The “overflowing swimming pool” rule

Have you ever heard of the “overflowing swimming pool” rule? Hopefully not because I think I’ve just created it! The photo below has just been captured from my hotel in Madeira. As you can see, in this pool the water level is full to the brim.

pool in the sun

The consequences of a pool like this only emerge once someone jumps in – as the image below demonstrates.

water pouring out of a full pool

Whilst observing this, courtesy of two fellow guests taking the plunge into the ice cool water, I was reading Byron Sharp’s excellent book – “How brands grow”. This certainly ranks as one of my best purchases in 2012. Two of the many jewels from this publication are as follows:

  1. Light or infrequent customers of a business matter more to the bottom line than most people think they do (i.e. the pareto principle percentages are wrong).
  2. As a business grows it will recruit far more light/infrequent buyers than it will heavy/frequent buyers.

As is often the case when I learn new business theories, it leads me to reflect on the consequences for small businesses. This is where my swimming pool rule comes in!

One of the many differences between big and small businesses is the capacity of the respective environments for customer acquisition. In simpler words, big businesses can deal with an influx of additional customers with far more ease than small ones. Let’s consider a couple of small business scenarios: a modestly sized restaurant and a hairdressing salon. Imagine both of these businesses are growing healthily and have a modest but satisfied army of faithful customers. Buoyed by a consistency in good service and high quality both businesses become local stars. News spreads and a multitude of new fans want their hair styled in preparation for an evening in the wonderful restaurant.

In my swimming pool analogy the new fans are my guests entering the pool, full to the brim (existing customer base). Suddenly, for those longer-term customers, it becomes more difficult to get an appointment or secure a table. The atmosphere becomes less relaxed. Service seems rushed as the team battles to get through the schedule. The dynamic has changed. And if the business is not careful, the water that begins to leak from the pool represents those long-standing customers.

This is not a new phenomenon – you will doubtless have experienced it many times yourself with your own favoured places to eat or be served. It happens frequently because small businesses are less able to cope with the demands that success places on them.

It matters because those loyal old-timers are the rock on which the success was built. They will have been raving fans and through word of mouth may well have played a key role in its growth. Too many businesses either do not care about or do not know how to remedy this situation.

Like many things in life, the solution lies in a combination of honesty and good communication. The loyalists need to be told:

1. “we’re becoming really popular” – always a great thing to tell anyone
2. “we recognise and value you as one of our best customers”
3. “we are doing <this>  to ensure you continue to be treated as a VIP here”

In 99% of cases, the above three steps will have them feeling 10 feet tall and becoming more loyal than ever. People like to feel part of the in-crowd, appreciated and acted upon. Steps 1 and 2 above are easy. Step 3 needs to have some kind of solution (<this>), which will be heavily dependent upon the business environment in question. It may mean creating a special VIP night. It may mean implementing a priority booking system. It may mean changing the layout so that a quiet area gets cordoned off. Or it could be something so simple as offering a loyalty card.

Something can always be done to retain loyal customers. The key thing is that something always needs to be done and it needs to be communicated to the right people, whether through email, letter or just face to face. If this is achieved the natural next step is to grow the business horizontally to accommodate the ever growing collection of VIPs – old and new!

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