by Jurek Leon
Customer loyalty. It gets mentioned a lot, but who does it well?
Think of your own buying behaviour. Who are you loyal too? What is it that makes you loyal to them? How do you demonstrate that loyalty? Do you come to the organisation’s defence when you hear others being critical of it? Do you automatically buy from them or go to them without even thinking of alternative providers of the products or services?
It’s a topic that fascinates me, but I do often wonder about programs that get called ‘loyalty programs’ by financial institutions, retailers and many other organisations. With most of them, where does the loyalty come in?
Analyse the best
The world’s most successful loyalty program is run by Tesco, the UK retailer. Tesco has more than 10 million club members – phenomenal given that the program has only been going at full strength since 1999. They had other programs before, but it is only really in the last six years that their current program has made them a dominant force.
Four times a year, they send out six really highly targeted coupons to their members. Four of these are for products customers have already been buying, which they are able to identify because they analyse all the data that they get from sales; and two are for products that the customer hasn’t bought but is likely to buy.
What enables Tesco to identify this is data analysis....in great detail. 80 per cent of all Tesco sales are recorded through their Clubcard program. The analysis of this information provides invaluable insights into customer buying habits and shopping behaviour and has enabled Tesco to gain a dominant market position and confidently extend its offering.
Obviously, increased sales and profitability are the factors that have others wishing they had such a program in place. However, when I was looking into their program, there was something unexpected that came out of it. Clive Humby, who is one of the creators of the amazing Tesco Clubcard program, said something that most people would think is a bit unusual. He said, “What companies really need to do in establishing a loyalty program is to thank their customers for previous purchases rather than to encourage them to buy more.”
That’s a good point, isn’t it? Thank them for the previous purchases. Perhaps it seems a bit obvious but lets look at this a little deeper.
Most business people will say, ‘I want to put in a loyalty program to get customers to buy more from my business’. And sure, you want that as the end result and Tesco definitely wants that too.
Yet, four out of the six coupons are for products the customer already buys. If you were being hard nosed about it, you might think that is a waste. Why give them a coupon for something they will buy off you at full price? The answer: Tesco is really saying “thank you” for being a loyal customer with these four coupons. Then they use two more to introduce their customers to products that, based on their typical buying behaviour, they are likely to like....and may currently be buying elsewhere.
What’s loyalty got to do with add on sales?
Now, that way of thinking is actually the same as we use at Terrific Trading when we help people to improve their add-on selling. The preoccupation with bosses and in too many sales training programs regarding add-on selling is to demand that salespeople and service providers concentrate on using techniques to increase the average sale per customer, to increase the average spend that they make. Therefore, the emphasis that many programs have is on how to get customers to spend more, how to squeeze more money out of the customer...and many service providers resist this approach.
Instead, we like to work with them on the premise that when you do the thinking for your customer, when you show the customer you care, the result is that they are likely to buy more from you.
For example, learning to ask clarifying questions before giving information is just the sort of thing that helps to increase the average sale. When you show you are interested in a customer, it builds rapport, it builds the relationship. As a result, your customers give you more information. This enables you to identify and offer more complete solutions to their problems. The reward for this caring for the customer tends to be an increased average sale.
This customer focussed approach to add-on selling demonstrates your interest in the person’s needs rather than ‘a sale’. Customers can sense when a salesperson is more interested in what they are getting out of the transaction instead of being concerned about what the customer is getting. Also this changes how the salespeople feel about add on selling – if they are more comfortable showing interest and caring rather than foisting extra goods onto an unwilling customer then they are more likely to play an active part and be committed to the process.
When you build trust you build loyalty
In the same way, what Clive Humby is saying is that when you care about your customers and thank them, the relationship and trust builds and as a result of that, as long as you let them know what else you have got available, they are likely to buy more. Everybody wins.
So, it is a whole different way of thinking about and approaching customer retention and relationship building. Yet, it very successfully leads to increased sales and greater loyalty.
Jurek Leon is a speaker, trainer and consultant. To subscribe to Jurek's FREE monthly email newsletter go to the Free Articles section of his website www.terrifictrading.com and type in your name and email address. It’s simple and easy. Alternatively, email Jurek at info@terrifictrading.com.
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