Every company needs customers. Our job is to help profitable locally owned businesses take their customer base and transform those people into owners through the power of crowdfunding.
Customers are the engine that creates value to a business. First, they spend money in the business. Obviously step one toward profitability is sales! Second, customers are service and quality (and value) sensitive. These customers help business managers shape their service offering to respond to the market; successful adjustments create more and more customers. Third, customers spread good experiences through word of mouth (and social media), generating additional customers. Of course, a dissatisfied customer can also sound off to the world about a bad experience, costing the business customers in the future with a bad Yelp review or Facebook post.
However, we know three things about owners which make them so much more valuable as customers:
1) They spend more money.
Even if an owner has a very small percentage stake in the business, they feel more comfortable buying just a little bit extra. And all those little bit extras can really add up. Do you want fries with that? Owners do.
2) They visit more frequently.
An owner, when faced with a choice between visiting their own business and a competitor will almost invariably choose their own business even if that means waiting until later to make a purchase. Or they may deal with inconvenience, going out of their way to make a purchase. Increasing the frequency of customer visits is a key component to increased profitability.
3) They become evangelicals for the business.
Instead of passively sharing information about their purchasing habits as part of a conversation with their friends, owners go out of their way to preach about the great products and services provided by their company. Great Yelp reviews and glowing social media posts become commonplace.
But perhaps the most powerful part is that the occasional bad customer experience is much less likely to make it out to the public square. While a customer may want to blast the shortcomings of a failed experience, an owner wants to make sure that management fixes the problem. So while a poor sales clerk may receive extra skills training, that issue won’t make its way onto social media. And while a good review is worthwhile in this social media age, a bad review is like kryptonite. A crowd of owners protects a business when things go wrong.
Crowdfunding is about a lot more than “funding”. It is really about the crowd. And having the crowd own your business is soon going to become the key component to a successful marketing strategy.
Jonathan Frutkin is an attorney at The Frutkin Law Firm, PLC in Phoenix, AZ. He’s written a new book called “Equity Crowdfunding: Transforming Customers into Loyal Owners” which was published in May, 2013.