Progressive Rentals August-September 2007

Growing Customers Organically by Following the Rental Cycle by Bud Holladay
RTO Legal Miscellany by Ed Winn III
Don’t Let the Bed Bugs Bite Your Business by Richard Cooper and Jeff White
Leveraging the Power of Customer Buzz by Patrick Galvin

Growing Customers Organically by Following the Rental Cycle
by Bud Holladay

There is no easy way to increase the customer count of a store or a company without first considering all the ways that it can shrink. Until those holes are plugged, no amount of advertising, selling, marketing, cajoling or incenting will raise the customer count for more than a few weeks and maybe not that long. Y Organic growth comes from understanding the full cycle of the rental or leasing transaction and examining all the areas where opposite forces intersect. For example, it takes less time to write an incomplete or risky order than a good one. (A good order can generally be defined as containing enough verified information to adequately assess risk and reduce the likelihood of future loss. Is there any other reason we use order forms?) But time is in short supply when the store is full of shoppers or three phone lines are buzzing.

Conversely, it takes more time to turn around late payers than to accept partial payments or weak commitments. Time is really a valuable commodity when past-dues are piling up and deliveries are not in. You probably won’t hear much about “organic growth” or “intersecting forces” on Monday’s conference call or at the next management meeting because most of us prefer to talk about things we think we know: “gain,” “sell,” “reduce” and “grow!” Problem is, most of us have been talking about those things for years and still the largest privately owned company in the industry operates fewer than 75 stores. Where 15 stores used to be a good start, that number now defines a mid-sized chain. Just try finding stores in your market that have more than 400 customers. Y Revenue per store is up, but it should be with all the higher-end goods now being shipped. Smart operators are planning now for the day when prices on those products drop, as they surely will.

Remember the $1,000 VCR and the $100 pager? On the other hand, if you have a couple of nice little stores and you are happy, your creditors are happy and the homestead is paid for, you should skip the rest of this and plan your next fishing trip. Don’t mess up a good thing. If you have been struggling with growth and can’t figure out how those big operators do it, read on. As we learned in high school, there is a reaction to every action. Banging out more sales and bending the rules for problem payers are not growth strategies. They are simply postponement tactics. The resultant reactions have to be taken into account: poorly structured deals become problem payers and problem payers take time away from good selling and closing techniques.

Over time, things get worse, not better. Don’t blame the advertising. Don’t even blame the local manager. In most cases, he or she is merely doing what he or she has learned creates greater job security. That is, give the boss whatever he wants. Pavlov and 1,000 dogs can’t be wrong. If the boss never draws the big circle representing the Rental Cycle on the white board—with red “X’s” marking the critical points—and never discusses ways to minimize conflict at each intersection, the people charged with running things never realize what must be managed. They get numbers instead of understanding. No store will grow organically or internally until every person on the payroll understands how to manage each step of the process that will convert shoppers into renters and renters into owners—if indeed that is what the owner wants and sometimes it is not. Absent such understanding, everyone continues doing what has not worked in the past, but with renewed vigor and enthusiasm after each conference call or with each new contest. Motivation is a wonderful thing.

Someone once described swimming as being similar to drowning, except the outcome is better and you want to do it again. The same might be said for growing smart by identifying and addressing the critical intersections in the Rental Cycle. Most of the big operators have already done this by implementing procedures and processes that mitigate any negative impact on growth. This is not to say that all managers execute flawlessly or even regularly. But mega chains also have in place the means to analyze activity, measure outcomes and determine which manager is headed for the ditch. They don’t wait until the store is in the ditch and the water is rising. That is called drowning. Don’t confuse it with swimming. Let’s take a look at some of the more critical intersections where selling and operating can collide.  This could be where the Big Bang Theory originated.

STAFFING: Creative staffing puts not just the right number of people together, but also the right mix of people in the store at critical periods. EEOC and OSHA and FLSA aside, no law requires everybody to arrive at the same time each day and leave at the same time. The hospitality industry mastered flexible scheduling using full- and part-timers long ago. If it works for 10,000 bars and restaurants, it just might work for us. Short or wrong staffing makes it impossible to get all the details right today that could cost us later if not recorded. The problem is exacerbated when staff is burdened with other, more immediately measurable activities that do not further the selling or servicing process. But if those other activities are what the boss looks at and calls about on a regular basis, which do you think will get more attention?

