Want to Sell More? Try Customer Loyalty Programs
Last week, FEI marketing whiz Marka gave savvy salesperson Zoot a tip for increasing FEI’s share of customer (SOC). This week, Marka offers Zoot one last piece of advice for selling more to customers. Remember, fire = print.
Marka and Zoot went toga shopping at the mall one Saturday afternoon. As they headed out of Togas Aplenty with bags in hand, Zoot stopped Marka.
“I’m craving froyo,” Zoot said. “Let’s stop at Grape Leaf Frozen Yogurt.”
“That’s on the other side of the mall!” Marka said. “GrapeBerry’s right next door.”
Zoot brandished a ticket. “But I’m only two purchases away from getting a free froyo at Grape Leaf!”
Marka raised her golden eyebrows. “Clearly, Grape Leaf’s Customer Loyalty Program is working.”
“Should we do start one at FEI?” Zoot asked.
“Hades yes!” Marka said. “According to Fire Business magazine, it costs a company about five to 10 times more to acquire a new customer than it does to sell to an existing one. On average, current customers also spend 67 percent more than new ones. Bottom line: we should be doing everything we can to grow our share of customer. And loyalty programs that reward frequent customers are a vital arrow in our quiver.”
“What would such a program be like?” Zoot asked.
“Let’s keep it simple,” Marka suggested. “We’ll create a system in which customers receive points for every purchase—say one point for every $100 Drachmas spent. Customers get rewards and perks based on the points they accumulate.”
“What kind of rewards?” Zoot asked. “Free froyo?”
Marka rolled her eyes. Zoot wasn’t quite getting the picture. “The point of a customer loyalty program is to get more business from existing customers. Giving customers free froyo is a nice token gesture. But will it really persuade them to buy more torches, matches and kilns? Instead let’s offer benefits to frequent customers that make it more attractive for them to work with us.”
“I get it,” Zoot said. “Maybe each $1,000 Drachmas our customers spend gets them $10 off a future torch purchase. Maybe once they spend $10,000 Drachmas, they get 10 percent off all torches for the year—or 50 percent off our ‘loss-leader’ TorchBuddies product.”
“You touched on an important point,” Marka noted. “To ensure rewards are in line with level of loyalty, let’s make this program tiered. Everyone who joins the program gets a nominal reward just for signing up, say a few bucks off a torch or two. As customers move up the ladder, we increase the reward’s value.”
“We could have Bronze, Silver and Gold tiers—just like the Olympics!” Zoot exclaimed.
“Sure,” Marka said. “Finally, don’t forget that many of the most valuable rewards we can give customers aren’t financial. Bronze members might get a subscription to Fire Buyer’s Weekly and a ham every Olympians’ Day. Silver members might get a membership to the Torch of the Month Club, and free expedited shipping. And Gold members could get everything the Silver and Bronze members get, plus priority scheduling and a 24-hour VIP customer service line. All these perks are as valuable—if not more so—than actual Drachma discounts.”
“I can practically see our share-of-customer growing,” Zoot raved. “Now...about that froyo.”
Today’s FIRE! Point
It’s much easier to get more business from existing customers than to sell to new ones. Consider giving customers a real incentive to do more business with you by offering a loyalty program that provides perks, discounts and other benefits to your customers.
FIRE! in Action: Mongolian Barbecue Uses Customer Loyalty Programs to Bring in Bigger Spending Diners
The restaurant sent a variety of promotions to existing customers that encouraged them to return—from free desserts to free gift cards for their friends. These campaigns have achieved high open, redemption and referral rates.
Next week: Marka gives Zoot a tip for calculating the effectiveness of a Customer Rewards Program.