Paco Underhill’s Why We Buy

Paco Underhill has written one of the most essential books for all retailers, marketers, product designers and business owners and managers.  This book describes the “science of shopping” in a detail that I have never seen.  From Underhill’s research he as gained valuable insight into the behaviors of all shoppers in just about any circumstance possible.  From merchandising and store layout to signage and salesmanship Underhill has given retailers the keys to successful selling.

To begin the journey to retail success Underhill discusses his research processes.  From countless hours of personal observation, video taping, and interviews Underhill has gone further and deeper into the psyche of shoppers than anyone thought possible.  Through the research presented in the book we learn about the “Butt Brush Theory”, an interesting phenomenon that all stores should avoid.  Further into the book Underhill underscores the vast differences between the way that men shop compared to women.  He even goes so far as to explain the effects of women shopping in groups, solo, or with children.  Underhill also emphasizes in Why We Buy the physiological requirements of shopping and how retailers and product designers must meet the physiological needs of their target market segment in order to achieve sales success.  The statistics and raw information combined with the real world examples presented by Underhill provide ample opportunity for the reader to learn and understand the optimum retail process.

One of the most helpful things presented in the book was the notion that the three pillars of retailing; design, merchandising, and operations must all work together for optimum sales performance.    In the many examples that Underhill provides on this topic we learn that by merchandising sweaters on tables rather than racks provides a better selling environment for the customer, however, it increases the need for an employee to fold and re-fold the merchandise.  This shows the effect of merchandising on operations.  Each of the three aspects of retailing have a direct impact on the other two.  Underhill really goes above and beyond explaining each component of retail and the optimum strategies to maximize all three into one great retail sales machine.

This book is a must read for anyone in retail, product design, or store management.  Even one of Underhill’s tips in Why We Buy has the great potential to increase sales by a rather substantial percentage but using all of his information can be a game changer for a number of businesses.

Tips for Adding New Revenue Streams

As business owners we all want to maximize our profits in any way we can, especially now during the economic downturn.  Many times we keep doing what we’ve always done during tough times when we really should be, as cliche as it is, “going outside the box”.  What does this “going outside the box mean”?  Well it probably has different meanings for different departments in the business.  Right now for this post I want to focus primarily on getting outside the box for our revenue stream.

Adding new revenue streams to an existing business is a great way to improve cash flow during tough times.  One creative “outside the box” idea may be all the difference  between success and failure.  As businesses are closing at an alarming rate and people are losing their jobs it becomes necessary for the business owner to figure out not  how to thrive but how to survive.  I believe that adding new revenue streams to an existing business is a great opportunity to help a business survive.  The question is how can we add revenue streams to our existing product or service line without offending current customers or sacrificing current service levels?  Here are some ideas to get you thinking about creating new revenue streams.

*Provide a la carte services/features~Many customers may not need or want all of the services or features that your business offers in standard options.  Try breaking everything down into individual components to allow people to purchase only what they need.  While you do this you might also be able to add features/services to your offering that people have requested.  By providing your customers with the option to “pick their price” they will be more likely to make a purchase.  Once they are committed to one feature or service you can always try the upsell to further their committment.  Just don’t push too hard.

*Provide varying levels of customer service~The main thing to understand here is to not dilute your current service level but to add another tier of “priority” service at a premium price.  Many people will pay a premium to be placed at the front of the line for service.  We see amusement parks doing this with success so we should be able to work this into everyday business as well.  It can be as simple as having a dedicated phone line, a special kiosk, or specialized representatives ready to serve these paid premium customers.

*Leverage your website traffic with affiliate programs~ If your website is one of the lucky ones that receives hundreds, thousands, or even millions of hits a month it might be fruitful for you to sign up for some complementary product or service affiliate programs.  By signing up with affiliate programs you can get paid on a pay per click or pay per sale basis and earn some additional revenue that may help you with your cash flow.  Do not sign up for affiliate programs for competing products or services which could hurt your primary business.  Your business may be able to cover website costs through affiliate programs alone.

*Self Publish~If your business has an ebook or some other form of written documentation that is informative consider publishing it and selling it through Amazon or Lulu.  It would be a good idea to keep your free e-books available but also let potential clients know that there is a printed version available with extra chapters, bonus material, worksheets, or some other premium.

