The Importance of Making A Personal Connection

Check out this recent article from the Wall Street Journal which explains the impact personal connections have on spenging decisions. As people are forced to cut back on expenses, they are far more likely to continue spending money at the businesses or with people with whom they feel connected to. Independent Restaurant Owners should make it a point to personally greet all of their customers. It puts a real human face on your business, making it more than just an other anonymous place where they go out to eat. You're what makes your restaurant special and different, don't be afraid to captalize on this.

The Guilted Age: Spending to Keep Others Afloat By Stephanie Simon

Melanie Ulle and her husband are scrimping these days, and she feels guilty about the exotic foods -- the hummus, the naan, the chai -- that she stocks in her already-full kitchen each week.
Truth is, though, she'd feel worse if she stopped buying them.

Ms. Ulle likes the couple who runs the small ethnic market by her Denver home; she likes their kids, who play by the register after school. She sees how empty their shop is now. She's heard they've both taken second jobs. So, despite her own pinched budget, Ms. Ulle feels compelled to help them out. Each week, she faithfully runs up a bill close to $50.

"It's the guilt economy," Ms. Ulle says.

And it's helping keep families afloat.

Ms. Ulle's spending is borne of the empathy that comes with knowing when you trim your budget, you're hurting others who may be much closer to the brink.

The burgeoning field of behavioral economics argues that people don't always weigh costs and benefits rationally, and don't always act in their financial self-interest. These hard times have revealed a new wrinkle to that illogic: Our budgets reflect more than our personal needs. Those families whose finances permit it sometimes spend with the needs of others in mind.

Donations to many charitable institutions are down, but that may not be the correct measure of the nation's philanthropic impulses. Writing a check to an institution is impersonal, abstract and easy to quit. Far more difficult is canceling the kids' weekly music lessons when you know the piano teacher's husband just lost his job. Or firing the house cleaner who greets you every week with a new photo of her baby.

There's more than a touch of self-interest mixed in with the altruism, of course. Those who can afford luxuries like private piano lessons and weekly house cleaning aren't keen on forfeiting such luxuries -- something families freely acknowledge. But they also say their decisions are shaped in part by the pain that cutbacks may cause others.

"What we buy or stop buying, when we buy, for whom, and how much we spend are never simply decisions to maximize our own interests," said Viviana Zelizer, a Princeton professor who studies the intersection of sociology and economics. "The monies we spend signal which relationships matter to us."

That may be why Jessica Gottlieb had no trouble canceling the monthly pool cleaning at her home in Studio City, Calif., after her online retail business tanked, costing the family thousands of dollars a year in income. "There were different guys coming out all the time. I didn't know them," she said.

But she's anguished about the gardener, who has been mowing her tiny patch of lawn for a decade. "He's watched my kids grow up from babies," Ms. Gottlieb explained. "He's a part of our world."

At $60 a month, she knows the gardener is a ridiculous frill; she could buy a push mower and take care of the lawn herself quite easily. But Ms. Gottlieb, a self-described softy, has decided that he stays. "I'm a big marshmallow," she said.

Financial coach Heather Tuininga, who is based in Seattle, counsels her clients to strip away such emotional entanglements when they're budgeting.

She recalls one client who bought breakfast in a local Starbucks three times a week because she liked the barista. Ms. Tuininga laid out the facts: The barista was friendly and no doubt welcomed the tips, but her client didn't owe the woman anything.

"Relationships based on financial transactions are not true friendships," she recalls saying.
Ms. Tuininga told the client she'd be better off using the $80 a month in Starbucks expenses to pay down her credit-card debt -- or to donate to a charity that could help more people in far greater need than one barista.

That's true, says J.D. Trout, a philosophy professor at Loyola University. But he sees empathy -- and the irrational acts of spending that spring from it -- as a trait to be cherished. People keep the gardener or tip the barista extra, even when they can't afford it, because they sense their common vulnerability in tough times, said Mr. Trout, author of the new book "The Empathy Gap."

"There may be better ways to spend that money," he said. "But we'd worry about someone who didn't have those feelings."

