So, the total invested: $30 (assuming Zane hadn't been able to get a manufacturer's refund). Total to the bottom line: $240, plus the profit from referral business. The result: a minimum 700% return on investment.
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Chris Zane's continual business education had started long before he could imagine computing the lifetime value of a customer -- and it always focused on service. "If you give good service, you'll stay in business," one of his first mentors told him. "If you don't, you won't."
"Thanks, Mom," said Chris to Patricia Zane.
That was when Chris Zane was a teenager, and his company-building career was already under way. It had started in a garage when he was 12 years old and fixing bikes for his middle-class East Haven neighbors. The mechanically gifted Zane learned that a kid who delivered what he promised and made his customers his first priority could make out pretty well. "If he told someone he would fix a bike, he would do it, even if something else came up," says Patricia Zane.
Friends told their parents, and parents told their friends, and Chris Zane was soon pulling in $300 to $400 a week. "I had a Connecticut state tax ID number when I was 12," he recalls. "My dad made me get it." When he turned 16, Zane thought it was "time to get a real job" and started knocking on bike shops' doors. He landed in a downtown Branford shop but was soon told by the owner that he had better start looking elsewhere -- the shop was going out of business. Zane's wheels began to turn.
"I told my parents I wanted to buy the inventory and take over his lease," he recalls. Most parents would have dismissed the idea as a childish whim, but, says Zane's mother, "we knew if he was committed to something, he would follow through. He wasn't a quitter." And Patricia and John Zane were quick to recognize a negotiating opportunity. They agreed to let their son borrow $20,000 from his grandfather on three conditions: Chris would pay back the five-year loan with 15% interest; his mother would tend the shop in the morning, but Chris would come in every day after school and do his homework at night; and, most important, his parents and grandfather would hold all the stock until he completed college. "All through high school I told my parents I wasn't going to college," says Zane. "But they told me they wouldn't give me ownership until I had a degree." He agreed.
He racked up $56,000 in sales that first year and managed to increase revenues by 25% annually over the next two years, an accomplishment that gave him self-confidence -- a bit too much, perhaps. When he turned 18, Zane began to think it was time he stopped doing gear adjustment and started sitting behind a desk, leaving the hands-on business of customer service to his two employees. It didn't last for long. "I started to hear from people that the store didn't have the same feel," says Zane. "Things would slide, and we saw that business was flat. Then I woke up and put all my eggs in the service basket.
"The attitude changed from 'The customer is inconveniencing you and preventing you from doing your job' to 'The customer is your job,' " says Zane.
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Over the next several years, he went out of his way to forge relationships with customers that would tie them to him for life. Guided by gut instinct and the ability to assimilate and apply every bit of information that might be useful to his business, Zane differentiated himself in the marketplace with a number of innovative tactics. The real kicker: like the lifetime free-service guarantee, Zane's service and marketing gambits often look expensive but usually cost him very little. Some examples:
No More Nickel-and-Diming. "We stopped charging for anything that cost less than $1," says Zane, who started that policy 10 years ago. A customer who wanted, say, a master link -- an inexpensive part that holds the chain together on a child's bike -- would be given one free. "The cost to me is virtually nothing," says Zane. "We're not going to chase the pennies -- we're looking at the long-term effect of giving someone a master link. You should see the look on people's faces." The annual cost: less than $150.
Community-Service Marketing I. Zane's parents raised him with the expectation that he would give something back to the community, and he has. But he's also discovered that being a good citizen pays off. In 1989 he started the Zane Foundation, which now awards five $1,000 college scholarships to Branford High School seniors. He has financed the scholarships with revenues generated by 50 candy machines, scattered throughout the Branford area. All are labeled with Zane Foundation placards. "We're doing something our competitors aren't and that the category killers aren't. If people see that we're taking care of the community, they're more likely to come to us." After an initial investment of $2,500, Zane says, the program has paid for itself.
Community-Service Marketing II. Zane also never misses an opportunity to work with school-age kids. He's spoken to kindergarten classes about bike safety, helped the police register bikes, and, when Connecticut passed a bike-helmet law in 1992, persuaded Trek to help him offer $40 helmets to kids at cost ($20). "Indirectly, we profited because we did something for the community," says Zane. "We also got a lot of publicity, and that boosted sales." The cost of the helmet program: $0.
