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How to run a successful pawnshop
- Do you need customers?
- How important is the customer?
- Do you know how much they are worth?
- How much does it cost to acquire them?
For example: Let’s just look at Yellow Pages.
Other costs have to be taken into consideration, too. To name a few, rent, billboards, radio, TV, telephone, exterior signage, utilities, banners, social media, text messaging, direct mail, employee interaction, word of mouth, newspaper, and website. In fact, the true value of your business and most of our investment lies in the number of customers you have. The livelihood of your business is determined by adding new customers and keeping the ones that you have [called retention].
I never really understood the depth of this question until I did an analysis of my advertising budget while I was CEO of SuperPawn. One area of serious conversation was the Yellow Pages. We were spending $315K per year for our stores and we were introduced to a program where data was prepared by the telephone company to track the number of calls we were receiving at each of our stores. We also had a 3 day study of what types of calls we were receiving at the stores so we could attribute new customers and current customer along with the types of questions.
For an average store, we were spending $750.00 per store per month. We were getting 5 calls a day from new customers, so each call cost us $5.00. We were successful 25% of the time in getting the customer to the store. Of those 25%, 80% of the time the customer conducted a transaction.
We were getting 30 customers a month for $750.00 OR $25.00 per customer. Wow!
We learned a lot just by our review and research. We found that our phone interactions were weak. It took too many rings to answer the phone and our employees were not trained on phone etiquette.
Secret Phone Tip – Customers calling for estimates for items were often told they had to come in. Most of those did not come in. 90% of those who were given a courteous estimate of value came in.
$25.00 per customer blew me away. Plus, that number didn’t even take into consideration telephone and employee costs. We also found that if the customer did not come back a second time, we lost money. Customer retention is vital.
This is a great exercise in measure advertising dollars spent and return on investment. Every dollar of advertising should be evaluated by how many new customers will get and keep.
The next evaluation is how much it costs to acquire an item. yes, for every item that comes over the counter, there is a cost to acquire that item [called overhead]. Driving an increasing volume of transactions drives down the cost to acquire. The more efficient you can be, the lower the cost to operate. This is one of the most important drivers to profitability you can produce.
Any slowdown can turn a profitable opportunity into a loser and it is really hard to figure out. That is why gross profit is not a great way to measure success.
Increasing volume of sales is one of the best methods to succeed. Lowering margin and increasing turn is the most healthy and profitable way to improve your business.
Sit down and analyze your advertising. Pay attention to all of the time you are taking to conduct your business. Organize yourself and your staff. Get more efficient and you will find a better looking and successful business.
Figuring out what a customer is worth is part of Customer Relationship Management (CRM). A lot goes into this analysis. Each time a customer comes into your business, every transaction has to be updated and evaluated. Companies spend thousands of dollars a month on this information. With Bravo, it is included.
With Bravo, you will know how much your customer is worth. Bravo keeps track of every transaction of every customer every second. Essentially, customers are worth their contribution over a lifetime. The longer you keep a customer, the more they are worth. Bravo ranks your customers who you know who is the best. Want to learn more? Give us a call.