Lis Calandrino

Here's my latest blog post over at Talk 1300 called "Become Different and Irresistable".

I’ve been reading how high-growth companies, even in bad times, spend little time thinking about staying with their competitors. Instead, they make their competitors irrelevant. How? By continuously trying different things that will delight their customers, code name: customer service.

High growth companies—irrespective of their industry—all described what has been called the “logic of value innovation.” Firstly, don’t try to get better than your competitors. Instead, become different and irresistible. Look for new markets and find out what they want. Look to customers for the future rather than the present. Always thinking, what would my customers want?

Read the rest here.

I teach a lot of entrepreneurial classes and one question that is always asked during the session is "Should I reduce my price?"

Of course you can do anything you want, but is it really worth it to lower your prices? There was an article in USA Today in August of 2009 talking about the consequences of lowering prices to bring in business. In the short term it will certainly bring in customers if they want to buy. Long term, you will have to ask yourself, are these the "right" customers?

If your customers are better customers what message are you giving them by lowering your prices? You’re saying our brand has changed; we’re not the store you thought we were, in fact, we’re not sure who we are!

Ray Noorda had a wonderful business in the company he founded: network software supplier Novell Inc., until he became obsessed with beating Microsoft Corporation. His battle was futile. He left Novell as it began a long downward slide.

According to Benson P. Shapiro, in his article Commodity Busting: Be a Price Maker, Not a Price Taker, in Strategy+Business Magazine, he states that smart competitors don’t try to beat their adversaries; they avoid direct competitors and instead maximize profits. The astute manager wants to establish a set of quasi "local monopolies," protected from competitive as well as customer pressure. This demands confidence, not bravado, astute analysis instead of raw aggression, and careful, empathetic focus on the other players in the marketplace.

Before you lower your prices you need to ask yourself, what for? I had an interesting conversation with a very large higher-end retailer who was experiencing a serious economic slowdown. I asked what he thought he might do and his remark was "If retail continues to be this way for the next year, I might have to close one of my underperforming stores." I asked how long had this been a problem, to which he remarked, for years, but when business was great we could carry the store. You probably know my suggestion: close it now! He thought that this was very negative thinking on my part: Why didn’t I think it would turn around? I stated if it couldn’t turn around in good times why would it turn around in bad times? Save the spending and put the money in your pocket. What did he do? He continued to drop prices, which gave salespeople an excuse for lower prices even more: "It’s not our problem they said." It also ate away at their self-confidence. What happened in one year? He closed the store.

Customers have distinct thoughts on stores that continue to change their prices, here are the results:

• 70% said that slashing prices means the brand was overpriced to begin with. If you can’t sell it at the original price then maybe that price was wrong or did the quality change? The more you shop TJ Maxx or Marshalls the more you begin to wonder if certain brands should ever be sold at full retail prices.
• 62% said that if a company does not slash, reduce or put a product on sale, that means that the brand is either extremely popular or already a good value. Brighton is one of those companies that has rarely if ever put merchandise on sale. Brighton just knows the stuff is unique and of good value.
• 60% said that if a company put one item in the store on sale, then they felt other items in the store would soon go on sale. Macy’s has a habit of doing this with their women’s clothing line; by the end of the season, it’s all on sale. If you’re not too fashion conscious, it’s smart to wait until the sales and buy for the next season.

If you engage in price wars to increase your market share by cutting prices, you run the risk of lowering profits and not being able to cover your overhead. The result: you’re out of business.

Other companies, which still have the goal of maximizing their profits, follow suit by also lowering their prices, then a chain reaction occurs. The result? Everyone suffers a loss in profit. As previous research has shown, price wars seem to occur because of the mistaken belief that lowering prices below competitors’ prices is a competitive strategy. How can it be a competitive strategy if you’re not making enough money to break even — forget making a profit. What other strategies can you use to react to a competitor’s lower prices?

