. In fact, the more pain you are willing to suffer to maintain that trust, the more believable you will be.

-Phil Wrzesinski
www.PhilsForum.com

PS To grow Trust as an indie retailer you need two key elements; a trustworthy staff and credible marketing. Here are two books to help you do both better…

Read those books, do what they teach. If you don’t get far more back than you invested, I’ll buy the books from you. Yes, I trust them that much.

The Five Drivers of Traffic – Convenience

I posted that JC Penney was struggling because it was losing in all five of the main drivers of traffic… Price, Product, Convenience, Trust and Delight.  Let’s look at each one of them separately.

CONVENIENCE

Convenience is a tricky subject because there are many different ways to define convenience. 

You could be considered convenient if it is quick and easy to get in and out of your store. Heck, we have a whole category of stores like that called, conveniently  Convenience Stores. Smaller stores located on intersections with front door parking, a handful of commodity products, and rarely ever a line at the register. You can charge a lot more for a product when you have this kind of convenience.

You could be considered convenient if you have such a wide selection of product that it truly is one-stop-shopping. This is the road Wal-Mart and Target Supercenters are taking. Add in the groceries and you can get everything you want under one roof. How convenient!

You could be considered convenient if you offer services that make your customer’s job so much easier. Free giftwrapping is such a service. We get many customers the day of the birthday party or baby shower who stop in on their way. They get the gift, get it wrapped, buy a card and off they go to the party. Repair services, installation services, delivery and assembly services are matters of convenience to a customer.

The first and last of those three examples are fairly easy for indie retailers to own. 

We can certainly be quick stops for customers who don’t want the hassle of parking in a huge lot, walking half a mile to the front door, navigating a 200,000 square foot store to find a $20 gift, only to now have to wait in line behind someone juggling three kids and two shopping carts in a line staffed by a minimum-wage, poorly-trained, gum-chewing clerk.

We can offer services that make life easier on our customers like those mentioned above.

But I will also argue that we can, in some ways, also own that middle example. Do you have everything to “complete” a sale? For instance, if someone buys a model, do you also sell them the glue and paint and a display case to show off the finished product? If someone buys a pair of shoes do you also have the socks, stockings, inserts, shoe polish, shoe-trees, suede brushes, and waterproofing to complete the sale?

Whatever you sell, you can become the “convenient” store in your customer’s mind if she is able to buy everything she needs to complete that purchase. If she has to go to another store to finish the purchase, you lose that driver.

Convenience comes in many forms. Although you may not be the one-stop-shop that a Wal-Mart Supercenter is, you can (and should) still own convenience in many other ways.

-Phil Wrzesinski
www.PhilsForum.com

PS Completing the Sale is a major component of my staff training. I want my staff thinking about that with every customer. It isn’t so much about selling a product as it is about fulfilling a need or solving a problem. When you start thinking like that you will see two things happen. First, your average sales will increase. Second, your customers will be happier. Yes, your customers will spend more and be happier at the same time!

The Five Drivers of Traffic – Product

I posted that JC Penney was struggling because it was losing in all five of the main drivers of traffic… Price, Product, Convenience, Trust and Delight.  Let’s look at each one of them separately.

PRODUCT

Products are the stars. Without them, you don’t have a business. You have to have products that people want. Products typically fall into three categories:

  • Commodities – the products everyone wants and most stores carry. Products designed for the masses (and usually sold at the masses).
  • Niche – the products that are different, maybe with special features, that appeal to only a small but loyal segment of the market.
  • Custom – the unique, one-of-a-kind products such as hand-crafted artwork, customer-customized products, and items so different you wouldn’t expect to sell more than one.

To own the traffic driver of Product, you have to own at least one of those three categories.

Commodities
This is probably the toughest for an independent to own, because the mass market wants this category big time. They believe this is their category so much that they try to commoditize products that might otherwise seem niche.

The other problem with this category is that price drives more of the purchasing decisions for commodities. The mass advertises the price constantly, which sets the perceived worth in the customer’s mind.

But if you own the Commodities (at the right price), you can draw the masses.

Niche
This used to be the domain of the independent toy store. Our model was easy. Carry the stuff Toys R Us and Wal-Mart didn’t carry and you can compete easily with the mass. The profit margin was better on these toys, and there was plenty of product available that wasn’t in the big boxes.

