We have been pushing the envelope from the very first days I owned my shop in terms of the kinds of services we offer our customers so that they wouldn’t ever think about leaving us for the competition. Even as a sixteen-year-old when I first bought the bike shop, I recognized that the best and perhaps the only way I could differentiate myself from the seventeen other competitors in the area, and especially the “big boxes,” was to offer customers services they couldn’t get anywhere else. That’s how the idea of a one-year free service guarantee grew into today’s lifetime free service and parts guarantee that we discussed in detail in chapter two.

Today, we can attract customers from all over the country that value our services more than the next guy offering the lowest price and, perhaps more important, more than the bike shop around the corner from their homes. The same principle applies to the corporate side of our business, where we can stand on our track record of eliminating customer service calls and delivering our bikes on time while our competitors can merely offer up promises of what they might be able to do. By embracing the idea of selling an experience and offering superior customer service, we have not only leveled the playing field, we have actually tipped it in our favor. But my competition continues to be slow to recognize this fact. In their attempts to match our service and parts guarantees, they’re actually putting their businesses further and further behind us because they’re not really buying into the key principles that make those programs so successful for us.

Basically, rival shops offer up their own service guarantees only because they believe it will help them sell to the customer standing in front of them. In fact, other shops hate offering warranties or guarantees of any kind because they see such programs only as drains on their profits, rather than as the means to win lifetime relationships. As soon as a customer comes into their shop for a repair, they’ll try to find some way to charge him or her for something that didn’t quite make it under their warranty, say a fifteen-dollar wheel alignment, for example.

What these guys don’t understand or appreciate is how much tacking on that extra charge annoys their customers. Consider the customer who thought they were comparing apples to apples when they were comparing the guarantee programs at Zane’s and one of our competitors. But, as soon as that customer brings the bike back in for a tune-up, my competitor has already thought of some way to squeeze something extra out of that customer like an extra part of the service that conveniently wasn’t covered by the guarantee.

By acting this way, these guys prove that they simply don’t see the $12,500 forest beyond those nickel-and-dime trees standing in front of them. Not that I mind all that much, of course, because that just gives us more opportunities to convert our rival’s customer into our own lifetime customer. Unlike our competitors, we focus hard on making sure that the bikes we assemble and repair never have any reason to make it back into the shop. Our goal has always been to get our customer to buy their next bike from us, not their next spoke or brake cable.

I’m amused when I hear that my competitors have been bad-mouthing Zane’s to the customers in their shop, usually by saying something along the lines that Zane’s prices are too high or that we really don’t make good on our promises. When these stories come back to me, I always get a smile on my face because I know we’ve just won another battle. I’ve also received many phone calls directly from these same competitors begging me for mercy. Imagine you pick up your phone to hear the voice on the other end of the line say, “Hey, Chris, I’ll drop this lifetime free service guarantee if you will. Then, we can just compete on price like every other business out there.”

Compete on price? Ha! These guys just never seem to get it. The last thing I want to do is get involved in some kind of race to the bottom; that’s Walmart’s territory. If we were so foolish as to go up against the biggest of the big boxes, both my competitor and I would soon find ourselves out of business. My competitors simply continue to outthink themselves, and I’m stealing their customers as a result. Although their profits are drying up, at Zane’s, we continue to grow our revenues by 23 percent each and every year—a rate we expect to double, perhaps even triple, once our national expansion plan is in place. With that track record to give us the confidence to keep pushing the envelope of how creative we can be in our business, I continue to have a blast by rolling out new programs or thinking up new ways to keep our competition scrambling to keep up with us.

As another example, think back to the bike lock giveaway we orchestrated on the Yale University commons, where we basically left my biggest competitor stuck with a season’s worth of bike locks because we struck first by handing out 1,000 free locks to the incoming students with a big Zane’s logo on them. Do you think that guy had an unkind word or two for me over the years as those potential customers started walking in the doors of our shop instead of his?

Also consider our flat tire insurance program, which I discussed back in chapter three. The truth is that, although that program is an extremely profitable component of our retail business, I started it simply to keep my customers from walking into my competitors’ shops to get their tires fixed. It bugged me to no end to think that my customers might have a reason to visit one of my competitors and, worse, spend some money in another shop simply because it happened to be closer to their homes. Today, we not only have a program that gives our customers an incentive to come back to us, it creates pressure on my competitors to come up with something similar or risk losing their existing customers to us.

