Did you ever stop and wonder how many businesses go broke because they did not spend enough money. This is not usually the first thing that comes to mind when thinking about businesses that went broke, but it does happen. I find that this is more common in service companies where ‘how you do it’ can be as or more important that what you do. But this can occur anywhere in any business.
The thought crossed my mind a few days ago, and it brought back memories of other businesses I had liquidated that probably, and some definitely, had similar problems that lead to their insolvency.
It crossed my mind most recently after I had had dinner in a restaurant and was about to leave. Now, to set the scene, this restaurant owner had spent a lot of money building a great looking place. The food was good, the wine list extensive and the service – well – average at best but disappointing. Not bad, but not what you would expect from a place that tried to market itself as a high end dining experience.
As I was leaving I saw the restaurant manager near the reception area and thought that I would provide some feedback. Most businesses would love some feedback, but most customers provide none. If people have a bad experience with any business they generally leave, don’t ever go back and usually tell all of their friends to avoid the place. Again, this does not just happen in restaurants or in the service industry, it is just as application to poor quality products.
So I approached this manager and asked him if he would like a little constructive criticism. He did, and he listened to everything that I had to say, thanked me for my comments and said he hoped to see me again soon. I would like to think he did not laugh his head off and call me a Wanker as soon as I was out of sight.
I made the comment that while everything else was good, the service let the place down, and that I partially measured this by the fact that I had to try to attract the waiter’s attention a number of times, and each time it took me a few goes to get it.
I suggested that this may have been because they were particularly busy (it did not seem like it), the particular staff members were a little inexperienced or they just were not aware of their surroundings and what was happening at the tables they were servicing. In any event, he took the comments well.
Back to the main story. Businesses market to get customers. Getting new customers is a lot more time consuming and expensive than retaining current customers. Add to this that happy customers can be a business’s best marketing device as word of mouth recommendations have a lot more credibility than advertising copy.
Unhappy customers may be double negative marketing as they (1) may not come back and (2) may talk about their bad experience and ‘un-recommend’ you. You have to spend a lot more time and effort convincing the person who has heard bad things about you to use your service or product, than someone who has never heard of you before. You firstly have to make up the lost ground caused by the un-recommendation.
In fact you may need spend nothing to get someone who has heard good things about you to use you. They may just seek you out based on positive recommendations.
There is nothing new or profound in any of this. So why then do business owners ignore it?
My final comments to this restaurant manager were that I used a table on that Thursday night, but may not use it again, so he would have to go out and market to a new person to use that table. If I told people about the ‘bad’ experience I had had, he would have a smaller market to find that new customer in (the people I spoke to probably may just ignore his marketing), or he would have to spend more time and money to convince them to try the place.
The problem on the night may have been solved simply by having another one or two staff on, or doing some staff training. But both cost money.
If he spent some more money on training the staff or rostering on more staff (this is the not spending enough part), he could probably spend less on marketing or he may have increased sales as he would have more repeat customers. Fuller restaurant, less marketing cost, more profit. If the math is right, the bottom line has to get better.
So where do some business owners go wrong. Money needs to be spent to fix problems and make service and products better. But often too much money is spent trying to overcome the symptoms of a problem, and not enough is spent solving the problem.
This philosophy must apply to nearly every business to some extent. It certainly applies to Worrells. If we gave you bad service, you would refer work elsewhere – and this is the reason that we spend so much time and money developing our systems and training our staff so that they provide a better product with better service. We will not go broke because we did not spend enough money.
I will go back to that restaurant in a month and see if they let me in.