When was the last time you received a thank you note after making a purchase? Only on rare occasions have we ever received a thank you note from the owner of a business after making a significant purchase. If we did receive such a note I would certainly revisit the business, assuming the quality was at least good. So why is it that hand-written thank you notes aren’t modus operandi for most business owners? It’s not because businesses have so many regular repeat customers that they don’t need more. No, the answer is that owners don’t understand customer loyalty.
One of the most important lessons we teach business owners is that there are different degrees of customer loyalty. Just because someone buys from you once doesn’t mean that they will continue buying from you. One-time buyers are nothing more than shoppers; they aren’t customers. It’s not until someone buys asecond time that they become customers.
We introduce the Ladder of Loyalty to clients to help them understand the different levels of client relationships. There are six rungs on this loyalty ladder. The lowest level of loyalty is the “Suspect” because they haven’t purchased from your business, and the most desirable customers rest on the top rung as a “Raving Fans”.
Suspects: Suspects are members of your target market. You may have directed some lead generation activities towards them, but they have been unresponsive to those marketing initiatives.
Prospects: The next rung on the ladder is occupied by those Suspects who express interest in learning more about your business. Perhaps they call you after being referred to you, or after reading one of your advertisements, or after meeting you at an event. How you and your frontline team members handle this initial inquiry is crucially important in moving the Prospect up your loyalty ladder.
It’s important to collect their contact information so that you can start building a relationship with them. Building customer loyalty is all about relationship building. Your goal is to move each customer up to the next level of the ladder.
Shopper: When your Prospect makes their first purchase they become a Shopper. Most business owners incorrectly label first-time buyers as customers. These Shoppers are just checking out your services or products. They have no loyalty to your business.
Customer: It’s only when someone makes their second purchase from you that they become a customer. With their second purchase most Shoppers become profitable, but they don’t have a sense of loyalty yet.
Member: Customers become Members once they begin to feel like they belong to your business. At this stage they are building loyalty towards your business. How do you develop this sense of membership? Once they make their third or fourth purchase give them a VIP (Very Important Person) card, or invite them to an event you host for members only. Perhaps you give them a “Members Kit” that includes a catalog of all your products or services and some valuable coupons.
Advocate: The interim step between Member and Raving Fan is an Advocate. Advocates are huge fans of your business and recommend you often to their friends and acquaintances. Not only are they referring business to you, but they keep buying.
Raving Fan: The highest rung on the Ladder of Loyalty is reserved for Raving Fans. These are those clients of yours that can’t stop selling your business for you. It’s as though they become part of your sales team. How wonderful would it be if your clients did the selling for you?
You might think that owners spend as much money getting new clients as they do developing strategies and programs to move Customers up to Raving Fans. Unfortunately, most business owners spend roughly 95% of their marketing dollars to find Prospects, leaving only 5% of their dollars to spend on moving relationships up the ladder. A more appropriate mix would be 60 – 70% of marketing dollars to develop Prospects and 40 – 30% to move clients up the ladder until they become Raving Fans. It’s six time less expensive to get an existing client to make a purchase than to get a Prospect to buy for the first time.
Conclusion: Focus on strategies you can implement that will move customers up the Ladder of Loyalty. You are missing tremendous lead generation potential if you leave clients sitting on the Customer rung of the ladder where they are not helping you market your business.
Let’s look at a couple strategies designed to move clients up to the next rung. Note that what follows are just a few of many strategies designed to create upward movement on the ladder.
Moving Shopper to Customer: In order to get the Shopper to make their second purchase, why not give them a coupon upon their first purchase that can be applied towards their next purchase. By including an expiration date on the incentive coupon you are more likely to get the Shopper to come back. For example a coupon that is good for $5.00 off their next purchase if used prior to (expiration date). What about sending the purchaser a hand written thank you note?
Moving Customer to Member: Recall that Customers become Members when they begin to feel an attachment to your business, as though they were a member. An example you see in some restaurants is a beer stein with the member’s name engraved hanging over the bar as special treatment for frequent buyers. What can you do to make your frequent buyer clients feel special, as though they are a member? How about offering a frequent buyer program? Perhaps displaying a “Welcome” sign outside your office with the member’s name for all to see.