Yet another example of how we applied this kind of competitive pressure involved one of my earlier promotions, in which I was one of the first companies in the country to give away cell phones. Of course, free phones are all too common today. But at one time, this was a radical practice. By tying the free phone to the purchase of any new bike, I was able to create a hugely effective advertising campaign at very little cost to our bottom line. The key was realizing that most companies that sold phones for the phone carriers and manufacturers pocketed some profit on the sale of the phone, as well as receiving a commission on each new customer activation. At that time, phone companies were paying $250 for every new customer you could sign up, although the phone cost $225. I figured that I could clear in profit an amount over and above what I would make from the sale of the bike, as well as usage commission from the phone company and a co-op advertising allowance the phone company also paid out. When I added up all the numbers, it was clear that this was a golden opportunity I couldn’t pass up. I soon got myself licensed as an independent phone dealer and rented a billboard—which the phone company paid for—to promote the giveaway: “Buy a bike from Zane’s and receive a free cell phone.”

Within hours of the sign going up, tons of new customers poured into our shop—a steady stream that didn’t let up for months. We ended up with one of our most profitable quarters in Zane’s history. Meanwhile, my competitors were left with the choice of scrambling to offer a similar program of their own or be left standing still in an empty shop.

We continue to push the creative envelope with our marketing service programs today. We have embraced technology for some help in rolling out innovations like a live Internet-accessible Web-cam into our tech center, where customers can connect and watch how to make their own corrections or repairs. With Skype, which allows us to communicate via voice and video over the Internet in real time at virtually no cost, we can communicate with the corporate recipients of our bikes on how to make a necessary adjustment, regardless of where that person lives. We also use e-mail to stay in touch with both the retail and corporate customers in our database. For our rewards programs recipients, we can stay in touch after they’ve selected a bike from a rewards program by passing along the shipping and tracking numbers so that they aren’t forced to wonder when it might be arriving.

But e-mail can be a powerful and inexpensive marketing tool as well. Although my competitors spend big money on advertising in local newspapers and on highway billboards, we can produce customized outreach programs that are both virtually free and incredibly effective. For example, because we collect our customers’ heights and inseams to custom-fit their bikes, we can send out zero-cost reminders about new inventory we might have just received in their size or even a coupon they can use the next time they visit the shop. Once we have potential customers hearing about programs and promotions like these, it never takes long before those folks begin asking my competitors why they aren’t offering a similar service. Of course, all my competitors think about is, “Jeez, how much is that going to cost me to set up?” rather than how they might put something similar—or even better—in place as an effort to leapfrog me. The goal, again, is to keep changing the game on our competitors so they’re always trying to keep up. I never want to give them a chance to catch their breath—or focus on moving ahead of me.

As I mentioned earlier, we hear feedback from a few of our customers that one of our competitors has been bad-mouthing some aspect of how we do business at Zane’s. These customers of ours are acting almost like undercover agents on our behalf because the stories they collect usually involve customers stopping in at a competitor’s shop and asking if they happen to offer programs similar to our lifetime guarantees. The response that these customers relay back to us is that the guys working the sales floor at our competing shops respond to the questions by saying things like, “Listen, Zane’s is full of it. They’re trying to rip you off. That Chris Zane is full of hot air. They don’t really offer free service; that’s just a scam. We’ll treat you right if you buy your bike from us.”

After hearing about one too many of these competing managers trying to spread some dirt on Zane’s, I decided to do something creative to end this particular smear campaign; I called up the offending store manager, let’s call him Pete, and offered him a job at Zane’s. I had heard that Pete was actually a pretty effective manager, so I thought if I could lure him away, I would not only cause my competitor a lot of pain, but I could acquire an effective employee as well. After I made my pitch, the first answer I got from Pete was a minute or two of silence. At first, he seemed more than a little nervous—and maybe even suspicious. After breaking the ice a bit by making a joke or two, I then asked him how much he was making. “Fifteen dollars an hour,” he said.

