GUERRILLA RETAILING
Unconventional Ways to Make Big Profits from Your Retail Business
Copyright © MMIV by Jay Conrad Levinson, Elly Valas and Orvel Ray Wilson, CSP. All Rights Reserved.
Library of Congress Control Number: 2004103109 ISBN: 1-886481-07-5
The Guerrilla Group Press, Boulder, Colorado.
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“No matter if you’re thinking about starting a retail business, or you are a veteran, Guerrilla Retailing is a must read. Every page will bring you ideas how to become even more successful in an ever more competitive and crowded marketplace.”
Barry Behr, Whirlpool Corporation
“This book is packed with practical information any retailer can use to energize their business. I hope our competition doesn’t get a hold of this gem. If you aren’t doing many of them you won’t be around to try them when the next edition comes out. I found myself making a laundry list of action items to try in our business. If you use just one idea in the book, it’s worth the cost.”
Michael Abt, Abt Electronics
“This is a must read. Guerilla Retailing emphasizes ideas and details that cannot be overlooked. Serious tactics and strategies for retailers and other small businesses are contained in this gem of a book. It motivated me and my employees.”
Cecil Hernandez, Euro Bath & Tile
“In 1985 my Mom sent me a copy of Guerilla Marketing for Christmas. The next year my sales doubled, and this book turned out to be the most valuable Christmas gift I had ever received. Guerrilla Retailing continues in that tradition. It is a must read for any small retailer who wants to slug it out with the big guys.”
Rob Candler, Rob’s Music
“This book is great for someone like me, a musician without a business background. I just need someone to tell me in plain and simply language some things that can help my business. This is a book that I can really understand.”
Sandy Ficca, Boulder Drums
Have the authors speak at your next conference, convention or sales meeting. Any of these can be customized from a 40 minute keynote to a multi-day workshop.
Guerrilla Retailing
Everything you need to know to run a successful retail store, and hundreds of low-cost marketing tactics to attract customers.
Characteristics of a Sales Guerrilla
Ten things that set the superstars apart. Our most popular keynote.
Guerrilla Marketing
Fight back with this guerrilla arsenal of 100 marketing weapons, and 50 will cost you nothing.
Guerrilla Selling®
Unconventional Weapons and Tactics to Increase your Sales.
Guerrilla TeleSelling
Cover more accounts and more territory by creating a “telepresence” using phone, fax, e-mail, internet, and more.
Guerrilla Negotiating
Just because they’re nice people doesn’t mean they have your best interests at heart. How to create a fair advantage in an unfair world.
Guerrilla Trade Show Selling
Learn the most common trade show mistakes, how to plan for success, and close more sales when you get home.
Details and demo videos at www.GuerrillaGroup.com.
We dedicate this book to that small band of entrepreneurs
who bravely fight the retail wars, proving beyond doubt
that Guerrilla Retailing really works.
So, You Want to Be a Retailer?
KNOW THE ENEMY
What Do We Mean by “Guerrilla”?
A CREDO FOR GUERRILLAS
What Kind of Retailer Do You Want To Be?
Who Is Your Customer
Location, Location, Location
Merchandising Strategy
Store Design and Display
AMBIENCE
STORELAYOUT
FIXTURES
LIGHTING
INSIDE SIGNS
NEATNESS
Getting Lots of Customers Into Your Store
GUERRILLA MARKETING FOR RETAILERS
WHEN TO MARKET
HOW DO YOU REACH THEM?
RANKING THE WEAPONS
The Telephone as a Marketing Weapon
OLD CUSTOMERS, NEW BUSINESS
PHONE DEMEANOR
Low Cost, High Impact Promotions
DEMONSTRATIONS
SEASONAL PROMOTIONS
BUSINESS BUILDERS
Attracting the Right Staff
PEOPLE ARE YOUR GREATEST ASSET
RECRUITING AND HIRING SALES GUERRILLAS
How to Train and Motivate the Sales Team
Selling Effectively on the Retail Floor
THE ADD-ON
Selling at Higher Prices
A GOOD DEAL
GETTING UNSTUCK ON PRICE ISSUES
REASONS WHY CUSTOMERS WILL PAY MORE
Creating a Culture of Service Excellence
PROCESSES ADD TO THE SHOPPING EXPERIENCE
MOMENTS OF TRUTH
TRUE VALUE
Retailing in The Experience Economy
Getting Customers Back Again and Again
BEING EASY TO DO BUSINESS WITH
Dealing with Upset or Angry Customers
Guerrilla Marketing Online
Managing for Growth and Profitability
Metrics and Business Intelligence
Glossary of Financial Terms
Parting Shot
Appendix A
FINANCIAL DIAGNOSTICS
Appendix B
Job Descriptions Directory
Bibliography
About the Authors
Jay Conrad Levinson
Elly Valas
Orvel Ray Wilson, CSP
Acknowledgements
I owe countless thanks to Orvel Ray Wilson, who has been my writing partner for many books, each one superb, and to Elly Valas, my newest writing partner. They did the heavy lifting on this book and I know that retailers around the world will be as grateful to my co-authors as I am.
—Jay Conrad Levinson
With special thanks to Bob Goldberg, Rosemary Jacobshagen and the North American Retail Dealer’s Association (NARDA) and its members for opening their stores, lives and hearts, and for the opportunity to learn and teach, and to grow with them. In memory of my retail mentors: Jerry Gart, Zeke Landres and Harry Valas. With appreciation to Orvel Ray Wilson, for his support in making this book possible.
— Elly Valas
Deepest appreciation to Elly and Jay, as well as to Aaron Wilson, Chris Boyer, Ryan Brady, Pat McNamara, Michael Larsen, and all of the team at The Guerrilla Group who worked so hard to help make this book a reality. Special thanks to Denise, the love of my life, for putting up with our late nights and long hours while we were writing it, and for her expert proofreading, as well as all of our readers who made so many helpful corrections and suggestions. Thanks as well to all our clients and friends, customers and suppliers who have shown us how wonderfully rewarding the world of small business can be.
