29 April 2009

With current market conditions in mind, it is easy to fall into a negative way of thinking. Steve Yastrow, founder of Yastrow & Company, puts an alternative spin on things.

You’ve encouraged people to think of this economic crisis not as a recession, but as a ‘recalibration.’ What do you mean?
The world has been completely reset. The way our companies produce results has changed. Our competitive environment has changed. Most importantly, our customers have changed; what they think about, what they care about, even who they are. If you think ‘recession’, you may be tempted to hunker down and wait for things to get better. But if you admit that your world is a new world, you can recalibrate and get ready to thrive.

How do you suggest retailers recalibrate?
Let’s focus on a few key steps. First, existing customer relationships – ask yourself: “Am I getting all of the business I reasonably could get from my existing customer relationships?” For 99 per cent of retailers in the world, the answer is no. For most businesses, the untapped potential in existing customer relationships dwarfs the scale of the economic downturn’s effect on their business. To unleash this potential, recalibrate the way you look at customer relationships.

Recognise that, in this environment, every one of your competitors is trying to steal your customers. If your messages to customers focus only on promotions, price and products, it’s easy for the customer to see you and the competitor as interchangeable.

The best competitive advantage is when a customer thinks of your business not in terms of ‘them’ or ‘that store’, but as ‘we’ – when their focus is not only on your products and prices, but also on their connection to you. It’s magical what happens when a customer thinks that way about you.

How can a retailer create ‘we’ relationships?
Every time a customer enters your store, only three things can happen to their relationship with you: it can improve, it can stay the same, or it can get worse. When customers leave your store with a stronger relationship with you than they had when they came in, we call that an ‘encounter’. However, if your relationship with the customer doesn’t get better, or it gets worse, we call that a ‘transaction’.

The goal of a customer visit is not just to make a sale, it’s to create a relationship-building encounter and to avoid creating a mere transaction. Creating encounters is quite simple, but it usually doesn’t happen in a retail environment.

Engagement in the moment, conversation and uniqueness create encounters. If every person who works in your store focuses on creating relationship-building encounters with every customer they meet, you will see your share of each customer’s business grow. For most businesses, this is not the employee mindset. Recalibrating the way your employees see their jobs, so they focus primarily on relationship-building encounters, is one of the most important things you can do in this time of economic turmoil.

How can retailers recalibrate the way they find new customers?
Attracting new customers is the most expensive and inefficient thing businesses do. So much of the money spent on advertising, direct marketing and other marketing communications efforts is wasted. Think of it this way: the average person is exposed to 5,000 marketing messages each day. How many of those make a difference? Very few.

One of the best ways to recalibrate the way you attract new customers is to focus. Avoid the temptation, so common with traditional marketing, to cast a broad net and hope you catch a few new customers in it. Don’t evaluate marketing programmes on how many people they reach, but on return on investment – the quality of the interaction they create with a potential customer. Reach fewer people, but reach them with a richer message. It’s the only way to get noticed when 5,000 other messages are bombarding your prospective customers.

The highest returns on investment are the friends of your happy customers. Do you have a deliberate and strategic plan to encourage your customers to bring their friends to you? The next highest return comes from attracting people who are geographically close to your store. Why advertise to people miles away when there are people visiting neighbouring stores?

What else do retailers need to do?
Make sure your brand story is right for the times. Your customers’ lives are different. The way they make decisions is different. How they behave is different. The amount of money in their pockets is different. So, it makes sense to re-evaluate the story you are communicating. Imagine a customer visits your store and the stores of three other competitors during a day. What would make her say about your store: “That is the only place I want to buy.” Is your story so clear, compelling and powerful that it can transcend the noise of the marketplace, drowning out the din of your competitors’ messages and reinforcing the relationships you are building with your customers?

Steve Yastrow is the founder of Chicago-based consulting firm Yastrow & Company, which has acquired a reputation among business decision makers, including senior Microsoft representatives, as an outside partner that challenges organisations to take a fresh look at themselves from the inside out. His approach is based on the ideas found in his books, Brand Harmony (The Tom Peters Company Press, 2003) and We: The Ideal Customer Relationship (SelectBooks, 2007). Steve earned an MBA from the JL Kellogg School of Management at Northwestern University.

This article first appeared in the Summer 2009 edition of Retailspeak magazine.

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