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Ask INSTORE: November 2006

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Calculating your ad budget, handling unclaimed watch repairs, assembling your full staff for meetings, and more.

[h3]Think in Terms of Exposure When Calculating Ad Budget[/h3]

[dropcap cap=Q.][h4][b]How do I calculate my ad budget?[/b][/h4][/dropcap]

[dropcap cap=A.]Advertising guru Roy Williams suggests it’s better to think in terms of “total cost of exposure”, which is your “cost of occupancy” (usually rent) plus your advertising budget. This means a business owner who saves money by investing in a weak location will have to spend much more on advertising, he says, adding that a high cost of occupancy, such as a landmark location, is often the least expensive advertising you can buy.[/dropcap]

How then to work out the numbers? Williams recommends you use this formula: Budget 10-12% of projected sales for “total cost of exposure” and then adjust the figure by the store’s average markup (not profit margin). Say, for example, you are projecting sales of $1 million (10% = $100,000) and your average markup is 91%, you’d thus have a figure of $91,000. Finally, deduct your cost of occupancy (let’s say $60,000) and voila! you have it — a $31,000 ad budget.

[componentheading]POLICIES[/componentheading]

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[contentheading]Unclaimed Melody[/contentheading]

[h4][b]We’ve been in the same store for 25 years and have accumulated many unclaimed watch and jewelry repairs. How long do we have to keep them?[/b][/h4]

The laws governing abandoned goods are determined by each state, and sure enough, vary widely. In some states, 60 days is considered long enough for the owner to forfeit his or her right to it, in others they never really lose the right to claim it back (as long as they pay the repair cost). Trainer David Geller notes that in Georgia, where he ran his store, storeowners were required to keep unclaimed goods for a year and then make an effort to notify the owner.

After that they could sell the item, although the original owner could at a later date still claim the difference in the repair/resale price. Geller suggests spending $200 to get your attorney’s help in coming up with a procedure to handle such situations. He also advises that on cheap stuff, you ask for the bill to be prepaid. On watch repairs, Geller asked for a $20 deposit (refundable if not fixed). “That ensured the customer would pick up the watch just to get their money back,” he says.

[componentheading]MARKETING[/componentheading]

[contentheading]Bucket Shoppers[/contentheading]

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[h4][b]How can I get the most out of my direct marketing efforts this holiday season?[/b][/h4]

Don’t treat all customers equally, says Ellen Fruchtman of Fruchtman Marketing. “Do all of your customers deserve the same value gift card or special offers during the holidays? The answer is no,” says Fruchtman. “The object is to separate your customers into different buying ‘buckets’ and create incentives and offers that will move them up the ladder to a higher bucket.”

One example might be a $25 gift certificate on any purchase of $200 or more, sent to a customer “bucket” that is historically and consistently purchasing below $200. Another good example would be targeting the “win-back” bucket (customers with no purchases in the past two years) with a message that should encourage them to get back into the store during the holidays (e.g., “we miss you and here’s a special gift card to welcome you back”).

[componentheading]MANAGEMENT[/componentheading]

[contentheading]Meeting Fatigue[/contentheading]

[h4][b]I have a small sales staff. But every time I try to set up a staff meeting someone’s “kid has an appointment” or “it’s not my day and I don’t want to drive over”. What should I do?[/b][/h4]

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Yes, meetings need to be mandatory — and weekly — for at least 40 minutes, says Kate Peterson, president of industry consultants Performance Concepts. Have your group agree on a day and time and stick to it each week. If there’s not one day when everyone is in, consider rotating the day each week so that everyone has to take a turn coming in on a day off every six weeks or so.

And yes, you need to pay people for training time — both in-store and at home (if you make the home study a mandatory part of the job). Feeding them is a smart touch — and might help make the whole event more “social”.  

[componentheading]SERVICE[/componentheading]

[contentheading]Face Time[/contentheading]

[h4][b]Where’s the best place to position impulse items?[/b][/h4]

Right in customers’ faces! Retailers have long thought shoppers are most wary when they enter a store, becoming more impulsive the longer they shop. Thus, the classic positioning for an impulse buy was near the cash register. But a team of Rice University researchers found shoppers are actually likely to behave less and less impulsively as they are confronted with more choices. That suggests you want to get those silver pendants, charm bracelets and hot-selling Trollbeads in a prominent position where they’ll be seen early on by your customers.

[span class=note]This story is from the November 2006 edition of INSTORE[/span]

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What to Do with a Conservative Business Partner, How to Set Goals You Can Achieve and More of Your Questions Answered

Plus, how to get your staff to actually listen more.

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Apart from telling them to talk less, how do I actually get my staff to be become better listeners?

