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In Tough Times, Companies
Coddle Their
Regulars
Better Terms of Credit, Free Services Are
Offered to Loyal Customers; 'We Are On Our Best
Behavior'
By ANJALI CORDEIRO
With the recession making it tough to
win new clients, small businesses are stretching their
resources to keep loyal customers.
Some companies are allowing regulars
to stagger payments or place smaller orders, and even
throwing in free services to keep long-time customers
interested. With fewer new clients coming in, small
businesses hope that holding onto regulars will help
maintain stability and possibly boost sales when the
economy bounces back.
Faryl Robin LLC, a New York company
that sells high-end women's shoes, is giving better
terms of credit to retail customers with whom it has had
a lengthy relationship. Some long-time customers can now
pay a certain amount within its standard 30-day payment
period, and spread the rest of the money over the next
60 days, says Chief Financial Officer Jim
Biolos.
"It's financially more difficult to
replace those sales in this environment than to be a
little flexible," he says. The firm -- whose shoes sell
for $170 to $350 a pair -- has annual sales of about
$4.5 million.
The company also is allowing
retailers to place smaller orders of shoes -- nine pairs
instead of the traditional 12 -- and founder Faryl Robin
Morse is spending more time with regular customers,
visiting stores to help sell shoes and training
retailers' staff on sales techniques.
Without such efforts, which the
company says helped boost sales 20% in the first quarter
from a year ago, "it is possible we would have lost some
customers," Ms. Morse says.
Going the extra mile to retain
customers is especially critical for small companies
that "typically don't have the marketing and sales
budgets to lose customers and quickly get new ones,"
says Dan Oglevee, a professor of finance at Ohio State
University who does consultancy work with small
firms.
But an advantage that small companies
have over larger counterparts with myriad management
layers is the ability to tailor tactics to individual
customers and make decisions faster. "Their size makes
them more flexible," says Joseph Astrachan, executive
director of the Cox Family Enterprise Center at Kennesaw
State University in Georgia.
Mark Pollaci, owner and president of
Nucor Construction Corp., a New York company that
remodels office spaces, retail stores and bank branches,
estimates about 85% of his business comes from repeat
clients. Mr. Pollaci has been providing free
consultation services, such as visiting places that
long-time customers are considering leasing to give them
his opinion. With his customers turning more cost
conscious, he is putting in more hours than before to
ferret out the most affordable
subcontractors.
Mr. Pollaci has also sped up the time
frame of projects, completing them faster and at a 15%
to 20% lower cost than a year ago to retain customer
loyalty. He is able to lower project costs partly by
cutting into his own profit margins, and also because
costs for materials and contractors have come
down.
Retaining customers is particularly
important to him, he says, because he doesn't have a
sales and marketing division. "There are people coming
out of the woodwork to compete," he says.
His retail and banking customers have
been badly hit by the economy themselves. Helping them
get their stores up and running as quickly as possible
and at a more affordable price helps their business and
raises the possibility he will be hired again, he
says.
Simon Graj, founding partner of Graj
+ Gustavsen, a small New York firm that offers branding
and marketing services, says that when a client in the
apparel business was recently looking to expand its
brand overseas, he flew to many of the emerging markets
the client was considering, covering six cities within
India and China over two weeks.
"We are on our best behavior," he
says. In the past, as one of the heads of the firm, he
may not have been as liberal with his time and may have
delegated the extensive travel to one of his colleagues,
he says.
The firm is also being more creative
in how it allows clients to pay, sometimes accepting
equity stakes or a percentage of sales from a brand.
That allows the firm to "bet on the future" with the
customer, Mr. Graj says.
Source: The
Wall Street Journal
http://online.wsj.com/article/SB124571863733739347.html?mod=dist_smartbrief | 
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