• Rather than base your strategy on maximizing profit, a company can react by not changing its price at all. Instead, you can drastically increase your service level, or look for unique and more expensive merchandise and refuse to engage in the price competition. Each of these strategies can end the price wars and reduction of overall profit loss. Remember one of the signs of a business in trouble is their lowering prices.
• Don’t lower the prices in your better lines, instead look for a cheaper price point in the same line. This will not take away from your premier brand and allow your customers to stay true to the brand.
• You may have also noticed that Heinz ketchup and Hellman’s Mayonnaise have combated price increases by giving the customer less product.
• According to Unilever, "Recently, inflationary pressures have brought about by the increased costs of raw materials. Rather than raise our prices, we chose to slightly reduce the size of the 32 oz quart and 16 oz pint. This is the first time in over three years that we have had to increase costs to our consumers."
• If customer likes the product and the price remains the same, it’s easy to stay loyal. I don’t think I have ever finished a jar of ketchup or mayonnaise. Is it sneaky? Maybe. I’m still buying Hellman’s because I like the taste. Cutting the ounces wasn’t a secret.
  Remember if you’re not a price cutter, you are treading in unknown waters with unknown competitors who are better players. Players who are always cutting prices and known for “offering deals.” Those that make money at this game are masters at buying the right price points.” Tough competition.

Someone once said, I might go out of business if I don’t cut prices. The response: if you’re going out of business wouldn’t it be better to do it with money? 

There seems to be a lot of blame going on in Albany, maybe its catching. 

In Albany we seem to have three situations: the closing of the inner city YMCA, the building of the new Honest Weight Food Co-Op, and a charter school. 

The Y and the charter school have poor attendance — code for "not enough customers" — and they are both ruminating as to why the facilities should stay open. The Food Co-op is raising money for their new building and does not have enough investors. I know, I know, these are bad economic times—let’s get that out of the way. But let me remind you, a business is a business; I don’t care if it’s a not-for-profit, for-profit or no-profit. To stay in business, a business must have enough money to pay its bills and have some left over—that’s called profit. 
The problem for all three businesses is not enough paying customers— period. Did this just happen? I doubt it. Many of you know these statistics by heart, by the time a business is 5 years old 80% of its new business comes from referrals and existing customers.

Who is supposed to get customers for these businesses?

The problem with customer loss, it doesn’t just happen. Some bad reviews, annoyed customers and you’re on your way out the door.

By the way, I go to the local Y; it’s really close, I love my trainer and I can get in and out in 45 minutes.

Why? Because there are no customers! I feel the same way about Staples and I hope they’re not next.

Yesterday I’m on my way out of the Y and I hear a couple at the desk ask about the indoor track. I want to cry over the next three minutes as I listen to the woman at the counter literally talk the couple out of using the track.

With all due respect she didn’t look like she had ever run anywhere — no less on the indoor track. She also suggested that the couple go to the Y across town! There were too many people standing around agreeing with her for me to slap her — maybe they all work for the other Y on their days off. I got to speak with the “potential customers” in the parking lot.  They said they were delighted that she had told them about the Y and for being so truthful. “Truthful, I remarked, she doesn’t look like she ever saw the track, to which they laughed and said that’s what they were thinking. I also added, I’m a runner and as long as there are no cars or dead bodies in the way what could be wrong with the track? By this time they were on their way to the crosstown Y. They say an unhappy customer will tell anyone who will listen so you can be sure the membership isn’t going up this month. 

By the way the Y needs a bunch of members to stay open.

So the track is not great; the upstairs gym was a little cold for Zumba and Yogi, but I can wear a sweater. Did I tell you the Zumba instructor forgot her music? As a friend said, it’s like going to a gun fight and leaving your guns at home.  The Zumba instructor had 50 excuses as to why her life was too complicated to remember her music, Lisbeth, mind your business and hold your tongue. The woman next to me replied just loud enough for me to hear, "who cares about her life?" and then she repeated in Spanish for her friends!

Okay so the Co-op is another story. I have been volunteering to pack bags at the checkout. This is a good time to ask if a person’s a member, because members get an automatic 2% discount. Of course after bringing this up the cashier explains that I didn’t tell the truth. She says you have to invest $100 and if you want a 10% discount you have to work 3 hours a month.

Doesn’t she know, most people don’t want to work for “nothing” — not even 10%? Consider that a $100 investment will make you feel like an insider, part of something good.  In addition she said I was pushy. 

Guilty as charged!  Some of our customers travel 3 hours to come to the Co-Op, honest. Shouldn’t we give them a little something extra?

