Frequency of Payment Can Affect Loyalty

The more aware your customers are of the cost of your product or service, the more likely they are to use it. The more your customers use your product or service, the more likely they are to buy it again.

For example, a downtown athletic club offers its members a choice of paying their dues on an annual or monthly basis. The annual cost is $600 and the monthly cost is $50. They do not offer a discount for paying annually or an additional charge for paying monthly. The club finds that its members who pay on a monthly basis are much more likely to renew their memberships. Monthly members are reminded every month of the cost and are more likely to work out more frequently in order to get their money's worth. Members who pay on an annual basis are not reminded of their expense. As months go by, the annual member is less likely to use the health club's facilities to work out. By the end of the year, the annual member isn't working out at all and is unlikely to renew his or her membership. The price is the same but the perception is different.

Magazine subscriptions are usually sold on a one-, two-, or three- year basis. Typically, only 60 percent of the people who subscribe to a magazine renew their subscriptions. The longer the period of subscription, the lower the renewal rates. Publishers spend substantial sums of money in replacing as much as 40 percent of their customers every year.

Daily newspapers usually require their customers to subscribe only on a weekly or monthly basis and every month the customer is sent a bill. This monthly reminder encourages subscribers to read the paper and get their money's worth. Renewal rates are substantially higher for this type publication.

The timing of payment encourages your customers to use your product. The more they use your product or service, the more likely they are to continue doing business with you. Lawyers, dentists, health clubs, or any business that can allow customers to pay for their product or service as they use it will create loyalty.

Ducts Unlimited

Daryl Mirza is the owner of Ducts Unlimited in Chicago. Daryl should receive an award for cleverness in coming up with the name of his business. Ducts Unlimited cleans restaurant hoods and ducts all over Chicagoland. Daryl's employees arrive after a restaurant has closed and go about the dirty job of removing dirt and grease. Because it is after normal business hours, Daryl's employees usually do not see the restaurant owner or anyone from the restaurant while they are on the premises.

Restaurant hoods and ducts need to be cleaned at least several times each year to satisfy insurance requirements. When Daryl started his business more than 16 years ago he placed a small sticker on each hood after it was cleaned. The sticker gave the name of Daryl's company and showed what day the hood was cleaned. Usually hoods get dirty again within just a few days or weeks after they are cleaned. Customers would call to complain that the hood hadn't been thoroughly cleaned and Daryl would send a crew back to the restaurant to touch up the job.

Several years ago, Daryl used the example set by businesses that performed oil changes and began putting the next date when the hood would need to be cleaned, rather than the last date it was cleaned. A remarkable thing happened: Daryl didn't get any more complaints. Oftentimes the next cleaning got moved to an earlier date, giving Ducts Unlimited additional work. Before changing the date on the stickers, Daryl always seemed to be competing with other businesses doing similar work. Now Daryl's customers don't look at the hood and think it wasn't cleaned properly. Instead they feel Ducts Unlimited is fully aware of the condition of their hood and the next cleaning is already scheduled. Daryl changed his customers perception of value simply by changing the date.

Asking sincere questions is the key to determining what is of value to your customer. Your ability to learn what your customer's value is your most important challenge. It doesn't matter if you have a terrific product or service. The only thing that matters is "the value to the customer."

A substantial amount of time and money is spent on training salespeople in product knowledge. Product knowledge is very important, but not nearly as important as customer knowledge. Product knowledge is important only so you can know how to help your customer.

The purpose of every product and service is to solve a problem or fill a need. This is where the questioning begins. "How can I help you?" "What are you working on?" "Where will you be wearing the new dress?" "What kind of project are you involved in?" "What have you used before?" Definition of a need or a problem is the start of knowing and understanding your customer. Offering a product for sale or demonstrating a product without going through this step will end any chance you might have of knowing and understanding your customer. The customer will intuitively understand that you're interested in selling something more than you are interested in helping them.

There are two kinds of dollars: absolute dollars and relative dollars. Absolute dollars express the price of something in dollars. For example, a gallon of gasoline costs $1.50 or a head of lettuce costs $1.

Relative dollars express the price of something with added value. For example, I own a small powerboat. I park my boat and buy gasoline at a marina that is on the water. I can buy gasoline at a local gas station for about 40 percent less than it costs at the marina. However, I don't feel the savings begins to offset the inconvenience, danger, and mess of hauling a gas can around in my automobile. The added value of convenience, safety, and cleanliness is worth more to me than the cost difference. I use relative dollars to buy gasoline at the marina.

The grocery store where I shop offers various kinds of lettuce for about $1 a pound. They also offer a lettuce mix, which is displayed in a plastic-lined box next to the loose lettuce. The mixed lettuce is a variety of several different kinds of lettuce that is washed, cut up, and ready to eat. This lettuce mix costs around $6 a pound. Guess which one I buy? I buy the more expensive kind. Why? I like the variety. I don't have to buy 10 pounds of lettuce in order to have a selection and there is no waste. The key statement here is "and there is no waste." People make emotional decisions for logical reasons. The tag line of "there is no waste" makes the emotional decision to "buy what you want" logical. The logic of "I'm not wasteful" justifies the additional expense. We aren't doing any sophisticated double-entry accounting. We are simply justifying our lettuce expenditure of $6 a pound versus $1 a pound. There is nothing wrong with this. All of us can buy whatever we can afford, but we must justify why we do it. Value statements such as, "We like the variety and there is no waste," makes the additional expense logical.

This justification is important in demonstrating value. We should always talk about value rather than price. When we deal with our customers, we should place value first because that is why the customer is doing business with us. Value is why the customer comes back over and over again, demonstrating loyalty.

It's important that we talk about what our product or service does—what its value is—rather than just how much it cost.

Remember George the car salesman we discussed in Chapter 3? George never talked about the competition. When George said, "Toyota applies four coats of paint." I never knew if the competition was applying three coats or five coats. George was selling what he had to sell: four coats of paint. The man at the marina never mentions the price of gas in town, he only says, "Do you want me to fill it up?" He is inferring, "rather than you carrying a leaky old gas can around in your car."

Value is all about finding what is important to your customers and making sure they receive what is important to them in every transaction.

Masters of Value

Dentists have become masters at providing value. While some may believe that all dentists are the same, most recognize all dentists' offices are not created equally. Many dentists' offices feature fulllength motion pictures and stereophonic music of the patient's choice. I haven't seen a dentists' office equipped with a Sony PlayStation 2, but if it is going to happen, it will happen first in a dentists' office.

I am not suggesting that healthcare providers or other businesses turn their waiting rooms into entertainment centers, but I am suggesting that you think beyond just your product or service when you attempt to provide value.

Why Customers Come Back. How to Create Lasting Customer Loyalty
Why Customers Come Back: How to Create Lasting Customer Loyalty
ISBN: 1564146952
EAN: 2147483647
Year: 2003
Pages: 110 © 2008-2017.
If you may any questions please contact us: