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Joel nails it: Why Circuit City really closed

Today’s guest post comes from Joel Spolsky by way of Inc. Magazine.

Joel’s closing comment about the death of Circuit City:

For a business owner, there’s nothing more satisfying than watching honest dealers expand their operations while the schmucks, with their going-out-of-business markups, go down the drain.

Man, that’s just perfect. Let ’em shrivel up and die, they definitely EARNED it.

Check out the rest of Joel’s post here.

I’ll admit it. I spent $20 at Circuit City about 15 years ago. But just once. Really.

My only excuse: I wouldn’t have to drive across town to Radio Shack (yes, I am ashamed).

Circuit City wasn’t even a fun place to browse if you’re a gear head (or a wannabe gear head). What’s THAT about?

As for B&H, it’s enough to say that all my camera gear comes from there. Ouch:)

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Social media mistakes small business owners should avoid

Creative Commons License photo credit: notmpres

Today we’re going to talk about three mistakes that I advise small business owners not to make when getting into social media.

#1 – Don’t be a firehose

One of the easiest things to do – and most important to avoid – is the temptation to flood the place with automated messages.

For example, there are tools out there (like that allow you to automatically post links to your blog to Twitter. You can do the same with Friendfeed and Facebook.

Using tools like this to send your blog posts to Twitter or Facebook is fine – unless that’s the only thing you post.

If you’re the Flathead Beacon, CNN or The New York Times, you can get away with that – even though we’d still like to see more interaction.

As a small business owner, your job is not to be a firehose.

Interaction is better. Note the first word in “social media”. It’s social.

It’s not you standing on a corner preaching to anyone who will listen – while you listen to no one and interact with no one.

#2 – Don’t treat me like it’s our honeymoon when it’s really our first date

One of the most common mistakes I see in Twitter is the “Hey, thanks for following, want to buy my product?” direct message (in Twitter lingo, a DM).

Look at it this way. If we meet at a Rotary meeting for the very first time, the first thing you say face to face after we are introduced and are seated across from each other is NOT going to be “Hey, great to meet you, want to buy my product?”

It’s the same thing. Don’t do it.

#3 – Don’t assume that everyone wants to listen to your politics or the F bomb all day

They don’t. Just because the environment is a bit casual on many of these sites, don’t assume for a minute that you are sitting in a bar in a strange town where no one will ever see you again.

Would you have those conversations across the counter with a customer? Would you have them out loud with a friend in your crowded business?

Didn’t think so. Twitter, Facebook and MySpace are also not the place to have them either.

Always remember that you’re taking the time to use these tools in order to better connect with the people who are interested in what your business does, or what you know.

EXCEPT…when it supports the nature of your business. Yes, Ian’s Catholic goods store comes to mind as the easy example.

That may seem a bit cheesy, but the fact remains that if your politics have no business out loud at the counter of your store, then they don’t have any business representing you on Twitter and Facebook (etc).

Finally, watch your online mouth just like you would your real one. It’s still a business conversation.

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When their eyes roll back in their head…

eye roll
Creative Commons License photo credit: striatic

It’s a hint that they’re no longer listening. Really.

Even Robert Scoble (aka Scobleizer) appears to be getting a little frustrated by the apparent inability of tech people to talk to Jane and Jerry Small Business Owner, despite demonstrated expertise in providing tech news.

Bottom line, until you figure out a way to save the geekspeak for Dungeons and Dragons night at Starbucks and talk to your prospects in terms of business results, product benefits, time savings and return on investment, you’ll *never* consistently sell your solution to small business owners.

Yeah, maybe that D and D crack was a bit over the top, but I had to make a point:)

I know you’re really excited about the gigaflops, XML-RPC, LINQ, megabits, megapixels, bailing wire, duct tape and what not…but dude, it like so totally isn’t about that stuff to a small business owner.

Of course, if you’re one of the groups who has mastered this act, keep working on it. Someday, others in your market might catch on, so you need to keep your lead.

Open the conversation

Things to ask yourself before opening the conversation: What’s in it for them, in their terms?

