Build-a-Business with Referrals (the Build-a-Bear Way)

If business owners were to ask what the ideal price-point is for their product, I would say that there is not one, but many. Regardless of size, your business should offer multiple price points along with a plan to show customers the benefits of moving up the price curve and to ensure it is a frictionless move.

We had my daughter’s birthday party this weekend at Build-a-Bear Workshop. If you have never been there, it’s a place where kids build their own teddy bears and have a great time doing it. They pick the unstuffed animal, stuff it, dress it, name it and take it home. Kids love it. Besides having a great time, I noticed that Build-a-Bear is a master at pricing. What I observed fits into a pricing model that can be broken into six steps.

1. Introductory Pricing

Do not compete on price. I’ll repeat that again. Do not compete on price. Yet, at the same time, do not let pricing keep potential customers from talking with you. Offer a price point that will not send prospective customers away before you have had a chance to demonstrate your full value.

You can take home a Build-a-Bear bear for as little as $10. But you could easily spend $100 on a fully dressed, shoed, accessorized, scented, speaking bear. Build-a-Bear advertises parties starting at ”$10 per guest” and then readily shows you what else you can get when you step up to $15, $20, and $25 per guest [1].

Don’t make customers write you off because of price before you have had a chance to show them what you offer [2].

2. Provide a no-pressure upgrade path

While we were at Build-a-Bear, there was absolutely no pressure to upgrade. We told our hostess what our budget was and that was that. She helped each of the kids pick out options the fit the
budget. Everyone was happy. So, with no pressure to upgrade, any buying decisions were ours.

When and if customers upgrade, it is because they want to, not because they were sold into it. Note though, that no pressure does not mean no opportunity!

3. Inform customers of all available products you provide

With colorful, clean displays, Build-a-Bear clearly demonstrates to purchasers the opportunities to upgrade. Colorful clothes. Sparkly shoes. Exciting sports accessories. All were right there – clean, sparkling promises of more and more fun.

If you are not in a retail environment, keep in touch with your customers by email newsletters sent out automatically, with a blog, or by mail. Even if you do not have an ongoing relationship (such as a monthly subscription), you should to follow a consistent process of sharing updates and new product offerings with your customers.

Whatever means you use, make sure that the products or services are readily available for purchase. Again, back to the bears…

4. Make upgrades frictionless

When I say “readily available”, I mean readily. At Build-a-Bear, the clothes are not ready to unwrap and put on the bear. Not ready to buy and put on the bear. The clothes and accessories are ready to be put on the bear right there. Easily. Quickly. You don’t go buy something and then put it on your bear. You don’t ask for a sales person to take something down off the shelf or the rack. It is all right there in colorful displays, enticing you to pick up and put on to your instantly cooler bear.

Shopping for your products should be as simple – and enticing – as that. If you are online, give your customers ample chances to say “I want that” with persistent and numerous links and simple shopping.

A lot of companies do the first four steps – introductory/tiered pricing, up sell, newsletters/blogs, and frictionless upgrades. (Netflix has plans starting at $4.99 a month, but if you want unlimited rentals it’s $9.99 a month. 37signals offers free versions of their products with occasional offers to upgrade).

Build-a-Bear though is an example of companies that go even further by turning their welcoming pricing and no-pressure strategy into a referral machine.

5. Extra → Give them your best even if they are not your biggest

It is critical to Build-a-Bear that all customers have a very positive experience. There is a reason why the hard sell would not work there. There is a reason why they want everyone to have a positive experience, regardless of how much they spend. That reason is; referrals.

6. Extra → The Power and Importance of Referrals

Over 50 percent of Build-a-Bear’s business comes from word-of-mouth referrals. By making its purpose and plan to make a fan (and a salesperson!) out of everyone who comes in the door, the value of each individual sale becomes less important and the value of customer satisfaction more important. A customer that does not spend much money today might send a ton of business to the company. The value is no longer only what they spend during their 45 minutes in the store, but who they send for years and months to follow.

This makes everyone put forth extra effort to ensure satisfied customers. In my next article, I’ll show you four other reasons you should encourage and depend on referrals.

