May 5, 2011
I get a unique thrill from stumbling across the amazing entrepreneurs whom I could never invest in, but who are building great small businesses around every corner. It occasionally drives my wife crazy, but I love talking to small business owners – be they restaurateurs, shopkeepers, or auto mechanics – when I see them doing innovative things in their product and service offerings. I get excited by digging in and understanding where their ideas come from and how they think about and analyze their operations. Not infrequently, I’ll learn lessons about customer service or clever marketing programs that can be applied to my tech businesses.
I just had a great example of this yesterday afternoon. I was overdue for a haircut, and had an open hour between meetings. I used Lifebooker, a cool web service that helps connect consumers with perishable inventory at salons, spas, and other high end services, to find a discounted haircut at a place nearby. With just a couple of clicks I found a place a 5 minute walk away where for $28 I could get a haircut that was normally $45 (still way above the $15 barbershop cut I’m used to, but I was jammed for time and also curious to test out the Lifebooker service). I booked it.
I ended up at Onyx & Jade, on 38th St, and it quickly became clear that I was in an establishment run by en entrepreneur who cared about service, and who understood the value of a delighted customer. The moment I sat down in the chair, a woman came over and asked if wanted anything to drink – coffee, tea, soda, beer, cocktails – it’s all included with the haircut. As was a shoeshine. So here I was, getting a 40% discount on a haircut, and it included a shoeshine and a cocktail. This was a top notch service experience!
As Alyssa, the proprietress, began to cut my hair, I started peppering her with questions about the business. Turns out she’s an entrepreneur who set out on her own and opened this shop 6 months ago. A bold move in a tough economy – more points for Onyx & Jade.
Then Alyssa asked if I wanted a manicure. “I’ve never had a manicure in my life,” I tell her, “so no, thanks.” She tells me I’ll love it. I resist. She says “have one on me – Arlene will do it while I’m cutting your hair.” She had me trapped – it was going to be free and not take any incremental time. I relented.
20 minutes later I had an excellent haircut, a drink, a shoeshine, and my first ever manicure, all for $28. And then Alyssa showed her real entrepreneurial marketing brilliance – “So I’ve got a membership program. For $500/year, you can have unlimited haircuts, shoeshines, manicures, and drinks to go with them. Care to join?”
Wow. A customer retention program Amazon or Netflix could be proud of. For a little less than the price of one haircut/month, she’ll give you unlimited cuts and trims, throw in all the manicures you want for free, and offer you a shoe shine and a cocktail any time you want to pop in.
It’s brilliant – she gets paid up front, helping her with cash flow, and takes no risk of losing hard money, as her COGS is almost exclusively her labor. Meanwhile, she locks in a very dedicated base of customers who suddenly have (a) negative incentive to go anywhere else and (b) very strong motivation to tell their friends and colleagues about this terrific service. All this at a business that’s smart enough to use the idle labor sitting in her shop to dial up a free shoeshine and manicure to create a truly delighted customer. Surely there’s something in there that one of my portfolio companies can apply to their customer acquisition and retention programs.
I didn’t take her up on the membership – I’m not ready to desert Roger, my trusty barber of 15 years, and I don’t think I’m going to become a manicure guy, period. But I’ll go back and see Alyssa once in awhile for a haircut, for sure (probably when my shoes are dirty and it’s after 6pm, so I can have a beer with a clear conscience). She does a great job, and she’s clearly a fantastic entrepreneur with a nuanced understanding of her business model and the long term value of creating a delighted customer. Given my DNA, I can’t help but be compelled to reward that.