This means a little work on your part:

  • You need to know your customers’ business.
  • You need to know their lingo.
  • You need to know what keeps them up at night (other than the neighbor’s dog).

Yeah, it isn’t always easy – but it is worth the effort to put you well ahead of all those who insist on talking about the technology.

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Oprah is an alien?

Monday’s have been a bit over the top lately, but yesterday was a doozy.

Really, there’s enough things going on to give your business some challenges without adding today’s “entertainment”.

On the other hand, what Monday wouldn’t be complete without:

The only thing missing from today’s headlines might be Oprah announcing she’s an alien and that she’s having the Shamwow dude’s child. Next Monday perhaps.

Seriously though, there’s that issue of the mortgage

Meanwhile, your mortgage is still due and it’s Tuesday so perhaps the time has come to get back to normal.

Given the complexity of yesterday, I thought I’d keep it simple.

If you’re struggling to make your nut this week, here are a few questions to ask yourself:

Who are your customers? Really? Break them down into individual groups with different primary needs.

For each group ask yourself these questions:

  • How can you save them money?
  • How can you save them time?
  • How can you help them be more successful?
  • How can you treat your best customers even better?
  • When did you last speak with your 10 best customers? What else do they need that you aren’t supplying them with?
  • How can you reward your most loyal customers for sticking with you?
  • What can you do to get your newest customer to be your next great customer?
  • Are there any kind of events or workshops that you can offer to them to get them into your store?
  • What about the last 20 customers you lost? Have you spoken with them to find out why they left? Can you get any of them back?

About your products and services…

Can they be separated? Combined? Shrunk? Enlarged? Bundled? Delivered? Shipped? Installed?

Which of them need fine tuning, repair or overhaul?

Think. Then Act. Today.

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Apple’s Dirty Little iPhone Secret

Mac sales are off 3%. What will Apple do???

It’s not just the Mac, Microsoft just had their first quarterly decrease (6%) since they went public 23 years ago, blaming it on slow PC sales.

It’s the recession. It’s the economy. People aren’t buying computers anymore.


Let me take you away from Katie, Brian (etc) and the TV news for a minute, OK?

The missing puzzle piece

What did I leave out of that picture? A couple of things.

First, let’s look at Apple.

If you ignore the 3% downturn in Mac sales, there was a bit of good news from Cupertino recently.

First, the one billionth iPhone application was downloaded from Apple’s iPhone AppStore this week.

Look hard at that number. ONE BILLION mobile applications.

Even if 500,000,000 of these downloads are the iFart application, that’s still a really big number. In fact it’s enough to provide one iPhone app for every human being in the United States, Canada and Mexico combined.

If you use the one billion number, that’s one iPhone app for everyone in the United States, Canada, Mexico and Europe, combined.

Next, despite the 3% drop in Mac sales, the first quarter of 2009 (January 1 through March 31) was Apple’s best month EVER.

Best ever for revenue, best ever for profit. Best Ever. Not in the last few years. For the company’s entire lifetime.

What’d I leave out?

On April 20th, CNet’s article about Apple’s upcoming quarterly financial report was titled “Apple’s Recession report card arrives Wednesday“.

Seems like they’d already decided what was gonna happen.

When Apple announced results, it indicated that iPod sales were up 3% vs. the first quarter of 2008 (1Q2008) so that was kinda good news, but Mac sales were down 3%. Uh oh.

One more thing. Almost forgot… iPhone sales were up 123%.

Someone apparently forgot to send a memo to Apple about the “economic gloom”.

If you dig around a little, you find stories talking about the decline of the computer market and how Mac sales are off 3%, thus illustrating that it isn’t just limited to the Windows-based PC and it’s all because of the state of the economy.

But they forget one little thing: Left out of the sales numbers were 3.79 million Macs.

Shhh. It’s Apple’s dirty little secret

3.79 million iPhones, that is.

See, the iPhone is a small form factor Mac, not just a phone. It’s a computer.

Ask 100 people who sell mobile phones if the iPhone is their competitor and they will all likely say yes. Ask 100 people who sell computers if the iPhone is their competitor and I’ll wager that almost none of them will say yes. They’re dead wrong.