ORDER COMPLETION: Most order forms are used only twice—initially to send a new delivery and a second time to recover that same merchandise. The first instance is a no-brainer if the boss wants more deliveries. The second opportunity becomes problematical, but the loss can always be blamed on the guy before the guy who is there now (this is the guy who will be replaced by the next guy, who always looks like “The Guy”). Here’s a hint: why ask for six references if nobody in the store is going to contact even one of them? Why ask for four lines of information that nobody is going to complete if only two are critical to our needs? Efficiency is defined as identifying what we need and not diminishing the process by asking for anything else. Set the new hire down to go through a year’s worth of write-offs (maybe two years) and a year’s worth of paid-in-fulls and create a matrix of the information on each. Then talk with the managers and develop a new system for approving orders. One company I will not identify has prospered for years without requiring more than an authentic photo I.D. on all signers, verified proof of in(the parent must have mailing address, street address, e-mail address and cell phone number). That policy is stringently and ruthlessly enforced—and it works because of that and also because it is need-based.

AGREEMENT CLOSING: Anyone who has ever bought a house, signed an apartment lease or purchased a car can, even years later, probably recite in detail each step of the closing process. A person of authority who takes the rental customer aside and goes through a similar process will likely create just as memorable an experience for that customer. The agreement close is the beginning of the rental experience and not the end of it, as many store associates mistakenly believe. Their belief is founded on the disproportionate attention their boss gives to the detail of payments, inventory, past dues and other issues of the moment. The act of creating future good accounts pales in comparison. Nobody will call in the future and ask where the report is. They will call today.

FOLLOW-UP CALL: If the store manager calls each new delivery a few days later and shows real concern for the customer’s satisfaction, enjoyment and understanding, future problems and misunderstandings are reduced. This is such an easy, yet oft-ignored task that it boggles the mind. We spend thousands on advertising, but nothing on follow-up. Just ask this question: How many troublesome issues have arisen lately because of something other than (1) telling a customer the wrong thing; or (2) not telling the customer anything? Case closed.

LATE SECOND PAYMENT: Remember that the first payment was the amount the customer paid in the store on the day of the rental. So he already has one on-time, in-store payment on record. Build on that. Don’t berate, don’t belittle and don’t patronize. Common sense tells you that if you treat a customer like a renter instead of like an owner, he will react accordingly. Call the day before, the day of and the day after the second payment was due and you reinforce resistance, not lower it. Call me three times and I stop listening. Talk with me once about maintaining my already good record and I will listen. Understand that I have other priorities somewhat more important than your assistant manager’s close-out bonus and I might even smile and pay the extra amount to move my due date. Leave six messages on my voice mail and I will find out where you live and…

SERVICE ISSUE: If service or repair on a timely and satisfactory basis is still an issue for any operator in today’s marketplace, nothing printed in this magazine will help. You might be interested in Henry Ford’s take on customer service at a time when warranties did not exist, no parts were free and there was more profit to be made in repair than in selling. In his brief autobiographical essay, What I Learned in Business, Ford wrote, “The only foundation of real business is service.” Readers of history may recall that Ford was an ardent, adamant and vicious anti-unionite. But he was also the first American industrialist to structure wages and pricing so that his workers could afford to buy the very products they built.

These are not the only intersections that affect the customer’s book life. But I believe they are the crucial ones. I can say this with confidence because I operated my own stores with these things in mind and I liked the results. I see advanced forms of the same process in use today in highly successful mega chains. By the way, don’t be too critical of a chain that “bought growth.” The money to buy those stores had to come from somewhere. Certainly that includes the sale of shares to willing investors. But as a veteran of the investor road show and IPO circuit, I can state that no money managers are interested in companies that have not shown the ability to create customers and profit on a consistent basis. Understanding the Rental Cycle only cranks the engine you call your company. After reaching cruising speed you can fuel your growth any way you choose.

Bud Holladay is a founding member of APRO, was APRO’s first president and now is director of business development for Bryce Co. headquartered in Cullman, Alabama. Holladay lives in Frisco, Texas.

