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THE MAGICAL PROCESS OF "BACKENDING"
Double your business customers overnight..... at no extra cost!
Copyright James F. Coyle 2008, 2014
(If you have a friend who is struggling with their business please pass this webpage URL on to them)
USING YOUR EXISTING CUSTOMER BASE TO DOUBLE YOUR BUSINESS.....QUICKLY AND SIMPLY!!
This is probably one of the most important concepts that can be used by a business to generate growth. It refers to the use of existing clients to increase sales. Many businesses advertise furiously for new customers and virtually ignore existing ones. Here is an example: In my home town there are 3 major supermarkets and many more smaller ones....all competing for my dollars. They are happy to spend vast sums of money in the local newspapers advertising their products and it is common to see 4 full pages of advertising at a probable cost of $10 - $30,000, depending on size and circulation of the paper. Yet not one of these free-spending supermarkets has tried to track me down and offer me a special deal......as a known existing customer!
I would feel somewhat "special" if they did!!
If one of these giant operators bothered to collect my name and address at the checkout counter for a raffle (the first prize could be $200 worth of free goods and who wouldn't give their name and address for that sort of prize?) and then follow that up by posting me a short 1 or 2 page semi-personalized letter offering me a 10% discount off my next checkout bill...then I'd give them my business.....wouldn't you?
This promotion would probably cost them less than what they're currently spending on advertising, because they're making a personal offer to a target market of known customers. Also on top of that, their turnover would soar. Yet I am not aware of any local supermarket currently doing this. This would be a classical example of BACKENDING. On top of this, word-of-mouth advertising would attract new customers ....and this is definitely the best sort of advertising any business can get! The names and addresses collected in this manner could be circularized for months to advise people of special deals, new products, exclusive short-buys, etc. A promotion used in this manner could also be used to invite customers to shop on the quietest day by offering a special deal. Maybe a giveaway with a high perceived value (but which actually cost the supermarket very little). By doing this the staff would be fully employed and it would make the working environment more pleasant as the staff would be dealing with happy customers.
Think about this concept carefully and see how it would apply to your business. Are you ignoring your existing customers (nearly 75% of regular businesses do)? It sometimes costs a fortune to gain new customers, but very little to sell to an existing one. If you have treated your clients fairly and given them good value they will be inclined to support you....all things else being equal.......IF ASKED !!!! It is human nature to want to deal with somebody you trust. And it is uncomfortable for many people to deal with strangers because it tends to place people outside their own "comfort zone". It is a fact that a lot of people are silently begging to be led....the churches know this........so do the astute business owners. Give the people what they want. Hold them by the hand. Give better service than your competitors. Do things differently. Make your business exciting and interesting. Make it an operation that people tend to talk about. And if you're hiring school leavers make sure you hire young people with personality. A friendly smile and natural attitude usually goes down well with customers. Too many of the young shop assistants these days appear to have gone to school mainly to eat their lunch. Choose carefully. In a retail outlet it is a fact that zero staff personality means zero(?) long-term repeat business. True?
HOW NOT TO BACKEND
In my home city there is an old established organisation who have been in business 60 years......and based on this it is the owners belief that he has the God-given right to expect the locals to deal exclusively with him. The fact that he carefully selects his staff by digging them up from graveyards in the middle of the night does not go down well with his customers. His staff have been carefully trained not to bargain, negotiate, be helpful....or smile. In fact I get the impression that if one of them accidently broke into a smile.....you would hear the cobwebs twang from 50 feet away. In these days of severe competition, his trade is falling rapidly....because he is set in a business philosophy which is 30 years outdated. His Backending is....in effect....negative! And there are plenty of business operations run exactly like this. You will probably have had the misfortune to experience one or more in recent times.
By adding a positive backend component to a marginal or negative loss business you can actually turn it around to produce a positive return. If your operation is running at a loss give serious thought to this Backending. Some of the progressive businesses like the Tandy Corporation try to collect the names and addresses of all the customers who purchase off them. These people are then sent catalogues occasionally which must result in extra sales. People have money to spend. If they like your operation they will spend it with you.
An example of a variation of Backending worked well for an acquaintance of mine who owned an indoor cricket pavilion. He was complaining about the lack of players on Friday and Saturday nights. I wandered around his business one Friday night talking to people. It transpired that many players couldn't visit the pavilion at the weekends because they either couldn't afford baby-sitters or couldn't get reliable ones. I suggested to the owner that he convert an unused back area of his building into a temporary child-care centre on his two quiet nights. He put in a sandpit (at virtually no cost) and a video with cheap rental cartoons. He employed a schoolteacher who needed extra money at $45 per night. His overall turnover increased by over 40 %. And his opposition slowly went out of business.
A simple lateral solution to a serious problem!
He was actually Backending in that he used his existing customer base without advertising for new players....as his competition did. And it cost him nothing to advertise this new service. He simply placed a large hand written notice in the doorway and within a week all his regulars new about it. In effect he stopped advertising for new players and concentrated on his existing ones.
