The Selling Newsletter
*A free monthly newsletter of ideas to help make your selling easier*
Selling is the easiest job in the world…Just ask anyone who is NOTin sales!
My mission is to help make it easier for you to sell.
Best wishes for YOUR successful selling—Maura
“I do not live to play, but I play in order that I may live and return with zest to the labors of life.” ─Plato
I do hope you’re taking the time to relax so you can be recharged for your business. ─Maura
THE SELLING IDEAS FOR THIS MONTH
Not Necessarily So
Loyal customers buy more and are less expensive to serve. I’ll bet you’ve heard this and believe this. Recent research, reported in the Harvard Business Review (July 2002), investigated loyalty programs and their effects on business. The results surprised me. This long-standing business fundamental with data to support it is no longer always true.
What they found. The researchers tracked the performance of loyalty programs for a large U.S. mail-order company, a U.S. high-tech corporate service provider, a French retail food business, and a German direct brokerage house. They were able to use the data to compare the behavior, revenue and profitability of more than 16,000 individual and corporate customers over a four-year period. They found that the relationship between loyalty and profitability is much weaker than loyalty program proponents claim. The researchers found little or no evidence that customers who purchase steadily from a company are necessarily cheaper to serve, less price sensitive, or particularly effective at bringing in new business through word-of-mouth.
Why loyal customers are not the best customers. Some long-standing high volume customers know their value to their suppliers and often exploit it to get premium service or price discounts. Other experienced customers who can use less expensive channels like the Web also expect lower prices. Customers expect something in return for their loyalty and it’s often at the expense of profitability.
Finding the right loyal customers. The researchers found a particular kind of loyal customer who is good for business. These are the customers who not only buy, but also believe they are loyal. This attitudinal loyalty is a predictor of higher active word-of-mouth. Most companies don’t survey for customer attitude. Rather than defining loyal customers based on purchasing frequency (how often) and recency (how recent) of purchasing, the authors recommend you predict which customers will continue to purchase. Some customers do purchase infrequently and are profitable. To find these customers, you can use the formula tn. In the formula, t is the fraction of the period represented by the time between the first purchase and the last one. n is the number of purchases the customer made in the entire time period studied. Then instead of looking at revenue of customers, determine the profitability of customer purchases.
What this means for your business. The authors recommend putting customers into one of four categories: Short-term customers with low profitability (Strangers), Short-term customers with high profitability (Butterflies), Long-term customers with Low profitability (Barnacles) and Long-term customers with High profitability (True Friends). The authors say that even loyal and profitable customers don’t always deserve to be courted.
“Strangers” should be identified early with no investment in them. The authors recommend you “milk the “butterflies” for as much as you can for the short time they are buying from you.” They found that attempts to convert butterflies into loyal customers are seldom successful. The classic mistake made in managing these accounts is continuing to invest in them after their activity drops off. For “barnacles” they recommend you find out whether they have the potential to spend more than they currently do. They caution not to overkill the relationship with “True friends.” They found that too much contact was a customer turn off. They also found that learning “True friends’” feelings was important. The customers who thought they were loyal in addition to making purchases generated 120% more profit than those whose loyalty was observed through transactions alone. Reward your “True friends” for their loyalty. The French retail food business in the study lets loyal customers opt in to e-mailings of special promotions. It also grants them preferred access to company-sponsored events.
Finding the right prospects to sell to is important. It’s even more important to find the right ones to continue selling to.
SELLING ACTION ITEM
Review your customer revenues and buying patterns to identify your true friends. Find out why they’re buying from you and what they like. Make sure you continue to deliver.
WANT TO SEE WHAT OTHERS THINK?
Ever wonder what other salespeople think is more challenging—prospecting or asking questions to gather selling information. You can take the survey and see the results at:
HELP HELP HELP HELP HELP
Some sales professionals do something that’s different to build sales relationships. One car dealership manages their sales process so that instead of telephone leads coming in to the sales rep, they go to the sales manager. Why? This dealership wants to ensure the customer has a fabulous buying experience. The manager sets the tone and explains to the customer how they work to establish long term customer relationships. This unexpected, different strategy helps build this dealership’s business. Customers came in with the perception that sales managers are the enemy, not a source of building a business relationship. They expected to see the manager when they were painfully negotiating for a price. Imagine their delight that the manager was the first one they met and he wanted to work with them to ensure their total satisfaction.
I’m always looking for success stories and other tips from sales professionals. Please feel free to email me at firstname.lastname@example.org with ideas that have worked for you. To thank you, you’ll receive a free subscription to The Selling E-Letter™, a bi-monthly selling newsletter. ($50 value)
Mission: [email protected] works with business and sales professionals to make THE BEST JOB IN THE WORLD (selling!) easier and more effective. After all, how can you make a difference in the world if someone hasn’t bought something from you? And don’t forget about the ideas you’re selling every day.
Privacy: At [email protected] we take privacy issues very seriously. Your information remains with us and will never be sold, shared, or distributed in any manner, for any reason.
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Maura Schreier-Fleming works with business and sales professionals to make it easier to sell more and be more productive at work. Her clients want to create long-term client relationships. They include Fujitsu, Fannie Mae and Dr Pepper/7UP. She has an M.S. in Textile Engineering from Georgia Tech and was Mobil Oil’s first female lubrication engineer in the U.S. With over 20 years of sales experience, she teaches the art and science of selling with a unique hands-on perspective and a great deal of real-life insight. She is the author of Real-World Selling for Out-of-this-World Results. Her business column ‘Selling Strategies’ appears in the Insurance Record magazine. You can contact her for seminars at company or trade association meetings at 972 380 0200 or info@BestatSelling.com
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