Brick No60: How to get ready-made loyal customers
By Matt Weston, Friday 24 April 2004
Only the Devil's Advocate himself could argue that customer
loyalty isn't at the heart of small business success.
And even he couldn't defeat the time-proven rule that it
costs over five times as much to gain a new customer as it
does to keep an existing one.
Of course loyalty is important.
Like I said in brick #17: when my newsagent sees a queue of
15 customers with their Sunday papers, he doesn't see £25
worth of daily business, he sees £75,000 of lifetime
business
Almost all the advice given, chapters written and money
spent on getting customer loyalty focuses on keeping
existing customers loyal.
But what you do after the sale isn't the only way to
generate customer loyalty.
What I want to do today is show you that the way you
initially pitch your business and target your new customers
can have just as important an effect on whether your
customers stay loyal or not.
How to get ready-made loyal customers
Andy Brooke, a very loyal business bricks reader who is
setting up a (still under wraps) e-commerce business in the
North-West needed some convincing re my brick warning of the
perils of under-pricing last week:
" As a customer - although I value quality - my first
criteria for seeking out a product is price. In business
wouldn't I lose out on lots of potential customers simply
because there are others selling a similar product a bit
cheaper elsewhere? Wanting to believe, Andy. "
I asked Andy to look at it another way. If he chooses to
compete solely on price, his buyers will be the least loyal
customers possible - price-tarts if you like.
Any relationship based solely on money is a temporary one.
If your employees only work with you because you pay more
than your competitor round the corner, they're not loyal.
The same applies to your customers. If they only buy from
you because you're the cheapest, they're not loyal.
The best way to bring on ready-made loyal customers is to
follow the advice I gave you last week.
Don't compete by undercutting your competitors. Customers
who come on board because of your superior quality, your
faster delivery times or your personal touch are far more
likely to end up loyal to you than the price-tarts.
Did you see "Risking It All"?
Did you see the first episode of "Risking It All", the new
Channel 4 series about start-ups, at 9pm on Wednesday night?
The programme followed Naz Choudhry and Mark Viegas, a
loveable pair of do-or-die entrepreneurs setting up a new
freshly made fast-food concept called Real Burger World, in
Clapham, South London.
You had to admire the boys. They each ploughed £100,000 into
the venture, downsized their houses and eBay-ed their
worldly goods.
But the biggest challenge - and it always is the biggest
challenge - was getting punters through the doors and then
turning them into loyal customers. They needed to take£1,000 a day to break even, but struggled to net even half
that.
Out of desperation, one Saturday they roped in 50 close
friends and family to dress up variously as bananas,
strawberries, burgers and Ronald McDonald. They managed to
shift 1,100 burgers in just over 5 hours - but for just £1 a
meal.
Dishearteningly, they only managed to attract the
price-tarts. The next day they were back to square one, with
no increase in customers to show for their hard work.
I'm a big believer in the power of getting queues going.
Like Harvey Mackay says: "If it's in demand, everyone wants
it". But it needs to be a sustained effort. And if your only
way of creating the queue is to slash prices, you could be
attracting the wrong sort of customers.
But you can't knock Naz and Mark for trying. It's testament
to their energy that they managed to rope in 50 people to
dress up as fruit for the day! Make sure you set your video
next Wednesday for 9pm on Channel 4.
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