*Create new uses~Most of us have heard the story about how baking soda has been marketed with several different uses in mind, baking, cleaning agent, fresh refridgerators, etc.  See if you can do the same for your products or services.  For example, if you sell scented jar candles don’t just sell the fragrance, sell the mood, sell the light for the next power outage, sell the table centerpiece.  I have a feeling that just about every product can be marketed and sold for a purpose other than the original intent.

*Develop new markets~As marketers we are always trying to focus on our target market.  It is always target market this and target market that.  Well, sometimes other, non-target, markets may be just what our business needs in order to succeed during a recession.  Take Converse’s Chuck Taylor shoes.  The original market for these shoes was basketball players.  I remember wearing my Chuck Taylor’s during basketball games but look at them today…they are a fashion craze with camoflauge, hot-pink, and eve denim versions of the veritable classic basketball shoe.  This is just one example where a product has shifted “target markets” and been extremely successful.  I suspect more chuck Taylor’s are sold for fashion than basketball today.

These are just a few examples of ways to add revenue streams to your exisitng products and services.  Any extra revenue generated from new revenue streams is a blessing in today’s environment.  Take your time and be creative.  It is okay to “think outside the box” even though it is a terrible cliche.  Tell us how your business is adding new streams of income in the comments section.  I look forward to hearing some other great ideas.

Have you been busy?

If you’re a business owner that deals with customers and clients on a daily basis there is no doubt that at least once a day someone will ask one of these questions.  If you’re anything like me in my retail store you want to say “It’d be a whole lot better if you’d shop rather than yap about the economy.”  But, of course…we can’t say everything we think.  With trillions of dollars in deficits, unemployement at a high point, and the constant drumbeat of the media and various politicians “talking down” the economy it is no wonder that people wonder how the average business is performing.

I have found that people are using the economy to not make purchases.  I know its obvious right; but think about this for a minute.  The more bad news people here the more unlikely they are to make a purchase.  Look at the insanely simple graph showing the relationship between bad economic news and the customers liklihood to purchase. It is painfully obvious but the more negativity people hear about the economy the more unlikely they are going to spend their money, especially with those of us in the “non-essentials” businesses.  I have found that when someone asks “How’s business?”,  ”Keeping busy?”, or my personal favorite “Where’s Wal-Mart?” they are more than likely not going to be making a purchase.  Now their apparrent care for our well being as business owners, although nice, is really about them creating an excuse for not buying.

As business owners we can reframe the thoughts of the people that ask these questions.  Normally we would say something like “Yes business is down but not too bad” or maybe even poor mouth it a little more and say “My goodness it’s terrible.  I don’t know if we’re going to make it.”  Even if the person feels sorry for you or would like to be compassionate and help they still may not make a purchase because we have affirmed their thought that “nobody else is buying so why should I?”  We can change the entire outlook on the issue by reframing our answer to these questions with positivity and an encouragement to purchase.

In my store for example I was telling people that “Yes, indeed we are slow and just like everyone else we are hurt by the bad economy.”  In the last week or so I decided to try something different and it worked.  People’s general tendency is to follow the crowd and we can help create a positive purchase thought by answering their “How’s business?” question in a way that makes them realize that they should purchase.  Here are some examples that I’ve used with some success:

Customer:  So, How’s business?

Me:  Well it’s been slow but we’ve found that over 90% of the people that come into our store purchase something so we’re doing better than a lot of people.

Why this works:  You’ve told the person that  a great majority of people entering the store at any given time are making a purchase.  This alerts the customer that if they do not make a purchase they are in the minority, someplace most people don’t want to be.  This also reframes the bad information that they’ve heard and seen into a positive light thereby lessening the impact of the bad economic news.

Customer:  So, Have you heard of a lot of people losing their jobs?

Me:  Well I’ve heard of some folks being in unfortunate situations but if you look at it we have 90% employment which is pretty good when you think about it.

Why this works:  The people are so used to hearing the negatives that they sometimes lose perspective on the positives.  Sure 10% unemployment is terrible but 90% employment means that most people are doing okay.  This also shows that by reframing the image of negativity into a “glass is half full” mentality can help reduce the affects of bad economic news and increase the liklihood of someone making a purchase.  One more example.

Customer:  So have you noticed a drop in sales?