Mail-order operators rely almost 100% on Backending to make money. It costs so much thru advertising these days to attract a new customer that the logical thing to do is to keep making offers to your existing ones. Some new well financed mailing companies go a step further and actually sell a product at a loss merely to attract new clients to their mailing list. They expect to make up the loss by continued on-selling to this customer base.
During a recession anyone in business quite often has to go to extreme lengths to keep things afloat. Backending is the cheapest way to do this. Then as the economy improves you have a tremendous advantage over your competition as you are less cash-strapped and can take advantage of bargain buys which your opposition cannot afford to consider. Your business snowballs at the expense of your less astute competition.
I visited a restaurant recently which had a large round fish bowl on the counter and specialized in serving the business community. People dropped their business card in this bowl when leaving and once a month a card was drawn out and the winner given a free dinner for two. A good idea so far! I got talking to the owner and asked what he did with the business cards after the draw. He totally stunned me by saying that he threw them away!!! Here was a businessman (???) collecting 4-500 names and address of existing (presumably satisfied) customers every month.....and he was doing absolutely nothing with them. It would have cost him a small fortune to attract that many new customers via newspaper ads. So...what would you do with them if you owned this restaurant?
Simple! You would have all the names typed into a computer program in general categories of occupation. That is....you would put all the builders and construction people together. Then you would put all the doctors, lawyers and professional people in another category. And so on. Then....you would send a personal invitation out to, say, all the professionals telling them about your special "professionals only" dinner night (or dinner luncheon)....... and offer them a substantial discount in appreciation of their custom. They could also bring friends who would share in the discount. You would do this for each group in your computer customer base. The net result? A lot of NEW customers from the friends your regular clients introduced and a tremendous amount of goodwill. You could also arrange for a "mystery" speaker to address the group. Everyone loves a surprise mystery. You would be giving a discount but it is far better to have a full restaurant at reduced profits than an empty restaurant with no profits. And it adds a bit of excitement into their otherwise possibly dull lives. They will be mixing with like-minded people who share a common interest. The whole concept should be aimed at appealing to their "comfort zone" when you prepare the invitation.
Once again this is the use of Backending which will cost virtually nothing in advertising costs......but will produce a hefty increase in your cashflow. Also it is likely that many of the diners will return to your restaurant because they will have enjoyed themselves. And they'll tell their circle of friends what a great time they had. Word-of-mouth advertising....the best you can get!!
The critical thing is to collect the name and address of the majority of customers who walk in your door. And the easiest way to do this is by offering a windfall incentive such as a "lucky draw". It's even better still if you have regular weekly ongoing draws then you can tell your customers that they have a chance of winning several prizes. Everybody loves something for free. And when you hand the winner their prize take a photo of their happy smiling face and pin in on the wall by your cash register so that all your customers can see it. This will prove that your promotion is actually genuine and that the winners do in fact exist!
HOW I PERSONALLY BACKENDED A NEW STARTUP BUSINESS TO END UP
ONE OF THE LARGEST IN THE COUNTRY!
Many years ago I started a small electronic kitset shop in a back street in Wellington, New Zealand. I was an electronics designer and decided to start a business for myself as there appeared to be nobody else supplying kitsets. We used every last spare cent we had to open the shop. I had already developed a range of 25 kits and had pre-packaged about a dozen of each. We took a small ad in a local Wellington newspaper and slowly customers started to arrive, mainly by word-of-mouth. Over 6 months our business started to fire up but it was hard work. I approached
several electronics manufacturers (in those days they were referred to as Radio Factories) and asked if they had any surplus components left over from assembly line over-runs. To my pleasant surprise I was greeted with considerable enthusiasm as some of these factories had large warehouses overflowing with leftover components. I was able to negotiate useful components at less than half the price that I had been paying.
I designed a number of kitsets around these components and the business started to expand rapidly. I then took a batch of ads in other NZ papers and offered a mail-order service. We created a simple black and white brochure listing our kits.
In those days ham radio was very popular and we discovered that radio hams all over NZ were talking about us and ordering our brochure.
At that point we had to move to bigger premises in a better location.
We had a lot of walk-in visitors to our shop so we initiated a Friday night prize draw by capturing the name and address of all those customers who made a purchase (most were agreeable). We put their names on small bits of paper in a barrel and at 6pm each Friday night we would ask a random bystander to pull out 3 papers. The first one out would win a $100 voucher to use for purchases in our shop while the other two were for $20 vouchers.
Typically the $140 worth of goods we gave away cost us less than $40 so we were way ahead. The customers loved it! Our turnover increased dramatically and we had no need to advertise in the newspapers any more.
Meanwhile we had developed a mailing list of over 1000 customers countrywide and circularised these 8-9 times a year with our latest products.
We printed off a real cheap broadsheet on newsprint paper but it did the job. The customer base and turnover kept increasing.
After 7 years we ended up with a mailing list of over 4000 names and we were the largest kitset supplier in NZ. Quite a spectacular achievement! All brought about by various forms of Backending.
Backending is really business survival at its best.... and cheapest!!
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