CHAPTER 7
Bringing in those sales
In chapter 6 we touched on the importance of creating an effective and well-targeted marketing campaign that triggers the desired emotive enquiry. Next we'll discover the importance of how your business engages with the customer when they make that enquiry to convert it into an all-important sale.
Converting marketing enquiries into sales
Once you capture leads and enquiries through your marketing, the next critical phase, which lets many businesses down, is converting that lead or enquiry into a sale. This is where the ‘tread meets the road’, as they say, and where the enthused potential customer actually gets to engage and experience their first impressions of dealing with your business. First impressions are like a first date: you may have a great photo and profile on the dating app, but if you lose them when you open your mouth it's not going to be a good night!
That first engagement with your website, retail store or salesperson needs to reinforce the brand values and the brand positioning that you have portrayed in your marketing. This is what got them there in the first place so make sure you keep it consistent throughout the entire experience.
If it's a website that they're directed to, it must look professional and the layout must be clear and functional. Your potential customers need to be able to quickly find the information they want to learn more about, and it must be presented in a clear and engaging way, again re-enforcing your brand values (the ‘Why’ you exist) so they align with your customer's personal values and hopefully trigger that emotive purchase. If it's a retail store, the experience, look and layout must reflect the same brand positioning, values and functionality. The same goes for mobile sales people, and so on.
Pricing techniques
There are many techniques where pricing is used in conjunction with the product and its benefits to attract and convert a sale. This may have been used in your marketing to get a potential customer to your website or physical store, or you may have kept the price from public view until an enquiry was made, or you might have asked the customer to enter some personal data first to build your database.
You would have experienced many different pricing strategies in your day-to-day shopping life. For example, there are low-cost ‘get you into the store’ strategies, such as:
- loss leader — a commonly required product that is sold at a very low price to attract people into the store with the aim of selling a ‘basket’ of other products to make up for the loss
- bait and switch — advertising a product at a very low cost but with limited supply that sells out quickly, and then using the opportunity to upsell the customer to a more expensive product
- anchoring — discounting from a very high recommended retail price (which the item is never sold for anyway). We often see this in electricity retailing (e.g. 15 per cent off the listed market price)
- predatory pricing — this is discounted pricing used to protect your local area from competition. It is often used to hammer a new competitor to stop them getting market share and force them out of business.
Then there are pricing strategies to maximise margins. For example:
- price skimming — a new technology, a highly sought-after new product or a scarce product that is sold at a much higher margin to capitalise on the demand
- house brand — a brand that you own or have manufactured under exclusively, where the margin can be maximised because it can't be bought elsewhere. By your company taking on the marketing and logistics costs, it reduces the cost for the manufacturer, which they can then pass on
- price discrimination — where a different price can be used for different customers, maximising margins where possible. This is more a strategy used at a manufacturing or wholesale level where buying quantities and partner categories are often used as justification for different pricing for different customers.
Make sure you're aware of the different strategies that can be used rather than just pricing all products at the same margin. It's usual to trade off volume for margin. Those products that move quickly, that you can order in higher quantities and that turn over faster reduce costs within your business so they can be sold at lower profit margins. You may also choose to price different categories of products at different margins. A supermarket may choose to sell refrigerated lines that have a higher holding cost or ancillary electrical or pharmacy lines at higher margins than standard grocery items.
Subscription pricing
If you have a software platform that's providing a service, ongoing benefits or a streaming service, a recurring income model that creates a set income over a recurring billing period is a fantastic sales tool. This relies on providing ongoing value, with popular examples being gaming platforms, streaming services (TV, podcasts, etc.) and business accounting and service platforms.