In my book, pushy is when you’re trying to sell something of little value, not something of value.

Oh don’t forget the Charter School with the kids on TV crying about their school closing. The administration said they were proud of the kids for saying what they felt! I don’t even know what that means. They need more students to stay open and it seems that’s the administration’s problem. The effect is the closing of the school; the cause is not building the membership from day 1! Let’s not make it the kid’s responsibility to go out and get the sympathy vote.

Some thoughts about sales:

• Sales are what make a business whole. 
• Without customers there’s no reason for a business. 
• In a business, selling is everyone’s job; teach them how to do it. 
• Understanding why customers stay or leave is everyone’s job. 
• One “really” unhappy customer can ruin your business. 
• 96% rarely complain, they just go away mad. 
• Things might seem okay, but it’s likely most customers just aren’t happy. 
• How about some customer service training for all three of these places?

By the way, being proud of the company you represent is real customer service.

I hope Lincoln Pool isn’t next. 

Resources

Honest Weight Food Co-op members approve design of new $6M store

Flaunt It Honey!

My definition of customer service is giving the customer more than then they expect, i.e. Red Hot Customer Service. That’s exactly what JetBlue did Friday, October 30th at JFK International Airport.

Customers going through the terminal dressed in costume could show off their dance moves at the first-ever silent Halloween Eve disco. Friday I receive an excited call from Elin, designer supreme at Leader Carpet telling me about the event in J.F.K. Airport.

Elin’s comment: “Isn’t that cool?” I asked her what made it cool and she replied “It just is.” She’s right, it just is.

Here’s how it worked: When you went through security you would be given a set of headphones. Through these headphones you could hear a deejay spinning music. Of course, no one else in the terminal would hear the music.

That’s why it was called the “Silent Disco.”
“Our Silent Disco is about giving customers and crew members the chance to tune in to some great music, to burn some energy before getting on a flight or to shake out the stress of the week,” said Kim Ruvolo, brand manager for JetBlue Airways.

The event was produced by JetBlue partnership with Super fly Marketing Group.

So what do Jet Blue’s customer s think? In order to find out, JetBlue took a poll:

Disco at JFK?

Would you dance in an airport lounge?

• No: It is way too embarrassing
• Yes: I’ve got it and I flaunt it
• I don’t know: Depends if I’ve had anything to drink

I checked out the poll and 41% said yes and 37% said I don’t know.

So, 80% of the customers will dance for one reason or another.

I call this customer service at its finest; assuming they got to their destination on time, no foolishness like overshooting the run way by 100 miles, or losing some serious luggage. This is just doing your job or the price of admission to be in the airline business.

Customer service is delighting your customer, making them smile, going beyond the call of duty, or doing something that makes you unforgettable. The key, as brand manager Kim Ruvolo said, is to give the customer something different.

Being different can also build your competitive advantage—but only if the customer loves it. My friend in Boston told me about an experience she had with her hair dresser of at least 20 years. It seems she showed up at her regular appointment to find the usual docile German Shepherd guarding the couch. The closer my friend came to the couch, the more menacing the German Shepherd became. She said it really scared the wits out of her; the dog had never exhibited this kind of behavior. Eventually the owner came to her rescue and asked my friend if she had done anything to frighten the dog! My friend, a little in shock, eventually got her hair done and went home. On her answering machine was a call from her hairdresser.

“It’s a good thing she called,” said my friend. “She was about to lose a good customer.” My friend, however, goes on to say there was no apology, just more defense for the dog. The dog also has a stomach problem, making it even more questionable whether he should be at the workplace.

What’s next? My friend called to tell me she has a new hairdresser, and she’s done a marvelous job!
No amount of silent disco dancing could fix this problem.
What could they have done to make it better?

• Leave the dog home; he’s obviously too sick to be at work.
• Leave the owner at home, she’s obviously too sick to be at work also.
• Stop defending the customer since the dog was already defending himself.
• Give the customer a free trip to the Bahamas; I’m sure she would have invited me to go along.
• Give the dog a gift certificate to the vet or
• Get someone to take the dog to the vet.

What would you have done to make this right?