RTO Legal Miscellany
by Ed Winn III

Effective July 1, 2007, all new mattresses entering the chain of distribution must pass new flame-retardant tests and must have new labels verifying that they have passed. The new rule does not apply to mattresses already in rental dealers’ inventories or out on rent on July 1. The details of the Consumer Product Safety Commission’s (CPSC) new Mattress Open-Flame Standard are of more interest to manufacturers because they must develop products that will meet the new standards, but for rental dealers who want to know those details, they can be found in the Code of Federal Regulations at 16 CFR Part 1633 or on the Web at www.cpsc.gov/businfo/frnotices/fr06/mattsets.pdf. The new rule applies to mattresses and mattress and foundation sets.

The rule covers adult, youth, crib (including portable crib) and bunk-bed mattresses, futons, flip chairs without a permanent back or arms, sleeper chairs and water beds or air mattresses if they contain upholstery material between the ticking and mattress core. Mattresses used in or as part of upholstered furniture are also covered—for example, convertible sofa bed mattresses, corner-group mattresses, day-bed mattresses, roll-away bed mattresses, high risers and trundle-bed mattresses. Excluded from the rule are mattress pads, pillows and other items used on top of a mattress, upholstered furniture that does not contain a mattress and juvenile and other product pads.

Renovated mattresses are covered. A renovated mattress is one with the ticking or batting replaced and would not ordinarily include a rental mattress that is returned to the store, cleaned and fumigated by the dealers and then re-rented. Mattresses manufactured after July 1 will have to have one of three new tags, including information about the manufacturer and one of the following sentences: “This mattress is intended to be used without a foundation.” “This mattress is intended to be used with a foundation.” “This mattress is intended to be used with or without a foundation.” The choice of tag depends upon how the mattress was burn-tested—with or without a box spring. Rental dealers will have to rent mattresses in compliance with the new tags.

If a mattress is intended for use with a foundation, the set will have to be kept together and neither piece can be rented without the other. Nor can dealers mix and match mattresses and box springs any longer. The sets will have to be kept together. The initial focus of the CPSC, one might suppose, will be on the manufacturers and the testing facilities. That is where the burden lies under this new regulation. Eventually, the CPSC may investigate retailers and/or rental dealers to ensure that mattresses are being sold or rented in accordance with the regulation. Even without an investigation by the CPSC, if a dealer was to rent a mattress by itself that is intended to be used with a foundation and the mattress was involved in a house fire, both the CPSC and the FTC would have the authority to levy fines against the dealer and such conduct would likely be deemed negligent under the laws of most states. The message here is to pay attention to what kinds of mattresses you are buying and then be sure to rent or sell them the way they came from the manufacturer or distributor and in accordance with the new tags.

Here are some facts that rental dealers will find painful when they read them. In 1999, an unlucky rental dealer rented a washer/dryer pair to a customer, installed the units in the customer’s mobile home without incident and started collecting rent. In 2001, the customer finished paying on the units and obtained ownership. In 2003, the rental dealer sold all of the assets of his company to a competitor. In 2005, a fire burned down the mobile home, killing an inhabitant. In 2007, literally days before the state’s two-year statute of limitations on tort claims ran out, the customer filed suit against the manufacturer and the rental dealer claiming that the fire was caused by the dryer and that it was defective when it was rented way back in 1999—a product liability case. The rental dealer has no records anymore and is not so worried about being held ultimately liable for the fire and the death, but he is worried about his costs of defending this lawsuit, which have been estimated at $40,000 to $50,000 in attorney’s fees and other defense costs. It is a fact of the business that many of the products that dealers rent can last for a long time. Those products do not often cause damage, but they occasionally cause some damage and occasionally that damage is extensive, especially with electronic products.

Most dealers have insurance to cover product liability claims. And just because a product exists in a home where damage occurs does not automatically mean that the rental dealer is liable. The plaintiff must prove that the product was somehow defective when it was rented, although the law has expanded the definition of defective considerably over the years. In some jurisdictions, a product that does not satisfy the reasonable expectations of a consumer is defective. In addition to proving that the product was defective, the plaintiff must also prove that the defective product was the proximate cause of the damage or injury.