Me:  Well it seems like people are taking advantage of some great opportunities.  We’ve noticed people buying more of “x” and “y” because they know that the prices will never be this good again and they don’t want to miss out on a great opportunity.

Why this works:  Again, reframing the issue.  This one creates a timeframe of action for a customer.  By hearing that other people are taking advantage of sales, overstocks, etc. they believe that they may be left out if they don’t act immediately to make a purchase.

Of course the economy is affecting every business and until our “leaders” in Washington realize that in order for small business to create the jobs, wealth, and standard of living to which this country has grown accustomed  they are going to have to get out of the way, lower taxes and leave the market to operate as it should.  Without interference.  But now we know that by reframing people’s perceptions we can increase the liklihood of them making a purchase.  Emphasize the positives, I know it’s hard some days but that is what is going to keep some businesses alive for the recovery that will come.

One of the many benefits to owning your own businesses is the flexibility that you have to do basically whatever you want, whenever you want.  That is why it has been so long since I’ve posted.  I have found that spending time with my family rejuvinates me and helps me think more clearly and write more insightful and useful information.  My time off has also given me the opportunity to catch up on several books that I had been wanting to read for a long time.

Sometimes though, the flexibility of being a small business owner can hurt.  Take the last month for example in my life.  I haven’t really paid much attention to posting information here because gosh darn it…it’s my blog and I don’t have to write if I have something better to do.  Well that’s all well and good but I’ve probably lost a few readers during the course of the month because there have been no updated posts, not isightful information on how to grow your business, and no real tips on dealing with employee issues.  Well my friends…that is about to change.

Now that my wife is back to school I’m going back to work too.  Get ready for some new book reviews, some new podcasts…(we may even add video podcasts in the next month), and some great new insights into how we run our businesses on a day to day basis.  Plus I have been working on another project and it will be launching soon so keep your rss feeds tuned in and be ready to take your business to the next level with some great new information.

In order to hold myself accountable I am setting the following schedule so that you and I both know what to expect from this blog.  New posts will be added on Sundays and Thursdays and new podcasts will be released on Mondays.  I look forward to the months ahead and hope you will continue to join me as these next few projects come to life.

Book Review

We Are Smarter Than Me

We Are Smarter Than Me

New technologies create new opportunities to change the way we accomplish a variety of tasks.  The authors of this book, Libert, Spector, and Tapscott have used the current rise of social media and social networks to gain information for this book.  The experiment started when the authors realized that there is great power in the community and that the power within the community can have huge implications for organizations and business.  This book discusses the power of communities not only as comentators on a product or service but also great contributors to the success of a product or service.

We Are Smarter Than Me uses real world examples of how organizations have utilized communities (or crowdsourcing) to improve their research and development, marketing, customer service and virtually all other components of a business.  The vignettes presented in the book from such notable companies as Proctor and Gamble, Intuit, and Netflix show the various benefits of  using communities.  As the title of the books suggests the communities are smarter as a whole than a company’s management can be by themselves.  For example we learn in this book that Virgin Mobile created a team of elite young and active customers that served as both a focus group for new ideas and products and a loyal customer base that promoted the service to peers.

We Are Smarter Than Me also includes tips on how to use a community for your own business needs.  Another example in the book shows that loayl customers of a company can also serve as the support team.  A business can create forums for people to ask questions about a product or service and loyal, long-time customers can be given the job of moderating the forums, in many instances without any expense to the company.  This also serves as a way to show that the business is open and honest about the products and services it offers.

Reading this book helped me realize that all businesses should make the effort to create, develop, and nourish a community of loyal customers to spread the word about the business, provide valuable feedback about the products and services, and finally serve as goodwill ambassadors of the company’s brands and products.  For a very important lesson on this check out page 63 where the authors discuss P&G’s word of mouth program.  Go on out and create a community of your own with the advice and counsel of Libert, Spector, and Tapscott.

