The Richwood Report

At its foundation, business is pretty simple. One person wants something and is willing to pay for it. Another person has what the first wants and is willing to sell it. The two get together. The minds meet. The product and the payment change hands. This chain of events happening again and again is what people call business. Beyond this, it gets more complicated. There is more than one buyer; more than one seller; more than one product; more than one price. Companies don't make a living on single transactions. They conduct business by many transactions over many years. The mystery of how buyers choose to buy from particular sellers is the study of salesmanship. Long-term success in business depends on developing strong ties to buyers and sellers. This article by Gary North gives a detailed analysis of his decision to buy or not to buy and how it could have been different. These are some of his rules for getting business and hanging on to it:

1. Word of mouth is the most cost-effective form of marketing. (With the Internet, it’s word of mouse.)
2. The customer is always right, unless he is trying to cheat you, and even then you probably ought to go along with him anyway, once.
3. Identify your ideal customer, and structure everything that your company does to meet his/her demands.
4. If a price is listed, honor it – no bait and switch, no "that sale ended yesterday."
5. Offer a money-back guarantee or "we’ll fix it free of charge" (risk-reversal).
6. The value of a customer is the profit generated by the number of repeat sales (the lifetime value of the customer).
7. The first sale is the most expensive one for a seller to generate.
8. Profitability is in repeat sales (the back end).
9. Repeat customers are more forgiving.
10. Don’t carry a product line that repeatedly alienates customers.
11. Keep all sales records in a data base.
12. Use the data base to spot successes and problems.
13. Use the data base to make special offers to the ideal customers you want to return.
14. The customer evaluates the entire company through the people he deals with in the store.
15. Train your entire staff to understand these principles.
16. Create a system of ongoing rewards and punishments that reinforces this training.
17. Implement this system.
18. Begin at the top.

You may have heard that it is easier to keep a customer than to get another one. North's article proves the point in an unforgettable way and analyzes the event all the way from the sales floor of a single store to the stockholders' meeting. It's about a retail business, but anybody's customer could have written it. We can all be glad it wasn't about Richwood!