— Orvel Ray Wilson
Introduction
So, You Want to Be a Retailer?
Whether you’re trying to beat back Best Buy, ward off Wal Mart, or open your own hometown hardware store, this book will show you how to survive, and thrive in today’s hyper-competitive world of retail. After working with thousands of retailers all around the world, we’ve watched the losers come and go, while the winners grow and grow. We’ve catalogued their best practices, and organized them here for you step-by-step. Whether you’re just developing your concept, or opening your tenth location, you’ll find new ideas and tactics that can ensure your success.
It’s a jungle out there. There’s never been a tougher time for retailers. You’ll need all the help you can get just to survive. Luckily, you hold in your hands the world’s most powerful arsenal for winning the retail wars.
You’ll learn what to consider when choosing a name and identity for your business, and how to identify your best potential customers. You’ll discover how to pick the right location, hire the right people and display the right merchandise. You’ll learn how to retaliate against predatory pricing, while getting the maximum impact from your advertising. You’ll learn about low-cost, high-payoff promotions that have been tested by award-winning retailers in dozens of industries. You’ll learn how to build traffic, maintain margins, motivate salespeople and develop a following of loyal, repeat customers. We’ve even armed you with powerful analytical tools so you can diagnose and cure the most common business ailments without advice from an MBA.
No one is eagerly waiting for the next retail store to open and no one is going to throw a big party to celebrate your grand opening unless you do. In the 1980s, developers threw up more than 1600 regional malls, so many in fact, that today they’re having trouble finding sites for new ones. In the U.S. today, we already have nearly twenty square feet of retail space for every man, woman and child in the country. Compare that to only thirteen feet per person in 1980 and even today, only two feet of retail space per person in the United Kingdom. We are malled out, stored out and shopped out.
You’ve seen the hand painted signs in the windows, “Going Out of Business,” and “Everything Must Go,” or, more often, you make the trip to a favorite shop on a side street only to find the building empty and the windows papered over. These are tough times for retailers. The long-standing family businesses have been out-priced by the megastores and crowded out by urban renewal. Competition is fierce and margins are thin. Survival is difficult and profitability is illusive.
That is, unless you’re a Guerrilla Retailer.
You’ve seen them, too, haven’t you? They’re the busy, exciting shops and stores where there’s always a crowd and always something new and interesting to be found. You’ll find them in downtown storefronts, backstreet shops and even (occasionally) in the regional mega-malls. They’re at the swap meet, the flea market, or simply spread out on a blanket on the sidewalk. They break the conventional rules of merchandising. They may remain closed on Sunday, Labor Day and other big holidays. Or they might only open on Thursday evening and Saturday. Even so, they shatter the norms for sales per square foot and they make their owners delightful profits day-after-day, year-in and year-out.
No matter how the economy may swing, a never-ending stream of loyal, repeat customers adore these irregulars. Guerrillas not only love the musical ring of the cash register, but they enjoy the esteem of the community, the support of their vendors and the respect of their bankers.
How can this be? You hold the answer in your hand.
KNOW THE ENEMY
You are not paranoid. They really are out to get you. It’s no secret that big box stores are capturing retail market share by storm. Since 1990, more than 13,000 locally-owned pharmacies have closed. The market share of independent bookstores has fallen from 58% in 1972 to just 15% today. Local hardware dealers are disappearing too; Home Depot and Lowe’s have captured one-third of that market. Five companies account for 42% of all grocery sales. Blockbuster rents one of every three videos nationwide. A single corporation, Wal Mart, now captures seven percent of all consumer spending, and is the world’s largest employer.
More than 160 million consumers shop in discount stores each week, so if you’re going to be a guerrilla retailer, it’s best to know the enemy.
The terms “value retailers,” “superstore,” “big box retailer,” and “category killer” are all used interchangeably. For these retailers, size does matter. Their retail model depends on big volume rather than big markups. To do a profitable volume, they must occupy a big space. Typically, they range in size from 90,000 to 200,000 square feet and are located as often as possible near highway interchanges. They all use the same windowless box store design, with several acres of single-floor layout and vast surface parking.
We have to give them credit. At Wal-Mart, “Everyday Low Prices” is more than just a slogan. Over the years, Wal-Mart has relentlessly wrung tens of billions of dollars in cost efficiencies out of the retail supply chain, then passed the larger part of those savings along to customers. The New England Consulting Group, in Westport, CT, estimates that Wal-Mart saved its U.S. customers $20 billion in 2003 alone. Factor in the price cuts that other retailers must make to compete and the total annual savings approaches $100 billion. It’s no wonder that economists refer to a broad “Wal-Mart effect” that has suppressed inflation and set productivity gains rippling through the economy year after year.
However, Wal-Mart’s seemingly virtuous business model is fraught with complications and perverse consequences. Their stores often decimate whole communities of small town downtown merchants and drive down retail wages. The discounters’ entrée into the community is often greeted with great fanfare from the Chamber of Commerce, who’s blinded by the glitter of sales tax revenue and the promise of new jobs. Gifts from the city fathers often include tax breaks, roads and infrastructure, and environmental protection waivers.
Certainly superstores are not the only culprits. The definition of “big” is relative to the product category. A superstore of diamonds needs only 5,000 square feet or so to be called a superstore, while a superstore of cars would cover acres and acres and acres. For the supermarket and grocery sector, a big-box superstore will typically be in the 50,000 to 100,000 square foot range. Warehouse operations such as Costco normally contain 120,000 square feet. In contrast, for book retailers, 25,000 to 50,000 square feet would qualify as a big-box. For other specialty retail categories like eyeglasses, a 5,000 square-foot store would qualify. The key point is that “big-box category-killer” stores are several times the size of the traditional outlets in their categories.
We can categorize these “superstores” into three subgroups: discount department stores, category killers and warehouse clubs.
Discount department stores include Wal Mart, Kmart, Target and others who sell department store merchandise at lower prices.
