Topics >  Sales and Marketing >  Customers > 

Leader of the Pack

A bicycle retailer explains some of the strategies he used to attract and keep his customers.

One way for a small company to grow in a cutthroat market is to pick one of the countless competitive strategies available and ride it for everything it's worth. Another way is to pick them all

Chris Zane's competitors don't like him much.

Though his business is still small ($1.2 million in 1995 sales), 30-year-old Zane is already the largest independent bicycle dealer in the New Haven, Conn., market. He's confident. ("Let Wal-Mart come -- I'm ready," he boasts.) He's combative. ("I'll put you out of business," he's said to other dealers.) And, most important, he'll do almost anything to attract and keep customers. ("I'll give you lifetime service, guarantee you the lowest price, fix you a cappuccino.")

He'd better. Like similar retail businesses all over America, Zane's Cycles is under siege. Superstores and chains have taken over, leaving specialty bike retailers with only one out of every four sales; in Zane's market, three independent bike shops went out of business last year alone. "The smaller guys are fading away because they won't get into the game and compete at a higher level," says Craig Seeger, a Trek sales representative serving Zane's.

Far from fading, however, Zane has gained market share -- growing his business 25% a year by putting into practice every customer-winning tactic he can think up, adapt, or steal. He has read the management tomes, sought out gurus, picked his suppliers' brains, conducted focus groups, and studied customer behavior in his own store and elsewhere. He aims, he says, not to sell to customers but to own them.

To be sure, Zane's kitchen-sink-included competitive strategy can appear scattershot. His story contains half a dozen fashionable management ideas: continual learning, the lifetime value of a customer, guerrilla marketing, bootstrapping, community-relations marketing, cost-controlled customer service. And his success begs a handful of questions: How did Zane's Cycles, an ordinary business in an extraordinarily competitive industry, create a service standard that has become his market's price of entry? How has it become the region's most visible bike shop? How has it turned intimacy and ingenuity into competitive advantages that not even the hyper-professionalized chains can match?

But what Zane's story is really all about, what binds those ideas and questions together, is a mentality that Zane insists no business -- even the smallest -- can do without. Call it nonstop, no-limits, no-scheme-is-too-small competitiveness.

Even better, Chris Zane would tell you, call it fun.

* * *

Zane launched his first serious assault on his competitors 10 years ago, by offering one-year service guarantees (covering parts and labor on all routine service) when everyone else was promising 30 days.

"It took them two years to realize we were taking market share away from them, and then when they started offering a year, we offered two," recalls Zane. In 1986 he learned at a Manhattan trade show that some dealers were offering five-year service guarantees. "I figured that for most people, five years is the life of the bike," says Zane. "If they've had it for longer, they're probably not riding it that much, so your liability on service would not be that great." Why not, he mulled, offer lifetime free service?

"The core of my comfort is percentages. Everyone uses the free service the first year they have the bike, but I saw only 20% to 30% come back the second year. I figured my liability for lifetime free service would be minuscule." So in 1987 Zane raised the bar to the last notch, announcing free lifetime service on all bikes and making the offer retroactive. "We wanted to make our existing customers our apostles," he says.

His competitors balked. "Free service for as long as you own the bike is ludicrous," says John Budd, general manager of Action Sports. "But we've matched Zane tooth and nail." His shop now offers lifetime free service, as do most other bike retailers in Zane's market. Many feel they have no choice, and they're resentful that Zane has forced their hands. One dealer called him last year with a proposition: "I'll drop the lifetime service guarantee if you will." Zane just laughed. He had come to regard the guarantee as the foundation of his business and had extended it to everything he sold. "A guy once came in with a six-year-old pump that had worn out," recalls Zane. "I just gave him a new one."

Why? Because of Zane's bet on what that customer's lifetime of business would be worth to his store. "The guy had spent $60 on the best pump you can buy," he says. "So he's a premium purchaser, and here I have a chance to have him fall in love with us." Because Zane had a good relationship with the manufacturer, he knew he could send the broken pump back and get credit, no questions asked -- so the cost of the return was zero. The potential payoff, however, was big enough that even if Zane had been forced to absorb the cost of the pump (about $30), it still would have made economic sense for him to take it back.

Consider this: "The guy has been in twice since then," says Zane. "He's probably spent $200 on accessories [a $100 net to Zane]." And when it's time for a new bike, Zane's betting that he'll get first shot at the sale. At an average cost of $400 for a bike, with a 35% margin, he stands to make another $140. And let's not forget the intangibles. A customer who is, well, thrifty enough to have a pump repaired is likely to be so impressed with getting something for nothing that he'll spread the word. "I'll bet he's told everyone about it," surmises Zane. "Everyone" probably being other serious and heavy-spending biking enthusiasts like the pump purchaser himself. In other words, Zane's ideal prospects.