Small Businesses are Wasting Money By Copying Their Neighbors

Nobody goes in business to waste money, yet most businesses invest their cash in the wrong marketing. Nitsan Gaibel interviews Bob Salvas, a marketing consultant to small businesses, on how small retail businesses can retain their clients and get the most bang for their advertising buck.

Nitsan: What exactly does your business do?

Bob Salvas:  Marketing consulting primarily. My clients are usually smaller businesses or new businesses.  My focus is on B2C (business to consumer) marketing so typical businesses that I work with would include retail and restaurants as well as some others.

I have a real passion for helping the small business person successfully market their business in today’s complex world.

Nitsan: What would be a little known fact that is one of the key reasons why you are in business?

Bob Salvas: One of the main things that I stress when I am consulting with a client is that they need to spend a fair amount of marketing money on retention. Most businesses, especially when they start out, are 100% focused on acquisition. One of the most troubling statistics I have seen is that the majority of businesses in this country spend less than 20% of their total marketing budget on customer retention. That is simply not enough.I understand why they think that way-because businesses have always been about getting the new customer. Once the new customer is all set, they want to go out to find some more new customers-but it doesn’t work that way for long-term success. They end up spending too much time and money trying to find the people that they are then not retaining and that leads to the new problem which is “oh my goodness I need even MORE customers to replace the ones I lost!” So they spend additional money trying to bring in new customers and on and on it goes. Think about the math: if they are bringing in two new customers in the front door while losing three current customers out the back door, well the math does not work in their favor. Eventually they fail and unfortunately we see a lot of that today.

Nitsan:  So that’s a big misconception that most business owners have.

Bob Salvas: I believe it is. From the businesses that I have talked to, they just don’t understand the importance of actually putting some marketing money into retention.In fact, if you talk to businesses about the subject, they usually say something like “Customer service is very important to us.” But it is not JUST about customer service. There is lot more to it. I tell my customers that they should be spending at least half their marketing budget on some kind of retention based program. The irony of the whole thing is that if you do a great job on retention it actually leads to new customers because those customers that stay with you will become loyal to you. Loyal customers start talking to their friends and you get brand new customers that way, so there really is a profound benefit beyond just the retaining of existing business.

Nitsan:  So are there some people who do it right?

Bob Salvas: Sure there are. If you look at the some of the big successful companies that everybody knows, the one that comes to mind for me when I am asked that question is always Disney. Disney has the most stellar customer experience you can imagine. Everything is about the ‘guest’. One of my favorite stories was when Disney was creating the Disney World theme park down in Florida back in around 1970. As they were building the park, they actually spent money researching what the ideal temperature of ice cream should be if serving it in Florida. Naturally it was very hot in Florida and they wanted to serve the ice cream at the exact temperature so it would not be hard like an ice cube, but also would not melt as soon as you handed the cone to the kids. They knew that if the ice cream was quickly melting all over the place, it was not going to be a good experience for the child and especially for the parents. For years now families have been going to Disney World and telling their friends about the wonderful time they had….the best marketing will always be positive word of mouth.

Nitsan:  Is there a most effective form of customer vehicle for customer retention that you recommend?

Bob Salvas: I recommend a few different things. Certainly, staging a great customer experience for your clients is always important, but there is even more you can and should do. Often a key element for smaller businesses is setting up a loyalty rewards type of program.

This is especially important if you are in the retail or restaurant business because it helps you capture the information about who your customer is. You can still walk into a restaurant or a store today, pay cash for whatever you bought, walk out and nobody knows who you were. So asking people to sign up for a program first and foremost, you capture the information of who that person is. Remember, people are very reluctant to give up information for no reason, but when you say ‘We have a program and we like to reward our customers that give us repeat business,’ they are very likely to sign up. On average about 80% would sign up for it because they are getting something in return for their information. It’s more of a trade than if you just ask them for their email.

Nitsan Gaibel

Author of 12 innovative books that market executives and professionals, Nitsan Gaibel is a business writer and speaker. He also partners with executives to turn around under-performing teams in corporations.