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June 2, 2016

You’ve almost certainly heard that it costs much less to keep a customer you’ve already got than to go find a new customer to replace one who leaves.

Maybe this is obvious to you. But just in case it’s not, consider the fact that it’s both time intensive and costly to reach out to the thousands of prospects that might yield you that one new customer, and there’s no guarantee that one will ever come into the store a second time. How much more difficult is that than simply taking good care of the customer you already know?

There’s more: You know those business owners who claim they don’t have to do any marketing because all of their business comes from word of mouth? You listen to the guy who’s telling you that and you think, “Sure thing, buddy.” But secretly, you wonder if it might actually be true—and if so, how in the heck he did it.

Well, if the claim is true, one thing you can’t dispute is that only satisfied customers give referrals, so keeping your customers satisfied not only keeps them coming back and spending money, but also puts them in a position to make those referrals that require no marketing effort or expenditures on your part and bring you more customers.

Naturally, a strategy to hang onto your existing customers brings you multiple benefits. You’ve got a veritable army of people not only spending their money in your store, but doing a fair amount of your marketing work for you—and for free.

Meet Their Needs

There are a lot of ideas out there about how to successfully retain customers. Some people say you should give customers discounts and loyalty rewards. Others suggest doing push marketing. Still others tell you to focus first on great service and making customers feel welcome. Then there’s the call to do “churn” management, which is when you intervene with a customer whose activity has fallen off and is in danger of becoming an ex-customer.

There’s a place for all of this, but let’s consider how best to meld these tactics into a coherent strategy.

It starts with this basic question: What is the most important factor in the pursuit of customer satisfaction? And the answer is simple. It’s that they’re getting from your store what they want, and having a reasonably pleasant experience doing so.

What does that mean? Well, what do they want? They want to dependably find the products they need readily stocked on the shelves. They want to get questions answered or help provided when they need it. They want you to be nice (or at least respectful) to them. And they don’t want to spend more than what the products are worth.

These are the fundamentals. Before you focus on loyalty programs or anything else, you’ve got to get those fundamentals right. Target is struggling right now to keep product on the shelves because they invested in a far-too-complicated supply chain, and they can’t manage it. Whatever else Target may be doing right or wrong, it’s not going to matter if customers lose confidence that they can find the products they need when they go to Target.

So you’ve got to make sure your employees are trained properly and are treating customers as they should, and you’ve got to make sure your supply chain is working both internally and externally.

Using Loyalty Programs

Now, once you’ve got those things mastered (or as mastered as anyone ever can), it makes sense to work on securing customer loyalty by trying to learn more about what individual customers want and need from you—especially the ones who shop most frequently and spend the most. The supposed proposition of loyalty programs is that customers get discounts and special offers while the retailer is able to track purchasing activity so as to better understand the customer’s needs and priorities.

Using this data to push special offers to those customers is fine and will yield some benefits. However, before you do that, you ought to really be looking at that data and making sure you’re meeting the basic needs of that customer. That’s more important than pushing specials.

Personally, I’m not the biggest fan of loyalty cards because I think it’s a hassle to have to dig out a card every time I want to buy a cup of coffee or a stick of gum. I’m probably an outlier, though. Your customer might look forward to that discount on the tenth bag of dog food or the next purchase of cat litter. However you do it, make sure you’re making it worth your customers’ while to keep fishing out that card. If they feel like it’s an obligation rather than a privilege, it’s going to quickly turn into a negative.

Finally, a quick comment on “churn management.” This refers to an action the retailer will take when it appears a once-regular customer has tailed off in buying and appears to be at risk of becoming a former customer. This can be effective if the contact is designed to understand the reason for the change, and if the retailer can actually take a tangible step to address it.

But if it amounts to little more than “Hey, we miss you,” don’t even bother. If the customer still has pets, he or she still needs pet products and knows you would like to be the one providing them. There’s a reason that’s not happening at the moment, and it’s not because you didn’t say “hi.”

As with so much else in the realm of customer retention, it’s about meeting needs first. Master that and everything else is gravy.

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