How Well Do You Know Your Customers?

This is Part 2 of a 3 part series from Stockton Graham & Co. on what to focus on for 2010. This article will focus on getting to know your customers better. Part III  will center on the ascetics of your cafe. If you missed Part I on taxes, insurance and your lease, follow this link.

This is a great time to think about whom your customers are, what they like to buy, when they come into your shop, how they found your shop, etc.  I often like to ask our these questions.  Ironically, I saw similar thinking in reading a Bloomberg Business Week article about Target and how their new CEO plans to address changing consumer demand.  He mentioned a quote that Marshall Fields, a retailing pioneer, often told his staff: “Give the lady what she wants!”  Sounds very simple, but you need to understand your buyer and what they really want,  then offer it! 

 In today’s times, we would use less gender specific terminology, but the customer is always king and what they want or need will change over time.  You need to stay abreast of these changes while still providing quality coffee and great service, maintaining the very things that make your store YOUR STORE.

 When looking at a business, lots of times we think of cutting costs, but that can only impact your bottomline but so much. You need to grow your top line!  We tend to look at three areas for increasing sales and profits:  more customers, increased revenue per customer and increased customer frequency.   Each of these can cover a book, but I will delve into detail a bit to help you start thinking of steps you can take in these areas.

 1) More customers.  How did your current customers find your shop?  Where are they coming from when they visit and where are they going when they leave?  What do they buy when they are in your store?  You need to have new customers coming into your shop every week.  Customers’ patterns will change over time.  Attrition is part of business and you need to keep searching and to find new customers.

 There are not standard answers or responses to these questions, but understanding some of the customer behavioral dynamics will help you tailor your product, price, promotions and ultimately, profit. 

The best way to find out the answers to these questions is to ask your customers.  Many will be grateful that you even asked. Understanding how they found your store (signage, location, marketing, word of mouth, Twitter, etc.) will help you direct your efforts to finding more of them, if they are profitable.  Another way is to observe them is to determine how their purchase patterns change on given days or times.

 Understanding where they are coming from and where they are going should help you direct marketing efforts to those areas (e.g. maybe it’s an office building, a school or church), tailoring the products and pricing to meet their needs. Consider these examples: If they are coming from dinner, they will not need heavy food or if they are driving, they will want things that are easy to consume in the vehicle.

 Also, knowing the motivatoring factors for visiting your store will  help tailor your marketing, community activities and promotions to better meet their needs.

 2) Increase average customer revenue or revenue per transaction.  This is why the big chains offer not only a value menu, but combo meals to get you to spend more than you might otherwise have spent buying articles ala carte.  It brings to mind the infamous, “Would you like to upsize your meal?”  We do not want to cause our customer waistlines to expand and blood pressure to increase, but you want to make sure whatever they will buy for the day part of their visit, they BUY from YOU!

 This may help you do your own coffee and muffin combo, sandwich and drink combination, more expensive feature drinks, discounts on bulk coffee or a free cup of coffee when buying coffee beans, etc.    If they are going to come to your store once a month during their visit to your town, make sure they stop in your store for a drink and food items, buy beans to brew at home or work and are signed up for your newsletter.

 We have also heard from our customers that people are coming into their store less, and thus, buying few drinks.  If you review the national coffee drinking surveys, people are drinking as much coffee or even more, but changing where they drink it and that place is often in the comfort of their own home.  Thus, make sure they are drinking your coffee at your shop, their home or anywhere else they drink coffee.  Sell them BULK BEANS!    Help them make better lattes at home if they got a new home espresso machine for the holidays, but have them buy their espresso from your shop.

 Are parents coming in to buy drinks for themselves, but buying juice from the c-store for their children?  If so, consider offering something comparable for the children and give the parent one less thing to worry about in their daily routine.

 3) Increase customer visit frequency.  The more often the same customer comes into your shop, the greater the revenue will be and the higher your profits.  It’s a lot easier to get an existing customer to come back than it is to find a new one!  Understanding their needs should help you tailor products, promotions and pricing to entice them to visit more often.  This might be incredible customer service, combination purchases, and new featured drinks or rotating coffees each day, frequent buyer/reward programs, etc.  Remember, if the average customer is spending $5.00 per visit with 25% cost of sales, you are making $4 bucks gross profit per the visit per week. That’s over $200 per year!  Increasing their average visits to two a week will increase that to over $400 per year. 

 There are many ways to accomplish these goals.  Our team at Stockton Graham has a wealth of experience and knowledge and can help guide you through what to ask and how to adapt the customer feedback to your store. 

Jeff Vojta
Stockton Graham & Co.