We all know that it costs less to retain a customer than it does to acquire a new customer. Wouldn’t we all like to increase our profits? In order to do that – to increase revenue at a steeper rate than we increase costs – we need to know how to turn newbie customers into repeat customers.
And lots of us think we know how. Say “Y’all come back soon!”, right? Give them a pleasant shopping experience, either in brick-and-mortar or online? Well, sure, that can’t hurt. The human psyche is more complicated than that, however, so we as business people must be more adept. This is a short guide to how to perform the all-important business task of improving your ratio of return customers.
The How To depends, of course, on how large the company is, and whether you are offering tangible or intangible products and services. Examples that are appropriate to all of these business types are included here.
Step 1: Collect reliable objective and subjective information from current customers
The first step is learning what the customer values in products and in customer service and providing that. I have a Master’s degree in Psychology, but you don’t need that level of formal education to know that what one person values is NOT what another person values.
• In the same way that all husbands are not alike, and all administrative assistants are not alike, your customers are all individuals. What, besides being treated with basic respect, do they care about?
I teach a sales seminar that teaches people to pinpoint the Myers-Briggs type of the person they are talking to, in two minutes or less. Sometimes much less.
If you are selling high-ticket products or services, it is worth the two minutes to fine-tune your energy level, the ways that you present your ideas and which of your ideas to present.
In addition to personality-tagging, I also encourage the use of surveys, with incentives. Unless the incentives are substantial, though, be aware that people with a gripe are much more likely to respond than the folks who have interesting and well-thought-out ideas for increasing the quality of service. You need both, so consider inviting random shoppers in your brick and mortar (or via email with your online customers) to an in-depth exploration of the customer experience. Reward them when they do!
• Follow up with “customer care” after every phase of the first project, to solidify the relationship and find out about problems early.
If it’s a high-ticket item, hire people to do this. Train them in tone of voice and don’t let them work in blocks of more than two hours. Why? Because the ten cents you save by locking your customer care into cramped banks of phones, and making them dial hour after hour, will show up in their stressed voices. It will show up in their tired and perfunctory questions.
You want to telegraph to your client that you value them. You won’t convince me that you value me by interrupting my work to have some minimum-wage flunky ask me if there were any problems in my last project. I will respond to your fundamental lack of care by giving you an equally-perfunctory “sure, fine” and my original perception of your company will not improve; it might even decline. Make no mistakes here: Anyone who is age 60 or younger has been subjected to sales gimmicks their whole lives. We are savvy, we expect to be manipulated and lied to, and we don’t like it.
After asking no-pressure, neutral toned questions about the customer experience, and WITHOUT being obvious or annoying, mention other ways that you can be of service to the customer in the future. Either train your people to determine what kinds of products or services a particular client might need or have the sales reps handle this task. Consider discounting add-ons as “samples” for their consideration.
• Ask about five-year needs when planning projects.
If budgets are constrained, design a plan that allows for modular add-ons later. Remind client of possibility of add-ons at 6 month intervals. Less than six months is annoying and produces backlash. Inform client of new solutions that are less expensive or more “cool” in the way of add-ons. The decision to postpone can be reversed with new data.
Step 2: Use your best people on initial projects.
• Use your highest paid talent in the initial stages so your new customer gets the very best you can offer during their first experience with you.
Don’t reserve these people only for the established customers. Constantly work to upgrade the people skills of your staff. Bring in staff enrichment classes on customer care, strategic selling and relationship building.
• Pay your people more; fulfill their needs; treat them with respect.
Even in these days of cost-cutting globalization rhetoric, Costco is doing very well with a treat-your-employees-well policy. Hundreds of rigorous scientific studies have conclusively proven that employees who are happy with their own lives will treat your customers well. If they are not fundamentally being treated well by you, they will never, ever treat your customers well – no matter how you threaten or train them.
Step 3: Create a social network for your customers.
People are looking for ways to connect with their fellow human beings, in this socially-isolated world we have created. We crave social networks. If you can create a way for customers to interact with you for informational purposes, you win. If you can create a forum for customers to interact in useful ways with each other, you win big-time. Some businesses create online forums. Some businesses create book clubs, facilitated discussion evenings, and special speakers. Anything that brings people into your store, creates opportunities for display merchandising or special campaigns to catch their eye.
• Know the age/generation mix of your customers.