Charging a deposit or pre-payment
To keep a business healthy and your cash flow moving, if there is the opportunity to collect deposits or pre-payment for your product, always do it. Money going out the door paying for products or other overheads before you collect it from selling the product is known as ‘negative cash flow’ and this must be kept to a minimum by collecting money owed as soon as possible after the product has been sold. If you are collecting your money 30 days after the invoice date or 30 days after end of month, consider offering discount incentives to get this to 14 days or even seven days as it makes an enormous difference to your cash position and ability to pay debts and other overheads faster. You can then use this additional cash reserve to achieve better prices from your suppliers. If you can get yourself into an e-commerce business where you are collecting your money upfront before the expenses are incurred, this is known as a ‘positive cash flow’ business and it reduces the financial risk enormously. An example of this is where you may have an e-commerce store that takes advantage of a supplier's ‘drop-shipping’ warehouse. You hold no stock and when you receive an order it gets sent through to the supplier, who fulfils the order, and you receive your payment and profit upfront. It's very difficult in most circumstances to have a fully cash positive business but the aim must be to reduce your negative cash flow as much as possible.
As I always say, timing is everything in business. The ZEN Energy business was built on receiving significant deposits upfront. It was at a time when the technology was new and in demand, the ZEN brand was strong in the market and we placed ourselves in a position where we could scale the business rapidly utilising funding from system deposits that then funded our supply chain.
Service response and exceptional experiences
Let's talk about the rules of engagement: how do we as a business respond to our customers? Will it be immediate? Will it be within a day or longer? How many times will we let the phone ring, how long can people stay on hold and how will we answer the phone? Will the call go directly to the person who can help the customer or will it go through three departments, after which the customer is hung up on? Often, this will depend on the complexity and size of the business, but as a start-up or early-stage scaling business this can be a huge competitive advantage if used correctly. You have the ability to be nimble and react quickly to customer needs so develop your systems around responsiveness and build that into your culture from day one.
Every time the phone rang in any of our companies it had to be answered within three rings by anyone who was available and it had to be answered in the same way: ‘Welcome to Regency Food Services. Richard speaking. How can I help you?’ The person answering was trained in how to assist the customer. People often act impulsively to purchase a product and these people need to be serviced effectively and quickly so that they feel satisfied they have made the right decision while they are in that frame of mind. This also goes for an e-commerce response: there needs to be an immediate acknowledgement of their presence on the website with an option to get help or, if possible, chat with a real person — or at least a chatbot — with an extensive FAQ list available to answer common questions. If an order is consequently placed, a confirmation must be sent thanking them for their order, together with a receipt and tracking details. From there the physical dispatch and delivery process can really differentiate between companies.
Just this week I was pleasantly surprised and impressed when replacement ink cartridges for my printer appeared on my doorstep the day after I ordered them from an interstate provider. Orders can be batched in your order processing system and, depending on your order volume, can be sent to the warehouse (yours or a third-party warehouse) for stock picking at different intervals during the day. A picking list should be generated in bin location order so one sweep of the warehouse can pick all the stock for that batch and the stock can then be brought into a ‘staging’ area for individual labelling and dispatch. Dispatching stock to the customer the same day, or at worst the next day, together with confirmed tracking information is always going to be a pleasant surprise. Make sure you have live stock information so people aren't ordering stock that's not available and can't be delivered, not only letting them down but requiring a refund — all of which costs you time, money and most likely a customer.
And the process doesn't end with dispatch. How have you gone about choosing a logistics provider? Have you just chosen the cheapest option to provide to your customer, do you know how long it will take to deliver and could this severely let the customer down if they want the product quickly? I would suggest, where possible, to build an express option into the price of the product (if it's not too much of a cost burden) so you can offer fast, free delivery, which is sure to delight your customers. At a minimum, provide a clear option for express delivery so your customers have a choice if they are impulsive or need a quick delivery, and ensure they are kept informed along the way to build excitement.
The future of physical in-store retail shopping is going to be built on ‘experience’ shopping and exceptional customer service that simply can't be provided online. The mistake large retailers have been making is cutting back on service and staff to try and compete with online shopping, but this just takes them on a continual downward spiral until they're out of business.
If your brand values and positioning in the market are represented as a low-cost, budget or convenience provider with no expectation of good service in-store, then people are aware of that and they are only there for the price or the convenience. It's when you see high-priced department stores selling luxury goods with extremely poor or non-existent service that you shake your head and think How long can this last before either online shopping or other quality service-driven outlets take over and these stores are sadly out of business?