The Actionable Points

Do you have?

1. Introductory pricing that invites customers to talk with you further.

2. Simple, tiered upgrades or additional products

3. Visible, constant reminders of those available upgrades and their benefits.

4. Frictionless upgrade paths.

5. An experience that rewards all customers along the path to “premium” status.

6. A plan to turn the positive customer experience into referrals (subject of a future article [3]).

Do you see how that works? Don’t just look at today’s sale as worth the $ it brought in today. Look at the value the sale may bring in future referral business and future upgrades with the present customer. Try to figure out what the potential referral is worth to you, and make sure to include that value in pricing and marketing decisions.

Notes

[1] This is not bait-and-switch. Bait-and-switch is when a product of advertised price is out of stock, or not suitable for your needs, or the customer is simply pressured or shamed into buying a more expensive product than what led them into the door. At Build-a-Bear, they are fine if you choose to stick with $10 as well because of the exponential value you have as a potential referral. I am in no way recommending you practice bait-n-switch. Your customers will not end up with the positive experience critical for this approach to work.

[2] Some companies fear scaring prospects away with price and so hide price until the last minute. I think in today’s marketplace, prospects expect to see pricing readily available and that you will lose more customers by hiding your price than by making it clear you have some basic pricing and that the best deals are available at a more premium price.

[3] Like real estate has its three most important factors; business growth has its top three as well: referrals, referrals, and referrals.

Inbound Links

Left-or-Right is a simple and fun site. You can recommend a topic and can get a link to your site.

Note though that any inbound clicks you gain from it are probably not your target customers (unless you happen to be looking for tech savy, optimistic, retro, Firefox users).

The results from LeftOrRight.com are a good example of self-selective surveys. If you want a certain result just ask certain folks.

The Actionable Point

Have some fun!

Surprise Your Customers

iStockPhoto surprised me this week and made an impression with a small token.

After choosing to buy a photo, I was pleasantly surprised to receive a free download from their “Before & After Magazine” series. This small token:

1. made the purchase mentionable

2. added value

3. validated my decision to do business with iStockPhoto

This was not an incentive to buy. I did not know the guide would be offered when I decided to buy the photo. It was simply a surprise.

But for iStockPhoto, it is a great idea! This useful guide (“How to crop photos for function and meaning”) cost iStockPhoto nothing extra to deliver and provided value to both of us in return.

Plus, it gave me a chance to preview the quality of the “Before and After Magazine” series; attempting to encourage me to purchase others in the series.

The Actionable Point

What little token do you have that you can give to your customers not as a pre-purchase incentive, but as a surprise value-add?

Buzzwords Bingo

Buzzwords and buzz-phrases are everywhere and our careers might depend on tracking the right ones.

Here’s some wrong ones that, when put together form a read-made corporate strategy statement: “At the end of the day, a Gen-X, customer-centric, value-added paradigm which aligns our core competencies for synergy is a win-win!” – feel free to use it if you are applying for any newly opened CEO jobs.

In marketing terms, buzzwords are defined as “A trendy word or phrase that is used more to impress than explain”. Marketing folks by their nature want to put a catchy name to everything so there are plenty of buzzwords in the marketing domain. Business in general has its own buzzword backlash.

While marketing folks want to give a name to everything, IT folks want to give an acronym to everything. Like pithy names, acronyms are ripe for becoming buzzwords. Recent must-utters by the technically talented include SOA, Ajax, XML and SaaS.

Yet, what do you think of this premise:

Our careers can take giant jumps by getting involved in efforts at their early stages – which is also when they are most likely to be viewed as nothing more than buzzwords. When a marketing strategy, advertising opportunity, referral strategy, IT language, technology, or business model is young is the time to get involved. Not when it is mature.

Investing in and learning a mature language or technology is like buying a company’s stock at its high because of all the successes they’ve had over the years. Learning and becoming an early expert in an emerging business model, language or technology is like getting in on the ground floor of a company. There may not be a large pay-out now, but there might be great growth opportunity ahead.

Instead of deriding buzzwords as a passing fad, we should pick a few and learn more about them and identify ones that may become the next skill and experience in demand.

