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Reward your best customers

The strategy is simple: Give high-paying customers and incentive and they'll come back and buy more.

That way, you boost sales, find new customers through referrals, and lower your costs of marketing and customer acquisition.

So how do you accomplish this? By figuring out who your best customers are and what motivates them to buy. Once you know that you can add incentives to make it worth their while to buy more.

What's loyalty got to do with it?
Marketing programs that reward customers for their patronage are not new. Long before airlines established frequent flier clubs and credit card point rewards, there was the Sperry & Hutchinson Green Stamps program. Sperry Hutchison, the distributor of the stamps, launched the program in 1896. At its height in the mid-1960s, with 80% of U.S. households collecting stamps and 800 redemption centers nationwide. S&H was overseeing an $825 million market.

There is no question consumers love to participate when the loyalty program is right. It's clear that such programs can enhance profits. Research conducted across industries by consultant Bain & Company indicates that increasing a customer retention rate by only 5% can boost the average customer net present value by an astonishing 35% to 95%.

But today, the challenge is how to engender that loyalty. Competition is fierce, price often drives decisions, and consumers can pick and choose among dozens of options and outlets, whether it's healthcare or hamburgers.

Three steps to rewards
These three steps can help you can set up the right loyalty programs for your business and keep customers loyal.

Step 1: Identify best customers
The key first step is to define your target by understanding the characteristics of your best customers. You may be surprised to find that the customer you talk to most, the one whose family saga you've now memorized, is so demanding and buys so little that he's actually costing you money. And a customer you've never heard of, one who buys online every quarter, is really your biggest spender.

Neither frequency nor volume will define a best customer. You want to identify customers who provide the most profit. Only a thorough analysis of your customer database can yield such insights. The discovery of the online buyer, for instance, might lead to special e-mail offers.

If you're using Microsoft Outlook Business Contact Manager, included with Microsoft Office 2010, to keep track of your customer information, you can use the pre-formatted reports, including several that are focused on current customers and other focused on sales leads that will keep you informed. You can:

  • Create customized reports with criteria you choose.
  • Export reports to Microsoft Office Excel for further analysis, if necessary.

Next, find out what those customers like most about your products and what offers or improvements are appealing. Start by casually asking questions of customers each time they call. Then, when you've formed some ideas, mail a postcard survey to get detailed answers. To create a mailing list:

  • If you're using Outlook Business Contact Manager, use your data to create a mass mailing using the mail merge wizard in Microsoft Office Word or in Outlook.
  • Export your Business Contact Manager data and then use the mail merge wizard in Microsoft Office Publisher to seamlessly incorporate contacts from Business Contact Manager into your survey.

Make sure you have enough responses to figure out what really moves customers to buy. You may have to send out a few mailings.

Step 2: Divide and reward.
Armed with the information, classify your customers into four target groups, from highest to lowest spenders. Then categorize which products and services get the most attention or sales.

The resulting list will highlight the customers to spend your time and marketing on. You'll also know how to allocate your resources among the other groups and perhaps, the profile of new customers you can tap for growth. Remember, the goal is to get the best customers to return an spend more or buy more frequently.

There are dozens of ways to reward customers, including the well-known frequent buyers clubs, buy-several-get-one-free offers and time-sensitive promotions and discounts made available only to loyal customers.

Such ideas are tried and true. But you don't have to start big. Loyalty programs -- and the marketing materials you create to promote them -- can be very affordable. Some ideas:

  • Send personalized thank-you notes. After each visit or major purchase, send notes that thank the customer for their business. You might also enclose a discount or special offer that can be applied to his next purchase.
  • Send reminders. Set up a tracking system, that automatically generates a postcard or note offering a 10 percent or more discounts after a certain interval of time during which the customer hasn't bought anything.
  • Send e-mail offers. Capture e-mail addresses first -- with the customer's permission, of course. Have safeguards in place to protect the information. A promise of upgrades or e-mail only offers may motivate the customer to provide their e-mail address.
  • Send holiday or personal offers. A freebie or treat on a customer's birthday send the message that you've paid special attention. Sending news or sales dates for a customer's preferred brand or product will also make a favourable impression.
  • Share proprietary information or intelligence. If you offer professional services, a newsletter or special bulletin about industry news or events gives your customers a great value. You can also enclose discount and offers.
  • Offer steep discounts at off times. If your business has any specific down time, let loyal customers in on a bargain.

Step 3: Stay up to speed
Both markets and customers have a way of evolving. Don't simply set up a loyalty program and walk away. Keep track of any changes in customer or prospect information and make sure the list and the information is regularly updated.

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 6-295 Queen Street East
 Suite # 404
 Brampton, Ontario  Canada
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