3 Ways For Local Businesses To Benefit From Being Community Insiders

Being a believer in having a vibrant local business community, I want to support our town’s local businesses whenever I can. Recently, I spent over 3 hours at a recent Business Task Force meeting discussing ways to increase the vitality of our local economy. Putting my money where my mouth is, I set out last weekend with my 17 year-old daughter to run pre-prom errands as much in town as possible. We had the dress but needed it hemmed, needed a slip and had to schedule appointments for hair and makeup before the big event.

First order of business was getting the dress hemmed. In our town, there are several dry cleaners that do alterations. We went to the most exclusive one first and struck out. We struck out again at the number 2 provider. Apparently, people in our town only need their clothes altered on weekdays. Neither store had any one on site on a Saturday morning to pin the hem.

With two strikes against us and determined not to strike out on the dress-related errand front, we abandoned our local businesses and set off to Nordstrom at the nearby mall. They didn’t have the slip we wanted, but offered to order it and ship it directly to our home at no charge. Great service!

Next, we asked in a tentative voice if they would hem a dress that had not been purchased at the store. The timid associate who helped us with the slip asked a colleague and was told “no.” It seemed to us that the colleague hadn’t actually listened to the question – we asked our timid associate to ask the department manager. We got the answer we were hoping for, and the alterations lady appeared on the spot! Nordstrom has always gotten service. And they understand their customers’ lives. Score one for the Seattle chain store!

When it came to the hair and makeup appointments, we again went local. Here, the providers were far more tuned-in than the dry cleaners. We found a few who were willing or even planning to come in on Sunday (our high school’s prom is always on Sunday night, for some reason). One enterprising salon had created a Prom Special, a package deal for hair and makeup. Smart marketers at work!

What’s up with the alterations people? What can other local businesses learn from these vignettes? Here are three ways local businesses (providers of products and services) can take advantage of the fact that they are community insiders:

1. Make your services available when people in your town are likely to use them. Whether it’s the seamstress at the dry cleaner’s or the local coffee house, if you’re not available when potential customers are about, you’re not only missing a revenue opportunity you’re risking falling off the community’s radar. The last show at our local movie theater usually gets out around 11 pm. Almost all of the stores in town close at 6 and most restaurants and coffee houses close at 9. Affluent people are strolling back to their cars with nowhere to linger. Give them an opportunity to come in and buy something!
   
   
2. Make it your business to know what’s going on in your town, and tailor your offerings for local needs, tastes and events. Unlike command-and-control chain stores, local businesses can be more nimble. As the hair salons in my Sunday prom story show, being tuned into the local community can give local merchants an edge on the competition in the surrounding area. By offering specialized products and services (e.g., hair and makeup for the prom or box lunches for the mountain play every Sunday in June), they earn incremental revenue and as importantly, they motivate residents to give them a try when they might not otherwise, and have an opportunity to turn them into more frequent customers.
   
   
3. Help consumers extend the useful life of their purchases. As sustainability grows in appeal and shoppers become ever more frugal, interest in maintaining and repairing clothes and other items rather than simply replacing them is already on the increase. Expect it to continue. Being known as the place that can help people to get more use out of their clothing is on-trend and personal. It's more natural for a local business to provide these services.
   

Smart seamstresses will see an opportunity to help consumers make their clothing last, and will make themselves available to fit their schedules. Those who don’t figure it out will continue to reduce their hours until they are no longer in business, unless Nordstrom drives them out of business first.

5 Must-Do’s in Building Customer Loyalty

Many executives use loyalty programs to buy customer loyalty, offering discounts and giving away products or services, in the hope that they will make it up on volume. That said, success in implementing these programs and integrating the systems that support them has been somewhat limited.

According to an April 9, 2009, Aberdeen Group report: “Even though 53% of retailers surveyed indicate that customers can join their loyalty program on the retail website, the same is not true at the store POS. Despite the growth in online retail sales, store sales account for bulk of retail revenue and customer traffic. A mere 37% of all retail respondents reported that customers can join their loyalty program via the POS system in stores. This gap between the POS capabilities the retailers possess and POS processes that enable loyalty program implementation show that retailers are not taking advantage of the technology afforded to them."