Category killers are large niche retailers like Ikea, Toys R Us, Circuit City, Barnes & Noble Books, Home Depot, Lowe’s and Sports Authority that buy and sell in huge volumes at low prices. They create additional pressure on prices by eliminating the middleman and dealing directly with manufacturers.
Warehouse clubs, like Sam’s Club, Costco and BJ’s Wholesale, are membership shopping clubs. They offer a variety of goods, often including groceries, electronics, clothing, hardware and more, at wholesale prices. Unlike discount department stores, which may sell as many as 60,000 distinct items, warehouse clubs limit their range from 3,000 to 5,000 items. Their stores range in size from 104,000 to 170,000 square feet and serve markets up to 250,000 people.
Conglomerations of superstores in 250,000 to 750,000 square-foot centers are called “power centers.”
Superstores have acquired their affectionate nickname “category killers” because they don’t compete with existing businesses. They kill them off and monopolize the market.
When these behemoths move into a market, they typically over-staff the store with specially-trained teams of friendly, helpful salespeople, at least for the first few months of operation. Expanded staff and predatory pricing means that the first-time shopper has a positive experience and saves money. Customers are won early. Once the competition is demolished, the box store changes the product mix, raises prices and reduces staff. Some local stores just give up, while others try to adapt to fit a new market, but without access to venture capital, zoning variances or tax breaks, many fail.
As the category killer's smaller competition disappears, so do the helpful employees and prices start to rise.
“Predatory pricing” is another weapon wielded by the category killers. These “loss leaders” give the impression of wider savings. Car-bound customers find comparison-shopping inconvenient if not impossible. They’re at the mercy of the bar-code scanner.
The Fall of Department Stores
Troubled department stores are losing share to the mass merchants at one end of the scale, and specialty stores at the other. This reflects the larger economic issues buffeting retail in general, and the apparel business in particular, including deflation resulting from an oversupply of goods. Five years ago, department stores sold men's jeans at an average price of $40. Today, the same jeans sell for an average of only $34. At national chains like Sears, Roebuck & Co. or Kohl's Corp., the price is about $24. When the World Trade Organization further relaxes trade barriers with China in 2005, the U.S. market will be flooded with even more cheap clothing. All of this promises to put greater pressure on everyone to lower prices.
In spite of current economic trends, this is a great time to be in retail.
Twenty Important Trends in Retail
1. Experts are forecasting continued success for Wal-Mart and their ilk, as shoppers become ever more bargain-conscious.
2. We also see continued growth for the super center format. Total super center sales will nearly triple by 2010.
3. Even so, there are opportunities for conventional retailers to survive in a world dominated by the big boxes.
4. No more one-size-fits-all. Guerrilla retailers will have to take more of a portfolio approach to the market in order to appeal to more discriminating shoppers. Even customers who used to shop at sporting goods superstores like Sports Authority are turning to specialty shops that sell only soccer stuff, or only snowmobiles, or the ultimate example: Golf For Her, a retail boutique created by entrepreneur Kris Foy in Broomfield, Colorado.
5. Department stores are in a death spiral. Escalating competition from discounters on one side and specialty stores on the other will continue to squeeze this category, which will face more consolidation and retrenchment.
6. Malls will get mauled. Many will have to change almost beyond recognition in order to survive. The good news for guerrillas is that customers who are tired of hiking through the sameness of mall after mall will be more likely to go to a destination store for just the right product and superior service.
7. Reconcept rather than just remodel. Compressed lifecycles for products, retail concepts and brands mean the end of large, mass-merchandised specialty chains.
There used to be a restaurant on Highland Avenue in Downers Grove, Illinois, called The Highland Grill. Great food, great service, in the upscale burgers-steaks-and-fries grill-food format, very successful, always jammed. Then suddenly, BAM, they’re closed! Two and half months later they re-open as Parker’s Ocean Grill with completely new décor, new menu, but the same staff. We asked, “What happened?” The manager explained, “We’re part of an eight-restaurant chain, Select Restaurants, Inc., headquartered in Cleveland, Ohio, and we’ve learned that every four or five years, we have to gut the place and do something completely different before we get stale and our customers get bored with us.”
Today they operate 17 restaurants.
8. The Experience Economy excels. Guerrilla Retailing concepts will mix content and commerce as never before. The Rainforest Café couldn’t make it on the quality of their food alone. REI and their two-story climbing walls create an atmosphere of high adventure, even before you get your new gear outdoors.
9. Click & Brick. E-tailing’s impact will extend beyond its relatively limited share (currently about 3%) of total retail sales. By 2008, it will be 12%. Forrester Research predicts U.S. online sales will grow to $204 billion by 2007.
10. Smart shopping. Consumers will embrace technologies that give them better information about products and more control over the shopping process. Roughly half of U.S. consumers already shop on the Internet at least occasionally. A larger proportion use the web to research options before going to a brick-and-mortar store to make the purchase. The most successful operators combine information-rich on-line catalogues with storefront offerings. Guerrilla retailers will set up a computer terminal with Internet access and invite their prospect to check out competing products right there in the store instead of leaving to shop elsewhere.
11. Smart stores. Retailers will adopt technologies that enhance the productivity of store space and associates. Some solutions, including kiosks and self-checkout terminals, will improve staff productivity and make shopping more convenient. Guerrilla retailers will provide floorwalkers with wireless handheld computers that can check inventory, schedule installations, or even write invoices from anywhere on the sales floor. Rental-car agencies and even some restaurants already use wireless floorwalkers. Soon you’ll see a computer display mounted on your grocery cart that beeps an alarm when you pass an item that’s on sale, driving multiple-item, impulse and companion-item purchases.
12. Mobile sales will remain elusive. Starbucks Coffee, in Seattle, Washington, has experimented with micro-marketing. A coupon appears on the screen of your cell-phone when you’re in the neighborhood. But the sale of products and services via cell phones and other mobile devices will be limited through the end of the decade.
13. The global land rush continues. Despite growing world tensions, retailers and other businesses will remain committed to international operations.
