What has happened to businesses today…why are so many choosing to “reward” the WRONG customer instead of rewarding the RIGHT customer? Allow me to define “wrong” and “right.” The “wrong” customer is the “new customer” that is acquired primarily by marketing and promotions. And the “right” customer is a “new customer” that is acquired by your “existing customers.” While I know this might sound a bit unusual in the beginning or even surprising to you, if you think about it as both a business owner and a customer, I think you will see it makes more sense than you might have initially thought.
I believe there is a better answer to acquiring new customers and increasing your position in the market and your profitability.
During the last few weeks of this past year I had this illustrated to me in several ways. Let me share two of these situations with you so you can get a better feel for what I am talking about with respect to your own company. The first example is with Comcast, the cable company. I know…it’s the company everyone complains about for one reason or another. Let me share with you one of the primary reasons why this happens.
Comcast Example
I have been a Comcast customer since the 1990’s if you can believe that…I often find it hard to believe myself. My infamous “2-year contract” has expired and now I’m paying retail rates for my “triple play” of cable, phone, and internet. Of course, no one called me or sent me a notice letting me know I was going to be off a plan and would be paying more money, mistake number one. Since I saw this happening, I called to find out if they had any special offerings since they always have some type of promotion going on, mistake number 2 (you don’t need promotions). I had the pleasure of speaking with the “retention specialist” who recognized I was a 20-year customer as she looked at my account. While we were talking, I was also searching the internet for what offers were out there so I understood what was available.
As we were talking, the retention specialist thanked me for being a customer for such a long time…a nice thing to say to your long-time customers, a positive step. Then she told me what she could do for me and what offers she had available. Surprisingly (or not) these offers were higher than the ones I found on the internet. I asked her about the offers I had found and she gave me the phrase that is like fingernails running down the chalkboard for me, “I’m sorry, but those are ONLY AVAILABLE to NEW CUSTOMERS,” mistake number 3.
I then proceeded to ask what I always ask, “So what you’re telling me is that you care more about attracting a new customer than honoring your existing customers? Because you’re telling me that my best price is higher than what I could get if I was someone new to your services. Am I understanding this correctly?” As expected, she didn’t have a good response to this question. She simply said, “All I can tell you is the prices I have available to offer you as an existing customer.” Mistake number 4.
iThemes Example
My second quick example came from iThemes, a company I use for some plugins on my websites and blog sites. They have great plugins and help me do some wonderful things in a reliable way…nothing wrong with their product or services. They charge me an annual subscription fee to use their plugins. I got my renewal notice and it was $100 for the year. However, just a few weeks before my renewal I see an advertisement for 40% off their services…sweet. As you can probably already guess, after talking with them they informed me that this discount was “only valid for NEW customers, not their EXISTING customers.” Mistake number one.
These were just two of the situations I ran into in just a few weeks! Companies willing to invest millions of dollars to acquire new customers but investing zero dollars to keep their existing customers. Does this make sense to you? It doesn’t to me. If you are a leader in the company, it may very well make sense because your objective is to capture new customers and increase your customer base by a certain percentage every year. But as a customer, it makes no sense at all when a company literally penalizes you for being an existing customer. STOP and think about that for a minute if you are a business leader…we’ll wait for you.
The argument is always the same, if we don’t spend money trying to acquire new customers, we can’t grow so we must do something to get new customers. This is what most company’s leadership team (usually from their marketing group) is telling them. This is FALSE THINKING.
Throwing lots of money at big and frequent promotions with incredible deals to attract new customers just doesn’t make sense today in a highly commoditized world…you can’t win this game…at least not in the long run.
This is the wrong way to think about it. Allow me to share a different way to approach this same issue…but with much greater short (and long) term success.
The goal is to get new customers…no argument there. The question is “how” to make this happen and NOT LOSE YOUR EXISTING CUSTOMERS. Many analysts tell us “Loyalty and Retention” are at an all-time low today. What has happened to allow this to be the case? It goes back to the foundational elements of Customer Obsession…these core elements have been eroding over the past decade.
The goal should be to become “REMARK”able…where your customers are so happy with you they can’t wait to tell others about you! No one will disagree with wanting this result and no one will disagree that positive and frequent word-of-mouth is the most powerful form of sales and marketing…always has been always will be. The question is, “How do you become “REMARK”able so that your existing customers are doing your marketing for you?” That is the real question leaders should be asking today.
If your customers aren’t talking you up, spreading the word about how awesome you are, or telling others they need to buy from you, you have a problem. But with every problem there is an opportunity. The opportunity is to move from “giving money away” (advertising, promotions, marketing) to “getting customers for free”(having your existing customers (and other) do your marketing for you).
Think about a different solution…one where you are “REMARK”able.
Using the examples I shared above, let’s reverse the situation. What if you rewarded your loyal and existing customers more than a new customer? What if you gave your biggest discounts or additional product/service benefits to your existing customers instead of to your new customers? What if you did special things to help your existing customers throughout the year that improved their lives or their businesses? What would your business look like this coming year and beyond?
The first thing you would notice is that your existing customers would be far more inclined to “remark” about you and their friends and colleagues about how well you take care of them as an existing customer. They would go out of their way to talk about you…they would be “doing your marketing for you.” When this happens, these “new” customers (via word-of-mouth) would want to be a part of this and get the rewards your other existing customers are getting. This would spread and grow day after day, month after month, year after year. Before long you would have created “the most powerful marketing force on the planet…your customers.” What would your business look like if this happened?
This reverses the cycle described in the two examples above. Now you would look different from all your competitors. Now you would be reaping the rewards of “zero cost marketing” because your customers are doing this for you…FOR FREE!
You would be letting your competitors spend their money trying to attract all the new customers with cheap deals and promotions…spending money to get a lower return per customer. When you start to think differently about customer acquisition being done by your current customers (and others) instead of you investing very expensive money (your profits) into attracting new customers, you start to view the world of customer acquisition very differently. And here’s the kicker…many of the customers you are attracting with all these cheap deals and promotions aren’t really the ideal customers you want anyway. They are the “deal chasers” and not looking for a long-term relationship with your company. They are the wrong customers!
The Solution...and Opportunity
You have now killed the issue I described in the two examples above. Now you are offering to help your existing (loyal) customers improve their lives or their business…turning them into Advocates. This path leads to high LTV (Customer Lifetime Value)…which says you will make greater profits from each customer than you would with the traditional acquisition method. You will see much more profit per customer and your customers are happy to spend it with you because they know you care about them and they are important to you.
This is what becoming “REMARK”able means to a company…being Customer Obsessed so their customers do their marketing for them. This is my passion…as both a business owner and a customer…to try and get as many companies to be Customer Obsessed and give me lots of reasons why I tell all my friends and colleagues they need to buy from them.
What would that look like for your organization? Are you ready to change your path to be Customer Obsessed so you can become “REMARK”able? I would love to hear your story and what you think. If you feel this is a better way to think and act, share it with your peers. The more leaders we can get to understand how powerful this is, all of us, as consumers, will reap the rewards as well. It’s a win-win.
