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Playing As If You're Bigger Than You Are. Five years ago Zane made a strategic decision to commit 25% of his then-$36,000 advertising budget to a glossy 32-page catalog filled with his merchandise, which also offered 24 generic biking tips. Though the catalog looks original, it's actually produced by a co-op company; 16 pages are customized for Zane's Cycles, while the rest might be exactly the same for another bike dealer. Zane has exclusivity with the company for New Haven and nearby Fairfield and Litchfield Counties, so there's little chance of customers' receiving a copycat in the mail. Zane says the cost -- $9,000 a year -- is justified by the long shelf life the catalog earns by including the tips (advice about things like how to track your heart rate or improve your off-road riding). "People will come in with things circled in the catalog several weeks after it comes out," he says. The catalog reinforces Zane's customer-service philosophy and also gives the impression that his business is much bigger than it really is. The same goes for his 800 number (800-551-BIKE), which works nationwide but is used mostly in Connecticut, where a town 5 to 10 miles away might be a toll call. "It costs me a $24 yearly fee, plus a maximum of $200 a month for incoming calls in the summer. It's an inexpensive way to make the business look big," says Zane.

Free Cellular Phones. In February 1993 Zane was talking to a customer who was in the cellular-phone business and learned that while distributors charged approximately $225 for a telephone, the phone company would actually pay a $250 commission for each activation. Zane called Bell Atlantic immediately, proposing that Zane's Cycles become a phone distributor. His plan was to give away a phone to anyone who bought a bike -- a value added for customers that would actually earn him a net profit of $25. Bell Atlantic was less than enthusiastic, but the rep agreed to visit Zane's shop. "I showed her the catalog, and that really set us apart from other bike shops for her," says Zane. "She began to see us an alternative channel of distribution." Bell Atlantic signed Zane up -- making him the first retailer in the area to offer free phones. He activated 500 phones the first year, which earned him $12,500, plus another $25 a phone in co-op-advertising allowances. His profits are larger now, since the cost of phones fell to about $165, but commissions have remained the same.

Coffee Bar and Toy Corner. Two years ago Zane decided he was hitting the wall in his 900-square-foot store, so he decided to move. Planning for $500 per square foot in annual revenues and striving to build Zane's Cycles to a $2-million business over the next three years, he settled on a 4,000-square-foot space just outside the main business district. Making a personal loan of $100,000 to his business, he renovated his new store meticulously, installing the most up-to-date display racks and even including a play area for children. There was just one problem. Six months after opening the new store, he began to hear from customers that the new place wasn't intimate enough. The high ceilings and white walls were uninviting, making the store feel more like a chain than the homegrown business it was.

Zane thought back to a trip he had taken to Lucerne, Switzerland, where he visited a bicycle shop that had a coffee bar. "I knew what I had to do," he recalls. He commissioned a cabinetmaker to build him a 14-foot mahogany coffee bar, positioning it in front of the window that separates the repair room from the retail operation. Customers could relax over a cup of gourmet coffee (the coffee suppliers provided the equipment), mull over a purchase, or just watch the mechanics. Zane would also give kids a free Snapple and sit them in front of the Lego table or a video while Mom and Dad sipped and shopped. "People fell in love with it," he says. The bar, built for him by one of his former managers, cost about $3,000.

Former Competitors as a Marketing Channel. Call two of Zane's former competitors -- now out of business -- and you'll get this message: "The number you are calling is no longer in service. If you are in need of a bicycle dealer, Zane's Cycles will be happy to serve you. To be directly connected toll-free, please press zero now." By offering to pay the local yellow pages a small fraction of the defunct dealers' remaining advertising costs, Zane arranged to have their out-of-service phone numbers ring at his shop. The total cost to him is about $200 a month, which he'll continue to pay until a new book is published. Because the yellow pages helped him track the transferred calls, Zane knows he received 260 inquiries from his former competitors' customers last July alone. "The first day the line was changed, we sold a bike to a guy who asked why we closed our New Haven store," recalls Zane. "So the program paid for itself for that month." It also reinforces Zane's stronger-than-the-competitors image.

Price Guarantee. While Zane's lifetime service guarantee was one of his best selling tools, it sometimes made customers suspicious. "They'd say, 'Sure, you're giving me lifetime free service, but what are you charging me for the bike?' " recalls Zane. He knew his prices were competitive, but customers wanted to find that out for themselves. So two years ago he started a 90-day-price-guarantee program: find it in Connecticut for less, and he'll give you the difference plus 10%. "Now we can say, 'Buy the bike, ride it, and if you find it for less, we'll take care of it.' Our pricing gained credibility." Last year, says Zane, his sales were up 54%, compared with his normal 25% growth rate; he reckons the store now handles 20% more customers. And the sales are easier. "We make money through volume because we spend less time with each customer making the hard sell -- we can focus on the product," he says. Cumulatively, he's had to rebate less than $1,000. But, he says, "half the people who receive a rebate will spend it in the store that day."

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Donna Fenn

Inc. contributing editor Donna Fenn is the author of Upstarts! How GenY Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit From Their Success (McGraw-Hill, 2009). Both this blog and the book examine the ways in which GenY is changing the entrepreneurial landscape with new approaches to starting, growing, and managing their companies. Learn more at http://www.upstartsrock.com/.

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