Given the systems and other challenges in implementing “traditional” loyalty programs where customers earn points and redeem them for products or services, program design deserves careful thought. Here are 5 steps every executive team should take to ensure customer loyalty (and loyalty program success):

1. Know whose loyalty you want
   
   
2. Identify what you can do that will be motivating to them, as well as differentiating
   
   
3. Get clear on internal expectations, roles and responsibilities
   
   
4. Test and learn
   
   
5. Rollout and measure

It’s probably not surprising that e-tailers are the innovators on this front. They tend to have newer systems, integrated databases, and more business model flexibility. Zappos is a great example of a leader and loyalty innovator. Founded in 1999, the shoe e-tailer has 7.4 million total customers, and 3.3 million of them have made a purchase in the last 12 months.

What do they do that’s so special? Zappos has a huge assortment – 230,000 SKUs of branded footwear – and offers free shipping in both directions. That means they have eliminated the downside to buying shoes (or apparel) online — i.e., the fit issue. At Zappos, there is no added cost to ordering multiple sizes of multiple styles and returning the ones that don’t fit. That’s standard for everyone.

What earns Zappos rave reviews and WOM is the way it consistently surprises customers with free shipping upgrades so their shoes arrive sooner than expected. Our work with women shows that shoes are one the fastest ways to her heart, It’s not only the free shipping and surprise upgrades that make customers rave about Zappos.

Employees are clear on the importance of building lasting customer relationships and on their roles in the process. Lots has been written about Zappos culture and the emphasis on delivering a WOW experience. One of the best descriptions is from an interview of Zappos CEO Tony Hsieh that Bruce Temkin of Forrester did last year.

The company has a clear focus on its target customer, knows what motivates her and appeals to that clearly and convincingly. They have employees on board, and use data to improve the customer experience. Delighting customers clearly pays Zappos dividends: Over 75% of purchases come from returning customers, and the company reached $1 billion in sales, generating over 30% comps the last two years, alone!

Loyalty pays. Doing loyalty right pays more.

Good Service – Is It Too Much To Ask For?

As the economy falters, more people are working harder for every dollar, and parting with it ever more reluctantly.

The Deloitte Research Leading Index of Consumer Spending tracks consumer cash flow as an indicator of future consumer spending. The index has been falling since October 2007 and fell again last month. "Consumers in nearly every income group are being more cost-conscious," said Stacy Janiak, Deloitte's U.S. Retail leader.

In this environment, what’s happening to customer expectations? Our tolerance for shabby service is going down. According to RightNow’s third annual Customer Experience Impact Report issued earlier this month, we expect more as we spend more carefully. They found that in 2008, a record high 87% of consumers stopped doing business with an organization after a bad customer experience, up from 68% in 2006. They also found that even in the current down economy, 58% of U.S. consumers say they will always or often pay more for a better customer experience.

What are the implications of rising customer expectations despite a tight U.S. economy? First, companies should think twice about cutting customer service. Second, they should look at who is getting high marks for customer service and understand what they are doing right. Last, they should look inward and evaluate what they can be doing better to meet rising customer expectations.

So, which brands get customer service right? In March 2007, Business Week published its first-ever ranking of 25 client-pleasing brands. The Top 5 on Business Week’s list include: USAA, Four Seasons, Cadillac, Nordstrom and Wegman’s. All those are commendable and expected.

More recent, interesting and revealing are the findings from the third annual National Retail Foundation-American Express Customer Service Survey conducted by BigResearch in January 2008. The survey of 8,800 consumers found L.L. Bean delivers the best customer service in all retail formats. Internet-only retailers Zappos.com, Amazon.com, and Overstock.com came in second, third and fourth. I haven’t purchased from L.L. Bean in years (preppie is not my look anymore and my kids aren’t into it, either), but am a fan of Zappos and Amazon, and customer service is a big part of why.

Zappos makes it easy and risk free to buy from them. By not charging extra for standard shipping (in either direction), they eliminate some of the biggest barriers to online shopping – the hassle, disappointment and cost of returns. When I’m unsure what size shoe I need, I buy two pairs. That way, I get the right size, I get a return postage-paid envelope and all I have to do is drop the extra pair in the mail and wait for the refund to hit my credit card. And, they do surprise free shipping upgrades.

