How Can Your Business Respond to High Interest Rates and High Inflation? (Part 2) Know your Customer
Last month, we started a discussion on how best to respond to inflation and high interest rates – an economic double-whammy hitting us all right now.
We suggested that you take some time and ‘get to know your numbers’. Having a strong understanding of monthly costs, revenues, and margins is always good practice. We then suggested that you dig deeper and determine what products or types of products are generating the bulk of your sales. What products contribute the most to the bottom line? Finally, we suggested that you get familiar with your Key Performance Indicators (KPIs) – those other scorecard items that will help you with some big decisions – like whether to open on Sundays, or whether to open early, or stay late.
This month, we want to look more closely at your customers. Who are they? What do you know about them?
Who’s your customer? It’s a basic marketing question, but you likely have more than one. For example, a lumber supply and hardware store may cater to Do-It-Yourselfers (DIYs), as well as professional contractors. A women’s clothing store may cater to those in search of affordable work wear but may also cater to those in search of something more formal. In each example, the stores can win over their customers with a variety of products and accessories in each price point, and support those products with good product knowledge, and some self-serve resources.
Knowing who your customer is, is critical to success in any business climate – especially right now when 34 per cent of Canadian households and 43% of BC households say their financial situation has worsened over the last year. [Association for Canadian Studies, Feb 2023). Don’t let the economic numbers discourage you though - your customers are still buying. You just need to keep reminding them to buy from you.
So, here's a question – if you were able to offer your customer(s) an amazing deal next week, how would you let them know? Would you call them, or email them? Would you mail them personalized letter mail? Truth is, you might consider all of these but only if you have customer list.
Don’t have a customer list, yet? Unsure about whether you want to? Consider the math. Let’s say that 100 people follow your monthly newsletter, and you know (from your POS) that on average those on your list spend $34 each time they visit. You’ve also learned that they buy from you (on average) three times a year. Using that math, your mailing list is worth $10,200 ((100x34) x3)). Now let’s have some fun …
If you could increase the average transaction by 20% from $ 34 to $ 40.80, your mailing list would be worth $ 12,240 ((100x40.80)x3))
Then, if you were able to generate one more purchase a year, the number would increase to $16,320 ((300x40.80)x4)).
Base on this formula, every new subscriber is worth roughly $ 163 to your business.
Based on these numbers, adding one new person a day to your mailing list means 312 new people a year assuming a 6-day work week. (52 weeks x 6). All other things being equal that’s a potential $ 50,586 in additional revenue! Not bad. Not bad at all.
Of course, there’s more to it than just numbers. You can use your subscriber list to help you select new brands, through the use of surveys. After all, these are 'your people', if you treat them well they will also tell you who your real competition is. More importantly, they'll tell you why! Sure, not everyone responds will respond to your surveys but, over time, your surveys will generate better intel. Along the way, you'll develop a relationship with your customer that you would never have thought possible.
If collecting names for your mailing list seems daunting, here are three easy ways to get started:
During the transaction - ask your customers to join your mailing list. Be ready for some push back - customers will want to know what's in it for them.
On your website - invite visitors to sign-up for your newsletter. You'll be surprised at how many sign-up after 9pm.
Host a special event - (this is a personal favorite) gather people together for an event and hold a raffle for those those provide you with an email address. Over time, you may wish to have a contest or a giveaway specifically for your subscribers.
Overall, the thrust of our message today is "know your customer". Creating a newsletter can be time consuming, and will challenge your time management skills but we're suggesting it because we know that it works. If you stick with it, you'll likely find that email and newsletter marketing is the most effective way to develop a relationship with your customers and grow your brand.
Norm Adams, MBA, provides coaching and training strategies to grow small and medium sized businesses. Need a fresh set of eyes on your business? Drop Norm a line at firstname.lastname@example.org.
Norm lives on the unceded traditional territory of the Lheidli T’enneh First Nation, works part of the Dakelh (Carrier) peoples' territory.