Customer Loyalty

Real Small Business, Real Word-of-Mouth, Real Improvement.

Real Small Business, Real Word-of-Mouth, Real Improvement.

I don’t mean to bite the hand that feeds me, but I’ve noticed that we of the small business/entrepreneur blogging world talk a lot about word-of-mouth and other great business principles, but rarely do we write about actual experiences from small businesses applying the stuff. My goal is to change that with some real case studies of real businesses applying great business principles and enjoying the benefits. Here is my first attempt.

Chuck & Joan Matheny own two Sport Clips locations in greater Phoenix. Sport Clips is a hair cut place that caters to guys. Every stylist chair has a TV tuned to sports, all the décor is sports related, and they have an “MVP” service that includes a hot towel and a neck massage. Their motto is “Guys win.” If you’ve never been comfortable in the fru-fru world of hair salons, this is the place for you.

Anyway, last September Chuck was looking for a way to improve the performance of one of his locations. It had a great staff and a good location but wasn't performing like he hoped it would. Rather than pay for traditional advertising, Chuck decided to focus on encouraging his existing clients to spread the word. Four months later, without spending a dime on advertising, Chuck’s weekly sales were up well over 20% and have continued to grow.

From the client's perspective, Chuck's program starts with a simple invitation received at the conclusion of their service. The invitation is the size of a business card. It includes the stylist's name and offers a free service upgrade in return for visiting a web site to provide feedback. "Our feedback survey is extremely short," says Chuck. "It literally takes our clients less than sixty seconds to complete. Our goal is not to get feedback on every little thing, but to learn if the client is happy with the service and start an ongoing dialogue."

The ongoing dialogue is initiated with the last question of the survey that asks if the client would like to receive additional information and specials from Sport Clips. Nearly 90 percent of those that provide feedback choose to receive additional information. That’s a pretty good “opt-in” rate. Once customers opt-in, Chuck uses technology to stay in touch with them. First-time customers automatically receive reminders via email, including a discount coupon, every three weeks to encourage loyalty. Every customer that signs up receives a birthday greeting from Chuck including a discount on their next hair cut and Chuck regularly sends out email specials associated with holidays or other events.

The Sport Clips client experience is remarkable and worth talking about in and of itself, but Chuck also takes extra steps to encourage his clients to tell others about their experience. Each time a client completes a survey or receives an email from Chuck they are given the opportunity to forward online discount coupons to their friends along with a personal message. Thirty percent of the clients that join Chuck’s program take advantage of the opportunity and send an invitation to their friends.

Chuck's efforts have paid off in many ways. His stylists love the customer feedback and take greater pride in their work. He knows who his most loyal customers are and can contact them without paying for advertising. And, most importantly, his customers are actively telling their friends to try Sport Clips. All of which have lead to healthy growth.

Time, effort, and money required? The invitation cards that Chuck’s stylists hand out are business cards ordered from Vistaprint. They run about 4 cents a piece--four color both sides. Chuck uses PromoterZ for his online survey, opt-in list management, outgoing email and online referral generation needs. Cost: $50 a month. In terms of time required, Chuck spends a few minutes each day responding to customer feedback. Once a week he shares feedback with his managers as part of his manager meeting. He also spends some time each month deciding on a special offer to send out to his loyal customers. This month? Fathers and Sons that come in together get a Free MVP upgrade for Dad and a half price haircut for son.

Promoterz is the hands-free, word-of-mouth marketing service that takes care of the details so you can focus on business. Learn more

Listen and Grow!

Listen and Grow!

Jackie Huba from Church of the Customer, cites a study that concludes that customers that feel listened to are more likely to spread positive and unsolicited word of mouth. The study was done by Communispace, a company that creates and manages online communities. Key findings:

•82% of community members said they were more likely to recommend the company's product's than before joining the community.

•54% said they were more inclined to purchase the company's products since joining the community.

Though we've done no studies to prove it, we find the same thing to be true with our PromoterZ clients. Those companies that use the service to ask for customer feedback consistently generate more referrals than those that don't.

So do your customers feel like you are listening? Asking is certainly the first step, but I have personally completed a number of customer surveys and never felt like anyone was listening.

In my mind, the critical step to show you are listening is to respond. Simply acknowledging that you have received their feedback and are considering it will let your customers know that someone really is listening--and they in turn will start talking to others....

More happy customers. More repeat sales. More referrals. Learn more

"We took our eye off the customer."

"We took our eye off the customer."

That is a quote from Mike Duke, the chief executive of Wal-Mart's international division attempting to explain why Wal-Mart has had it's hat handed to it by Tesco the leading retailer in England. How have they done it? In a nutshell by understanding their customer and giving them what they want when they want it.

According to a recent article in the Wall Street Journal, Tesco has twelve million members in its Clubcard program which gives cardholders discounts in return for their name, address and other personal information. Tesco then actively mines the data they collect to make operational and strategic decisions. It seems to be working. Tesco has 31% of the grocery market in England, nearly double that of Wal-Mart and next year Tesco plans to invade Wal-Mart's home turf by opening stores in California.

When Wal-Mart entered the British market, Tesco turned to its databases and searched out customers that always buy the cheapest item. They identified 300 items that these price-sensitive customers buy most often and lowered the price on those items. The result: customers didn't defect to Wal-Mart.

Every three months, Tesco uses its data to send a packet of coupons to its customers. The packets typically contain three coupons for products the customer buys regularly and three for goods that the customer might like, or that Tesco wants them to try. Fifteen to 20% of all Tesco coupons are redeemed, the typical industry average is just 1 to 2%.