Book Review

Death To All Sacred Cows

It is always refreshing to read a business book by an author, or in this case authors, that have a good sense of humor.  Bernstein, Fraser, and Schwab use a perfect combination of wit, sarcasm, and humor to make an impact on the reader.  The authors hail from a very large advertising agency, The Gate Worldwide, where they kill sacred cows on a daily basis.  Now before calling PETA and complaining about an advertising agency killing cows please continue reading…

The notion of a sacred cow is more than a blissful bovine grazing in a field.  The authors have coined the term sacred cow to mean a “saying, motto, or aphorism about how business should be conducted that is widely assumed to be unassailably true.”  So the cows in the pasture are safe but what we thought were our business norms are sent to the slaughterhouse in this sometimes hilarious but always insightful read.  The authors have cleverly created chapters for each sacred cow and have included tidbits of case studies, horror stories, and anectdotes to prove their point that business norms as we know them are not always true.

For example, the sacred cow “Don’t Screw Up” is something that we think about just about every day.  By all means don’t screw up the sales presentation…don’t reply all to an email, etc. etc.  But the authors of this book tell the tale about Pfizer’s screwup in the 1980s that failed to treat hypertension yet created an enormous blue pill that created the hit single “Viva Viagra”.  So screwups are okay and these authors present other great tales about how this sacred cow should be killed.

Other sacred cows that the authors recommend killing are “The Customer is Always Right” (my retail experience will pull the trigger on that one), “Follow the Leader”, and “The Goal of Marketing is to Sell a Product.” By sending these and other sacred cows to the slaughterhouse Bernstein, Fraser, and Schwab have left the pasture for the competition and will give the reader’s business an surge of innovation, energy, and efficency.  Even without the business insight and information in this book the humor and wit by themselves are well worth the read.  Bernstein, Fraser, and Schwab deserve a fine cut of steak for writing this book.

What I Noticed While Traveling…

My wife and I just returned from our overdue vacation to Ocho Rios, Jamaica.   During the trip I had several opportunities to view and reflect on the way businesses and products were marketed and I thought I would present some of those thoughts here.

The first thing I want to talk about is missed opportunities.  During our visit we went to a couple of different “crafts markets”.  Now when we were on our way to these markets we were expecting to see individuals that make their products and sell them.  However what we found when we arrived at theses so-called “crafts markets” was one booth after another with the same, identical merchandise.   Not only were the “hand carvings ” from the first booth we looked at identical to those in the third, fifth, and all of the other booths but they were also accompanied by people claiming to have carved the pieces  and pushing the products with an aggressive sales pitch.   In addition to carvings there were baskets, purses, t-shirts, dresses, jewelry, and other items but nothing was different from one booth to the next.  Everything at the crafts market was identical, even markets miles apart had the exact same merchandise.  While at the markets we were skeptical about buying from anyone because we were afraid someone down the line might have the same thing at a more negotiated price.  We did end up spending about $25 with two different vendors but I wonder what we would have spent if there was product differentiation at the market.

Jamaican Crafts Market -Ocho Rios, Jamaica

Let’s just say that if each booth had something specialized for example a carver booth, a jewelry booth, a souvenir booth etc we probably would have spent more time in each booth looking at the items and probably purchased more if the items were marketed better as “local hand made” rather than mass produced as was the case.   Differentiating the products in each booth would have gone a long way to improving the experience.  In this circumstance, the “Wal-Mart” approach of being everything to everyone didn’t work for us and I don’t think it worked for the majority of the people we were with.   I was left with the impression that the craft markets as a whole were owned by one individual or company that purchased all of the goods and distributed them to the “crafters”.   It also made myself and other visitors feel scammed because they were posing as artisans or crafters but really it was just a bunch of people selling the same manufactured goods.

Another thing I noticed while at the all inclusive resort was the amount of waste generated by the food service.  Not only is this a great expense to the company but it is also an environmental concern with waste management.  Something that I would suggest to the resorts would be to label and explain the food choices more clearly so that people will not try things they know they will not enjoy.  It might also be a good idea to survey customers to find out which food options could potentially be eliminated from the menu and what is lacking on the menu.

In addition to the food waste one really annoying thing took place at the hotel that I would suggest goes against their goal of creating a relaxing vacation environment.   At our resort, and I’m told at others as well there were several different restaurant choices for dinner.  There was the main dining room buffet and then five or six other restaurants that required reservations.  Now the reservation desk consisted of one individual with handwritten reservation books for each restaurant.  Very quaint I know but very inefficient as well.  Also, the reservation desk was open from 8:00 a.m. to 4:00 p.m.

