President, Diamond Dealers Club of Australia
It’s an interesting question when we apply it to the diamond and jewellery industry
My instincts and experience would say that most jewellery retailers in Australia would be considered hunters rather than farmers. The diamond wholesaler does not really have a choice, they must be farmers because there is always a limited number of new customers. Of course, their problem is that they are so busy looking after the farm they are often slow to respond to the surrounding threats or prefer not to go with them on the basis that they are not really sure what to do anyway. This needs to change. We must be aware that the moment a courier company decides that they will deliver diamonds daily to Australia from India, Israel and Europe the pricing pressure will increase dramatically and the local diamond wholesaler will need to redefine their unique selling proposition.
So which one are you? I’m sure you’d like to think you’re both, so let’s define this a little bit better and ask yourself by the end of this article where you sit.
I’ll try and stay away from philosophical analogies and put it in more practical terms.
I define a farmer in our terms as someone who understands the need to cultivate their existing clientele. We constantly use the word trust in the diamond industry, and talk about the importance of earning our customer’s trust. Once you have earned that customer’s trust you are then able to make additional sales to that customer over their lifetime. There is an interesting concept that is particularly familiar to those who focus on their Internet business, and that term is the cost of acquisition. This term, if you don’t already know what it means, refers how much it costs you to gain a new customer. On the web, if I were to spend $1000 on marketing, Google words, ads, SEO, and I only made two new sales to new customers then my cost of acquisition is $500 per customer. Simple.
The same in a retail operation; you calculate on the basis of simply dividing the costs spent on bringing in new customers i.e. marketing expenses, by the number of customers you brought in during that period versus the money spent. So if you spent $1000 on marketing and you acquired 10 new customers, each new customer cost you $100 dollars. What never ceases to amaze me, is that how few jewellery businesses look at this calculation in the retail space. In addition, there is a total obsession on the next new customer (hunters) with little to no appreciation on focusing greater attention to their existing customers with whom they have already built trust (farmers). This is the key to reducing your cost of acquisition. Think of how expensive it is to get a new customer whilst you could email call or text an existing one.
The farmer needs to plan for the future – they need to put aside a buffer for the failed crop, they need to maximise their yield from that crop, they need to reduce the time from harvest to getting the product to market, and all the time they need to take in consideration what new technology can help them produce a healthier harvest. Let’s not forget the question – are they planting a crop that will be in demand in the year to come?
Bloody difficult, huh?
Successful jewellery retailers need to take lessons from this analogy andneed to ask themselves what they are doing to plan for the future. I cannot emphasise enough the need, the critical need, to commit pen to paper, or fingers to keyboards, and set goals which are a combination of;
- An objective
- A number
- And the date that it will be achieved.
You need to be open and share these objectives, targets, and date of delivery with your team so that everyone buys into these objectives, everyone shares the vision, and you take responsibility should they not be achieved.
Sure, hunting is important. Of course looking for new opportunities in a young business is essential but I can guarantee you that the long-term success of any and every jewellery business worldwide is because of repeat purchases from customers who have already been acquired. Simply because the cost of new acquisition is too high if you don’t.
The reason why most jewellery retailers fail or just shrug their shoulders in working this aspect of their business is very simple. The average age of most jewellery owners is probably 45+ and they never implemented a strong database tool in their business. Most were probably never shown or educated in this side of the business. The idea of starting now seems so onerous they just ignore it and place it in the too hard basket, sadly, to their detriment.
It is never too late to create a CRM – customer relationship management tool. There are easy to use ones and, yes, you might have to hire somebody to sit down three days a week and enter data, but I implore you to consider it.
Data is the new gold in the business world. Data will make or break your business. Data will allow you to make decisions based on facts and not instincts and data will be the only thing that will determine whether your business is ever saleable in the future.
Just like the farmer, who needs to know the exact number of crops they need to plant, they also need to have excellent data on yields, on how much fertiliser and insecticides need to be applied. No different to you. You need to have the same granular data on your goods, those that have not been selling, and your cost of acquisition of each new customer.
In Australia, we are in a bubble. Yes, you doing great sales now but what happens in 12 months or two years when the bubble bursts and everyone goes overseas again? How are you going to communicate with all those new customers you cultivated? What data do you have on them?
Right now, you are in the best possible position to invest in these things if you haven’t already. For those who have a great CRM and have accumulated extensive amount of data, why don’t you contemplate bringing in a data analyst to put some fresh eyes on this information and find you some new insights into your business. There could be some tremendous revelations. One of my colleagues discovered that they sold 32% more tennis bracelets to those customers who had also previously purchased diamond earrings.
If we don’t plan ahead like a farmer but purely act as a hunter, guess who’s going to go hungry when the bubble bursts?
So, which one are you, hunter or farmer?