Many businesses make the mistake that once they have a new customer, they think the work is over. How wrong they are, as the work has only just begun!
When a prospect buys from you for the first time, they step on to the first rung of what we call the “ladder of loyalty” and become a shopper. Then when they buy again they take the next step and become a customer, and so on up the ladder, as can be seen in the following diagram.
The concept Brad Sugars discusses in his book, Instant Repeat Business, is to increase lifetime value by using the 7 rungs of the Ladder of Loyalty
On the lower levels of the ladder, there is very little customer loyalty and if a competitor comes along with a better proposal, customers are more than likely to give them a try, and you may never see that customer again.
The art of achieving a high level of customer loyalty is to move them further up the ladder, so that they become loyal clients and eventually raving fans.
Once they become a raving fan, not only can you guarantee they will always buy from you, but they will go a stage further and start actively recommending other people to come to you, so helping to fill your sales pipeline.
So how do you turn your customers into raving fans? Well, the first stage is to know who your customers are and categorise them based on how much they spend with you and how much of your time they take up. I use an ABCD system:
A = Awesome
B = Basically sound
C = Could do better
D = Don’t want to deal with
There is little point in spending time and effort with your D clients. These are the ones that haggle over price, take up your time over pointless queries and spend so little with you compared to the effort you put in that if you checked, you’d probably find that they bring you no profit at all. So just pass them on to one of your competitors; you never know, they might become their awesome clients!
C clients are those that have not yet been educated in how you like to do businesses. They have some of D’s habits, but buy sufficient from you that they are worth trying to upgrade.
B’s are the clients who form the bread and butter of your business. Some you will be able to upgrade but others will need to be looked after and appreciated to maintain their loyalty
A’s are your advocates and raving fans. These guys make what you do enjoyable. They not only buy from you but they will refer other people to you.
So what do you do to upgrade and maintain your clients at the appropriate level? Well, the answer is simple. You keep in contact with them and create a loyalty scheme.
Keeping in contact- There are many ways that you can keep in contact with your customers, and technology has made this far easier than ever before.
With the advent of email, blogging and social media, you can remain in contact with your customers as regularly as you like for the minimum of investment.
The more traditional method of keeping in touch with your customers include telephone calls, newsletters, direct mail and entertaining. Whichever method you use, you must bear in mind the appropriateness of the medium and its effectiveness and importantly, make sure that you give value to the customer.
The easiest method to set up and systemise is the quarterly newsletter. Some people dislike newsletters because they are full of dull boring information about the company which is of no benefit to them. So the best way to appeal to people is to be more creative and have some fun with it.
People like to be informed of interesting things, learn something new and have fun. With some thought and creativity, you can make receiving your newsletter a highlight of your customers’ quarter.
Loyalty schemes- While the likes of Tesco have taken loyalty schemes to new heights, there are still some very simple schemes you can use that will have just as much effect. All you have to do is monitor the level of business a client does and then reward them when they hit certain targets. This can be done via databases, accounts systems or plain and simple printed cards.
Rewards need not be money off; in fact you can be really creative with this- all you have to do is show perceived value.
One great strategy is to find a non competing business in the same sector and offer each other’s clients something from your range, e.g. a photographer and a florist could swap a bouquet for a portrait. Remember that this will have the added advantage of putting a new person onto each other’s loyalty ladder.
Another great way to reward loyalty is to invite clients to a special event, such as an educational seminar, a new season products launch or even arrange a celebrity visit.
Whatever you do to keep your clients coming back and stepping up the ladder, make it interesting, add value to your clients’ lives, have some FUN, but above all, TAKE ACTION.