14. Retailers will act more and more like suppliers. As retailers grow they will seek alternative sources of products, leading many suppliers to find their retail customers becoming their biggest competitors. Wal Mart is already contracting for apparel directly with factories in China, two years in advance.
15. Retailers will become brand managers. Exclusive brands will be an important differentiation strategy for guerrilla retailers. You’ll see more and more one-brand only stores like Victoria’s Secret, Talbot’s, J. Crew, Eddie Bauer, Abercrombie & Fitch, The Gap and Orvis.
16. Suppliers will start to act more like retailers. Retailers will look to key suppliers to become category consultants, setting strategy for the category, managing inventory and selling space by location, almost as if they were operating leased departments.
17. Brand sharing. Retailers will plug into each other’s shopper data base and leverage location by leasing space for a store-within-a-store. Department stores often feature Ralph Lauren, Calphalon, or Nautica stores-in-a-store. Starbucks is setting up shop in your local Barnes & Noble, as well as in Albertson’s, right next to the Krispy Kremes.
18. Über retailers. Some giant retailers will leverage their brand identities, customer relationships and size to fulfill virtually all the needs of certain categories of shoppers. Cabela’s has followed this strategy to wildly-profitable success specializing in hunting, fishing and outdoor gear.
19. Suppliers become retailers. Some suppliers will seek to sell directly to the consumer, as in The Nike Store and The Sony Store. BOSE sells their acoustic noise-canceling headphones directly to consumers in airports as well as their own stores.
20. Customers will call the shots. More and more, customer relationships will be the key competitive asset for guerrilla retailers.
The battle has begun. You are massively outnumbered, outspent and out-gunned, and unless you fight back with everything you’ve got, you don’t stand a chance. You must become a Guerrilla.
Small is Beautiful
Retailers are learning that when it comes to store size, bigger isn’t necessarily better. Grocery chains such as Publix (and you could add Marsh, Harris Teeter and some others) with its 29,000 square foot store in Jacksonville, Florida, are finding that smaller units can create dollar volumes similar to bigger boxes.
Customers in the smaller stores are different. They make more trips to the store, buy more prepared foods and will walk to the store more often than those shopping in a 55,000 square foot unit.
First, there were only small stores. Then someone looked at the economics and said, “Look, I only have to pay one store manager.” With this and all the other economies, large stores were born. This was followed by the concept of one-stop shopping, which was never supported by the consumer. Now, many large format retailers are having difficulty finding available store sites.
Large stores create an impersonal shopping experience that appeals to a different consumer than the one who is loyal to the local market. Not everyone wants to drive for 20 minutes to shop. Different customers require different types of merchandise. People will adapt as necessary, but some really do like the feeling that they are taking control of their shopping dollar by driving to the big box and surviving alone in the “wilderness of oversized servings.” Others very much prefer personalized service and a special shopping experience.
There is certainly a place for both in this world. A big box must focus intently on the operations, while a smaller store can (and must) focus on the customer. Management of the box stores has pushed far too many administrative tasks down to the store level, causing distraction and lack of focus. This has led to the inability to deliver the type of management required to serve, please and cater to customers, not to mention the amount of time distracted from coaching and inspiring their associates. These are the key vulnerabilities that guerrilla retailers should exploit.
Many retailers are hard at work seeking a niche, creating points of differentiation and creating a value for their customers. Learning, finding out what works and expanding new and different formats can be exciting. These store formats may require a completely different skill set for reasons other than size. Imagine the need for an executive chef as your store’s manager, depending on the format. There’s a broad, unmet demand out there for different skills and talents for which size and dollar volume may be irrelevant.
These days, retail stores, for the most part, were not designed for the customer. Instead, they were developed to generate maximum sales with the least expense. There is nothing wrong with that, but guerrillas know that profit, not sales, is the only legitimate measure of small-business success.
Small guerrilla operators need to focus on adding value, and the extra special touches that the box stores can’t provide. The talent level of your employees must be at the top of the scale. In a small store, everyone has to carry their own weight. Small stores get no economies of scale, so every mistake is magnified.
The good news is that small stores with talent and creativity can generate profit margins that the big stores only dream about. Plus they’re experiencing the rewards of working with customers that can actually make it fun to work in retail.
Despite industry practice, stores should be designed as small as possible, while still meeting their merchandising and customer needs. Whole Foods Market, the world’s largest retailer of natural and organic foods with more than 140 stores throughout the country, averages about the same per-store sales as Kroger or Safeway, but their stores are about half the size. This sales-per-square-foot efficiency compounds the profitability they earn from higher gross margins.
Successful small stores usually have high customer counts and low sales per transaction. On average, quick shoppers spend nearly as much in five to ten minutes as a “browser” will spend in ten to twenty minutes. The speed of spending is far higher for the shorter trips.
A great majority of customers shop the large-format stores as if they were a smaller store. Eighty to 90% of the shopping trips never get beyond the first twenty percent of the floor. By spreading 20,000 feet of shopping over a 60,000 foot box, you have just moved many of the items a shopper might have purchased outside of their ambit.
Soon, these big 130,000 square-foot stores are no longer going to be the big push, because, the population is getting older. People are not going to want to walk through big stores. Guerrilla retailers have to capitalize on this very important trend. These customers want to feel like they are special. In a big box store, they feel like a number. Their parents told them stories about what it was like going to the neighborhood market when they were growing up. They called the butcher by his first name and he knew what cut to give them and how thick they liked it.
A small store also has an advantage over a larger store when it comes to personnel. It can better spend its time on training and cross training. Employees tend to stay longer in a smaller store because they feel they are part of something special. In the future, retailers across the country will give in to their customers, and bring back a smaller store format with a focus on quality instead of variety.
Still Room
There is still plenty of room for remarkable retailers. These guerrillas have a clear vision and a well-defined mission. They constantly strive to provide a unique shopping experience. They have Disney-ized the shopping trip by combining service, technology and theatre into a transcendent experience.
Shopping has become more and more experiential, so that the quality of the experience has become more important than the quality of the merchandise. Consumers will pay more for an item that’s artfully displayed, beautifully lit and professionally presented in pleasant and exciting surroundings.