Now it was my turn to deliver a moment of silence. “Man, your boss is underpaying you big-time,” I said. “I’ll give you $17.50 if you come work for me.” I received more stunned silence in response: I had obviously struck a nerve. A $100-a-week raise obviously meant something to this guy. After clearing his throat, Pete thanked me for the offer but told me he needed to think about it. He said he had been working for his boss for a long time and that he owed him the chance to match the offer. “No problem,” I replied. “Get back to me in a week.”

After a week or so went by, Pete called me up to tell me that his boss matched my offer. “Okay,” I said. “He’s still underpaying you. I’ll pay you $20 an hour to come work for me. We have an opening we think you’d be perfect for and we’re willing to spend some money to put any new ideas you come up with into action.” I received some more stunned silence in response. Pete eventually thanked me for my second offer, but, again, he needed to run it by his boss before he could say yes. “No problem,” I said, “I’ll call you in a week.”

When I got back in touch with Pete, he gave me his final answer. “Chris, I really appreciate your offer, but my boss matched the $20 and this shop is so much closer to my house. I have to say no to you.” I told him that was fine. But I also reminded him that, thanks to me, he did just receive an $800-a-month raise. In return for that, I asked Pete for a favor: please quit the smear campaign against Zane’s.

And to Pete’s credit, he did just that. We stopped hearing any faulty information originating from Pete’s store about all those supposed bad things we were up to. That turn of events alone was worth the time and effort involved in my attempts to hire Pete. Even if he had accepted my offer, I knew we would still make sure he was a fit with our culture and, if he wasn’t, I wouldn’t be afraid to let him go (plus, if we let him go within ninety days of hiring him, he would count against my competitor’s unemployment insurance premium, not mine). It may seem mean-spirited and certainly not my first choice, but understanding all aspects of our business is imperative. If he worked out, though, Wham! I would have had another crack sales manager working for me. The best part about the whole story, though, is that I just bumped up my competitor’s overhead by $800 a month—which might be a month’s utility bill or possibly even another employee’s salary that he would be forced to lay off to balance his budget. Either way, it was a win-win scenario for Zane’s.

There is also an interesting side note to this story: I’ve actually tried to lure away a competitor’s store manager on three different occasions, and each time I failed to persuade the manager to leave his employer to come work at Zane’s. But it never mattered because each time we tried it, we changed the game just enough on our competitors to continue to make it more interesting—and more expensive—for them to keep playing.

One of the stories I often share when I speak in front of seminars or college students involves one of my competitors who ran a bike shop in Clinton, Connecticut, which is just a few miles east of our Branford location. Even though his shop was small, it was in a decent location in the middle of downtown, right next to a popular pizza joint. But when this guy’s lease was up, he moved in the middle of the night to a larger location a few miles down the road.

One day as I was driving through downtown Clinton, I noticed that the shop was empty, so I pulled into the parking lot to investigate. I found out that the same folks who ran the pizza restaurant owned the building the cycle shop was in. After talking to the owners, I found out that my competitor had moved out without giving any notice, which left his former landlords high and dry and scrambling to find a new tenant.

“Listen,” I told the owners. “What would you say if I paid you $200 cash a month to put a sign in the window that would say, ‘Bike Shop Closed. Please visit our friends at Cycle Madison’ along with our address and telephone number?” (Cycle Madison was a nearby shop of which I was a co-owner.)

The owner of the pizza joint was thrilled with the idea. “Deal,” he said with a smile. Of course, my competitor should have done right by his former landlord and he could have posted his own sign redirecting his customers to his new location. He just didn’t imagine that someone like me would think to take advantage of his mistake.

The end result was that for the next few months, dozens of my competitor’s confused customers drove up to his former location wondering what had happened. Apparently, they hadn’t realized that he had moved. Fortunately for them, our sign quickly redirected them to our sister store location to get their repairs or buy their new bike—business that should have belonged to my competitor. For what added up to about a $1,000 investment on my part, we acquired dozens of potential lifetime customers.

One of the key points of keeping pressure on your competitors by driving them nuts is to get them thinking about what you’re doing, always focused on catching up rather than focusing on innovating and improving on the aspects of their own business. I’m always looking for ways to distract them and throw them off their game—outdoing their new billboard with one of my own across the street, for example, or taking out a half-page ad in the Yellow Pages that outclasses their postage-stamp-sized ad. It’s like jumping into a boxing match where I’m not just trying to keep from getting hit, I’m trying to make my opponent think about what I might do next rather than focusing on what his best next move should be. Think about how well Apple has gotten into the heads of the folks at Microsoft. Think those ads that equate Apple with young, tech-savvy people and Microsoft with an over-the-hill, middle-aged guy don’t have some effect on the psyche of everyone in Redmond?