Meanwhile, Apple understands that the job of making a sale is to get a customer, not the reverse. They know that once you buy a Mac, you’re likely to be hooked.

The iPhone lowers the bar and entry objections by providing a nifty computer with applications that you can easily install. Oh and it just happens to be a phone too.

They teach you – in fact, prepare you – for owning a Mac using their phone.

They teach you the same thing using the iPod Touch, which is basically an iPhone without the cell phone, camera and microphone.

Job of a sale: To get a customer

Ask anyone you know who has an iPhone. I’ll bet none of them use it just as a phone.

Ask them if they’ve bought their first Mac yet. If they haven’t, do they say they’re thinking about it? I’ll bet you get a “Yes” to one of those questions.

With Mac’s now having dedicated retail space in Best Buy stores nationwide, that purchase will become easier.

Steve Jobs has to be laughing.

What about you?

Your job is to figure out how to get a customer. You know that once you get them to be your customer, they’ll love what you do so much that they’ll never leave.

All you have to do is get them into the family. It’s OK to start with baby steps like Apple does.

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Anoop voted off American Idol. Economy recovers. News at 11.

Creative Commons License photo credit: boyghost

Yesterday, the International Monetary Fund (IMF, a conglomeration of old money guys from 185 countries) indicated that they don’t see the global economy recovering until 2010.

Meanwhile, Anoop was voted off of American Idol. Wow, I had a hard time getting to sleep after hearing about that:)

The Economy doesn’t have to be Your Economy

“The economy” or “The global economy” may have an impact on your business but it is not YOUR economy.

Don’t let all the doom and gloom junk on CNN and elsewhere cloud your thinking. Sure, some businesses and plenty of people are struggling. Business-wise, look closely at the reasons why.

Look under the covers at the businesses that are having trouble. In large part, a lot of them are businesses that haven’t shown any consideration for their customers in decades, or they stuck in outdated business models for far too long, or that they did things just because everyone else was doing them (over-building, over-extended, subprime lending, obvious stuff).

Examples: GM says they won’t make their debt payment and bankruptcy is likely. New York Times stock said to be worthless.

Are they unrecoverable? Depends. If they continue to try the same things that got them where they are today, maybe not.

Meanwhile, there are shining spots in the business news…

So who is right? The IMF or Apple, Wells Fargo and some local businesses?

It doesn’t matter which of them is right. What’s right for you is what matters.

Care as much about it as they do

Earlier this week a client remarked to me that I work as if I care as much about their business as they do.

Isn’t that how all your clients should feel?

Did anyone ever feel that way about GM or the New York Times?

You get what you focus on. Focus on doing more, better for your clients and you’ll get more, better clients.

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Do your numbers really matter?

Misty Valley
Creative Commons License photo credit: liber

Happens every day.

I see small (and not so small) businesses waste one of their most valuable assets: Their existing customers.

Let’s say you have 1000 customers and you average $1000 per sale per year for each of those customers. That’s a total of $1,000,000 per year. Let’s assume your costs are 34% of sales. More on  that shortly.

Studies have shown that across a random selection of industries, businesses lose 19% of their customers (on average) each year for an assortment of reasons.  That’s 190 customers per year for the company mentioned above.

And you’re thinking “No flippin’ way”.

Here’s the analysis:

  • 1% die
  • 3% move away
  • 5% leave because of a recommendation from a friend or relative
  • 9% leave because they perceive that another company has better products, service or prices
  • 14% leave because they are dissatisfied with your product or service

That’s 32% of the reasons they’ve left your business. The other 68% of the customers go somewhere else for some other reason (probably not the one you suspect).

The other 68% percent of customers start doing business with another company leave because of a feeling of indifference on the part of the vendor (or their staff), leaving them feeling taken for granted.

What about if the quoted research is only half right?

Think about your own experiences. Can you argue with these numbers? Even if your reasons are different HALF of the time, that still makes 34% of the changes due to indifference. Seems like a lot to me.