Retail has become shoppertainment. Successful guerrillas have turned their shops and stores into theaters, where the sales associates are the cast and the fixtures and merchandise provide the set. They tell a story or capture an era, seduce and excite you.
If you don’t have a story to tell, a theme, or a well-defined, well-executed niche, if you’re not remarkable, your days as a retailer are numbered.
If you isolate your uniqueness, defend your quality, provide expert advice and make shopping fun, you’ll do a Snoopy dance on the way to the bank with each day’s receipts.
Chapter 1
What Do We Mean by “Guerrilla”?
The strategy of course comes from guerrilla warfare; how do you fight back when you’re outnumbered, outgunned and outspent by the competition?
Just as a lightly armed, fast-moving band of rag-tags can paralyze an army, the retail guerrilla relies on information and surprise to gain a tactical advantage.
Information is the new currency of the 21st Century. By information, we mean knowing more about your customers, your market and your products than anyone. Guerrillas constantly walk the floor, managing their business from the only perspective that matters: the customer’s point-of-view. They ask casual questions and organize formal focus groups. They listen. It’s really no mystery. If you really listen, your customers will always tell you exactly what you need to do to be successful.
By surprise, we mean going the extra mile, adding the extra touch, doing the unexpected. They often do the very last thing their competitors, or even their customers, expect. They under-promise and over-deliver. They tell the truth at all times, at all costs.
Guerrillas are dedicated to building customer loyalty, while also earning handsome profits. Profit is the only legitimate measure of your success. No one ever went broke making a profit.
Be Exceptional
No one today has resources to waste on inefficient marketing tactics like random cold calling or half-hearted follow-up. Consumers have more choices than ever, and will no longer settle for shoddy quality or unresponsive service. You have to be positively exceptional to maintain their loyalty. To win the business in today’s brutal battlefield, you must become a Guerrilla.
Guerrilla Retailing is not so much a collection of techniques as it is an attitude, an approach, a philosophy of doing business. Guerrilla Retailing is about combining psychology and technology for getting maximum results at minimum cost. Some of it is common sense, but not all of it is common practice. Guerrillas build a constituency of dedicated followers by consistently maintaining the highest standards of quality, service and business principles.
Guerrillas rely on time, energy and imagination instead of the brute force of a big-budget marketing campaign. These are the three arenas where no one can outspend you.
A CREDO FOR GUERRILLAS
How do you explain it? Two identical storefronts in a strip mall; one sees tenant after tenant move in, open their doors and then fail, while its neighbor thrives year after year, generating generous profits for their owners. We’ve worked with successful retailers all over the world, from appliance stores in Atlanta to a tailor’s shop in Bangkok, and as different as these stores may be, the successful ones all exhibit this set of winning characteristics. They're easy to remember because each word ends in “ent.”
Investment
Guerrillas consider the money they spend on their team, their facilities and their marketing to be an investment, not an expense. Just like buying blue-chip stocks, you should expect to get your principle back, plus interest. Guerrillas understand the need to invest whatever it takes to meet changing market and consumer conditions.
There are only two kinds of marketing: good marketing and bad marketing. Good marketing pays for itself and returns a dividend. It drives customers into your store and profits into your bank account. Everything else is bad marketing.
More important than money, guerrillas invest time, energy and imagination.
Planning and researching your market, your competitors and your customers’ needs takes valuable time. But the time and money you invest in those relationships is a smart investment in the long run, if you manage it carefully. Be on the lookout for opportunities to leverage your selling capital for a greater return. For example, can the customer buy something, and also give you a merchandising suggestion, an introduction to another supplier, a referral, or a testimonial letter?
Rewarding customers for doing business with you is a particularly conservative investment. Don't expect overnight miracles. You might not hear from them again for months. But just like your blue-chip stocks, over the years they’ll be worth a fortune.
The average retail business in America only invests between three and four percent of gross sales revenue back into marketing. At the launch, it’s not unusual for start-ups to spend more than ten percent of revenues getting their name out and customers in. Guerrillas measure the effectiveness of every dollar spent on marketing.
And do something every day to invest in yourself. Constantly improve your knowledge of the product, the market and the customer. Read the trade journals that serve your industry religiously. Subscribe to them all. Two retail publications that we can recommend are The National Retail Federation’s magazine Stores and The Independent Retailer, published by the North America Retail Dealer Association. Ask yourself, “What could I improve?” Ask your customers. Listen to their answers. Act on them. Organize focus groups of customers and ask, “How are we doing?” If you really listen, your customers will tell you exactly what you need to do to succeed.
Consistent
Poor selling done consistently will be more effective than great selling done sporadically. The guerrilla who is consistent will outsell the better armed, better equipped, better organized corporate regulars, because prospects will trust them.
In the mind of the prospect, consistency is interpreted as credibility, longevity and success. This creates a feeling of trust. Guerrillas earn the confidence of their prospects and soon prospects become customers.
Most buying decisions are made unconsciously and modern psychology has shown us how to reach into the unconscious mind of prospects. Repetition is the key. At the risk of repeating ourselves, we'll say that again. Repetition.
Repetition is required on two fronts: selling the message to prospective customers and selling the message to the sales staff. Guerrillas repeat their offer to the same people over and over again. Even when prospects say, “no,” and particularly when they say, “yes.” They repeat their presentations and their specials and their seasonal offers. They repeat their message and their benefits.
And they repeat their sales training routinely. Weekly. Daily. Constantly. The most successful sales retail organizations in the world train and train and re-train. They train the truck drivers and the telephone receptionists and the service techs. Everyone hears the company's mission and values echoed in meetings, in the hallway, in the cafeteria and on posters in the break rooms.
Repetition. It's how the world knows who you are and what you're about. By maintaining the same identity over time, guerrillas attract business the others have left behind in their hasty retreat.
