Building a Customer Loyalty Plan, Step 5

The average company loses 20 to 40% of its customers every year. Well conceived and well executed loyalty programs for attracting, retaining and winning back high value customers are essential for any company to succeed. Build your own plan around these customer loyalty stages.

Turning suspects into qualified prospects

Turning qualified prospects into first-time buyers

Turning first-time buyers into repeat customers

Turning repeat customers into loyal clients

Turning loyal clients into advocates

Winning back lost customers

Turning loyal clients into advocates

Always remember that word of mouth is the most powerful advertising your business can have.
Referred customers require less selling time and are more loyal than other customers. They come ready to buy because in effect they have already been sold. Consider four proven strategies for earning word of mouth.

1. Give ’em Something to Talk About

Bonnie Raitt, the popular blues/country cross-over artist had a Billboard Chart hit in 1992 entitled “Let’s Give Them Something to Talk About” that told how a good story travels fast. That same philosophy is key to creating a high talk factor between customers and their friends. Direct Tire has given their customers something to talk about. Here’s how they did it.

Direct Tire President Barry Steinberg sees the whole purpose of customer service very simply: to keep customers coming back and to get satisfied customers telling others. Virtually everything that takes place at Direct Tire is directed to that objective. Need to buy some tires and be in and out in an hour? Direct Tire will schedule an appointment whenever it’s convenient for you. Need transportation immediately? Direct Tire offers one of the company’s seven loaners to use. You can pick up your car on the way home. What if those new tires blow out after 30,000 miles or if for some reason you are simply not satisfied? Direct Tire guarantees the tires as well as any service work the shop does—forever.

How does Steinberg know these services are important and worth the necessary expense? Consider his large loaner fleet. Says Steinberg, “Three years ago, before I had the loaners, I was doing $50,000 to $55,000 a month in service work. Today I’m averaging $120,000 a month and the gross margins on service work are 30% higher than on tires. People will call up and say, ‘I understand you have a free car I can use while you work on mine.’ We’ll say, ‘Yes that’s right.’ And they’ll schedule an appointment right then. A lot of them don’t even bother to ask what the work will cost. I’m going to add more cars.”

Typical of the length to which Direct Tire will go to keep a customer happy and loyal was the case of the customer whose car was sitting on a lift for front-end alignment. The customer had called in ahead of time to make certain there would be no delay for him to get to work. But Bobby Binnall, an employee who transports passengers to and from work, was delayed in a car that had stalled. The customer was getting edgy, and Steinberg had an inspiration: “I called the local taxi company, and in five minutes they were here and took the guy over to his office. The cab fare was $17, but can you imagine how many people he’s going to tell this story to? It was the best $17 I ever spent.”

It is this kind of reasoning that has allowed Steinberg to maintain his high net margin, even as he has increased his investment with a satisfying facial picture that shows how effective he has been in turning one-time buyers into regular customers. Direct Tire’s revenues continue to increase steadily, as they have every year since its founding in 1974, despite generally flat sales for the industry as a whole—all because he wins over customers who tell other people about their positive experience at Direct Tire.

2. Continually Search for New Ways to Earn the Talk Factor

A computer check-writing program called Quicken has become the most successful personal finance program ever written, holding an impressive 60 percent market share. Says Jeffrey Tarter, editor of the industry publication Softletter, “It has become the brand-name product in what would otherwise e a commodity business. It’s the Kleenex or Xerox of its market.” Sales have continued to explode. The company now generates annual sales of more thank $33 million and sells close to 1 million units annually.
Quicken is carried by Target, Wal-Mart, and other retailers and computer chains nationwide. And how large is the company’s sales force? It comprises exactly two people. But Scott Cook, CEO of Intuit, the maker of Quicken, sees it differently: “Really, we have hundreds of thousands of salespeople. They’re our customers.” Scott speaks of his customers as “apostles” and states that Intuit’s mission is to “make the customer feel so good about the product they’ll go and tell five friends to buy it.

But things weren’t always so rosy. According to Cook, May 1, 1985, was the worst day of his life. His company, Intuit, was less than two years old and he had to tell his seven employees that, because he could no longer pay their salaries, he had to let them go. Cook’s flagship product, an easy-to-use check-writing program for personal computers, had plenty of potential. What he lacked was money. Cook had started the company with $350,000, a sum raised from a combination of family loans, his savings, credit cards, and home-equity credit. Attempts to interest venture capitalists got him nowhere. And now the start-up capital was nearly gone.