If that 19% of customers lost per year number is accurate, that also means that a pretty strong 19% gain in new customer acquisition is just treading water.

You’re better than average, right?

Let’s assume that since you read this, you probably do other things to keep your business in better shape than the average. I’ll give you credit for 5% less loss than the average.

That’s still 140 customers. You’re now down to 860 customers not counting new ones that you have to spend marketing money to gain. At $1000 per year, per customer – your revenue has dropped from $1,000,000 to $860,000.

$140,000 feels like a lot, doesn’t it? That doesn’t even count how the economy might be affecting you (if it is).

On the other hand, that’s $50000 more revenue than the average competitor (5% = 100 customers/year times 5) who is losing 19% of their customers per year.

The good news

So if that was the bad news, let’s look at what a little effort might gain you in the way of good news.

Let’s try a 2% improvement on that 14% number. That takes us from a 14% loss to losing 12% of your customers.

It’s a small improvement, so how much meaning does it have?

2% of 1000 is 20 customers. 20 customers times $1000 per year per customer is $20000 in increased revenue from retained customers.

If you run a $1,000,000 per year business, that 2% is a week’s revenue.

Profit: The number that matters

As a percentage of annual revenue, it’s just a 2% gain, but there’s more to it than that.

A 2% gain in retained customers (ie: retained sales of $20000) at 66% profit/34% cost means a $13,200 profit increase of $660,000 to $673,200.

Over 5 years, that’s a total of $100,000 gross revenue increase and $66,000 net profit increase.

That’s a net profit change over 5 years from $566,000 to $500,000 – and that doesn’t count any other growth except to maintain that 1000 customer level. Doesn’t include lower marketing costs to retain customers vs. getting new ones.

For these numbers, a 2% gain in customer retention produces a profit increase of 13.2%.

2% seems like almost nothing, until you look at the bank account.

What can you do to make a measly 2% gain?

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#amazonfail, Niemoller and your business

choc bunny
Creative Commons License photo credit: Asti21

First they came for the chocolate bunnies, and I did nothing because I am not a chocolate bunny.

Quite a weekend we’re having: Passover, Good Friday, Easter, the Masters and a few thousand Easter Egg hunts, to name a few.

Oh, and I smoked a pork roast that turned out totally incredible. But I digress:)

In the midst of all the holiday celebrations, worship, family time and so on, Amazon gets into the act. So much so that they are trending #1 on Twitter (you must be logged into Twitter in another browser window/tab BEFORE clicking this link, sorry but that’s just how Twitter search works).

The hashtag (ie: search term) on Twitter that is receiving all the attention is #amazonfail.

First they came for those with an Amazon rank

It’s been a while since the online bookseller stepped in it and alienated a huge number of people, but they got into the act again this weekend.

Last time it was about Amazon shafting authors who use print on demand services that weren’t owned by Amazon.

This time, it’s some or all of the “adult” community.

At first, it wasn’t clear exactly what was going on (and still may not be), but an official customer service response from Amazon indicates that they are removing sales rank data for content with adult ratings. Amazon now denies this, calling it a glitch.

A growing number of folks in the GLBT (or LGBT) community (particularly on Twitter) are noting some inconsistency of the removed ranking data, noting that it seems to apply more to content of interest to them than to adult material across the board.

No matter what your feelings about the various forms of sexuality, I should remind you about two things:

  • First, the Rev. Martin Niemoller poem, “First they came“. If your business (through you) is willing to take on a group, be careful what you wish for. Be sure of your staying power with your stance on an issue.
  • Second, while there are political and other sensitive issues here, this isn’t why I bring this up. There are business issues intertwined throughout this.

In Amazon’s case on this issue, they risk a nationwide boycott from the LGBT community. If they change their mind, they risk a boycott by other groups. If they waffle and end up somewhere in the middle, they might get both.

Yeah but this stuff has nothing to do with my business!

Not really.

It’s 2009. For no cost, anyone can get detailed info about your political contribution numbers and plot them on a Google map and do any number of things with it, including to suggest that people pay you a visit.

