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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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Reward your best customers