Robin Dreeke, a former head of the FBI’s Behavioral Analysis Program, says the secret lies in an appreciation that good listening is more than simply shutting up. “Listening is having nothing to say. There’s a difference there. If you just shut up, it means you’re still thinking about what you want to say. You’re just not saying it,” he writes in It’s Not All About Me: The Top Ten Techniques For Building Quick Rapport With Anyone. The reason is that customers can tell you’re not focused on what they are saying. Instead, Dreeke suggests, do this: “[A]s soon as you have that story or thought you want to share, toss it. Consciously tell yourself, ‘I am not going to say it.’ All you should be doing is asking yourself, ‘What idea or thought that they mentioned do I find fascinating and want to explore?’” Get your sales staff or jewelry designers to take such an approach in their interactions with customers, and the results could potentially be revolutionary. No sales pitches. Just responding to what customers are telling them. That’s listening.

Year after year, I’ve carefully plotted SMART goals for my staff, but we never attain them. Any idea what we’re doing wrong?

To the rational mind, it’s hard to argue with the SMART mnemonic — Specific, Measurable, Achievable, Relevant, and Timely — when it comes to goals. At the heart of it is “achievable,” after all. Except, of course, when it comes to managing humans, it’s best to be wary of anything that gives off the clinical odor of rationality. In the place of SMART goals, we thus propose an experiment for you: This year, try some Vague and Seemingly Irrelevant goals (yep, the sort of targets that can’t even be counted on to form a clever acronym). Clear goals such as “Increase sales by 20 percent” can be motivating, but also set extra hurdles to fail at, which can throw the human mind into a tizzy (like a yellow Post-it sticker on your mirror that says “Don’t eat a cream bun today!”) Vague goals, on the other hand, can be liberating. As for “seemingly irrelevant,” the key word is the first: “seemingly.” This is management at a higher level. Identify the secret drivers to business success, be it the cheery baristas at Starbucks or actions in your store that result in a positive review on social media, and you may actually get the specific financial results you desire. In his book The Antidote: Happiness For People Who Can’t Stand Positive Thinking, Oliver Burkeman recounts the story of a Formula One pit crew whose members were told that they would no longer be assessed on the basis of speed targets; they would be rated on style instead. Instructed to focus on acting “smoothly,” rather than on beating their current record time, they wound up performing faster. It’s a seductive story. Could you do the same with your staff?

What’s a good rate of growth to aim for?

Some growth is necessary for any business to keep up with competitors, benefit from economies of scale and provide new opportunities for its people, but there are more important things you should probably be focusing on. As Brazilian businessman Ricardo Semler noted in his book Maverick, the only things in the world that grow for the sake of growth are businesses and tumors. “Growth needs to be balanced with margin, operating expenses and inventory levels, otherwise it can result in working harder but having nothing to show for it,” notes David Brown of the Edge Retail Academy. Worry about cash flow, profit, taking care of your staff and customers, and basically just doing a good job. Growth should then take care of itself.

I had an embarrassing encounter with a customer earlier this week, and now I can’t get it out of my mind. It’s tormenting me. Help!

The old-school psychoanalyst would say we need to revisit this in punishing detail (these thoughts of perfection, where do they come from?), but it doesn’t sound like you want to go there. In place of that approach, we recommend substitution (come up with a funny version of the story) or distraction. The latter gets a bad rap, but recent studies have shown it’s actually pretty effective. Want to forget that screw-up at work? Do what Gary Gordon of Samuel Gordon Jewelers used to recommend after a sale went badly and go polish silverware for 30 minutes. Or start plotting a complex dinner tonight. Your brain has trouble focusing on more than one thing at a time, so a new action interferes nicely with recollection. And running the same movie reel over and over in your head really helps no one.

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What To Do With That Sales Person Who Bombed Over Christmas, The Secret To Generating Terrific New Ideas and More of Your Questions Answered

Plus, what’s a fair repair warranty.

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After reviewing my sales team’s performance over the holidays, I found I have one who underperformed. She’s a lovely person and tries to implement the training we give her, but her numbers just don’t improve. Do we just persist with training?

It sounds like she has the right attitude and work ethic to succeed, just not in sales. Almost anyone can learn how to describe a product’s features (the knowledge), they can even learn how to ask the right open-ended questions to elicit a customer’s exact needs (a skill), but they’ll never learn how to push that prospect to get excited about jewelry and to commit at exactly the right moment. That is a talent some people just seem to be born with, says Marcus Buckingham, a leader of the play-to-people’s strengths school of business management. “In the minds of great managers, consistent poor performance is not primarily a matter of weakness, stupidity, disobedience, or disrespect. It is a matter of miscasting,” he says. You’ll be doing both your store and this woman a possibly life-changing service by forcing her to apply her talents and strengths in some other field.

Any thoughts on how to breathe some fresh air into our business? We need to shake things up.

Every good idea requires not only a fresh catalyst, but also a new way of looking at things. In the words of design consultant Tom Kelley, you want to achieve “the sense of seeing something for the first time, even if you have actually witnessed it many times before.” That explains the success of asking new employees (about a month after they’ve been added to payroll) what changes they would make to the way your store is managed. Constraints, such as radically slashing a budget for a certain department, are another well-proven way of generating new ideas and inspiring creativity. Reconsidering an issue in a different physical context seems to help, as does picking some specific type of person — a doctor, an astronaut or a historical figure — and imagining what they’d do in your situation. The key is to shift perspective as randomly as possible.