Do not capriciously change your prices, your products or your guerrilla approach. Just about the time you're bored stiff with your products, your presentation and your advertising campaign, the community you serve is just getting to know you and associating your name with those needs. By being consistent, the guerrilla becomes the second most likely source for their customers and when the competition screws up they automatically inherit their customers as well.
Confident
Guerrillas know that they’re selling quality. Unless your offering is top quality, guerrilla retailing will only accelerate your demise. Guerrillas believe in their products and their people. They depend on the rest of the organization to deliver on every promise, every time and then some. If they can't feel that kind of complete trust, they're working for the wrong outfit. They never bad-mouth anyone, even the competition. When something goes wrong, they take personal responsibility.
In an exit-poll survey, 10,000 shoppers in 50 states were asked, “Why did you buy that item here?” Of their responses, “selection” was ranked forth after third-ranked “service.” Only 14% said price was most important (it ranked 9th overall). The second most frequent answer was “quality.” At the top of the list, ranked as the most frequently cited reason for buying from a particular store was “confidence.” They felt confident that their needs would be met and the dealer would stand behind their purchase. Guerrillas do everything they can to communicate their own absolute confidence in their company, their offering and themselves. That confidence is contagious and spreads to prospects and customers.
Patient
Customers may not need your offering today, but they will sooner or later. Needs are cyclical. For example, if you’ve just eaten a big meal, you don’t feel much like ordering pizza. Your appetite has been sated for the time being. But in a few hours, you’ll begin to feel hungry again. Guerrillas are always on the lookout for the next need cycle, and strive to be there when the need arises again. They keep in touch with customers long after the competition has given up on them.
Not all purchases are made the first time the customer comes into the store. The larger the purchase, the more time consumers may take to carefully consider their buying decisions. So the guerrilla sticks with it. Every contact makes some kind of impression, so it takes a lot of contact time with prospects before they will be primed to do business with you. It may require several impressions of your company, your product or your idea to move the mind of a prospect from total apathy to purchase readiness.
Assortment
Guerrillas offer a wide variety of goods and services and can adapt their offering, their terms, even their delivery schedule to meet the customers needs. The more flexible they can be, the better. The old days when Henry Ford could offer “any color you want, as long as it’s black,” are long gone. The more options you offer, the more people you can serve and the more you can sell. But guerrillas also stick to what they do well and sell what they do best.
Subsequent
Guerrillas succeed by fighting for successive sales and concentrate most of their efforts selling to current customers. They wage their sales campaign simultaneously on three fronts, The Universe, Their Prospects, and Their Customers. But they marshal their resources to concentrate primarily on the third group.
The first arena, The Universe, includes everyone in your service area. Everyone.
Guerrillas invest 10% of their efforts reaching out at random to this massive audience, getting the message out and establishing their identity in the marketplace. They strike up conversations with people on air-planes and commuter trains. They get themselves interviewed on radio talk shows. They leave stacks of business cards on the counter by the cash register in the restaurant where they eat lunch. People who have an embryonic interest will pick them up and move into the next sphere.
This next group is smaller, a subset of the first and includes all of their Prospects.
Guerrillas know that someone is a prospect if they have a potential need for their offering, now or in the future. They haven’t met. They’re not in the guerrilla’s file box, yet. Guerrilla Retailers devote 30% of their energy to moving people from the Universe into the domain of Prospects by letting them know that they exist and gathering as much information as possible.
Harvey Mackay, author of the best-seller, Swim With the Sharks Without Being Eaten Alive, shares the secret of his successful envelope business. His salespeople complete a questionnaire of 66 items of interest on every prospect, and not just business questions. Mackay’s people find out your kids' names, your church affiliation, even your favorite sports teams and they use this information to build a close human bond.
The third domain in fig. 1-1 is the smallest, at the core of the other two and includes all of your Customers.
This includes everyone who has purchased anything from your store, ever. Guerrillas invest 60% of their selling time in reaching out to those people who have already bought. Yes, it’s unconventional. That’s why it works. Current customers are the most likely source of referral business and the only source of repeat sales. Guerrillas spend most of their time on the smallest group.
Guerrillas are in this for the lifetime value of a customer. For example, a shopper spends about $100 a week in the grocery store and on any Saturday the store is crawling with customers. So what if someone gets upset and goes somewhere else? Who cares? For the guerrilla, that's that’s the fifteen-hundred-dollar question, because $100 a week, 50 weeks a year, over the 10 years that a customer shops in that store, is a lot of groceries. Assume a gross profit margin of only 3% and that's $1,500.00 in pure profit walking out the door. If someone stole $1,500 from your cash register, you’d be fuming, looking to put them in jail. But we watch retailers drive customers away all the time and no one even thinks of calling the police.
Let's look at some really interesting numbers. If someone has a good experience with your company store, they’ll tell three people. If they have a bad experience, they’ll tell nine people. One in five will tell more than twenty people. Word of mouth is one of the most potent weapons in the guerrilla arsenal. Guerrillas use it with great care to build and protect a reputation for service, quality and excellence.
Convenient
Guerrillas know that they have to be user friendly. They have to be easy to reach, easy to talk to and easy to do business with. Their store hours mirror their customers shopping patterns. They answer their own phone. They return their calls. They give out their numbers at home, at the office and in the car, and they carry a pager. They have the phones manned at night and on weekends, even if only by an answering service. They are in touch.
A true guerrilla would never hand the customer an order form to fill out. They take care of all of the paperwork themselves. They do everything immediately.
A clothing store set aside 200 umbrellas for pedestrians to use on rainy days. Customers could ask for an umbrella and leave merely their name and address, which were added to the store’s mailing list. After eight months, 197 umbrellas were left. One was damaged by a storm and two not returned. The store reported 25 new accounts opened.
Excitement
Guerrillas are enthusiastic. They have a good word for everyone. They are militantly optimistic. They never complain about the weather, the economy or the people they work for. Their passion spreads like a wildfire. People love to do business with people who love their business.