I've been speaking with my friend Tom Boschwitz from Homevalu Interiors. Homevalu Interiors has been around for a number of years and continues to change and reinvent itself. But it doesn’t matter how long your business has been around or how good it is, every business is dependent on customers who are willing to part with their money. And these days, consumers think twice or even three times before they take the buying step.

Bringing customers out is a labor of love — what works for one doesn’t necessarily work everyone.  The key is go get out, experiment, try new ideas and of course just do it.

And there are companies that are doing it. It just takes more skill and inventiveness.  Some people say they never see a customer and then someone tells you they’ve seen about 100 on a snowy night in Minnesota.

Homevalue is an inventive company. Having done extensive customer research, including focus groups and consumer interviews, they probably have a better handle on what customers want and need than most businesses. Of course when the economy is tough one has to think wisely about where to spend advertising and marketing dollars.

Over the past few months, Homevalu has done a variety of in-store events for customers. Instead of hosting  color and design nights, which are quite common, they are actually holding multiple events. In fact, it's a party with various events and plenty of fun things to do.

I remember not long ago Homevalue held a pet adoption which brought in over 100 people! They also hosted Ladies' Night Out (see pictures), held in the middle of a Minnesota snow storm. Vendors such as Mary Kay, Byers Chocolatier, Lillian Handbags, and others were invited as well as the store that provided the wine and the music.

Tom says that he budgets about $40 a person for the event, while comparing  traditional advertising costs at about $60 a person. The last four events in total have brought in about 450 customers. It appears that he's creating quite a following.

By holding multiple events and bringing in many of the same customers, Homevalue gets to thank past customers while cultivating  new ones. It just proves, if you can build a better mousetrap…

Some ideas for your events:

• Ask your employees what events they think will pull in customers. Once you decide on an event, ask you salespeople for a list of 20 people they would invite. I had to bite my tongue because I wanted to say 50. Don’t forget the butcher, baker and candlestick maker. Once you have the list, decide on the theme, the invitation and other businesses that would add value to the event and have their own lists of customers.
• Be inventive; there is a flooring store in Kentucky that hosts line dancing every Thursday night—in the store. Does it work? Ask the "regulars" who bring different friends every Thursday. Ask the owners, who need a bigger dance floor to accommodate the calls.
• Take plenty of photos, get them to the newspaper, the chamber, your business group. Don’t forget to invite your local newspaper to cover the event.
• Get email addresses so you can send thank you notes. If you are having trouble asking, hold a drawing and note they will be notified by email.
• Send photos to the people who attended and send them via video email, Talkfusion.com or sendoutcards.com.  Both great ways to stay with your customers. One via email the other via snail mail. Don’t forget to use these marketing tools to thank the customers and also as a way to invite them. In your video remind your customers to visit the vendors who were at your event.
• Don’t forget to thank the vendors and get them as much publicity as possible. Remember, they all came to do business and are relying on you to make this happen.
• Plan for your next event while you're at your "present" event. Ask everyone what other types of events would they like. Will they help you plan? Who would they like you to invite? Is there a favorite charity they would like to support? How can you involve them? Is there a special charity they would like to support for the evening?

Remember, most of your business comes from referrals, not just from happy buyers but from people who just love you and feel good about recommending you and your customers.

How about your events, what are you doing what’s working? Come on, share it with us. Need some help planning an event? Call or email me.

I had the opportunity to talk with John Wells, General Manager for the past seven years of Taylor Flooring in Halifax, Nova Scotia. Taylor Flooring was awarded Mohawk Color Center Dealer of the year at the Mohawk Color Center Convention February 7, 2009. Taylor Flooring consists of four stores and has been in business for 16 years.

John Wells is in charge of hiring, training and ongoing coaching for his salespeople. The first thing you notice about John is his energy and focus. He knows what to do, how to do it and how to get it done. He talks about how important all employees are to the company and his connection to his salespeople. John is filled with passion about the business, the customers and the employees.  He talks about coaching as being an important part of his ongoing training program.  From my experience, it is rare for businesses to focus on coaching; but with the right coaches, people are able to make immediate and long lasting changes.

I asked John about the recession and what it means to their company. His reply was quite interesting. He said “in the United States, it’s real, in Canada there is more of a misperception about what’s going on. The news media just scares everyone so we become petrified.”