Are you ready for that?

If you think your personal values don’t affect your business, think again.

Every business owner will inevitably find themselves taking a side on a political, theological or similar issue at some point (probably several dozen). You need to think through how you will handle situations like this.

  • Will you bring your stance on contentious issues into your business?
  • If you become active on an issue, will it impact your business and if so, are you strong enough to stand firm when the public attaches the issue to your business? It doesn’t matter what the issue is. What matters is how you will handle it and how your staff will handle it.
  • Are you willing to deal with the fact that your staff feels differently about the issue (whatever it is) than you do? Whether you are or not, you should talk to a HR specialist or an attorney who specializes in employment law before hiring people. HR problems are a great way to lose your shorts.
  • Is your stance on an issue going to affect the clients and employees you attract? As long as you are sure of yourself, that’s the primary concern. Well, that and are you acting within the law?
  • Will your ethics on the issue in question suggest that your business ethics should be called into question?

I’m not asking nor suggesting that you temper your views or how and where you share them with others. Only you can make that decision.

Nor am I suggesting that you be hypocritical. Congruent for sure, but not hypocritical.

What I am suggesting is that you need to decide in advance if you are willing to lose your business (or a part of your business) over your stance on an issue. It’s ok either way,  just be sure of yourself before you go down that road.

Some might suggest that you’ll get more business if you show your colors. In some cases, I think that’s absolutely right. One of the easiest examples I can think of where this likely helps a business is Ian’s stance on China, human rights and his Catholic goods store.

More than anything, I am suggesting that you consider the big picture before you step onto the soapbox.

No matter how you feel, it is difficult to get the genie back into the bottle.

PS: It’s all about the malted milk eggs for me.

UPDATE: An interesting theory on what might be happening to Amazon:

Whether this theory is true or not, it’s a valuable lesson for system designers of social media systems, interactive/community feedback systems and the like.

Meanwhile, a bunch of tweets reference people actively tagging conservative books with keywords that might get them de-listed from the sales rank numbers for the same reason that others are being de-listed.

UPDATE: Amazon says the change in sales rankings is a glitch. In social media circles, they arent getting a lot of traction on that. Time will tell.

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Being Jerry Garcia

Just Good Food
Creative Commons License photo credit: dvs

When Jerry’s Grateful Dead showed up and played, people gathered.


Despite having just a single number 1 hit (Touch of Grey), the band was never concerned about a show’s tickets going unsold. Often, Dead fans bought tickets for every show.

But it wasn’t just a concert, it was more like a Deadhead Convention.

What Stays in Vegas?

If you held a convention for your customers, would anyone show up?

What would they want to learn? See?  Talk about?  Ask you?

Have you created a level of service so high that they’d name an ice cream after you?

What can you offer to them that would make them look at your business like you’re a rock star?

What would motivate them to follow you anywhere, as if you were a modern-day Pied Piper?

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If your entire staff turned over today, would anyone notice?

on a mission
Creative Commons License photo credit: llamnudds

And would they care?

If a long time customer (2 years, 5 years, 25 years, whatever) walked into your business today and all your staff was different from their last visit, would they notice the change?

Why do I ask?

Engagement. Relationship. Stickiness.

IE: Buzzwords that answer the question: “Why the heck should I come back?”

Think about it.

  • Have your employees engaged your customers in conversation, or just sold ’em something?
  • Have they worked to create a relationship that causes their customers to gravitate to them or ask for them by name when they call?
  • Do your customers go to their assigned sales rep because that’s who they’re assigned to, or because they know they’ll get the help they need from someone who knows their situation better than anyone?
  • Have they established a substantial level of trust with that customer to encourage repeat visits?
  • Have they exerted the effort necessary to learn as much as they can about the customer in order to serve them better?
  • Does your staff take ownership of their clients and their situation?
  • Do your clients ask for a particular waiter when they come to your restaurant?

Is 2% the only difference between you and them?

If your staff hasn’t taken the steps I described above, wouldn’t it be a lot easier to go elsewhere to save 2%?

How are you insulating yourself from that?