How do you build and maintain the loyalty of business customers? Here
are a few simple procedures:
- . Many
business customers are unprofitable. Why would you want to spend money trying to retain
them? Before you try to build loyalty, determine the profitability of each customer, and
divide them into five groups, from the most profitable (Gold) to the least profitable (the
losers). To determine profitability you will have to get some software written that
includes sales, margins, recency and frequency. The software should calculate every
customers profitability on a monthly basis.
Find out who your profitable customers are
- . Your top
20% customers typically represent 80% of your profits. Dont deluge them with
marketing. Instead, figure out ways to give them super service things that you
could not afford to do for all your other customers. Airlines let their gold customers fly
first class. Banks pick up their phone calls on the first ring. Marketing dollars
should be spent on customers in the second, third and fourth quintiles. Dont waste
marketing dollars on the losers at the bottom.
Spend service dollars on the gold customers
- . Suppose that most of your
business customers consist of environmental companies, transportation companies and
construction companies. Set up three advisory panels, one for each group. Find out who the
key influencers or decision makers are in each of the most profitable companies in each
group, and invite them to become members of your advisory panel. Get their advice by
email. Create stationery with their names and companies listed prominently. You can use
this for acquisition, and you will have these advisory panel members as customers for
Create advisory councils
- . Whenever a
regular business customer calls you up, your customer service reps should be able to see
their entire purchase history on the screen before they answer the call. This can
be done by storing your customers phone numbers in the database, and tying the DB to
your phone service caller ID, so that the appropriate record is on the screen. Your reps
will know when they are talking to a Gold customer. They will know the problems that
occurred in the past, and how they were resolved. You will make each customer feel that
they are really well known and appreciated by your company even though the
customer service rep has never spoken to them before. This one, inexpensive,
innovation could do more for retention than a thousand "we appreciate you"
Get Caller ID for your customer service
Inc. of Waltham, MA has an annual Bulls Eye contest for customers who use their
business name lists and SIC coding system. All customers are encouraged to enter, and many
of them do. The winners receive free trips and recognition. IMarket uses the entries to
advertise their services. The results are announced at a major trade show. It is a win-win
situation for all.
Have contests for the best use of your product.
- Why do your
business customers stop trading with you? In most cases, marketers havent a clue.
Frederick Reichheld in The Loyalty Effect outlines the use of a customer defection
study. Such a study needs to be conducted by phone, and in depth to determine the root
causes of the departure, business practices that need fixing, and sometimes to win the
customer back. In one such study at MicroScan, they discovered that customers were
concerned about the reliability of MicroScans instruments. MicroScan took corrective
action. They shifted R&D priorities, redesigned their customer service protocols, and
developed a new low-end model for small labs. The result: they began to retain more
customers, and became market leaders. There is real gold in such studies, providing that
your company is prepared to take the results seriously, and act to correct the problems
Debrief your defecting customers.
- What is the real test of
customer loyalty? It is the repurchase rate. How many of your existing customers will buy
from you the next time that they buy in your category? Customer satisfaction surveys are,
in many cases, worthless. American automobile manufacturers typically have satisfaction
survey results of close to 90%, but repurchase rates of 30% to 40%. Many companies have
not calculated their repurchase rates. If you are interested in customer loyalty, find a
way to determine your current repurchase rate, and compare it with other rates in the
industry. It may be a sobering experience. Once you know what it is, find a way to improve
it. This is the way to build true, measurable, customer loyalty.
Learn your repurchase rate.
Arthur Middleton Hughes is Vice President of The Database Marketing Institute. Ltd. (Arthur.firstname.lastname@example.org) which provides strategic advice on relationship marketing. Arthur is also Senior Strategist at e-Dialog.com (ahughes@e-Dialog.com) which provides precision e-mail marketing services for major corporations worldwide. Arthur is the author of Strategic Database Marketing 3rd ed. (McGraw Hill 2006). You may reach Arthur at (954) 767-4558 .
The articles on this web site are available to the general public to read, enjoy and for limited business use. If you want to reprint more than one or two of them for resale or use in a business or educational environment, send an email to Arthur Hughes at email@example.com. He will give you permission by return email. The cost, depending on the number of copies you want to reprint, is very inexpensive.