John’s solution: stop listening and stop focusing on the bad news. If 32% of homes are in foreclosure, John looks at it as an opportunity.  According to John, these homes will have to get sold and there’s his opportunity to go in and update the flooring in them. As we all know, it’s the half-full / half-empty attitude.Taylor Flooring works at using financing for flooring to help customers sell their homes.  The trick is to apply for the credit so it doesn’t get in the way of the customers other loans, and to time the closing of the loan so it coincides with the sale of the house.  Taylor aggressively seeks realtor partners by providing sliding scale commissions to realtors that offer good client referrals. The larger the flooring sale, the larger the commission.

The key to staying cool while the rest of the world is talking doom and gloom? According to John:

• Don’t panic. Leave that for your competitors. If you panic, it will send shock waves through your sales staff and make it difficult for them to concentrate on doing their best. (Interesting that John should make this statement. On February 14, one of the writers from the Wall Street Journal made the comment that it is essential that our President tell us the truth — but to not rub our noses in it. Everyone needs to know that there is hope, no matter what’s going on.)

• Focus on what works well and do it over and over again. Your team should be on auto-pilot for survival skills. Cut unnecessary overhead and focus on what brings in business and more profitable customers. This is the time to dump the unprofitable ones and to give more to those that are supporting your business.

• Have 'pit bull' persistence in follow through to close deals. Hold on to what works and don’t let go.

“Retaining a leadership position requires internal positioning," John adds.  "You are constantly improving the processes.”

These processes encompass the following:

• Having systems in place that keep the wheels turning. Everyone needs to know what to do and how to do it, consistently. All the pieces must fit together.
• The leaders must have positive attitudes and initiate the changes they want to see if they are to create believers. Once people believe, positive things will happen.
• Proper behavior must be identified and monitored. This includes professional presentations, keeping the store looking great and looking professional. Everyone knows what’s required to promote, differentiate and support the brand.

As John says, “it’s all about promoting great relationships with your customers and your employees and living the core values.” 

With stores going out of business right and left, it’s great to see one that isn’t: Anthropologie. 

As a matter of fact, it's growing!

If you want to make it, you have to be different than your competitors. Being different can mean offering different things or by targeting a specific audience, finding out their likes and dislikes and catering to them. Unfortunately, many small businesses don’t roll that way. They decide on a product because they like it, go into their parent’s business or buy an existing business and suddenly they’re in business! Being in business is different than staying in business though. 

Which brings me back to Anthropologie. It was founded in 1992 by a small group of people with a love for making things that inspire the imagination.  Quite clearly, these intrepid entrepreneurs have traveled the world and broken new ground with their catalog and Web designs. If you can believe it, they also refer to their customers as "soulmates!" Target, meanwhile, refers to their customers as “guests,” which is what a number of other stores have been doing of late. But soulmate? That's entirely different. It  implies a level of intimacy that I think is a little too "out there” for many businesses. It doesn’t matter what we think though, because it works for them.   

My information from the retail and wholesale end of the flooring industry is that the middle and lower end of the market is pretty much gone. This started me thinking about the better end of the market… are luxury customers gone as well?

To answer this question, I immediate thought of Chris Ramey, president and founder of Affluent Insights and chairman of The Luxury Marketing Council Florida. The Luxury Marketing Council is a think tank, collaboration greenhouse and intelligence source for marketers focused on the affluent. What’s interesting about Chris is that he comes from the foorcovering industry, having been past-president of International Design Guild, a 100 showroom chain of decorative floor coverings. He'll also be speaking at Surfaces 2009.

According to Chris, history teaches us that when children graduate and move out of the home, their parents begin to retreat from materialism (see chart below). Considering we’re living longer than ever and Americans aged 50 and older now hold 77% of the assets in America, the historical retreat from materialism hasn’t exactly been true of late. Sixty truly has been the new 45, as the saying goes. But things are different now, Chris observes. This group doesn't feel so wealthy anymore and it's possible this demographic will revert back to the "old 60s" mindset. "This group has been bitten by their financial advisors and it's now looking like the government wants to take their wealth and spread it around,” he says.

