The Customer Loyalty Investment – Acres of Diamonds
Guest Post by: Rory Fatt (Royalty Rewards)
In the early 1900’s, a minister by the name of Dr Russell Conwell travelled throughout the world and gave the same speech nearly 6,000 times. The effect was so powerful that wherever he went, audiences would pack the room to hear him speak.
His speech was titled, “Acres of Diamonds.” His theme: “Diamonds are not in the far-distant mountains or in yonder seas: They are in your own back yard, if you just dig for them…”
This is the story of how that sermon still works today in any business if the owner (YOU) simply uses direct mail – a tool that will prove to retailers that there are literally, “Acres of diamonds in their own backyards…”
The diamond I am referring to is your customer list. Some of you may be asking, now that I am building a customer list what do I do with it?
There are only three ways to grow a business, and any business activity falls into one of these three steps:
- Acquire MORE New Customers
- Have Your Customers Return MORE OFTEN
- Have Your Customers SPEND MORE Each Visit
This is a fundamental marketing formula though most retailers don’t follow this proven formula. Too often retailers just like you spend most of their resources and time constantly trying to attract new customers forgetting about your current customers thinking these existing customers will come back when they need more services and products that you sell. This is a huge mistake!
This old thinking is very costly. Your customers are just like you and me. They are busy with a lot of stuff like family, jobs sports, hobbies etc. One of the last things on their mind is thinking about returning to your store(s). You need to remind your customers using multiple strategies like direct mail (postcards for example), email, phone calls and other means that are effective. That is why it is so critical to have up to date accurate customer information.
The big lesson to learn from the 3 –Step Business Building Formula is that BIG PROFITS are in Steps 2 and 3. It is far easier and cheaper to get an existing customer to come back to your store than it is to get a new customer. A new customer cost 5 times more to attract than a previous customer. More importantly, surveys have shown that customers, who have shopped in your store even just once, will spend on average, twice as much as first time customers.
See, it is all about customer retention. Frederick Reicheld, VP at consultants Bain & Co. in Boston and the author of “The Loyalty Effect” states that “a 5% increase in customer retention yields profit increases of 25–100%.”
This is truly ground breaking because it confirms again that Step #2 and #3 are really where the big profits are! It is far easier and cheaper to get a customer to return to your store than it is to get a new customer. There are literally, “Acres of diamonds in your customer list.” It costs more to win a new customer than to keep an existing one.
It is important for YOU to spend some initial advertising dollars to attract new customers (Step #1). But the real profits are in what you do with these new customers AFTER you’ve acquired them. Retailers like you need a system to gather information from them so they can market to them in the future, transitioning them from new one time customers to repeat clients, because returning customers keep on buying! It’s that simple!
CRS is proud to offer a series of guest posts to our Blog written by Rory Fatt a leader in the field of Customer Loyalty. Rory Fatt is a member of the Royalty Rewards team, a leading Customer Loyalty program with proven results! Rory is passionate about helping retailers tap into the goldmine that is their customer list in order to increase Customer Loyalty and help businesses succeed.
If you are interested in learning more about how to leverage your customer list to increase your bottom line let us know! CRS will be hosting a Webinar with Royalty Rewards on September 22, 2010 and we would love for you to join us! Email CRS today to reserve your spot, spaces are filling up fast.