Both of these elements are going to be difficult for the plaintiff to prove in the dryer case because of the huge gap in time between the rental and the fire. But the dealer is still left with defending himself because there are plaintiff’s lawyers out there who will take these kinds of cases. One thing that the dealer in question might have done is to have purchased a “tail” policy for his product liability coverage when he sold his business. These kinds of policies carry over coverage at a greatly reduced cost when a business is sold and the risk is thereby lessened. Lawyers and doctors buy tail policies for their malpractice insurance when they retire. Rental dealers may want to consider similar kinds of coverage when they sell.

As it stands, the dealer is stuck with his own costs of defense no matter what. He can only hope that the plaintiff’s case is so shaky that it will be dismissed early in the proceedings and the dealer will be spared an enormous cost. Brand new products, for the most part, get rented with all of the product information, operating instructions, warranty information and safety warnings attached in a sealed plastic bag. With a really good installation process, the delivery people will open that bag and go through all of the documentation with the customer before leaving so that the customer is knowledgeable about the rental product and can use it successfully without calling the store every day with another question. When dealers pick up merchandise, they may or may not get all of the original written documentation that accompanied the original rental. Most of these operating manuals and other written materials can be downloaded today from manufacturers’ Web sites.

Dealers who send out used products without proper documentation are adding to their risk. If they send out a home entertainment center with a five-channel receiver and no instructions, the dealer may get the unit back quickly because the customer cannot get the product to function as intended. Merely telling the customer that the manual can be downloaded does not really help if the customer does not have an Internet connection. More dangerous still is the practice of sending out used product without the written safety instructions. Dell Computers, for example, has four pages of safety instructions in its multi-language Product Information Guide. Several of the safety items are highlighted with boldface type and the universal warning symbol (a triangle with an exclamation point in the middle similar to the illustration at right).

A dealer who sends out a unit without the safety warnings to a customer who later is injured by the product could face ruinous liability for the arguably negligent omission—failing to warn the customer of the dangers of the unit. It would be a good practice, at the very least, to make multiple copies of the safety warnings on the new products as they come into the store—four or five copies should be enough—and then make sure operationally that these safety warnings go out with the product every time it is re-rented. Most safety warnings are only a page or two long, which makes them easy to copy and perhaps equally easy to overlook on the delivery. It would be tragic, indeed, if it were to take a serious injury and a judgment against a rental dealer for hundreds of thousands of dollars or more to drive this point home.

Ed Winn III is APRO’s general counsel. His e-mail address is edwinn@mwvmlaw.com.

Don’t Let the Bed Bugs Bite Your Business
by Richard Cooper and Jeff White

A corporate executive and his family arriving from overseas were placed in a fully furnished home rented by a relocation firm. Within days of moving into the home, the family began noticing welts on their arms and legs. They couldn’t figure out what was causing the itchy welts and not being familiar with bed bugs, the thought that it could have been bed bugs never crossed their mind. E The covert lifestyle of bed bugs allowed the infestation to spread for almost two months before the family finally observed the bugs feeding upon their infant one night. Immediately, the furniture rental company was accused of introducing the problem and was held responsible for the infestation. Q This is a story line that over the past five to six years has become more and more common. As recently as six years ago, bed bugs were unheard of; today it is a common occurrence. Bed bugs were virtually eradicated from the United States shortly after World War II with the heavy usage of pesticides such as the now-banned DDT; however, in recent years they have made a dramatic comeback and have spread to all 50 states very quickly. Some experts blame international travel on the rampant reappearance of bed bugs as travelers unknowingly bring the insects home with them in their luggage.

In any case, one business that is being significantly impacted by bed bugs is the furniture rental industry. The impact on the furniture rental industry is twofold: either rental furniture can be the source of a bed bug infestation or furniture that was previously uninfested can become infested while at a client’s location. In either case, the end result is lost revenue, reduced profits and increased liability. Q If we revisit the case study presented at the beginning of the article, the first thought is, how do we know the furniture company was responsible for the bed bug infestation? Clearly there are a number of different ways the bed bugs could have been introduced other than through the rental furniture. However, in this particular case, the evidence stacked up against the furniture rental company and it was held responsible for the infestation.