What is an acceptable warranty on a customer’s repair?

A one-year warranty on repairs from defect is the norm, according to Blaine Lewis, a master diamond setter and metalsmith. “For example, to replace a Tiffany head in four or six prongs, your store would guarantee the setting and the stone for replacement up to one year from service if, with normal wear, a problem occurs. The warranty should state that the guarantee is not applicable if abuse beyond normal wear is at fault.” Lewis says to make sure your repair prices are high enough to let you provide a strong guarantee, which can give you a competitive edge. Keep in mind that while you do offer a strong warranty, you’ll find that you seldom have to honor it (and maybe never if you’re really, really good).

Should I encourage my sales staff to use mimicry to build rapport with customers? It seems too obvious and manipulative.

If you’re worried about getting caught, take comfort in studies that show that most shoppers are actually really bad at noticing it. In his book Honest Signals: How They Shape Our World, Alex Pentland cites research showing subjects identified mirroring of their words and body movements only about 10 percent of the time and mostly only when it was a really unusual gesture. The students also liked the mimicking agent more than a neutral one, and rated him or her as being friendlier as well as more interesting, honest, and persuasive. Just adding mimicry, the research found, made a sales pitch 20 percent more effective. We humans like people who are like us, and whether it’s social background or word choice, emphasizing this similarity improves social relations. Besides, if your salespeople are paying such close attention to everything a customer is saying, they may just discover exactly what it is that customer is after and provide excellent service, which can’t be a bad thing.

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How To Decide Between Equal Job Candidates, Splitting Staff Chores and More of Your Questions Answered

Plus how to market your engraving capabilities.

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I have two good candidates for the position of sales associate, but I can’t decide between them. Can you suggest a tie-breaker?

Toss a coin and let fate be your arbiter. If they’re both equally appealing candidates and you can’t reduce the uncertainty by doing further research or interviews or trial runs, then your decision doesn’t much matter. That likely sounds like rash advice, but this paralysis you’re experiencing has a name: Fredkin’s Paradox. The computer scientist Edward Fredkin summed it up as, “The more equally attractive two alternatives seem, the harder it can be to choose between them — no matter that, to the same degree, the choice can only matter less.” To be sure, it will probably turn out to have mattered in hindsight, but by then it’ll be too late. Given that you’re unable to know how things will turn out, overthinking this one — or any similar tough choice — is futile.

How do you share the chores among sales staff fairly and in a way that is easy to enforce?

Store consultant David Geller suggests breaking your staff into groups and rotating the responsibilities. “Put some easy chores with some bad ones like vacuuming and cleaning the bathroom,” he recommends. The people whose names are under the different groups of chores (see table) do them for only one week, and then they move onto the next group of tasks. This shares around the bad and light chores and also makes it easy for the store owner to raise the issue when a job needs doing. “After doing this, I no longer complained to a person; I complained to a group,” Geller says. “If I go out and see the glass in a showcase is dirty, I don’t expect everyone to clean it, just Group 2.’”

I recently purchased an engraving machine. Any ideas on how I can market it?

One of the biggest mistakes jewelers make is keeping their engraving machine in the back room, says Annette Peloquin, marketing manager of Signature Engraving. Putting the engraving machine in the front of your store, even if it’s just for special events like Mother’s Day and Christmas sales, has a “curiosity” factor that will attract new clients into your store. Also, regular direct-mail pieces with coupons or discounts on engraving services are another way to promote your services. “Be sure to aggressively promote the wide range of engraving possibilities,” such as logos and photos engraved on charms, she says. Hand out flyers to bridal shops and bridal planners that may wish to engrave picture frames or champagne glass or guest book foiling. Also, says Peloquin, engraving corporate gift items for small-to-medium-sized businesses can be another lucrative sideline.

I found a honey of a deal at an estate sale, but I’m worried about paying so little for a piece worth far more. Are there any state or federal laws regarding the purchase of jewelry that is marked at a grossly understated value?

While laws vary widely between different states and municipalities, Elly Rosen of the AINetWork’s Gems & Jewelry Trade Reference says, “We may seek guidance from the general principles involved.” For Rosen, the simplest answer is that “we can buy as low as we wish and make as much profit as we can … so long as we do nothing to deceive or take advantage of the seller.” Estate sale buying is the easiest to answer as it’s a free and open public sale with the seller in control. In such a situation, Rosen says, “We can offer as low as we wish and it’s their option to accept. If it’s an auction and our low bid gets the hammer — it’s ours to resell at whatever profit we can fairly obtain. If we’re on the street and someone offers to sell an item far below its value, we can accept their offer. We don’t know each other, so there’s nothing leading them to believe we have special knowledge they might otherwise rely on.” However, when buying over the counter in your store, things change. “[Customers] may believe they can rely on our knowledge, so greater care is needed not to say or do anything implying low value. They ask for $50 for a $1,000 item, we can accept their offer.”

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