Toys R Us and Target changed that game as they kept buying more and more of the niche products. Now the Internet is trying to take over this category. The Internet is built for the niche market. One website can reach all 500 potential customers for a niche product much more easily than trying to get that product into stores in the 500 markets where those people live.

There are still plenty of niche products out there not carried in the big boxes, but the list of products not sold online gets smaller every year. If you can find niche products that are also MAP protected (see the discussion on Price), then you can still own the Product driver.

Own this category if you want to attract customers who are less price-focused and more solution-oriented.

Custom
This is still a wide-open category. The big boxes don’t want it. Not a high enough turn-ratio. The Internet is struggling with this category because it is hard to attract people to check out product they don’t know they want, and in most cases they prefer to see and touch first before falling in love with it. Individual artists can be successful online, but mainly because they have built a tribe of followers. The independent retailers are also wary because it takes a lot of commitment and cash to get into the world of custom, one-of-a-kind offerings. Do it poorly and you’ll go broke.

To own this category, you need a savvy buyer who can guess the wants and desires of the customers before they walk through the door, and can hunt down those products and fill your store with them. If you have a buyer like that, keep her. They are a rare breed.

The fun part of owning a store full of custom products is that the mix is always changing, the delight factor is high, and your most loyal customers will come back often just to see what is new. If you can own this category, you can earn a lot of word-of-mouth, too.


If you want to own Product as a driver of traffic, choose one of those three categories and own it lock, stock and barrel. They each draw a different type of crowd and require a different type of advertising.

Then again, there is some wisdom in not worrying about owning any of the categories of Product but just dabbling in all three. 

  • Carry some Commodities to draw the masses. 
  • Carry some Niche for the people wanting something different (and to make some profit.) 
  • Carry some Custom to keep the store ever changing and unique.

If you can afford the lower profits on the commodities and the lower turn ratios on the customs, you can have a fun mix that has something for everyone. Focus on owning one of the other major drivers of traffic.

-Phil Wrzesinski
www.PhilsForum.com

PS Some of you might wonder why I spent the first 90% of this post telling you how to own a category, and then end it with a paragraph about why not to own any of them. I do so because I want you to consciously make that choice. I want you to decide what you want to be, and be it by choice, not happenstance. Knowledge is Power (France is Bacon).

The Five Drivers of Traffic – Price

I posted that JC Penney was struggling because it was losing in all five of the main drivers of traffic… Price, Product, Convenience, Trust and Delight.  Let’s look at each one of them separately.

PRICE

There are two pricing schemes that can work to own Price as a driver of traffic – Sales & Discounts and Everyday Low Pricing.

Sales & Discounts is when you constantly have some type of sale or coupon or promotion going on. The tricky part of this is actually making your sales and discounts be worth something. Before the Internet, the simple perception of a sale or discount was enough to draw traffic. But today’s smartphone-savvy shoppers will call you out if all you do is jack up your prices and then offer a discount off that inflated and unrealistic price.

The other downside to Sales & Discounts is that you have to constantly be ramping up the hype machine in your advertising and marketing. Or you have to be sending out coupons and mailers enticing people to stop in.

Everyday Low Pricing is quite different. Instead of the gimmicks, sales and coupons, you simply lower your prices below everyone else and keep them there. It is certainly more trustworthy. It is also easier for customers to check to see if you truly are low price. The hype is gone, but if you do have the best prices, you will get the traffic and sales.

The Internet makes this driver quite difficult for most independents to compete. Pretty much almost everything you sell can be found online, and most often for less.  Unless you only sell items that are strictly protected with Minimum Ad Price (MAP) policies, it is almost impossible to own this driver.

Also remember that you will be competing directly with major chains like Wal-Mart and Target who have three distinct advantages over you.

  • Lower overhead through amazing operating efficiencies
  • Bullying power to get better prices and rebates from vendors
  • Billions of dollars in advertising

Of all the drivers, this one is the least favorable for indie retailers and I wouldn’t recommend it as a strategy.

You still have to have prices that are attractive, however. Price may only be one of five factors that drives traffic, but it is still one of the biggest factors in driving actual purchases.

Check out this free download – Pricing for Profit – that will show you how to make your prices attractive in a price-sensitive retail climate.

-Phil Wrzesinski
www.PhilsForum.com

PS If you do have a price advantage, you have two choices. Shout it to the world, or raise your prices and start pocketing the difference. My dad always said we should never be below our competitors’ prices. No one thinks of us as low price, so if we’re below them, we’re just leaving money on the table.