The end result of was tens of thousands of dollars in hotel bills, pest control bills, loss of property and thousands more to have all of the family’s personal belongings (including their car) fumigated with Vikane gas prior to relocating them to a another fully furnished home. Setting up policies and procedures With the growing liability associated with bed bugs, the burden of proof will fall on the furniture rental company to prove that it has done everything possible to prevent the rental of furniture that was infested prior to receipt by the client. The development of policies and procedures for dealing with bed bugs is essential for any company that rents furniture. These policies and procedures should document the steps taken to ensure, to the best of one’s ability, that furniture is free of bugs when leaving the warehouse and that the vehicles used to deliver furniture are not infested as well. Procedures also need to be in place for dealing with furniture pick-ups at clients’ locations where bed bugs may be present.

The first step to take is to educate your staff about bed bugs. There are a number of common misconceptions that, if not cleared up, can result in a false sense of security and can ultimately result in a bed bug problem that could have been prevented. For example, it is often believed that bed bugs are restricted to beds only and that throwing an infested bed away is the solution. The truth, however, is that bed bugs and their eggs can be found in any piece of furniture or personal item. Another common misconception is that a visual inspection of furniture is an adequate method to determine if bed bugs are, or are not, present. Just because bed bugs are not observed doesn’t mean they are not there. Due to the cryptic nature and small size of these bugs (bed bug eggs and the freshly hatched immature bugs are 1 millimeter in length), they often go undetected during a visual inspection. Therefore, you cannot rely on visual inspections to give an accurate summary of the presence or absence of bed bugs. However, adult sized bed bugs are visible to the naked eye.

They are reddish-brown and grow to about one-quarter inch or five-eighths of an inch long. Small rust-colored spots on pillow cases and sheets and/or bed bug droppings can be visual cues that there may be an infestation. Bed bugs are bloodsuckers and the rust-colored spots are evidence of a crushed insect. They are not yet known to spread disease, but some people can have severe allergic reactions to the bites. So, since bed bugs come out and feed at night and hide in cracks and crevices during the day, looking for evidence of their existence can provide good clues. A good magnifying glass can help, too. The misconception that periodic treatment of a structure or delivery vehicle with pesticides will eliminate a bed bug problem is especially dangerous.

Often rental furniture companies that find a dwelling to be infested will require the home to be treated prior to picking up the furniture for return. The belief is that once the home has been treated, it will be “safe” to pick up the furniture because all of the bugs will be dead. This is simply not the case for a number of reasons. First, some bugs are very tolerant or resistant to the chemicals used. Eggs are not affected by the pesticides and will continue to hatch in the days following the treatment and bugs that were between blood meals are unlikely to be affected by the chemicals at the time of the application. In addition to educating staff, it will be important to create and document the steps and procedures for all employees to follow when dealing with bed bug-related issues. For example, procedures might include the following steps:

• Ensure that furniture is free of bugs prior to being placed into a delivery vehicle
• Ensure that the delivery vehicle is free of bugs; and,
• Ensure that furniture being returned into inventory is free of bugs.

Step 1: Ensure that furniture is free of bugs prior to being placed into a delivery vehicle Heat chambers are one method currently being used by the furniture rental industry to eliminate the potential for bed bugs. Direct exposure to temperatures in excess of 115 degrees F for 15 minutes is enough to kill all stages of bed bugs, including the eggs. However, in order to heat an item correctly, it must be exposed to high temperatures for the core of the furniture to reach lethal temperatures. Typically, temperatures need to be elevated to 160 degrees F or higher and held for several hours in order to reach a lethal temperature throughout the furniture. Otherwise, the bugs can find “cool zones” to hide in until the heat treatment is completed. When done correctly, the use of heat can be a very effective method of eliminating bed bugs from furniture and is one of the few ways to ensure that furniture that is being delivered or returned into inventory is free of bugs. The greatest limitation of this method is that some items or finishes can be damaged and thus cannot be subjected to heat treatments. Some furniture rental companies that can afford to outfit a heat chamber using a truck box or trailer, for example, are doing so to combat infestation. Finding companies to outsource thermal treatments, however, are few and far between. Gas fumigation—not be confused with fogging/bombing or total release aerosols—is another very effective method that will destroy all life stages, including the eggs. The advantage of this method over heat is that items that cannot be subjected to extreme temperatures can be fumigated. The disadvantage is that fumigations cannot be conducted by “in-house” staff unless a member of the staff possesses a license to conduct fumigations. The gas used for fumigations is a lethal gas (typically Vikane) and so only those who have undergone extensive training and possess a license to conduct fumigations can conduct them. Rental dealers may take it upon themselves to either hire out fumigations to a local pest control company or offer training to an in-house staff person for fumigation licensing.

