Small firms have service advantage, experts say

By Barry Flynn
Orlando (Fla.) Sentinel

FORT LAUDERDALE, Fla. — Everybody who walks into PriceLess Dry Cleaners gets a little gift.

Free coffee, cookies and candy are mainstays. Flags are handed out around the Fourth of July and carnations on Valentine's Day. Regular customers get discounts mailed to their homes.

There are lots more, too, from discount coupons good at other businesses to a roll of the dice for a break on your latest purchase. They are all part of an effort by owner Dennis Rodriguez to forge a firm relationship with his customers.

For one thing, Rodriguez said, "When you make a mistake, when you're in a relationship, they're a little bit more forgiving."

Of course, making good on any problems is part of keeping that relationship solid.

His customers seem to appreciate the effort: His four stores across Central Florida bring in between $2 million and $2.5 million in annual revenue, Rodriguez said.

Rodriguez, who has managed the business for more than a decade, bought it from the founding owner only two years ago. He doesn't think of the gifts that he and the former owner developed as a particularly sophisticated marketing strategy. Instead, he said, "It's just showing people how much we appreciate them."

Whether it's sophisticated or just natural down-home neighborliness, business experts say the kinds of connections Rodriguez makes with his customers exploit one of small businesses' few advantages in an increasingly competitive business world.

"The real competitive advantage that small businesses have is their closeness to their customers," said Michael Verchot, director of the business and economic development program at the University of Washington in Seattle.

"They're just much closer" than bigger companies, he said.

That closeness to the customer applies to more than just retailing. Small manufacturers and distributors, for example, can use their size to deliver products faster than their larger competitors do, and just generally respond more nimbly to customers' needs.

"The two primary ways most businesses compete are on service or on price," said Elaine Hagan, director of the Harold Price Center for Entrepreneurial Studies at the University of California-Los Angeles.

Small companies have a hard time winning on price, she said.

That leaves service.

"If people get good service, they often come back and buy multiple products," she said. Once a business is selling customers multiple products, the relationship becomes more one of mutual dependence.

"It gives you more of a weblike relationship" with customers, Hagan said.

"Lock them in with multiple contracts, product lines or services," Hagan advised. "The costs of switching to multiple vendors will help to retain these customers."

Another cost issue is simply the price of acquiring customers. Some studies suggest that it costs from five to 10 times as much to attract a new customer as it does to hold on to an existing one, Hagan said.

PriceLess learned through experience the value of holding on to an existing customer, Rodriguez said.

"Over the years, we spent a lot of money trying to get new customers in the door," he said. Now, he devotes much less effort at finding new customers and concentrates on keeping the ones he has.

Rodriguez said his delivery business, for example, has grown more from people seeing his vans in their neighborhoods and from word of mouth than from the direct-mail coupon advertisers that he sometimes uses.

"Generally, when we get a new customer, eight out of 10 say, 'my friend' or 'my relative' or '(my) neighbor' comes here."