Research conducted by the Gallup Organization shows that most “satisfied” customers do not come back — only loyal customers do. When a customer of yours comes back to your store or showroom, do you know the real reason why she returned? Did she return for your products, your prices, your service, your employees’ concern for her, your installers’ skills, or your treats on the front counter?
Do you know which of these characteristics usually turn a satisfied customer into a loyal customer? Finding the answer is crucial for your profits this coming year. Developing customer loyalty is the most important foundation for ongoing business growth.
In my last few columns, I’ve described two of the three critical disciplines that all market leaders share. Those first two disciplines, as defined by Michael Treacy and Fred Wiersema in their book, “The Discipline of Market Leaders,” are operational excellence and product leadership.
The third discipline, which I’ll introduce now, is customer intimacy. Treacy and Wiersema argue that before you can become a market leader, you must choose one of these disciplines as your outstanding hallmark. And at the same time, you must be at least competent in the other two.
Customers know that its simply unreasonable to expect the same supplier to deliver superior value in every dimension. However, they will buy from market leaders who maintain reasonably good standards in the other dimensions as well.
I advise you to choose customer intimacy as your primary and outstanding discipline. Why? Because this specific discipline empowers you to establish a sustainable competitive advantage against the mass merchants. You’re not likely to beat them at operational excellence, because their operating expenses may run around 18%. If your percentage is typical (greater than 30%), you probably wouldn’t want to cut enough to reach 18%.
As for product leadership, you live at the mercy of your suppliers. If a supplier does offer you a product that is superior to any product offered by competitors, you can expect a copy of that product to appear within a year. Therefore, that advantage is not sustainable. (Of course, you might excel at service leadership, whereby you offer a superior service not readily imitated by competitors.)
Again, for these reasons, I recommend that you focus on excelling at customer intimacy. Other retailers have found that this discipline gives them a definite edge against the big boys.
Have you noticed that consumers tend to expect more from independent retailers? Retail trainer and consultant Jon Trivers reports that customers who are disappointed with the service in big-box stores probably will return to that same store. But customers who are disappointed by an independent retailer will probably not return, even if that retailer fixes the problem to their satisfaction. You may think that unfair, but that’s the way it is.
Consumers expect better service, and more personalized attention in independent stores. So take advantage of that! Customers relate to your people. At the big-box stores, on the other hand, they chiefly relate to the products, availability and prices. Bottom line: you had better deliver customer intimacy, or your clients will vote with their feet by heading away from your store.
Cliched as it is to say so, there is no “free lunch.” Building customer intimacy will require some new effort on your part. To fuel this effort, teach — repeatedly — that the greatest result of customer intimacy is customer loyalty. And that translates to customers who return to buy from you and who go out of their way to recommend you to their friends. Can you imagine a greater benefit?
In my next installment of The Art of Retail Management, I’ll suggest six methods you can adopt to intensify your power to influence customer loyalty. Stay tuned!