But two main reasons that locals don’t spend locally is:

1.  The business isn’t really a Destination

Obviously, this is exactly what I teach in my webinars, workshops, and BootCamp, but I get business owners all the time telling me that their businesses are Destinations when they clearly aren’t. 

I particularly remember one furniture store owner who called our office and said, “I’m already a Destination. Is there anything that Jon can teach me?”

My first thought was: “No, probably not, especially if this guy assumes he knows everything”, but when I pointed out that a Destination Business consistently pulls customers and the media from all five Consumer Time Zones, even beyond 3 hours away, then he got quiet.  His business was a Destination for many locals who had bought furniture from him, but he still lost business to local competitors and his business had no clear differences or drawing power beyond its local market. 

A true Destination Business captures locals (because they recognize that the business is one-of-a-kind), but it also captures consumers who are willing to postpone their purchasing until they visit it, and that can happen from customers miles away.

That’s one of the reasons this economy is more forgiving on Destination Businesses:  They regularly draw more customers from more diverse marketplaces, making downturns in local economies less impactful.

But here’s the second reason that locals don’t spend locally:

2.  Locals don’t like your business, even though they know it exists.

Brutal reality here, but it’s true. Think of all the businesses in your city or town in which you won’t spend money. 

I can think of stores I won’t go in anymore because the product selection was horrible, or the service was lousy, or the store was dirty, or the people were just not nice. 

I can think of a local restaurant that’s owned by a husband and wife team that advertises all the time locally.  My wife and I always say we won’t go in again, but we’ve gone back several times, hoping that it will redeem itself.  And this restaurant never fails to disappoint.  The service is always slow, the drink selection is poor, the food is average, and it’s always so loud you can’t even carry on a conversation.  Probably most annoying is that we always see the owners running around, always frantic, and I don’t think we’ve even been greeted once by them. 

The one redeeming feature of this restaurant is that it has a great outdoor deck where it’s nice to eat (even with all the other downsides I’ve mentioned), but most of the time we go there, it’s closed to outside seating, or if you are seated out there, then, they forget about you.  Minutes turn to half-hours with no sign of an employee.  Now this would be great if they’d bring us all our food, and a couple of bottles of wine, and then depart, but that doesn’t happen.

When we mention this restaurant to our friends as a possible eating choice, everyone has the same complaints about it.  When it comes up as a possible place to eat, it is immediately discounted and crossed off the list.

If this restaurant is like others in this country, I imagine that their sales and traffic are down right now.  And I would guess that these owners go home at night, believing that their business is down because of the economy, thinking of the ways they can market and advertise to bring more people in.  These owners might be the kind that sit around talking about how “locals don’t support local businesses”, never understanding that many of us locals have supported them multiple times, only to be repeatedly disappointed.

But here’s the major lesson that must be applied to any business:  You will never know how much business you are losing due to your operational problems and own deficiencies unless you somehow survey or poll the customers you are losing. In the world of customer loyalty studies, people who have spent money with you who don’t come back and go elsewhere are called “Defectors”.  You must set up a system to hear their complaints, with the hope that you can win them back.

But don’t expect a defector to just walk up to you and tell you something is horrible about your business. That’s not going to happen.  You must set up a confidential method that allows customers to talk behind your back without them receiving retribution for their negative feedback. And then, you must be willing to listen to the criticism, and act on it.

It’s a lot easier to say: “My business is down because of the economy.”