Are you loyal to your customers?
June 6th 2011
By Martin Grunstein
There is always talk among businesspeople about how price preoccupied and how disloyal customers are these days.
Many businesspeople complain that some of their long term customers switch brands or providers when they are offered only a slightly better deal by their competitor. “Where is the customer’s loyalty?” they cry.
I think most businesses are LESS loyal to their customers than their customers are to them!
How often do you see companies offering a special deal to get new customers or win back old customers when very little has been done to nurture the relationship with the existing customers.
One of my workshop participants said “I used to be a loyal customer of XYZ retailer until they started having massive sales advertised in the newspaper. They are offering 30% off to people who have never done business with them before while I have been paying full price the whole time and have never received any recognition from them. They are not very loyal to me so why should I be loyal to them?”
It is very well known that if you approach your telecommunications provider and tell them you have been made an offer by their competition, they will match that price to keep your business. So who are the people on the worst deals? The people who never complain and just continue to do business with that telco. In other words, their truly loyal customers.
Years ago my wife used to subscribe to MARIE CLAIRE magazine and she always used to renew her subscription when she received the first notice from the publisher asking her to do so. One year she forgot to renew her subscription and she received a letter offering her a make up kit if she renewed. She didn’t respond to that offer and a couple of weeks later came an offer of a make up kit and a voucher to be spent at a well known retail store. We decided to see how much they would offer her if she was “disloyal” and didn’t renew until the last minute and she eventually received over $100 worth of goods to renew. Needless to say, in future years she waited till the last minute to renew and got all the goodies.
This is ridiculous but it is the norm in the industry. The less loyal you are, the more we will give you.
Can I propose an alternative that can save money and create loyalty instead of disloyalty? When the loyal customers renew at the first opportunity (which is what the publisher wants), how about sending them a card saying “thank you for renewing, we appreciate your loyalty” and throwing in a make up kit or some other token of appreciation. That way there is an incentive to be loyal rather than to be disloyal and basically, people will do what gets rewarded – works in parenting, works in business.
I say to my clients that instead of yelling at the people who don’t pay, why don’t you reduce bad debts by recognizing the people who do pay? Get your accounts receivable person to identify all the people who have paid their account on time every month and, at the end of the financial year, send out a card saying “I notice you paid your account on time every month this year. Thanks so much for that. You made my job so much easier. I hope you’ll accept this bottle of wine as my way of saying Happy New Financial Year”.
Next year when I have 12 bills to pay each month and I am only going to pay six of them on time, yours will be the first bill I’ll pay on time every month. It’s easy to not pay a computer, it’s hard not to pay a person, it’s almost impossible not to pay a person who thanked you for paying last time. $15 spent on wine could save you $15,000 of bad debts. It all depends where you place the focus.
The word loyalty is bandied about in business with great inaccuracy.
For example, many companies have “loyalty” programmes like FLY BUYS or Frequent Flyer programmes or “Get your 10th coffee free cards”. Please understand, these are NOT loyalty programmes, they are incentive or, more correctly, bribery programmes. If you spend $17000 on petrol, you can fly to Melbourne. Getting every 10th coffee free is effectively a 10% discount. How can you tell it’s not a loyalty programme? Because when you take away the programme, the customer often leaves too.
Let me tell you the very important difference between recognition and bribery. It is where it happens in the sales process. Recognition happens AFTER the sale and bribery happens BEFORE the sale.
Let me give you a couple of examples of recognition that are cheaper and more effective than bribery.
My financial planner rang me before Melbourne Cup day a few years ago and said he was having a FREE Melbourne Cup sweep for his best clients to thank them for their business. He told me what horse I drew and that there was a big hamper at the office that would be mine if my horse won.
I didn’t win….but I told about a dozen different people about my financial adviser and I think he picked up a client or two from my recommendation stimulated by the free Melbourne Cup sweep.
He could have run ten Melbourne Cup sweeps for 240 clients and generated ten times the goodwill. And perhaps he did. I don’t know and I don’t care. All I know is that I felt recognised and I was motivated to tell others about him.
One of my clients in the optometry has a friend who owns a book shop. Whenever he sells a pair of reading glasses for the first time, and the frames could be anything from $100 to $1000, he sends out a thank you card and a paperback novel he buys from his friend for $5. The card says “Thanks for buying your glasses from us. We really appreciate your business. I hope you’ll accept this book with my compliments and enjoy reading with your new glasses for the first time.”
The optometrist says he gest lots of word of mouth referrals from the $5 book and those people all pay full price for glasses when they do business with him. What is his competitor doing? BUY ONE, GET ONE FREE which has been decimating profits in the eyecare industry for over 20 years.
I am not saying that there is anything wrong with having an incentive for new customers to do business with you or for existing customers to do more business with you, just don’t call it a LOYALTY programme.
It is important to know that people are loyal to people, not companies or incentive programmes. If you want me to be loyal, remember my name, get to know me and ask me about what’s happening in my life when you see me, give me a call to see how my business is going or give me something that is not linked to me buying from you.
That’s what creates loyalty!
The day telcos or airlines or retail stores start spending more on recognition for their existing customers than they do on bribery for potential new customers, that’s the day we will see more customer loyalty in the marketplace, but not before.
Martin Grunstein’s outstanding results with over 500 Australiasian companies across over 100 industries has made him this country’s most in-demand speaker on customer service. He is available to speak at your next conference or meeting and is contactable on 0296623322 or firstname.lastname@example.org or you can go to www.martingrunstein.com.au.