Workers in the service industry recognize the value of that one-on-one connection, and often work hard to build it. As the recession has deepened, for instance, Christopher McGraw has made a point of taking more time to greet customers at McKinners, the gourmet pizza restaurant he co-owns in Littleton, Colo. He nurtures a sense of relationship with his regulars by showing them a cellphone snapshot of his 19-month-old, Teddy, giggling in the tub. And he greets returning customers by name, asking them personal questions about their jobs or pets.
Mr. McGraw believes building those connections is a key factor in keeping his restaurant afloat. "I hear it all the time: 'We're back because we wanted to come see you.' "

James Jafari, a massage therapist in Indianapolis, makes a point of showing clients pictures of his nine-year-old daughter or talking about his latest family vacation -- anything that "will let them see me as a three-dimensional human being," he said. In this economy, he adds, "it's the personal relationships that are keeping me going."

That rings true to Mr. Jafari's client, Phillip Cox, who continues to pay for massages a couple times a month, even though he recently lost his job in investment management. Mr. Cox has cut back on other luxuries, like taking his family out to dinner. Logically, he knows that decision will ripple across the economy, hurting the busboys and waitresses at his family's favorite restaurants. But he doesn't know those people, so he finds it an easy cut to make.

By contrast, he can't bring himself to let go the woman who cleans his house twice a month, when he knows her car recently broke down. Nor can he cancel his massage therapy, when he knows Mr. Jafari's business already has dropped by 20%.

"I don't want my difficult situation to impact the people I support," Mr. Cox said.

He's quick to point out that he has a more selfish motive, as well: He wants to maintain his comfortable lifestyle as long as he can, in the hope that things will get better soon.

That expectation of recovery is part of what keeps Ms. Ulle shopping at the ethnic grocery, too. She loves trying out exotic foods, and she wants the store to be there for her down the road, when she no longer has to watch her budget.

In that way, her weekly guilt-economy grocery bill may be a sort of investment in the future. As she said, "it's not wholly philanthropic."

For the original article, click here.

Why You Have to Keep Marketing In A Recession

Here's great article posted by Jan Norman, a small business consultant, that outlines exactly why it's so crucial for you to keep marketing during a recession. Keep this information in mind if you have to reduce some of your business expenses, so that you don't end up reducing your revenue at the same time.

Recession Is Most Important Time for Marketing

In the face of a recessionary economy, marketing budgets tend to suffer. Small businesses typically allocate marketing dollars according to available revenue, which naturally slacks during periods of economic decline, says Ray Benedicktus, assistant professor of marketing at California State University, Fullerton.

However, marketing activities are the primary determinant of that revenue, so a substantive reduction in marketing logically inhibits the business’ ability to generate sales at one of the most crucial point in its existence, he says.

To weather this storm, top companies will maintain spending or at least find ways to make smaller marketing budgets just as effective, says Benedicktus, who is a former SBA consultant who has advised more than 100 small companies. Overall, small businesses can do a few things to hedge against consumers’ recessionary behavior.

Know thy customer: It is essential that firms discover how their customers are identifying value, searching for purchase alternatives, and/or changing their spending habits.

With fewer dollars in their pockets and more informative search technologies at their disposal, customers are searching for the best value. Research gives us the knowledge to make good decisions, so let’s find out what’s important to our customers now and deliver it, he says.
Research is not cheap, but the good news for Orange County businesses is that there are a couple of great business schools nearby where faculty, business development center staff, MBA students, and student business organizations are itching for interesting projects.

Maintain and communicate high standards: There are many routes to creating and communicating value to customers, but only one route has anything to do with low prices.
Certainly we are more price conscious, even in business purchasing, but none of us goes out searching for a lemon, Benedicktus says. We can also reduce psychological costs, such as uncertainty, by generating business through referrals, monitoring and communicating customer satisfaction levels, and increasing product trial and demonstration opportunities.

Alternatively, a focus on customer benefits like product quality and delivering excellent customer experiences also increases value, he adds. Customers don’t necessarily want to spend less money, but overall, people just want more for the money they do spend.

People make the difference: Marketing is a group of activities that consists of products, promotions, pricing and place (distribution) strategies. However, no marketing mix strategy is any good without great people, he says.

Now is the time that businesses should be most concerned with improving their sales teams, hiring customer oriented employees (especially on the front-line), cross-training, and engaging existing employees regarding factors that might be contributing to low morale or less than optimal performance.

Maintain marketing: As your competitors cut their marketing budgets and market presence, increase your advertising to gain market share, he says.

Advertising becomes less expensive when fewer businesses are purchasing spots, so deals are out there if you are willing to negotiate with communications providers.

The key is to maintain or increase frequency of ads, and for goodness sake, differentiate yourself by not saying things like “in these difficult times.”

To read the original article, click here.