While your
back was turned, technology caught up with you.
Everything today works. Tires
don’t go flat. Cars start
on cold mornings. Television
sets don’t need repaired. Computers
work the same whether they are from IBM, Dell, Gateway or Compaq. Most of our products seem to be made in China, Japan, Taiwan,
Korea or Malaysia. They work
great.
What all
of this means is that your competitor’s products work just as well as
yours do. If you add a new
valuable feature, within six months all of your competitors will add that
same feature. We can no
longer say that our products are better because they aren’t, and our
customers know that. We
don’t want to say that they are cheaper, because this is self-defeating.
We don’t all want to be the cheapest guys in town. What differentiates the successful suppliers from the less
successful today is the method of delivery.
Winners have technical service and customer service that provide
recognition, relationship and rewards.
Surveys of defecting customers in industry after industry show that
most people leave not because of price or product problems but because
they don’t like the way they are treated.
If you want them to stay, recruit the right kind of customers in
the right way and treat them very well.
Treat them so well that they can’t afford to leave.
Customer
retention programs are important for several reasons. Long-term loyal customers buy more often, spend more money,
buy higher priced products, provide more referrals, are less expensive to
serve, have higher retention rates and have higher lifetime values.
So, how do
you get loyal business customers? There
are several methods that are sure to work:
-
Acquire
the right kind of customers to begin with.
That means acquire people because they appreciate your
products and services, not because they are looking for the lowest
price.
-
Pay
sales commissions that are heavily skewed toward renewal, repurchase
and retention, rather than solely rewarding acquisition.
-
Build
a customer database with purchase history.
-
Use
the database to determine the profitability and lifetime value of
every customer.
-
Divide
your customers into five segments (quintiles) based on lifetime
value. You will find
that the top segment – your gold customers – give you 80 percent
(or some other large percentage) of your revenue and profit.
Every company that has carried out this segmentation has
found the same thing.
-
Develop
a strategy for your lowest quintile.
These people are not only not profitable, they are costing
you money. You must
either shed these customers or reprice their services so that they
become profitable. In
many cases, you can increase your bottom line more by restructuring
the losers than by working with any other segment.
-
Concentrate
your marketing dollars on the second and third quintile – those
just below gold. The
gold customers may be maxed out.
They may be giving you their entire share of wallet in your
category. The lower
quintiles are usually the ones where the marketing dollars produce
the biggest bang for the buck.
-
Since
your gold customers are your most valuable ones, work very hard to
think up and deliver special services that are only available to
them. Make them feel
special. Make it
expensive for them to switch: expensive because they would lose all
the special services.
But what
special services should you lavish on your gold customers to keep them
loyal? Everyone has to think
up his own solutions. Here
are some that are working in a number of industries.
To work, the service has to have a higher perceived value to the
customers than it costs you to create it.
-
Create
a President’s Club or an Advisory Board for your top customers.
Print stationery with the names, titles and companies of your
board members. Hold an
annual meeting of these top customers.
Let them know they are special and you will have them for
life.
-
Have
a contest for the most innovative use of your product or service.
Open it to all your customers.
Create an outstanding industry panel of judges.
Award the prize at the industry trade show.
Issue handsome award plaques that your customers can display
in their reception areas.
-
Add
caller ID to your customer service line, giving your agents
electronic access to your marketing database. When your customers call, the caller ID will put the
customer’s entire record on the screen so that the agents can say,
“Mr. Williams. So
glad to hear from you. How
is the new Model 38 working out?”
This type of recognition builds loyalty.
-
Create
a Gold Team to respond to your Gold customers’ calls.
Give the Gold customers a special toll-free number that
routes them directly to this team rather than your regular staff.
Answer, “Gold Customer Service, can I help you?”
-
Assign
a personal banker to each valuable customer.
If you are not a bank, make it a personal account manager.
Have your letters signed by this person.
Give the person a personal phone number.
Personalize your relationship.
-
Create
an extranet with a special password on your Web page.
Create a special page for each of your best customers.
Using cookies, route your preferred customers automatically
to their page, which welcomes them by name and includes the products
and special prices that
apply only to them. Put
the name of their account manager on the page.
If they are on an advisory board or if they won an award, put
that on the page.
-
Use
the extranet to provide access.
Let your best customers roam through your warehouse or your
technical manuals using their preferred password access.
Make them part of the “inside” team.
Let them discover for themselves that the part they are
looking for is in your warehouse in San Jose and that they can have
it shipped automatically by filling out a Web response form on their
private Web page.
-
Let
your customers’ technical staff advise you on product design.
Through the extranet, encourage engineers and programmers to
preview your new product designs, making suggestions.
Before the Internet, this was difficult and expensive.
With Web access, it is easy and cheap.
The customer’s technical staff can fill out a Web response
form making suggestions to your design team.
-
Send
birthday cards and thank you letters.
This is business to business.
Why not? What
harm can it do? How
much does it cost? Do
it. Don’t include any
literature, specials or advertising.
Just say, “Thank you for your business.
Having you as a customer means a lot to me.”
-
Collect
e-mail addresses. Send
e-mails to notify customers of the status of things.
“Chuck: Your
spare parts were shipped by Federal Express this afternoon.
They should arrive tomorrow.
Airbill number 8128 3505 7994.
Call me if there is any problem.
Carol”.
How much
do these things cost to do? Not
much. How important will they
be in building customer loyalty and the bottom line?
The results could be very profitable.
Arthur Middleton Hughes is Vice President of The Database Marketing Institute. Ltd. (Arthur.hughes@dbmarketing.com) 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 arthur.hughes@dbmarketing.com. He will give you permission by return email. The cost, depending on the number of copies you want to reprint, is very inexpensive.
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