Step 2: Ensure that the delivery vehicle is free of bugs Using different vehicles to deliver furniture from those being used to pick up furniture may help reduce the likelihood that delivery vehicles will become infested. However, because this may not economically feasible, other measures may need to be considered. For example:

• Routine inspection and monitoring and treatment of delivery vehicles;
• Wrapping of all furniture in plastic prior to being placed into the vehicle;
• Returning inventory that is coming from a dwelling with bed bugs is never placed in a vehicle that contains outgoing inventory;
• Gas fumigation of any vehicle and its contents in the event bed bugs are identified or infested furniture is brought back in the vehicle.

Mattress and box spring encasements are another very effective tool that can be used by rental furniture companies. Encasement of mattresses and box springs can be used as a precautionary step before renting out any bedding. The encasements will greatly aid in identifying bed bug infestations at the time of furniture return and should never be removed by a customer during the rental period. Fully encased beds restrict the ability of bed bugs to infest the interior of the mattress and box spring where they will go undetected; instead, any bed bugs will be readily visible on the exterior of the encasement. In addition, if any beds are found to be infested during a pickup, they can be encased prior to being placed in the delivery vehicle, thus preventing the dispersal of bugs from the infested mattress and box spring. It is important, however, to be sure that the encasements used have been designed specifically for bed bugs and have been proven to be effective. One such encasement has been designed by Protect-A-Bed out of Chicago, Illinois. Not only are these encasements fully bed bug proof, but they also provide antiallergen protection as well and can be a value-added service.

Step 3: Ensure that furniture returned into inventory is free of bugs Changes in contract language to address the client’s financial responsibility for items that become infested while in their possession may become more common. In order for this to be possible, it will be necessary to be able to establish that a customer received furniture that was “bug free” (see the previous two steps). Regardless of whether or not such contract language exists, crews that pick up furniture must be trained in spotting visual evidence of bed bugs so that infestations that are visibly present are identified prior to removing the furniture from the dwelling. Any furniture that is removed should be handled carefully as it is removed—wrapping it tightly in plastic is a good idea—to prevent the inadvertent dispersal of bugs and eggs that may fall off the furniture. Mattresses and box springs can be encased, as mentioned above, to trap any bugs that may be associated with bedding. Again, infested furniture should not be placed in a vehicle containing items that have yet to be delivered.

Treatment of returning inventory with common pesticides is not an effective method for ensuring the elimination of the bugs and their eggs. Instead, upon return, all items should either be discarded, heat-treated or fumigated. Fumigation of the delivery vehicle will also ensure elimination of bugs that may be associated with it. Limiting eradication efforts only to items that are visibly infested can be a costly mistake as any item coming from an infested dwelling is subject to bed bugs. Clearly there are several different pro-active steps that can be considered and while there is no sure-fire way to be 100 percent certain that no bugs are present, procedures that are sound and well documented will provide the grounds for a strong defense in the event of litigation. Dealing with bed bugs correctly will surely result in added expenses and will change the terrain from a competitive point of view. Ultimately, one must weigh the costs and determine the level of risk that they are willing to take when it comes to this challenging new pest problem.

Richard Cooper is the staff entomologist and technical director for Cooper Pest Solutions in Lawrenceville, New Jersey, 800/949-2667. Jeff White is a research entomologist at Cooper Pest Solutions. You can e-mail Cooper at rick.cooper@cooperpest.com and White at jeff.white@cooperpest.com. Cooper will be giving a presentation, “Don’t Let the Bed Bugs Bite!” at APRO’s 2007 Rent-to-Own Convention & Buying Show in Reno, Nevada.

Leveraging the Power of Customer Buzz
by Patrick Galvin

The typical rent-to-own customer is so saturated with commercial messages that it is increasingly difficult and expensive to market your store effectively through advertising alone. Customers have developed many techniques to escape from advertising. They flip through the pages of newspapers and magazines without even noticing advertisements or inserts. They change radio stations during commercial breaks. They switch stations or hit the mute button when advertisements interrupt their television programs. Or, they watch premium cable TV stations or use digital video recorders to skip marketing messages entirely. Fortunately, buzz marketing can provide a less expensive and more effective method to expand your business. There are some successful, non-advertising methods to get people into your store.

