Who are you? Who are your customers? Are you the best service provider in your trade area? Are your prices at the top of the range or are you the low cost provider? Is your pricing strategy to be the good (lowest price), better (average price) or best (highest price)?
They are all out there, and yes, there is a place for all three. There is a consumer for each one. You don’t need to be the best or the highest priced to be successful, but you must know and understand who you are before you start advertising.
Are you Starbucks or Dunkin Donuts?
Both are very successful, and both are very different. Starbucks is the high producer located in areas where the household income is high enough to support their price points. They built their reputation for delivering high-quality coffee with superior customer service in a better than average environment. Usually, their clientele is higher income, white-collar executives and younger college students. Dunkin Donuts’ strength is the blue-collar worker who, at first, wanted a good donut with a cup of coffee. Only after Starbucks’ success did Dunkin Donuts add the higher-end coffee drinks, upgrade their stores and move closer to the Starbucks’ image. Both companies are successful and have a place in the market. There are also lower-end coffee shops. These providers, located in lower priced facilities, might not provide the same customer service but will provide coffee at a much lower price. There is a place for everyone.
The Super Customer
So, you know who you are, and you’re ready to build a marketing strategy to attract the right consumer. The consumer will become your super customer — the one that will love you and tell everyone about you. Let’s start by identifying the customers you already have.
My automotive aftermarket career started long ago. As a young store manager, I quickly realized that 20 percent of my products and services produced 80 percent of my sales. As I moved from store manager to district manager, I soon noticed just a few stores produced most of my district’s sales. It went on and on; 20 percent of my sales associates sold 80 percent of my total sales. The most important discovery happened when I noticed 20 percent of my customers produced 80 percent of my sales. “Wow,” I thought. “This is revolutionary.”
I thought it was genius of me to recognize this, but during a visit to the library (imagine having to go to a building to conduct research — obviously this was long before Google) I learned I was not the first to discover a brilliant fact and this 80/20 ratio already had a name: The Pareto Principle. It was named after economist Vilfredo Pareto. The principle states, for many phenomena, 20 percent of invested input is responsible for 80 percent of the results obtained. Eighty percent of consequences stem from 20 percent of the causes. The biggest effort is achieved by focusing on how to find more consumers like your most important asset — your very best customers that produce 80 percent of your profits. The more times customers come in for service, the more times they will come back. This is why customers who come twice are more likely to return for additional service than customers who only came once. The more times customers return the more likely they are to return again and again. These are your super customers.
Go Get More Super Customers
Who are they? Where are they? How do we invite them? First, we must clearly understand who our current super customers are. Before we can market to consumers that mirror your best customers, we must be able to identify our super customers. Consider using the recency, frequency, monetary (RFM) model, which uses three simple purchasing behaviors.
1. Recency - Customers who have purchased something from you in the last year are more likely to purchase from you again.
2. Frequency - The more often customers buy from you, the more likely they are to buy again.
3. Monetary - The more customers spend, the more likely they are to return and buy again.
Once you know who they are, take it to the next level. Pour some real love on these folks. Consider a special thank you offer once or twice a year. Since these customers purchase other services, consider offering them a 25-percent discount on their entire ticket for every vehicle in the family. Thanksgiving is a perfect time to say, “Thank you; we appreciate your loyalty.” Don’t lose them between service intervals. Make contact with them often. Keep your brand top-of-mind with monthly newsletters. Don’t just sell; make sure the newsletter is full of useful, welcome information.
Since you have two groups of customers — the 20-percent group that gives you 80 percent of your profits and the 80-percent group that gives you 20 percent of your profits — where should you be investing your advertising dollars?
If you’re Starbucks, you need to attract consumers that best match your Starbucks customers. You should not be spending your advertising budget looking for consumers who prefer Dunkin Donuts.
Target the Right Consumer
One of my favorite quotes is from Sam Walton, the founder of Walmart. Walton had 10 rules for success in retail. No. 10 was “swim upstream.” He simply said, “If everyone is going one way, the best path for you is to go the opposite direction.”
Are you still using yesterday’s mass marketing techniques? Are you using marriage mail (shared mail) products to send coupons to every household in your trade area? Are current customers and non-customers receiving the same offers?
Yes, the marriage mail price per coupon is low, which allows you to send large numbers of coupons to most every household in your trade area. This is the exact reason you should stop doing it immediately. Saturating your market with coupons does nothing to set your brand apart from all others. In fact, it does the opposite. It makes all quick lubes and repair shops look the same.
Do you use large discounts to attract new customers? If you do, will they come back and pay full price or return only if they receive another low price offer? I think you know the answer. Most of these consumers will never return and pay full price or be in your super customer family. Loading up your bays and making your loyal, super customers wait might cost you. You could lose loyal customers by extending their time of service. In addition, because of low prices and customers that will not purchase ancillary services, your average ticket may fall and your cost of goods may rise.
Instead of deep discounts and coupons in every mailbox, invite only consumers that look like your super customers. Utilize large six-by-nine-inch individual post cards targeted to non-customers in your best zip codes with sufficient household incomes. Yes, you will distribute less coupons, but only quality prospects with a high potential to become super customers will receive your message. Keeping your discount at 25 percent or less and providing a great service will attract consumers who will return and pay full price. Your goal is to attract consumers that are more likely to join your loyal super customer family and become brand advocates.
If your advertising plan has always been built around mass distribution of coupons that brought large numbers of consumers, this probably sounds a little nuts to you. That’s OK. Start small, test, measure and compare your results. Here is where it is best to keep it simple. Contact your direct mail marketing partner and discuss the concept. Run your best ZIP codes, and give this information to your vendor. Ask them to acquire address information along with household incomes in your target ZIP codes. The next step is to take your customer data and bounce it against their list to remove current customers. Now, you have a clean list of prospects who are likely to try your service and become part of your super customer family.
It’s all about the return on investment and the lifetime value of each customer. Continue to test and measure your results.
With this strategy, you will fire the non-profitable customer while moving your resources to find and keep your super customers.