According to Pam Danziger, president of Unity Marketing, a consumer insights firm specializing in the luxury mindset, "What’s happening now challenges the conventional wisdom that the most affluent are immune to economic ups-and-downs mindset.This time the ultra-affluent are being hit in the source of their wealth: the value of their homes and the stock market."

A recent report in U.S. News and World Report echoes this sentiment: “When wealthy consumers feel the need to conceal their lavish purchases in plain paper bags and avoid public shame by attending underground shopping parties, it's obvious that all is not well for the luxury goods and services market. Once considered well insulated from economic downturns, the luxury market has received a brutal beating this year, with sales plunging 34.5 percent this holiday season compared to last."

Price has become the most important factor in U.S. consumer purchase decisions and retailers must adapt to that new reality if they are to be successful. "What's so intriguing these days, whether you work on Wall Street or in Wal-Mart, is that it has absolutely become chic to be cheap," says Tracy Mullin, National Retail Federation President and CEO. "It's all about price. Factors like quality, selection, store location and customer service are taking a back seat. We believe this will continue for the foreseeable future."

Suppose nobody comes back and Michelle Obama sets the new standard and we all have to shop for clothes at Target and men only have two or three black suits like Barack? This might just be the reality, so be prepared for it:

Kick up your brand strategy

According to the experts, all is not lost. There are things that we should be doing if we are going to land on our feet.

Bob Schwartz, interim CEO of Portero, an online auction-based marketplace for luxury merchandise, suggests a revitalization of your brand. He recalls overhearing a FedEx executive's response when asked why they weren’t advertising at the Superbowl. The executive said if the public doesn't know who they are by now, then they'll never know.

Shall I list all the brands that feel that way? How about all the US car brands? If you start trashing your flooring brands around you will decrease the value of your other products (since brands set the standards). When the market turns around, what will you have to offer? Several luxury retailers, including Bergdorf Goodman and Neiman Marcus, slashed prices so severely that they looked more like they belonged in the discount outlets. I was in Macy’s the other day and my favorite brand, Ralph Lauren, was slashed down next to nothing.

Remember, hang on to your brand name. As my mom used to say, your good name is all you have!

Can you say, Web 2.0?

According to the Luxury Institute's Wealth and Luxury Trends—2009 and Beyond report, "Innovators such as Gilt, Ideeli, A Small World, Portero, Vivre, Couture Lab and several off-the-radar players such as Bespoke Global, are gaining traction online via membership models, global communities, and by aggregating categories of bespoke luxury designers and producers in one-stop-shop destinations." The report says that the economics of these online marketplaces will become much more compelling as the economic downturn makes opening stores and running traditional advertising economically challenging.

Online marketing is one of the cheapest (or free) ways to connect with your customers. Are you maximizing your LinkedIn connections (check out the We Sell Flooring group on LinkedIn) and Facebook friends to build your business? Remember, up to 78% of consumers research on Google before they make a purchase. Does Google know how to find you? According to Ramey, “Build your blog around what’s important to you or better yet, be on Lis’s blog.  Check your marketing budget, shift from paper to electronic, it’s where the world is going.”

Give up cutting prices. If you’re going out of business, go out with money. If you’ve planned on staying around, protect your margin. Remember cash flow isn’t profit and profit is what keeps you in business. Cash flow just makes you think you have money if you don’t understand your numbers.

There are other ways of selling a luxury product at a slightly lower cost that's attainable for consumers in today's rough market. The more the customer buys, the more you can justify a price discount. If you’re selling carpet, find ways to offer a less expensive cushion or suggest that customers move their own furniture. Discounts must always be legitimate or you will destroy your credibility. You’ve probably noticed fragrances as well as many kinds of food brands being sold in smaller containers. All of these things can help retailers minimize production costs.

Find ways to integrate yourself with kindred souls

Several luxury hotels in the Washington, D.C. area offered special packages for the inauguration. Although they cost a pretty penny—up to $50,000—these packages mixed luxury with philanthropy. For example, one of the hotels gave a portion of the proceeds to a charity of the guest's choice. Another hotel offered an eco-conscious package. The Luxury Institute says that wealthy consumers increased their preference for socially responsible brands from 51 percent in 2006 to 57 percent in 2007, and it sees that figure rising dramatically in 2009.