For example, we all know that recommendations from friends usually carry more weight than advertising since they are seen as less biased. According to McKinsey & Co., a leading management consulting firm, positive word of mouth plays an important role in 67 percent of all consumer buying decisions. For people to recommend your store to their families and friends, you must first ensure that your merchandise and service are outstanding. The best marketing in the world is worthless when a customer is treated rudely or ignored in a showroom. Likewise, shoddy storefronts, displays and products will long be remembered after your jingle or commercial is but a distant memory. Service after the sale is also essential. Follow-up phone calls after deliveries, timely service to fix damaged merchandise and ongoing communication with birthday cards, phone check-ins and newsletters can help turn satisfied customers into excellent referral sources.

Yet, excellent service and quality products are not enough to guarantee success in today’s competitive marketplace. You must find new and different ways to distinguish your store from competitors—ways that customers will appreciate. For example, one rent-to-own store I visited had a DVD playing on a continuous loop at its showroom entrance explaining how the furniture on display was made in American factories to rigorous quality standards. The footage of the furniture manufacturing process and interviews with factory employees was so interesting that I didn’t mind waiting 10 minutes for a salesperson to finish a rental agreement before engaging me in conversation. In contrast, I left two other RTO showrooms where all the sales people were busy and I didn’t have anything to do while biding my time. Some of your vendors may produce videos for their Web sites or trade show booths, so consider asking them for copies that you can play in your showroom. Or, with permission from manufacturers, consider uploading these videos to your Web site to create some buzz. Online video is increasingly popular with more than 40 million Americans watching videos on YouTube (www. youtube.com) in May 2007 alone. Community involvement can also make a huge difference in creating word-of-mouth patronage for your business. For instance,

I’m a loyal customer of a small neighborhood grocery store in large part because its employees volunteer at a local elementary school on a regular basis. In addition, a couple of times a year, the store owner donates 10 percent of her total sales to the same school. The store owner has kept journalists informed about these charitable activities, which has resulted in feature coverage in various community newspapers. Since many people don’t have time to read newspapers, it’s important to leverage favorable media attention. Many Starbucks stores do an excellent job prominently displaying local press clippings that highlight the volunteer involvement of their employees in local causes such as youth mentoring programs and Habitat for Humanity. I’ve seen customers reading these articles and making favorable comments about Starbucks’ commitment to the community while waiting in line for their morning lattes. Positive press will acquire even more value when you post it to your Web site. After creating an online pressroom for my family’s retail furniture store, I noticed customers coming into the showroom with copies of articles printed from our site.

I heard customers say things like, “When I read about your store in the newspaper, I knew I had to visit because it seemed different from every place else.” Publicity can also raise your profile with suppliers. Journalists for trade newspapers will often cover businesses that are featured in the general press. When I started getting coverage in local newspapers, I sent clips to furniture trade journalists, which got them to write about my store. These stories in the trade press enhanced my store’s standing and leverage with manufacturers and led to an invitation to join a prominent board of advisors for a retail furniture association. Of course, great publicity alone is not enough to generate customer referrals. To maximize referrals, it’s important to institute a systematic referral program. For instance, have your salespeople and delivery drivers let customers know that your business relies upon word of mouth to succeed. Put this information on your customer receipts and Web site. Many store owners have discovered that satisfied customers will only refer their friends when they are asked.

Finally, consider rewarding customers who refer their friends. Some successful rent-to-own stores have coupons spread throughout their showrooms that offer $10 off a customer’s next payment when he or she refers a friend. Furthermore, the friend who is referred receives $10 off his or her first month’s payment as well. As it becomes increasingly difficult to reach consumers through traditional advertising alone, rent-to-own stores that succeed in building buzz through attractive storefronts, great products, sparkling displays, outstanding customer service, community service, media coverage and referral programs will be the ones that thrive.

Patrick Galvin is the founder and president of Galvin Communications (www.galvincomm.com), a public relations and word-of-mouth marketing firm in Portland, Oregon. He will be giving a presentation, “Boost Your RTO Store Sales with Buzz Marketing,” at the APRO 2007 Rent-to-Own Convention & Buying Show in Reno, Nevada.