Generations at Work is one of a new genre of books catering to businesses who need to understand how specific age cohorts think, and what they value. It is well worth understanding this factor, as the needs of the young, edgy, hip Millenial crowd is vastly different from the value-conscious Boomers. One small article can only scratch the surface of this subject. Make sure, while you are doing this research, that you are surveying and studying (Step 1) real customers, not potential phantom customers. A particular generation may have more money, and be more willing to spend it on your particular goods or services, than another. How this relates to social networking, in particular: the WWII generation wants courtesy and respect (don’t treat them like your pals), so their need for social networking would be for information shared in a dignified manner; Boomers are the over-stressed sandwich-generation and they need to have social networking that revolves around saving them time, so you might consider play areas for kids (this is also of interest for the GenX’s who generally have younger kids) and ways for parents to meet up for family-oriented activities with other customers. You see the pattern.
Online forums with information related to your products and services, that allow customers to interact with each other to share information will help to drive additional sales. Just make sure that you hire an intern to monitor the forums, to prevent either racist/lewd or otherwise inappropriate threads to get started or to prevent the forums from degenerating into company-bashing. Remove all such posts immediately and respond to them as you would an on-fire customer service crisis. If it happens more than once, you need to examine your customer care operation.
• Stay connected in ways that add real value to the customer, not just sales solicitations: add a personal touch, mention your pets or family or hobbies in a witty and humorous way.
If you and your staff aren’t witty or humorous yourself, hire interns to do this and give these interns glowing testimonials as well as at least a nominal salary.
Here are some well-tested ways to turn initial customers into repeat customers:
1. in-store newsletters, with useful content. Use interns to create content.
2. special clients-only areas on your website with valuable content, not sales pitches. Save the sales pitches for the public areas of the site. Use interns to create content at low cost. This is also an area where your employees can gain resume-building skills by learning writing, layout and so on.
3. specialty blogs for customers, combined with e-zines.
A public blog run by your company can help you gain new customers as well as rewarding your existing customers. The content can be created by your team of energetic interns, combined with your eager-to-add-skills employees. Make sure that these activities get included in your people’s regular performance evaluations.
A private blog, and an electronic magazine (e-zine)
One caveat: do these yourself, so you can add the personal touch. A zine, newsletter, blog or website that is created by a generic content-creator is instantly recognizable as such – think of the “personalized” newsletters that realtors send out as a popular bad example.
Another way to stay connected with customers, and to allow them to connect with each other, is to organize social events through your store and website. A local pet-products store has a much larger “marketing footprint” in our city than her square footage would predict. She has a special area of her website for events. She announces special dog-walks at various parks, allowing customers to bond in that shared experience. She sponsors Single Dog Owners events for unattached owners. I’ve attended and they are a fun experience. As a cat owner, I decided to leave my “kid” at home, but enjoyed meeting all the fun single dog-dads. It takes little time and leads to a lot of repeat business because it builds loyalty.
Another way to build business through social networking is to provide space on your website or at special networking events for people who use your products or services to meet each other for their own business networking. I don’t advocate spending much on refreshments if you sell low-cost items, but it pays off for the big-ticket items. I saw an appliance store have an ice-cream social for ticket-holders (clients got them in the mail or could pick up or print one off for friends/guests) and get not only a big turnout but also big sales. Customers who had friends who were considering these items actually dragged them in and made them spend an extra couple of dollars to get an appliance from a local store that cared about after-sales service. Everyone won.
Step 4: Provide Effective Rewards & Incentives for Repeat Business
Of course, you are providing incentives for referrals, which might take the form of cash rebate or coupons to the local bookstore. Avoid dinner-for-two; some of us are single. Avoid anything involving alcohol or tobacco; many people have health or religious objections and won’t use them. Avoid anything sports oriented; I am not the only Certified Sports Hater on the planet, and consider time spent in that matter only slightly less hideous than root canal. Cash rebates work best, because your customer can use them for whatever they choose.
A coupon for a discount on their next purchase is an excellent thank-you for your first-time customer, provided that you do NOT require them to buy something very expensive, or to buy two of something that they only want one of, and so on.
• Don’t ignore the small, steady repeat customers.
Staples, for example, has two incentive programs. One provides an unrestricted coupon that I can use the next time I need to shop. I use that one, and I do come back. They asked me once why I never use their other promotion – the one that requires me to spend $150 to get some dollars off. Do I have to explain why that is not motivating? This kind of promotion is only interesting or motivating to a client who waits until they need a lot of stuff and then uses the coupon. I am sure that I spend at least as much on office supplies, except that I practice a just-in-time process, and buy what I need when I need it. I don’t tie up costs in inventory by stocking up, and I focus on incentive programs that allow me to do that. So I don’t shop at Staples as much as I would otherwise. They are focusing too much on the The Big Scores.