By the summer of 1998, the little company had just $125,000, generated primarily from Intuit sales in bank lobbies. If he wanted to catch the all-important Christmas selling season, Scott had to roll the dice on a make-or-break ad campaign. He wrote the ad himself and spent all of the $125,000 on the campaign. It worked. Scott’s all-or-nothing ad campaign, coupled with his uncompromising efforts to create a product that truly satisfied its buyers, paid off.

To create this phenomental word of mouth with such potential mass-market appeal, the Quicken program had to be fast, cheap, hassle free, and, above all, easy to use—so easy that anyone as a first-time user could sit down at the computer and start writing checks. And Intuit is on a constant crusade to meet these objectives. One such example is Intuit’s Follow-Me-Home programs, in which Quicken buyers from local stores are asked to let an Intuit representative observe them when they first use Quicken. This way, Intuit gets continual feedback on how the product might be made just a tiny bit easier for first-time users. “If people don’t use the product,” says Tom LeFevre, chief programmer, “they won’t tell their friends to use it, either.”

3. Get Your Product in the Hands of Influencers

Conventional wisdom says that in order to get a group of “opinion leaders” to earnestly spread the word about a new product, its maker must first give the product away.

Not so with Approach Software, a start-up in Redwood City, California, which found a way to earn initial sales from opinion leaders and then triple the number of people who purchased its product on the advice of friends or associates in the six months following the product’s launch. How did the company do it? By offering a low introductory price and a ninety-day, money-back guarantee. The target of the offer was carefully selected, influential users, who were asked to try the company’s first product, a database software program designed for nontechies.

Approach’s limited-time offer of $149 for Approach 1.0 for Windows, plus free technical support, quickly got the innovative software into the hands of thousands of small-company CEOs and other targeted customers. The price was hard to beat, given the software’s appealing characteristics—less than a half-hour to learn the program and seamless integration with other database software. Competing products cost as much as $799.

4. Turn Centers of Influence into Full-Time Advocates

One unique application of word-of-mouth advertising in the Deep South proved how effective this form of prestige recommendation can be Fifteen years ago, Jay Stein decided to expand the department store in Greenville, Mississippi, that his grandfather had founded in 1908. As a stroke of luck, several well-to-do women from Greenville volunteered to help out during the stores’s liquidation sales of some designer clothing. Commenting for the Wall Street Journal, Stein said, “they had firsthand knowledge of this better merchandise, because they had worn it for years.” The experience convinced Stein that the concept was worth replicating. When Stein Mart opened its second store, this time in Memphis, he created a designer boutique department in the store and he and his wife recruited socialite friends to operate it.

Today, to be hired as a Stein Mart “boutique lady” is a bit of a status symbol, as indicated by the waiting lists for the job at all fifty-one Stein Mart stores. “As soon as I heard they had an opening, I called to put my name in,” reports Gay Kemp, who is married to an international marketing executive. “Everybody I knew was doing it and they kept talking about how fun it was. When you look at the women who are doing it – doctors’ wives, women who have mansions on the river – well, it’s a neat association.”

“The boutique ladies are our secret weapon” says Jay Stein. These women work one day a week, earn $7 an hour, and are excused from cash register responsibility and evening shifts. Instead, their activities are focused on “spreading the word” about designer merchandise. For example, when a shipment of $39 designer silk separates arrived at the Jacksonville Stein Mart, boutique lady Joy Abeny, the wife of a former managing partner of Coopers and Lybrand, hit the phones. She called fellow board members at Wolfson Children’s Hospital and “told them to get over here.” Joy’s friends obliged by spending $2,000 in her department that same day.

For many boutique ladies, it’s gratifying to learn that women of a certain age and without a resume are still welcomed in the work force. Many compare the job to volunteer work, since, as Kemp sees it, “you are busy helping people.” The pay is a bonus. “It’s fun to get a paycheck that’s mine,” says Kemp, who also adds that the employee discount of 25 percent is more important to her than her $40 paycheck. “I don’t care who you are or how much you have, everybody likes a discount,” she says.

In return, Stein Mart enjoys a polished, loyal sales force of advocates. Joyce de la Houssaye of New Orleans wedges her boutique duties into a full schedule of Junior League, golf, and four grandchildren. She brings flowers from her award-winning garden to decorate her boutique department. After organizing a special sore reception, she took off in her golf cart to deliver flyers to neighbors about the upcoming events.

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Source: Jill Griffin’s Customer Loyalty: How To Earn It, How To Keep It