"The global crisis of confidence in governmental, financial, and other institutions will drive luxury consumers to demand that luxury brands serve not just them, but society as a whole," the report says. "They will require luxury brands to be ethical with all constituents, charitable in ways that make a difference to their beneficiaries, and eco-friendly in ways that can be documented."

As Ramey says, “Find out who and what is important to you and build your business around it.”

A couple more tactics from Ramey:

• Focus on serving your best customers since loyalty is at an all time low. Identify your value proposition.  Explore why your best customers are loyal to you and what makes them want to be “your customer.” In a difficult time when everyone should be hording cash, everything requires ROI.  Measure every cost and every service to determine where you are getting the best ROI and stick with it. If it isn’t making you money, look somewhere else.
• We’re in a period of correction.  Materialism may or may not be decreasing –- but it has certainly paused.  Remember being different is doing different things, not doing the same things differently. Create new programs – serve your clients and prospective clients like you’re working with your favorite Grandmother.  Leverage your current customers.  Reach for something new. If they trust you with their flooring they will trust you with other products too.  My suggestion, go out of the flooring industry and look at what’s being done: try the Mac counter.

To sum it up:

Despite a slower 2008 and the prospect of declines in 2009, Bain &Company research predicts that the luxury market will return to growth quickly as more and more consumers enter the luxury segment worldwide. Tomorrow's consumers will reflect more demographic and psychographic diversity, leading to changing spending patterns and rebellion against standard offerings.

Hang on to your hats folks. Life is like a roller coaster, sometimes it will make you sick and other times it will be exciting. But you bought the ticket so you might as well hang on for the ride.

More info on luxury

• The Luxury Institute

• Affluence Research

New problems require new strategies; how about looking in the restaurant industry?

I was listening to WMHT today — our public television station — as the host interviewed Danny Meyer, the CEO of Union Square Hospitality Group (USHG) in New York City.

Like any good Italian, I am fascinated by all foods made with tomato sauce, but having spent summers with my Aunt Margie and her Elm Tree Restaurant in Martindale, NY, I am fairly well-versed in what makes a successful restaurant. In its hey-day during the 80’s, the restaurant seated 200 people — which was huge in those days.  Along with Aunt Margie as well as Aunt Margaret (who had a major pizza joint) and my dad (who reportedly had various restaurant dealings) food was a major part of my  life. It all hit home the day Aunt Margie told Uncle Tony in no uncertain terms the value of her chef, Tony, by saying "I can get a new husband quicker than I can get a new chef so leave him alone!"

The restaurant that she opened in Martindale was my Brooklyn-raised Aunt’s dream. A place in the country, a place for her friends and a place for good food. In the early 60’s, Aunt Margie and Uncle Tony bought an ice cream parlor in the middle of nowhere and eventually turned it into a famous restaurant in the area.

The important part of this whole story is the people came for two reasons: (1) the food and (2) to visit with the family. So, back to the interview with Meyer.

Meyer was asked if he was changing the food or the price of his food in his restaurants to help him get through the economic downturn. Meyer agreed that there were fewer people eating even less food and not ordering as many bottles of wine. In fact, people were buying glasses of wine as opposed to what he called the “trophy wines” – those big bottles for the tables.  But in answer to the question, he proposed two things to think about. I think these statements are essential for anyone who is contemplating his business fate.

• Think about your behavior in the current economic environment. Do you really want to change the products that you are selling, or the price? Do you really want to change the success that you've had thus far to try something that may not make sense, including cheapening what you have to offer?

  Your loyal customers know who you are, so why scare them? If trust is a reason to buy or not buy, why start behaving erratically with your customers? If you don’t know who you are, why would anyone want to give you their money? At this point, stability is important for all businesses. No one wants to give their money to someone who isn’t stable.

• The other statement was: think about how you want the current economic drought to end. Essentially, when this is all over (and the more I read and the more I listen it seems like 2010 is when things will start to change), where will you be and who will you be? Are you changing your whole business to become something so you can survive? Here we go, it’s the cash flow thing again. Shall I remind all business owners that cash flow isn’t profit and it’s profit that keeps us in business?

According to Meyer, hospitality is hope. People want to be with people and being out eating great food in a great restaurant makes us feel better. Look into Jack Mitchell's book “Hug Your Customers.” Mitchell has great stories about bonding and loving his customers.