One way to turn initial customers into repeat customers is the opposite of the advice that most consultants offer – the “go after the BIG customer accounts” strategy. While going after big accounts seems very attractive in many ways, you generally have a long sales cycle to the large accounts, they are heavily courted by everyone, they expect steep discounts that can cut your profit level to starvation levels, and they can prevent you from diversifying. By all means, spend some effort going after this kind of customer, if you like. Just don’t ignore “small customers.” Especially in retail, you really don’t know how much power a person has in the long-term strategic sense, simply by looking at their job title, their clothing and other outer trappings, and the size of their initial order.
We have all heard the story of the new bank branch manager who was less-than-polite to the shabbily-dressed senior depositor who asked him a question. He turned out to be the local millionaire who didn’t dress his success. Big financial loss when he pulled all his business. In my own experience, I know of dozens of small customers who are Centers of Influence – the people who know a lot of people and whose opinion counts with them. Centers of Influence can be a potent source of referrals if you make the effort to keep them as repeat customers.
You can provide yourself with a solid, enduring revenue stream from low-volume, repeat customers. These low volume clients can provide your company with year-round, steady income if they get fair prices with good customer care. For them, good customer care involves listening to them carefully and focusing on whatever aspects of the experience matter to them most. Some low-volume repeat customers like quarterly discounts or special shopping days. Be aware that your low-volume but steady customers won’t qualify for volume-related discounts at all in some cases, or it may take them so long to accumulate points that the reward value is diluted.
• Rewards must be immediate and frequent (usually).
Psychologists say that in order to learn a new habit (like shopping at your store or calling you for a quote), people need rewards for taking that action, and the reward needs to be almost immediate.
Big tickets like a trip to Maui, if I have virtually no chance of winning it, are not motivating to me. Less-educated people, who buy lottery tickets because they don’t know about statistics, might be. Are they your prime market? Another audience that goes for the long odds on big prizes is sales people and others who are addicted to risk. If they are your market, then you know how to reward them. The rest of us need a coupon we can use on today’s purchase, or a free highlighter with $30 worth of school supplies. Think about exactly who your customers are: their ages, occupations, income levels, and other characteristics that you learned about when doing the comprehensive research from Step 1.
• Use logoed materials carefully. Choose items that your specific customers desire. (If I don’t desire it, it won’t motivate me.)
What about “stuff” with your company’s logo on it? Does it help keep customers? Is it really a reward? It depends. Here in the South, people are mad about tote bags. People give them to me, I thank them very kindly and give them to deserving relatives, friends and women’s shelters. If someone asks me what I really care about, I tell them: a mini-flashlight; a photo holder; note cards. I have a long list. Pens ordinarily don’t turn me on, unless the pen itself turns on – think flashing lights. Ordinary pens don't do it for me unless you are the manufacturer of Viagra; I always get a laugh when I pull that one out.
Portfolios with slots to put my credit cards are not on the list. I’ll keep my precious cards in my wallet, in my purse, which never leaves my side, thank you very much. But if you give me one, I’ll give you a dazzling smile, thank you very sincerely and you’ll never know that it ended up at the women’s shelter or with my friend Billy who hasn’t already got one.
Step 5: Know when to cut your losses. Know which customers you don’t want as repeat customers.
Cutting your losses is the last essential in the process of turning first-time customers into repeat customers. At any price level, you need to know ahead of time at which point you will wish them well with another supplier. [The skills of negotiation include knowing your Best Alternative, which is involved in the process of turning initial contact into repeat custom. I highly recommend the best-sellers Getting to Yes and Getting Past No.]
Like everyone else on planet Earth, you prefer being around pleasant people. That means that you will have a tendency to over-service the nice clients. However, beyond a certain point, extra service does not give you extra loyalty. Provide beyond-the average customer care, but don’t over-do it because you are avoiding the unpleasant folks. Consider dumping the unpleasant folks to free up energy to acquire more pleasant customers, whom you really want to serve. My own unpublished research indicates that letting go of the unpleasant people that you don’t fundamentally like generates more long-term profitability.
The process of turning first-time customers into repeat customers takes research, solid employee training and good labor relations, well-trained and responsive customer care, creating a social network in which customers can interact with you and with each other, and the right rewards and incentives. Creating the right mix for your specific business is definitely worth the effort in increased profitability.