Our second day at the resort we went to the reservation desk at around 1:00 p.m. and were told that all reservations were taken for all of the restaurants.  Now keep in mind this is three hours before the reservation desk closes.  So I asked to make a reservation for the next night and was told that they only do reservations for the same day but just this once she would give us a reservation for the next day.  Good thing too, because as we left the resort for our excursion into the crafts market at around 8:00 the next morning there were about 100 people lined up for the reservation desk.

Now why on earth should people have to get up early to plan their dinner on vacation?  Wouldn’t it be more appropriate for the resort to let people make computerized reservations for whichever days they need at one time?  Is it right for people to have to get up and wait in line on their vacation just for a good meal?  I don’t think so.  I would categorize this as a customer service issue that should be addressed by the resort.

It was very interesting to learn the customs and trends in another country and to see how things are marketed and sold.  One thing that the people of the “crafts market” could learn and something that we should all remember is that our product or service must meet the needs and expectations of our target market.  All in all it was a wonderful trip and I will put into practice some of the other things that I learned and I will post about them in the future.  All the Best!

During the next week I will be traveling with my schoolteacher wife as she begins her well deserved Summer Vacation. Vacations are not normal for me, nor do I expect them.  I was always raised to work hard and focus on that so traveling has never been a top priority.  I am very excited to be taking this trip with my wife for several reasons.  The first and obvious is the time we will spend together, but in addition to that, traveling to new countries can open one’s eyes to new opportunities.  

Seeing how different cultures work, how they shop, and what their marketing messages present is an interesting way to evaluate your own business in your own culture.  As a traveling entrepreneur for the next week I will be seeking out new ideas from a different perspective.  I will see marketing messages from an outsider’s point of view and begin to understand how individuals or businesses not in my industry or target market may view my messages, and hopefully, I’ll be able to develop a new message to these outsiders from the experience of being an outsider myself.  

Other things that I will be paying attention to are the displays stores use to sell their wares, the outdoor signage promoting various businesses, and the pricing strategies for market type businesses.  There are so many variables when traveling abroad to look at from an entrepreneur’s perspective.  Other things to consider while being a vactioner are service levels at airlines, hotels, and restaurants.  As a customer I will use these experiences to determine what customer service activities are effective and which ones are not and apply that knowledge to my own businesses. 

Using your vacations and travel experiences to gain practical  knowledge all while relaxing and enjoying the pool or ocean is a valuable tool toward greater business success.  Discussing service levels, what worked and what didn’t, with travel companions is a real world look at business and a great way to evaluate some of your own business knowledge and practices.  During your Summer Vacations pay attention to what other businesses do whether it is in a different city or a completely different country.  Feel free to post comments on this post about what you learned about business during your Summer Vacation.  We’ll be back with a new Podcast on Wednesday June 10th.  In the meantime…All the Best!

Are employees empowered to make decisions?

Do you trust your employees?

There are many good reasons to empower employees to make decisions.  First of all it shows confidence in their abilities and is a symbol of trust.  Empowering employees to make minor day to day decisions will lift the burden of those decisions from management so that managers can focus more on strategic issues with broader implications.  Also, the front line employees are quite possibly more capable to make some decisions since their day to day responsibilities may directly relate to the decision being made.  This is especially true for decisions dealing with processes and procedures.  When employees are empowered to make decisions they may be able to increase the efficiency of the business because of their specific and unique knowledge of their job.  

It is impossible to empower employees if management doesn’t trust them.  Trust is a very important factor for all businesses, managers, and employees.  When a business hires an employee they are entrusting that person to not only act in accordance with the company’s policies, but they are entrusting that person with the company’s intellectual property, physical property, and potential for success.  If the company cannot trust the employees there are serious issues somewhere.  The issue could be that the company doesn’t treat the employee fairly and therefore the employee wants to seek “justice” through distrustful activities.  The issue could also be that the employee is just a bad seed and has done something to violate the trust or has yet to earn trust.  

All issues of distrust in a work environment need to be investigated and explored.  If criminal activity is the culprit the decision is obvious but if other minor issues cause the distrust then a plan needs to be developed so that the employee and the employer can both regain the trust of one another.  Trust is also one of the most critical issues in allowing employees to be empowered to make decisions.  Empowering employees to make decisions is a good way to show management’s trust in the employees and the employees should respond by making good decisions for the business.