Different
It is better to be different than to be better. The best way to avoid head-on competition is to never go head-to-head with other stores in your market. Guerrillas are passionate about differentiating their stores from others. All things being equal, price becomes the battleground and you will never be able to beat the boxes on price. So plan your product mix so that things are never equal. What can you offer that is different, that provides more value, that is in scarce supply, that makes you unique?
Guerrillas are passionate about differentiating their stores from others. They work diligently to provide a fresh, unique customer experience. Because they understand the relationship between risk and reward, guerrillas seldom take the easy way out. They will make retail destinations out of unconventional buildings and try every memorable, humorous stunt to attract the attention of their customers. They will pioneer new products, seek new markets and go to extremes to assure customer satisfaction.
Commitment
The guerrilla is dead serious about serving customers, making money and building a future for themselves and their company. They do not see retail selling as a step along the way, but as one of the most demanding and highly-paid professions. When they lose business to a competitor, they hunt down the cause and correct it. They will risk everything except quality and they treat every customer as if their business depends on him or her, because it does.
If your competitors don’t hate you, you’re not trying hard enough. If you're not 100% committed to your customers, your product and your organization, you'll never survive as a guerrilla. Get out and make room for someone who is. If it’s your own business and you’d rather work on R&D or operations, hire someone who thinks about your customers constantly and make them your designated guerrilla.
These are the characteristics that guide the guerrilla’s field tactics. They protect you from detection and assault.
Post these “ents” on your bulletin board. Sell by them. Live by them.
Chapter 2
What Kind of Retailer Do You Want To Be?
You too can be a guerrilla retailer once you learn the secrets of marketing, selling and managing people. You will learn how to develop a business plan that outlines your goals, defines your special niche and targets the customers you want to serve.
Retailers who do a better job of strategic planning than their competitors gain significant competitive advantage. The planning process can seem daunting at first, but it will energize you and fuel your success. It will help you organize what needs to be done and to anticipate the resources you’ll need to reach your goals.
No one plans to fail, but many have failed to plan with dire consequences.
Mission and Vision
Vision is the force that has led man to discover new continents and travel into space. It’s the palpable drive that makes us set seemingly impossible targets and reach new heights.
In 1961, John F. Kennedy was able to mobilize the nation when he committed to landing a man on the moon before the end of the decade.
Steve Jobs changed the face of the world when he envisioned a personal computer on every desk in America.
Dick Schulze led his locally owned Sound of Music into the superstore giant Best Buy after he imagined himself becoming the nation’s leading electronics retailer and having stores across the country. In 1983, he offered to share his vision with members of the Board of Directors of the North American Retail Dealers Association, just after he changed the name of the company to Best Buy. A year later, he was the keynote speaker at the association’s annual convention delivering an address he titled, “How I’m Going to Eat Your Lunch,” in which he outlined his plans for large-format stores, public financing and a national expansion plan.
Your Mission Statement outlines the fundamental direction of the company. It tells employees and customers what to expect, what the values and guiding principles of the business are and where the growth of the company will come from.
When drafting your Mission Statement, be careful that it doesn’t limit your potential and that it doesn’t make promises you can’t keep. Since it will be used to guide your decision-making at every step of the way, it’s a good idea to have your staff, customers, suppliers and other stakeholders review a draft before you cast it in concrete.
Valas Stores, Inc., founded in 1941 in Denver, Colorado, was one of the earliest consumer electronics retailers. They pioneered technologies like big screen television, VCRs and microwave ovens. Their mission statement read like this:
MISSION AND PHILOSOPHY
“It is the Company’s philosophy to offer our customers a wide selection of innovative products within the product lines we market.
“We provide value to our consumers as well as technical expertise, both at the time of purchase and after the sale.
“The Company provides flexible, varied credit programs for our customers.
“The Company provides opportunities to our employees to profit, acquire new skills and advance within the organization.
“Through its involvement in various activities, the Company returns to the community some of the profits gained there.
“Our history, compassion and integrity have been keys to our success. We will continue to maintain our credibility with our suppliers, our consumers and our employees.
“We will strive for corporate profitability to enable us to grow and expand.”
This mission statement kept the company from making costly mistakes. For example, in the early 1980s, Kerry Olson, one of the store’s best sales associates tried to convince the company’s management that they should start selling personal computers. After several weeks of wrangling and debate, the owners finally agreed to let her use a dark corner of the store to test the market for this odd new product. They told her to buy a couple of computers and a couple of printers and see what she could do.
A week later, Kerry came back to the weekly management meeting to talk about selling computers once again. When her managers said they thought they’d resolved that issue in the previous meeting, she asked them to re-read the company’s mission statement.
The management team was reminded that, “It is the Company’s philosophy to offer our customers a wide selection of innovative products within the product lines we market.” Kerry knew that just throwing a couple of pieces of equipment into an unused display area wouldn’t work. She wanted a complete commitment.
The company spent the next three months merchandising an entire computer department, hiring a department manager and training the sales staff. The computer division soon accounted for 30% of the company’s sales. Kerry Olson’s radical views about the future of personal computers made her a pest and a heroine.
Goals and Objectives
After you have defined your mission and your vision so that you can see where you’re going, who your customers will be and what products you will be selling, you can begin to establish more concrete goals and objectives. Some of the most common include:
Performance Objectives:
Market share
Sales revenue
Number of units of product sold per year
Financial Objectives:
Gross margin
Inventory turnover
Gross margin return on inventory
Return on assets
Net profit margin
Owner’s equity
Productivity Objectives:
Sales per square foot
Sales per employee
Sales per sales associate
Community Objectives:
Provide employment opportunities
Give consumers additional choices
Contribute to the tax base
Become a resource in the community
Develop the ability to support charitable endeavors
Personal Objectives:
Create wealth
Self-gratification
Promote an interest or hobby
Status and respect
Successful guerrilla retailers develop goals that help promote the company’s mission and vision. Goals must be specific and time bound so that you can measure and monitor your progress.
Guerrilla Retailers might have goals like:
Beat industry averages by increasing gross margin 1% by the end of the second quarter.
Add an additional product category this year.
Open a new location within three years.
Recruit, hire and train three new sales associates before the holiday selling season.
