How Do You Get Customers To Spend More?

Gwynne Young
Managing Editor, CustomerThink
Member

Posted 14-Sep-2005 03:23 PM
Hi Dick,

The loyalty gurus tell us that, all things being equal, it's better to spend money on retaining current, high-value customers, than it is to spend money on acquisition.

But businesses have to continue growing, right? Shareholders have to know that revenue and profit is increasing. So if you're going to focus on retaining the customers, it stands to reason that you would expect those customers to spend more to keep growing your business.

So, I pose this question to you: How do you get your customers to spend more on your products and services?

Gwynne

Dick Lee, CRMGuru Panelist
Advisory Board
Member
Picture of Dick Lee, CRMGuru Panelist

Posted 15-Sep-2005 07:22 AM
Gwynne—great question. Hopefully many subscribers will chime in to add their thoughts, but here's one answer.

The best way to expand relationships with current customers is to engage them in dialog, listen to them and really hear them. Too many marketers approach relationship-building as cross-selling—getting customers to buy more of what we currently sell. That's product-driven thinking in disguise, not customer-centric thinking. Customer-centric marketers will engage their customers to find out how their capabilities (as opposed to products) could make further contributions to customer businesses/lives.

In this vein, invention (using current capabilities to offer new products/services) will often be at the heart of efforts to successfully expand relationships. So will new communication/packaging methods that help customers better understand and utlize the benefits of current products/services. So will delivery channel changes.

Also, it's important to note what we haven't mentioned so far—holding hands in a circle with customers singing Kumbaya. Or kissing customers on the cheeck—good ones twice. Building relationships isn't primarily about little nicities—although they're nice. It's primarily about delivering new value—in exchange for which customers bring new value into the company.

Dick Lee

Author Dick Lee is founder and principal of High-Yield Methods, a Twin Cities-based consulting firm specializing in helping clients achieve customer-centricity through CRM and proper alignment of process and technology. Dick is the developer of the Visual Workflow approach to business process improvement.

Graham Hill
Guru
Member

Posted 16-Sep-2005 07:27 AM
Gwynne

I am not so sure that this is what the loyalty gurus are telling us.

I think they are telling us that we should actually balance some spending on customer retention and some on customer acquisition activities.

Take a look at this article by Werner Reinartz to see how this tricky balance can be achieved.
http://www.reinartz.com/research/RTK_JM_Jan05.pdf

Graham Hill
Independent CRM Consultant

Gwynne Young
Managing Editor, CustomerThink
Member

Posted 20-Sep-2005 10:02 AM
Graham,

I was being a little flip. Of course, you want balance. But you still want to see your existing customers spend more with you. My feeling as a non-expert, non-guru, is that I want to feel appreciated for my current business, but I always hate a hard sell.

I hate the feeling that, because I spend a certain amount, I am now prey to a ton of offers in the hopes that I'll spend a lot. I don't know how typical I am. But if I have good feelings about a business (mainly, that their customer service people are pleasant and resolve my issues quickly—or that I never have to contact the customer service people), then I'm more apt to go back for other products or services, rather than shop around.

Gwynne

Posted 22-Sep-2005 04:26 PM
I find that frequently upselling to existing customers is able to be carried out when there is good telephone account managemnt, when the customer has been carefully profiled, and when a relationship has been established. Frequently we are only selling part of our product lines, and with conversation, profiling and finding out the future plans of the customer we establish opportunities for future sales of more of the same products, as well as other products we have in our range. Also as Gwenne says excellent service means that our customers do come back, and bring their friends. However it all starts with the initial relationship, the conversation about the customers future plans and current needs, and ensuring what we provide is a win/win situation for both parties.
Ann Mayer

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Cathy Allington
Member

Posted 22-Sep-2005 06:04 PM
There is a balance required between acquiring new customers and upselling existing customers. However, it is far easier to sell another product to an existing customer.

Let's take the example of a bank where they have customers of a particular account or product only, say a business checking account. Another product, such as a credit card, links to this account and provides cheaper interest rates, or benefits in terms of easier access online. As a customer, I would really appreciate it if my bank let me know about this additional product, by way of a personalised letter, personally signed.

"Hi Cathy,

Thank you for maintaining your business checking account with us—we really appreciate your business. Thought you might also like to know that our credit card account links in with this, and makes it easier for you to ... (state the benefits to me)

Just wanted to make sure we were doing the best we can to let you know what we offer.

I'll give you a call next week to touch base and see if you have any queries about the service you are receiving from us. In the meantime, hope business is going well for you. Would love to hear about it! :-)

Kind Regards
Joe Bloggs
Account Manager"

If I received this from my bank, I would be overwhelmed! I would appreciate the personal contact, appreciate the fact that they had actually looked at their records before contacting me and knew what I had and didn't have, and the fact that someone actually cared enough to contact me about what is obviously a benefit for me. And if they actually did ring me when they said, I would probably buy their other service!

Cross and up selling to existing customers is not about the hard sell—it is about understanding what customers already have with you, and letting them know of other services which may be of benefit.

Cheers
Cathy Allington
Client Relationship Marketing Pty Ltd

www.gyob.net.au

Graham Hill
Guru
Member

Posted 23-Sep-2005 08:29 AM
I agree with Anne and Cathy.

There is strong evidence that in general, existing customers are easier to sell to than non-customers and much easier to sell to than ex-customers.

However, we must be careful not to accept these generalisation as applying to all customers, in all industries, in all circumstances. As is so often the case, the devil is in the details.

Some of the many factors and that have been shown to influence customers to re-purchase the same product (or not) include, product vs service industry, satisfaction vs commitment, short vs long-term tenure, shallow vs. deep product use, few vs many products held, past vs present pricing fairness, post-purchase regret, few vs many competitor products, marketing instrument used, to name just a handfull. The list is long, the interelationships between the factors complicated and the results not always intuitive.

For example, it has been shown that new customers with very high satisfaction ratings may be less-likely to repurchase due to the difficulty of delivering against their raised expectations during the repeat purchase process. It's obvious when you think about it, but places caveats upon the received wisdom that you should try to delight new customers. (You should try to serve them to a higher level than competitors, but not to delight them).

The challenge is in applying these "marketing science" insights to best use the limited customer management resources available, to achieve the best return from acquiring just those customers that "fit" with the company's delivery capabilities, from growing the depth and breadth of customers purchases from the company, from growing the period which they stay with the company and regretably, from losing customers who no longer fit with the company anymore.

In reality, the vast majority of companies are still at the experimental stage when it comes to turning this into everyday business practice.

Graham Hill
Independent CRM Consultant