In the coming weeks, Americans will be getting rebate checks (BusinessWeek.com, 4/23/08) as part of a federal economic stimulus package. The National Retail Federation estimates $43 million will be spent on products and services. But how can small companies, often with thin marketing budgets in the best of times, capture their share of that shot in the arm? Steve O'Leary, chairman of Orange County (Calif.) advertising agency O'Leary & Partners, says the key is creating a loyal customer base and encouraging word-of-mouth referrals. The co-author of Building Buzz to Beat the Big Boys spoke recently to Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.
What's the biggest problem small businesses are facing right now?
I think they feel crunched. The entrepreneurial attitude is incredibly positive overall, but they realize it's very difficult for them to compete against the massive advertising budgets of the big boys. The small businesses have to be more nimble and they have to be smarter. But right now there's a lot of fear about going into a recession, considering there's going to be less buying and price is going to be more important than ever.
What can entrepreneurs do to survive and thrive in this climate?
The biggest advantage they have is that they're closer to their customers, not only in proximity but also in direct dialogue. Also, there's increasing evidence that people are becoming more locally oriented. All the consumer research we're reading says people are developing preferences for buying locally and doing less driving. This is a great opportunity for small businesses to connect more firmly with their customers and create a community with them, either online or in retail stores or both.
What kind of advantage does that customer connection give small companies if they run with it?
A small firm can adapt its product or service mix much more nimbly than larger corporations. A small restaurant can switch its menu depending on customer requests, a small store can change what it stocks, a small service provider can offer new options and packages. This is all stuff that Outback can't do. A big chain store can't change its menu or its pricing or offer specials based on one customer's request. That request has to be sent back to headquarters and the customer never hears back.
How do entrepreneurs encourage feedback from their customers?
First, they should identify the really loyal customers who are going to become what we call their "buzz agents." Most entrepreneurs know the people who are always in their establishment, the ones who ask questions, the ones who comment about the products or services. They're like family, and they're the ones who will most reliably provide word of mouth for you.
Then there are infrequent visitors who come in repeatedly but not all the time. They're more like flirts, but you want their feedback, too. The once-in-a-while customers—we call them "phantoms" in our book—are worth talking to, but they're probably not going to have a lot of opinions about your company because they don't have as much experience with it.
Aren't there people who naturally like to influence opinion and make recommendations?
Definitely, and they're the ones you want to target. Those people are great at word of mouth and they do it because it makes them feel more valuable socially or they're just good-natured.
What kind of customer feedback should entrepreneurs solicit and how should they go about it?
They can do this very simply just by making an extra effort to talk to people when they come by or call up and by training their staffs to do the same. Come up with a few simple questions about things like upcoming menu changes or seasonal products you're thinking about carrying. Ask what you could do to improve your service. You can make up a little survey, perhaps, where people can check boxes—but don't make it complex.
How does getting that input translate into increased word of mouth?
You have to follow up on the input you get and then acknowledge the customers who gave it to you. So if you've added a new entrée or a new wine choice or a new clothing item, post a note on your menu or a sign in your store or on your Web site thanking the customers who suggested it or voted for it and acknowledging their input. Then give them a discount.
When people get recognition like that and they're made to feel important, that's a good experience. And people want to tell others about their good experiences. The more you involve your customers in your business, the better they like it and the more they're going to talk up your company to their friends and neighbors. Smart entrepreneurs can do something like this once a week or once a month, certainly. And that really adds up over the long run.