Establish sales goals every month to improve productivity of sales associates.
Attend three new trade shows or product markets this year to look for expansion opportunities.
Increase executive compensation 5% in the current fiscal year while still showing a 3% bottom line profit.
Strategies and Tactics
Strategies are carefully designed action plans for reaching the company’s goals and objectives. If goals determine where you want to go, strategies are the maps that get you there. They detail the steps you need to take to succeed at meeting the targets you’ve set for your business.
Let’s say that your goal for this year is to increase your sales volume by $150,000. What are the strategies you might have to use? Remember, each strategy must include a detailed tactical action plan.
Hire one new sales associate
Review job description for sales associates
Write and place help wanted ad
Initial screening of applicants
Interview most qualified applicants
Check references
Conduct second interview with best candidates
Tender offer
Train new sales associate
Review job description
Explain sales goals, commission system
Discuss customer service policies
Share sales philosophy and sales process
Conduct training on computer system
Arrange for product training with key vendors
Arrange for associate to “shadow” other associates
Review progress
Offer additional training opportunities where necessary
Celebrate new sales associate’s success
Develop new promotion
Detail steps of action plan necessary to develop new promotion
Conduct sales contest
Detail steps of action plan to conduct sales contest
Add new product line
Detail steps of action plan needed to add product line
Add new strategies with each new action plan as your vision unfolds.
Chapter 3
Who Is Your Customer?
One of the most important decisions retailers make is defining their target customer. It’s also one of the most difficult. There are very few products that can be marketed across all ages, all income ranges and all ethnic groups representing all demographic populations.
Even basic commodities like cereal are segmented. Cream of Wheat doesn’t generally appeal to the Cap’n Crunch crowd.
Only compete in markets where you will win. Some basic precepts for “Wal Mart-Proofing” Your Business:
Target customer
Box-stores target the wide middle of the market, where shoppers are driven primarily by price and location. Find a way to serve the under-served, unrecognized or unwanted shoppers.
Differentiation
Instead of competing on common ground, alter the value criteria to maximize your own competitive advantages.
Customer Retention
Don’t innovate in ways that can be copied by the boxes. Innovate in ways that their scale can’t adapt.
Another way to think of this problem is to define your headpin customers. This metaphor of course comes from the game of bowling, where the objective is to knock down as many pins as possible with each ball. But you mustn’t just aim for the headpin or you risk a “split.” You have to deliver the ball into the “pocket,” or that spot on either side of the headpin that causes all of the pins to topple over one another. Likewise, the guerrilla retailer will aim their marketing message to either side of their target demographic to get the greatest numerical impact from their marketing.
Try this exercise with your development team to get your strategic juices flowing.
Step 1:
Brainstorm to come up with a list of unrecognized customer niches. To stimulate your thinking, look at a cable TV listing or at a magazine rack to see how the media has broken out market groups.
Examples of under-served, unrecognized or unwanted niches:
Health conscious Baby Boomers
Football game tailgaters
Gourmet cooking enthusiasts
Senior citizen pet lovers
Time-pressured business people
Vacationers with children
Hispanic or Asian communities
English as a second (or third) language
Step 2:
Break out your list of customer groups based on your company's ability to serve them successfully. Develop your action plan. Can you:
Kick Butt: Nobody does this better than us
Benchmark Well: We're among the best at these, or
Willing to Lose: realize you can't be all things to all people. Better to serve one or two groups really well, than to try to serve them all.
Age
A long time ago it became clear that McDonald’s target market was children, (or more specifically, children with mothers in tow.) From the first Happy Meal to the most modern PlayPlaces, Ray Kroc’s direction was clear. McDonald’s doesn’t mind if kids bring their parents (after all, they usually bring the money) but for better or worse, all kids love to go there.
And then a funny thing happens to those kids. They suddenly expanded their horizons, outgrew the PlayPlace and start going to Subway, Burger King, Schlotzky’s Deli or, heaven forbid, Noodles & Company.
Baby Boomers
Customers born between 1946 and 1964 have different buying habits than the Generation Xers who followed them. The Generation Y buyers will be a larger cohort than even the Boomers and will have access to more disposable money than any previous generation.
The post-war Baby Boomers are beginning to enjoy the extra space and freedom of the empty nest and they don’t have to pay tuition, take family vacations or be scout leaders. Free of the economic demands of raising children, now they’re able to spend time and money on hobbies, passions and themselves. When they move out of the family home, it’s often into a larger, more luxurious house.
They’re torn between saving for retirement and blowing a wad on some great new toys. They’re gadget geeks, plowing millions into lightweight hiking poles and hand-held GPS receivers, even if they’re only planning to walk around the local three-mile loop. As boomers begin to retire, their lifestyles will change to focus on travel, entertainment, grandchildren and in staying young, fit and vital. Savvy retailers will remind them that since most continue to work well into retirement, they might as well spend some of that hard-earned money now.
Generation Y
By 2010 there will be over 35 million members of Generation Y, also referred to as the Echo Boomers. Born after 1978, these “about to be’s” spend about $187 billion a year on clothing, entertainment and food. They shun brand names like Levis in favor of smaller, more trendy names like Soap and Vans.
Teens today differ from their rebellious progenitors in that all they've ever known is the new economy. They expect unflagging customer service, speed-of-light e commerce, just-in-time delivery, generous return policies—oh and deep discounts. Simply put, they're the toughest, most demanding and most fickle customers in the world. They read few newspapers but have marathon sessions watching MTV.
You’ll have to be creative to reach them and gain their attention. They don’t frequent malls, but love things that are new, trendy and different.
Generation X
The term Generation X came from a book by the same name written by Douglas Coupland in 1991. It is a fictional book about three strangers who decide to distance themselves from society to get a better sense of who they are. He describes the characters as “underemployed, overeducated, intensely private and unpredictable.”
More cynical than their younger counterparts, this group of 46 million young adults has a combined spending power of $125 billion a year. Born between 1965 and 1980, they were the first group to grow up with television.