Here's an example of retail shopping being an ‘experience’. There's a men's fashion retailer I frequent because I often need help in pairing clothing items and putting an outfit together for an occasion. I have developed a good relationship with the manager, Marc, who through his systems and personal service knows every item he has sold to me and what I have in my wardrobe from his store and will put outfits together with that knowledge, thereby maximising the value I spend on future items. Now that's exceptional customer service that can't be replicated online, and a service I'm prepared to pay a premium for!
That's the future of retail shopping, so don't choose a physical retail store option for your business unless you understand how to differentiate on service and are prepared to go through intensive staff training and role-playing to get a consistently high level of face-to-face service. This is about local knowledge, local service and local ownership in most cases. There are additional overheads in running a retail outlet compared to an online store, or a drop shop that doesn't even have a warehouse, and these have to be balanced out with exceptional customer service and convenience. There's no doubt this is possible, but physical retail has changed, and sloppy, poor, inconsistent service just won't cut it anymore if you want to build a long-term successful business.
If you're a manufacturer or a wholesale business, the same principles of service apply. You still have customers; they're just not at the end of the supply chain. Your customers, whether they be wholesalers or retailers, still have a choice, no matter how much you think you have them locked up. Every company must be in the business of continual improvement because if you aren't, a competitor will emerge and take it away from you. Service response and delivery (fulfilment) is an ever-changing landscape with technology providing ever better ways of communicating with and servicing customers.
When things go wrong
While we're on the subject of rules of engagement with our customers, we also need to acknowledge that things don't always go the way we planned. The way you deal with these situations will separate you as a great company from those that get poor reviews and eventually fall by the wayside. The difference is communication. Avoiding a difficult phone call because no-one wants to make the call will only result in an angry customer — and you stand to lose the customer when the entire relationship can easily be salvaged just by explaining what has happened and why. Most customers are reasonable and if there is a valid reason they will usually understand, but timely communication is essential. Don't wait. If the customer is waiting for a crucial delivery or service, the best time to call them is as soon as you find out there's a delay, an issue or that there's a stock out. Give them a chance to source stock elsewhere or help them through the process if you can. If you wait or don't advise them and that delivery just doesn't turn up you have literally thrown yourself and your company under the bus when everything could have been salvaged with a phone call. Also, don't rely on electronic messaging or emails as people are often busy and not always watching their computer or phone. If they're waiting for a delivery and it's not coming, be sure to ring them as soon as you find out.
Service response also relates to the after-sales-service experience, as customers need confidence that if something goes wrong, they're dealing with a trusted business that will support them to ensure their experience meets the brand promise. Rather than anguish over the cost of a replacement for a faulty or damaged product, or a product that just doesn't meet the customer's expectations, a quality business must look beyond this initial cost. Weigh it up against the damage that can be caused by a disgruntled, angry customer who will go out of their way to damage your reputation and put other prospective customers off. This is a much higher cost in the long run than the immediate ‘fix’ that could have been done to diffuse the issue and preserve the business reputation. Sometimes this is due to the delegation authority that local managers have, or their experience in how to deal with a particular problem, but this is all countered by proper training and culture. This can cause a lot of anxiety for your staff if they can clearly see the issue but aren't allowed to act appropriately to service the customer due to constrictive processes.
Of course, there's always going to be that difficult customer who may try it on for a discount or free stock when everything has actually been done correctly and they were serviced well. In this case you need to be prepared to respond to any public criticism in the same public forum that they used and outline the professional process the customer has been taken through so the public can see the issue is with the customer and not your business.
And finally, there's the process of learning from your customer's experience. It's super important to have good after-sales communication to ensure your customer was satisfied with both the product and the service, and to learn from any negative (or positive) experiences, so negatives can be reduced, and positives enhanced, along with any further suggestions the customer may have. The more personal and open ended this communication is, the better, but it also needs to be quick and efficient so as not to deter the customer from responding. Always aim for ways to improve the response rate so you can learn more on how to further improve your overall business. Some businesses encourage this with a small gift or discount voucher on their next order.