Aren’t all businesses basically in the hospitality business? Many of our products look alike which makes price the only discernable difference. You know the game – if everything looks alike, price becomes the winner if you haven’t anything else to offer. Our society is all about experiences and destination shopping.

Don’t many of you have customers that just drop in and say hello and wish you well? How are you interacting with these customers? Do you just see them as problems, interrupting your day or are you involved in their lives, working for causes that are important to you and your community? I read that twice a week some employees of one of the USHG restaurants prepare and deliver food to patients at a hospice unit of Beth Israel Hospital in Manhattan.

Are you asking customers how they are getting through the “big R” and if they have any ideas for your business?

I think Meyer’s book "Setting the Table: The Transforming Power of Hospitality in Business" is well worth a look, and his statement “hospitality is hope” is uplifting for all of us, with or without food.  A friend of mine, Mark, who owned a flooring store in Yonkers during the 70s, used to cook Italian food on Fridays and opened the door so everyone in the neighborhood could smell the garlic from his white clam sauce. I'm sure it brought in some business. If anything, people enjoyed it.

So, think about your approach to hospitality and your business. We’re all in this together. Now, I'm off to research USHG and pick out my next restaurant for my trip to NYC.

Go On The Offense or Defense?

Recent McKinsey research indicates that during the last two recessions (1990–91 and 2000–01), growth slowed for nearly every retail subsector in the United States. Of the retailers that existed during both downturns, 93% experienced slowing revenue growth in one of the recessions, and 59% endured it in both. Unfortunately, when the economy goes on an upswing, the average retailer may still experience a lagging growth. 

The question is: can you make it through? You can if you don't put your head in the sand and pretend things will be better. If you have money, take it and run. If you plan to stay around, this is the time to think positively and decide what to do as your market gets better.

Cutting overhead, doing less advertising and shutting off the heat may help get you through these times, but will you be in any better position when things are better? Cutting expenses is a more defensive than offensive move; it may not save you–it just may prolong the inevitable.

What you need is a combination of tactics.

The dynamics of a downturn—declining sales often followed by a sluggish recovery period – means some quick thinking is in order. In tough times should you cut staff and close stores? Even in times like these, there may be ways to improve your positioning in the market, but it might not be easy.  This is the time to do some brainstorming with your team and an outside consultant.

Determine the overall health of your business; your team players, management commitment and your balance sheets. If your business is in good shape and you have cash, this may be the time to invest in other businesses or people that will improve your marketing position. This is something your weaker competitors can’t do. Many of them are just hanging on. Like monopoly, maybe this is the time to add some hotels to your property.

Do a market analysis. Where do you stand, what are your growth possibilities, what are the strengths and weaknesses of your competitors? What are your competitors doing to get business? Can you steal  their market share or is it time to move out of the neighborhood? There may be some good real estate deals out there if you have the financing.

How about purchasing a business that complements the one you own? How about adding a product category, like kitchens or window treatments. What can you add that is natural for your existing business?

This is the time to look for good employees–but be careful hiring from your competitors. If you have a decent training program, hire people with good attitudes and enthusiasm from other industries. You need good positive people.  

Maybe this is the time to move into another market; maybe someplace you’ve been eyeing that will help you take over your weaker competitors' market share.  Can you expand your existing business and take over the market? It’s the Monopoly thing again.  Can you negotiate a sweet deal for yourself?

Start analyzing your traffic. Was it decreasing before the slowdown, were you losing business? Has the neighborhood changed? How are other retailers doing in the area? Is it the economy or something else?

If you’ve got dough, how about going on an all-out push to drive customers into your stores? This will help get rid of some of your marginal competitors. Go into your “down and dirty mode” and offer deals to your customers that they can’t refuse.

Weathering the storm and going back to basics may help get you through it, the problem is, if you aren’t on the look out for growth during the bad times, where will you be when times are better? Can you afford to make improvements on your building, change your displays and look profitable? It’s times like these that customers get scared – if I order from you will you be in business long enough for me to get my order?

It actually may not be a bad idea to take out the Monopoly set and get your employees' competitive juices flowing.

Remember, "big shots are little shots that kept shooting."