Scaling your business through loyalty
A common statement you’ll find in any business book is that ‘a successful business is an expanding one’. Expansion brings verve and excitement to organisations, and the very process of it brings other benefits too – better purchasing power and terms; more brand awareness – things that become a virtuous circle in their own right, and make further expansion possible (and easier).
But even firms that have already been successful scaling up, and have multiple outlets can often feel just as cautious for their next phase of development as they did when they made their initial growth plans years ago. It’s not that they don’t want to grow more, or have the appetite for it, but more often than not, it’s because there is still a fear of doing more of it. Even though common sense might suggest that if you’ve made a successful, highly customer-centric, and highly customer-loyal business in many locations already, then replicating this elsewhere will be just as successful, this doesn’t always follow-through.
So why is this? I believe scaling up often fails to happen because there is a lack of usable data in businesses, data that can effectively give CEOs the ‘green light’ they need to make this decision for them. In a business’s early growth phase, scale can be relatively well managed. There are fewer variables, and less elements to take in. The larger an organisation gets however, the more complex it becomes and the more variables there are to consider. In short, more and more data is needed.
And in my view it’s lack of data – not lack of ambition – that thwarts expansion. When CEOs/marketers/planners don’t have data, they can’t make insights, and without insight they can’t meaningfully use this to make more educated decisions about the likely success of their growth plan. But we believe things don't have to be like this.
Good data destroys fear, and creates opportunity
Clearly, understanding how, when and where to expand needs to come from knowing that existing customers love, and repeat-visit (and by how much) your service, and will predictably do so elsewhere. But it’s also more nuanced than that. Without deeper loyalty and other service data, firms may mistakenly believe they are doing better than they really are.
Take, for instance, how one particular outlet performs compared to others from the same group. Say it’s top performing for sales in that region. On first impression, this could be seen as the model store to replicate. Yet, just looking at pounds and pence metrics alone can hide a multitude of sins. For example, the store could have poor hygiene, snarky customer service or a lack of knowledge/helpfulness amongst the staff.
You see my point? It’s really important to be able to identify any issues to enable the business to move forward. Otherwise, as soon as a rival pitches up nearby, which performs better on all those elements, customers suddenly have choice and are much more likely to take their business elsewhere.
A fair warning
Changes like this can literally happen overnight and destroy businesses in the process. But this happens when those responsible for scaling up realise they need to improve their service levels too late. The worst planners can do is base further expansion – launching a string of new outlets simultaneously – on the false view they’re doing really well.
To this we ask one simple question: how reliable are simple financials to base growth plans on? And yet, this is all that the vast majority of retailers really have to go on. It needs to be based on what customers think. Whether they will tell their friends and family about you, and come back. But on this metric – again – we have to be careful - as anyone who has politely said they loved their new haircut to their barber, (but secretly hated it) can relate to, saying one thing doesn’t always mean it's the truth. Give customers the chance to feedback anonymously though, and they’ll be far more honest.
The proof is in the pudding
Data from some of our café-owner clients shows that customers who were happy with the range of delicacies on offer to them spent 11% more per transaction that those who said they were disappointed by it. Additionally, retailers report that customers who rate customer service highly spend 10% more per average transaction than those who say they are disappointed.
Information like this is gold dust in terms of being able to give owners the confidence to take the plunge and repeat the product offering in a brand-new location – and then fine tune and adjust to meet different geographical needs. Even when a store is scoring really well, there are always things that can be improved – and finding these out (and early on) is vital to knowing whether you have the right ingredients to grow. Music, for example is something we’ve picked up comes across well in mall locations, whereas the same stores on the high street is less well received. Again, it’s important to dig out these gems so that you can better serve the clientele.
It’s not just overall standards that can be measured. Customer service scores from specific employees, across specific shift times can and should also be measured too. The only way further stores can really flourish, is by managers knowing (in detail), how different employees contribute to - (or take away) from profit.
At the end of the day
Scaling up any business is all about protecting existing revenue, analysing what’s working well and being able to monitor growth - and all without losing sight of the precious customer experience. For some business owners, the way they chose to achieve this scale is be through a leap of faith, relying on ‘gut’ feel, or just being brave (but potentially reckless). Nowadays though, growing a business doesn’t need to rely on such finger-in-the-air methods.
The key though, is this: If planners don’t have data, they’re operating in the dark. It’s as brutal, but as simple as that. Yes, scaling up a business always involves some degree of risk, but there’s such thing as calculated risk – and the better the calculation, the more manageable risk becomes.
Good data insights not only allow for controlled experimentation before implementation, they help monitor growth and ensure consistent performance across what really matters to your customers and how much they spend. Consumer-driven data insights allow business owner not only to improve the day to day, but also plan and predict their growth outcomes with greater confidence.
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I was formerly a consumer rights lawyer at Europe’s largest consumers’ association, Which?, before founding TruRating in 2013 when I began to notice how influential online review sites were becoming and the make or break role they were playing for many businesses.
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