What can a small business that can't afford to put a big loyalty card program like Tesco's into place learn from Tesco? Here are a few things:

  1. Information about your customers is valuable and is worth giving a discount to get. Some of our customers at PromoterZ have wondered if they should give a discount coupon to a customer every time they give feedback. Our position is always the same: yes! The information is invaluable. Where else are you going to get it? Even if every customer gave feedback (which they never will) and got a discount, you would still be in a better position to compete because you would understand your customers better.
  2. Use the information you gather to stay in touch in appropriate ways. Tesco sends out coupons that it knows its customers want to receive. In your efforts to stay in touch with your customers are you sending what your customers want to receive or what you want to send? How can you know what they want to receive? Go back to number 1 and ask them. One of our PromoterZ customers, Sport Clips, uses the system to send first time customers a coupon just in time for the next haircut.
  3. Focusing on understanding customers and meeting their needs is powerful--so powerful it can even beat Wal-Mart!
Get customer feedback, generate referrals, and increase repeat sales for as little as $150 a month. Learn more

I'm Sorry, This Movie is Late. That will be $400 Million Please!

I'm Sorry, This Movie is Late. That will be $400 Million Please!

In the old movie rental days I always knew my family was paying a lot in late fees. Apparently, we weren't alone. Netflix, highlighted in Businessweek as number 29 on their Hot Growth list, changed all of that. Here's another great story about an innovative company not only competing with the big boys, but completely changing the rules.

How well is it working? Last year Netflix's profits doubled to $41 million while Blockbuster and Movie Gallery lost a combined $1 Billion! Now get this, $400 million of that billion was due to late fees that Blockbuster had to give up in order to compete with Netflix. Netflix is getting close to 5 million customers and is expected to do nearly a billion in revenue this year. Not bad for a company that many thought would never succeed because we all want "instant gratification" when we rent movies. Apparently, some of us are willing to plan ahead a little.

Perhaps even more important than dropping late fees, Netflix competes by understanding its customers and their tastes and building customer loyalty. Seventy percent of Blockbuster's rentals are new releases. For Netflix the number is only 30 percent. Instead of pushing whatever Hollywood's latest offering is, Netflix actively looks for films that it's customers want (what a concept). The average user on Netflix rates over 200 films (talk about customer feedback). Combine that with rental history and Netflix can predict pretty well what will rent and what won't. This information allows it to actively pursue films from independents that others won't take a chance on.

Of course the future of movie rental is sure to change. While there is plenty of debate on the timing, it is almost certain that web distribution of movies will grow. Netflix plans to be there and will bring along its 5 million loyal customers...

The growth of your business will be determined by what your customers say about it. Do you know what they are saying? Learn more

A Better Mousetrap?

A Better Mousetrap?

The Wall Street Journal recently reported on a couple of entrepreneurs that apparently came up with a better mousetrap--make that pen. For how many hundreds of years have we as human kind been using writing utensils that are straight like a stick? Been a few at least and before that the quill. Then in 1987 Colin Roche, a high school student at the time, gets sent to detention and dreams up a new design for a pen to relieve his writer's cramp (any guesses as to what he was writing 500 times?).

The first prototype was built in his dad's garage (see picture-first prototype on far left) and the company, called PenAgain, did nearly $2 million in sales last year. Now, according to the article, they've been given a shot at the big time--thirty days to prove it will sell in Wal-Mart. If 85% of the 48,000 pens ordered by Wal-Mart and placed in 500 test stores sell during the first thirty days, they are in. If not, they may stay on in some of the trial stores or be completely dropped.

Getting into Wal-Mart is a big deal. They have 138 million customers every week! Competition to get a product into that channel is stiff. According to the chain they see about 10,000 new suppliers every year. Of those only about 2% make it to the trial run stage and that is just the beginning. Suppliers to Wal-Mart have to adhere to strict packaging and shipping requirements, monitor the sales of the product in each store, and drive customers into Wal-Mart to buy the product.

So what is PenAgain planning to do to drive customers into Wal-Mart to buy their pen? Unable to afford print or TV ads they plan to do viral marketing. Over the past several years they have collected an email list of 10,000 customers who regularly buy their pens. Mr. Roche describes them as "people who really want to know what the heck is going on with us."

I hope they succeed. Next time I'm in Wal-Mart I'll look for one of their end caps and drop $3.76 to see how it works both because I'm curious but also because I learned a few things from them:

  1. It is possible to improve everyday things that we take for granted. I'll never look at a pen again the same way. A good paradigm shift.
  2. Though it would be easy to summarize this story by saying, "A kid came up with a new kind of pen while in high school detention and now it is selling in Wal-Mart," the fact is a lot more than just a better mousetrap has gone into their success so far. The article doesn't say how many small retailers they work with, but $2 million in sales is a lot of pens and I'm betting a lot of retailers. That's a lot of selling to get to this point.
  3. It doesn't matter what kind of business you are in, building a database or list of customers that want to know "what the heck is going on" with your business is vitally important. The world may not beat a path to your door if you build a better mousetrap, but your loyal customers will if you have a way to let them know. I checked out PenAgain's website, you can join their mailing list right on their front page.
  4. Public relations efforts do work. PenAgain is doing something right as far as PR goes. I was impressed they were in the Wall Street Journal, then I took a look at their site. They've been in Newsweek, Wired, Entrepreneur, and San Jose Mercury News just to name a few. Whatever they are doing, it works and their odds of selling 48,000 in the next 30 days is going up.
Find your happy customers and put a megaphone in their hand. Learn more
Syndicate content

Seeds from the blogworld
We search the business blog world looking for posts that illustrate principles, or "Seeds", that if followed, or "planted", will help small businesses grow. We list them here for your convenience. Enjoy.

Blogroll