One of the best examples of how well this strategy can work for Zane’s involves the annual Big Wheel Sale we hold every spring. As I mentioned previously, this sale is absolutely huge for us; it accounts for more than 15 percent of our annual sales. And we make a big deal about it by spending big to promote it in all the regional media. Our vendors even come out for the weekend to enjoy seeing their products sell by the truckload. Of course, all the attention we receive tends to annoy the heck out of our competition.

A few years ago, a few of our competitors tried to create a big sale of their own. Two shops, one in West Haven and another in Branford, both touted their own HUGE sale in a series of expensive billboards and with TV advertising. They had me on edge for a while, wondering what they might be up to. It’s too bad for my competitors that their whole strategy backfired.

When the big day arrived, some of our customers came and told us that they had stopped by our competitors’ sales to see what the buzz was about and that it was a huge letdown. Whereas we literally have 1,400 bikes on display during the sale, our competition had a few dozen bikes parked out on their lawn. Not only did their attempts at creating buzz not generate enough traffic to compete with us, the lack of anything interesting going on actually created negative feelings among the potential customers who stopped in because the whole event fell so short of their expectations.

Later on, I learned from someone who worked for one of my competitors that they felt their version of the sale was a big success because they had sold twenty-five bikes over the entire weekend. “We sell twenty-five every single day of the year,” I thought. If we only sold twenty-five bikes on the biggest day of the year for us, we’d probably be out of business by now as well (yep, the West Haven store went out of business). The point of this example is that, rather than trying to find a way to leapfrog us, maybe by creating a unique event involving a shoreline ride or even a carnival or something, my competition just tried to chase me at my own game (offering, in their mind, a “HUGE” sale) and, as a result, lost big.

As soon as one of these shops went under, I would call up the phone company and get them to forward any calls placed to that number directly to our retail hotline. (This has since become common practice and a source of a lot of extra revenue for the phone companies, by the way.) A lot of those shops still had ads running in the Yellow Pages, so if a prospective customer dialed the number, they would reach us instead. Plus, any bikes that shop had sold over the years had a sticker with the shop’s phone number stuck to its frame. As the customers who bought those bikes needed service or a replacement, they would simply look at the number on their bike and ring it up. Only, instead of being connected to New Haven Bicycle and Sport or Alpha Lo Bicycles, they would hear a message that said something like, “The number you are calling is no longer in service, press 0 to be connected toll-free to Zane’s Cycles for all of your cycling needs.”

Not only did this bring in plenty of extra calls for Zane’s, it gave these potential new customers the notion that somehow the phone company was endorsing our business, which gave us a little bit of bonus credibility before we even struck up a conversation.

We’ve also been able to purchase phone numbers from a defunct competitor outright so that a customer calling that number would be connected directly to our retail shop. I remember receiving such a call a few years ago from a prospective customer who was trying to gauge the price for a new bike he wanted. I happened to be working the phones that day from inside my office. I was in the middle of some paperwork when the phone rang.

“Hello, you’ve reached the world-famous Zane’s Cycles,” I said in my friendliest voice.

“How much are you guys asking for a Trek 820?” the caller asked.

“That model is selling for $269.99,” I replied.

“Thanks,” he replied and quickly hung up before I could get in another word.

Five minutes later, another call came in. “Hello, you’ve reached the world-famous Zane’s Cycles,” I said into the phone.

“How much are you guys asking for a Trek 820?” the caller asked. “It’s selling for $269.99,” I replied before I could register anything.

“Thanks,” the caller said and quickly hung up.

After a minute, I thought, “That was weird. Was that the same guy?”

After another five minutes went by, the phone rang again.

“Hello, you’ve reached the world-famous Zane’s Cycles,” I said.

“How much are you guys asking for a Trek 820?” the caller asked.