CEO Tony Hsieh tells customer service stories that rival the urban legend about Nordstrom allowing a customer to return tires (which the store never sold). One story is about a customer who was traveling on business and didn’t know where to call to have pizza delivered to his room. He called Zappos and asked for help. The Zappos customer service rep got the necessary information, placed the order and had the pizza delivered. Of the company’s 10 core values, #1 is: Deliver WOW through service.” And they do!

And Amazon is a definite favorite in our house. The site is fast and easy to use, and they have an ever-expanding assortment to choose from. Because we buy so much from them, all our shipments are upgraded to next day at no extra charge. This week’s Sunday NY Times profiled Amazon’s long road to surpassing Ebay in market capitalization. “While E-Bay was buying into classified advertising, online payments and Internet telephony, Amazon spent hundreds of millions of dollars building its brand as a trusted retailer — hiring customer service representatives and returning money to customers when transactions went awry.”

Together, this data is a wake up call for retailers and others. The economy is tough and getting tougher, and brands known for great customer service should be better able to ride it out.

Five Things We Want in a Brand Now and Who Delivers

We have high hopes for brands. In fact, brands are all about hope. We want them to show concern for less fortunate people, provide us great service, give us good advice, care about the planet, and help us take care of ourselves. In looking at the brandscape recently, I found a few surprises. Here's a summary, and a few comments on each one.

The brands that deliver now:

1. Social Conscience:
   Benetton uses its ads to make a case for ending hunger, fighting AIDs, and more. The images are usually bold and often shocking. It's attention-getting stuff. TOM’s Shoes takes a different approach by building social responsibility into its business model, not just its marketing. They give away a pair of shoes to a child in Latin America or Africa for every pair they sell. Customers can get in on the Shoe-Drop events, too.
   
   
2. Great Service:
   You’ve heard the urban legend about Nordstrom taking back defective tires, which they've never carried. They’ve been the poster child for customer service. Zappos.com strives to be the online service leader, and through their policies, training, and depth of inventory, they are doing just that. They carry all the major brands, shipping is free, shipping upgrades are used to surprise and delight customers and returns are accepted, no questions asked.
   
   
3. Good Advice:
   In the old days, financial advisors did all the talking. Remember EF Hutton's "When EF Hutton talks, people listen"? But the slogan belied a one-size-fits-all approach to advice. In a perfect Web 2.0 take on what good advice is, Schwab acknowledges that people today want someone to listen them, and give advice that's relevant to their situation. Schwab's tagline, "Talk to Chuck" says it all.
   
   
4. Green Cred:
   From its support of the Surf Rider Foundation to effectively creating the market for organic cotton to working with their suppliers to produce recycled raw materials, Patagonia was the first brand with Green Cred. And by using Patagonia's products some of that cred rubbed off onto customers. Now, Nalgene is the way to make a statement about your Green Cred. Their polycarbonate and HDPE bottles are the way we'll keep bottled water companies from draining our springs and avoid all those water bottles ending up in our landfills.
   
   
5. Good For Your Body:
   Thanks to fruit smoothies, Jamba Juice became known as a provider of healthy snacks. Here’s a surprise: Taco Bell’s Fresco Menu is lighter fare than most items on the Jamba Juice regular menu, and its “Why Pay More?” campaign makes it good for your wallet, too.
   

Bring us your poor, your tired, your broken down merchandise

Seems like a lifetime ago customers brought broken merchandise back to the store or a designated repair center to get it fixed. Those days are long gone. Now, retailers allow customers to bring in their ruined merchandise and exchange it for new products or a store credit. Some will even issue a refund.

In their 2006 MIT Sloan Management Review article, James Stock, Thomas Speh and Herbert Shear lament how product returns have come to be viewed by companies as a necessary evil, a painful process, a cost center and an area of potential customer dissatisfaction. They show that many successful organizations have realized that an effective product returns strategy can provide a number of benefits, such as improved customer service and customer knowledge.

There's the famous urban legend about Nordstrom taking back supposedly defective tires - which they've never carried. Even more impressive as well as true - since 1986 American Girl has had a Doll Hospital. They invite customers – 5 to 9 year-old girls – to bring or send in their broken dolls to have them repaired. And that’s not all. The doll comes home wearing a hospital gown with a “Get Well Soon” balloon in her hand. That’s amazing – breathtaking, in fact.