You cannot go back in time. When what is a buzzword today becomes increasingly successful tomorrow, only those that have been working under that buzzword for the years leading up to its breakout will be able to say they have more experience and knowledge than most anyone else. Those derided as buzzword-chasers will find themselves their industry’s experts.

Business evolves quickly (every business today is tied to technology to a degree that almost all of business moves at the rapid pace once directly associated only with “technology”). So it does not take much time for your investment today in working with a relatively new idea, language, framework, or business model to pay off when you find yourself an expert in it next year. The hard part, like in trading stocks, is knowing which relatively immature technologies will succeed and grow and which will remain in buzzword purgatory.

The point is don’t immediately write off something new in your industry that appears over-hyped as only a buzzword. “Buzzword” could be just a phase that an emerging trend passes through. Being the subject of hype or buzzwords does not equate to being a passing fad.

Do you agree?

Branding

We are going through a branding change. To better reflect the benefits of the Synap Software lead management solution, it has been re-branded from LeadsOnTrack to LeadsOnRails.

LeadsOnRails more clearly paints the picture of rail tracks, where LeadsOnTrack could mean any kind of tracks, or just “keeping track”.

Tracks remain an integral part of the product (LeadsOnRails users still use “tracks” to put a lead on a campaign path) yet not in the sense of “keeping track”. The new name helps avoid a message of keeping track of leads and contacts and reinforces the benefits of moving those leads forward.

With the LeadsOnRails name we are building marketing collateral (websites, one-pagers, brochures, etc.) around the product benefits that are also associated with railways:

Fast,
Reliable,
Powerful and
On Schedule.

p.s. My friend Mark Cohen warns in his usual humourous way that an analogy with railways may not be the most promising, considering Amtrak’s image. So, hopefully readers and users are thinking about freight trains, not passenger trains. (He also got a laugh out of the fact that the very next article after “It’s not you…” starts with the word “We” – if nothing else I_ can provide a small dose of semi-regular entertainment).

It’s Not You, It’s “You”

When small business owners wonder if their web, ad, or other copy should be written as “I” or “we”, I think the right answer is neither. The right answer is to refer to yourself, your company, or your product with its proper name. The other right answer is to refer to yourself, your company or your product less often and refer to your customers more often.

Widget’s R Us

I read a comment about the use of first person and third person in Jeffrey Fox’s How to Become a Marketing Superstar: Unexpected Rules That Ring the Cash Register. Fox intelligently makes the case for using third person form in web and marketing material.

Third person form (e.g. “Widgets R Us” instead of “we”) allows you to do two things and leads into a very important third benefit.

• Get your company or product name in front of your readers as often as possible. “we…we….we…” or “I…I…I” are not nearly as effective as “Widgets R Us…Widgets R Us…Widgets R Us” at making a name stick.
• Increase credibility in the mind of your reader. When you hear someone talk about themselves, don’t you automatically take it with a grain of salt, as they say? When you hear someone talking about a third person, that doubt is subconsciously reduced – even if just by a miniscule amount.

No one wants to read about you, but everyone loves to see the word “YOU”.

Reviewing copy for first vs. third person also gave me a chance to see if our company and product website had too much about us and too little about prospective customer benefits.

You can go on and on about how great you, your products, or your services are; but you really need to show what you can do for your customers. Reducing the references to yourself and increasing the use of the word “you” in copy is one way to show that you are in business for your customers.

People love to see references to them, even if with a tangential “you”. Companies that can point to customer benefits naturally find they write less about themselves (no matter if first or third person) and more about their customers.

I took another look at our product copy with the aim to:
1. replace references to “I”, “we”, or “our product” with “Synap Software” and “LeadsOnTrack.com” and
2. talk less about ourselves and let readers see the word “you” more often. (The first was accomplished easily, the later is more difficult).

I just made these changes so do not yet know if it has any impact, but I already like it better.

It is not about you, but it is about “you”.

p.s. One exception to this approach is when you are writing a personal note like a “Letter from Bob”, an entry in a web log, or any piece of writing that is meant to be a personal story or observation. Those, of course, should use first person.