“Sir, that model is selling for $269.99,” I said, this time with a huge smile on my face. It turned out that this guy had been calling all the bike dealers from A to Z in the phone book and kept getting connected to our line. I guess he was just focused on asking his question and therefore wasn’t paying attention each time I picked up the phone and greeted him exactly the same way each time. I bet you can guess where he ended up buying his Trek 820.

In addition to taking advantage of shuttered shops, I’ve tried, whenever possible, to make it harder for new competitors to enter the market. One example of what we did to implement competitive insulation in our market involved Cycle Madison, which I mentioned previously. That shop was a joint venture I formed with another bike shop owner based in Essex, which was about forty-five minutes east of our shop in Branford. I had heard that Trek was interested in supporting a new shop in the Madison area, a fast-growing suburban neighborhood that is just about halfway between Branford and Essex. Rather than have some new shop owner come in and try to eat both of our lunches, I suggested to my fellow shop owner in Essex that we open up our own shop to serve the Madison market. He agreed and we split the costs of opening the new shop down the middle, which ended up being about $50,000 each.

The nice thing was that I had a sales manager that was looking to move to the Madison area at the time. He was also looking for a new challenge, like managing a shop of his own. So he got the job of managing that shop. And, unlike Zane’s, which supplied the recreational crowd, the new shop would cater to the higher-end racing crowd. Our new manager then successfully recruited a mechanic to join him from another one of our competitors and, because both of these guys were well known and trusted by the Trek folks, the company stopped pursuing the idea of opening another shop in the area. Although Cycle Madison is now closed, we kept it running for about seven years so that it could serve its primary purpose: to keep other competitors out of the local market.

I will admit that there are competitors of ours on the national level that I would never want to go toe-to-toe with. I know, for instance, that there are guys running shops in Milwaukee and Portland, Oregon, who I would love to learn a few things from. The goal of competition is to pick off the weaker players and team up with the stronger ones. In fact, a few years down the road, when our national expansion has gathered some steam, perhaps these guys would make great co-branding partners or even full-fledged owners of a joint business. The mistake too many people make about competition is that they let their ego lead them where they don’t ever need to go—there is plenty of low-hanging fruit to pick without ever entering into a fight among equals. Of course, the same idea applies in reverse: the stronger I make our business, the crazier someone needs to be to try to enter the market and go toe-to-toe with us. If and when that happens again, we’ll be ready.

You can learn a lot about the values of a company by where it chooses to make its cuts during tough times. Although you might hear about how much a retailer values its customers when times are good, it sure should raise some eyebrows when they lay off most of their frontline staff during the bad times. No matter how bad things get for us, I would spend my very last nickel on those things aimed at building on our customers’ experiences. I would cut computers, inventory, and even the size of my store before I cut back on the number of people we needed to make our customers’ lives a little better as a result of shopping with us. The cost of connecting with our customers isn’t something an accountant can write off as a variable cost—it is a fixed expense and an investment in our future as a business. Without our attention to service, we will lose our differentiation in the market and find ourselves replaced by someone else who understands this principle better than we did.

But, because we do understand this concept, we plan to maximize our prior investments as we look toward the future. Unlike many other companies who have made the mistake of thinking about service simply as an expense, we have built the foundation of our company on the notion of delivering an exceptional customer experience and we can leverage the strength of that structure as we continue to expand.

As a company on the upswing, we also won’t face a lot of the hurdles other national companies might have to overcome in trying to replicate what has made us so successful. Again, we’re going to be attacking this game with a fresh set of legs and we’re not going to be afraid to reinvent the game entirely if it suits us.

As we roll out nationally, we’ll be using our database of some 300,000 customer records to help us pick the best locations for our shops and to seed those areas with the Zane’s brand before we’ve even located there. By sorting the information in that database, we can tell that we already have 200 customers in Phoenix, Arizona, for example, or 75 customers in Denver, Colorado. We can send those folks packets with a Zane’s branded T-shirt and water bottle and let them know we’re coming so they can tell their friends: soon, you, too, can get lifetime free service just by cycling around the block.

That means, of course, that even though most new businesses might be challenged with a slow start as word gets out about them, we’re changing the rules by making sure we’ll have momentum as soon as we hit the ground. Again, as long as we stick to our mission of delivering unique experiences to our customers, it doesn’t matter what playing field we land on—look out below!