The key to building long-term customer loyalty is not through chasing price or luring new customers with discounts, rather it is time to focus on building a positive experience so engaging, so memorable, that your existing clients can’t stop talking about you to others.
Is it Possible to Make Price Irrelevant?
When I say you can make price irrelevant, it sparks conversation and debate. Some will say, “that is impossible!” I disagree, it is possible. I am not saying you can double your prices or even raise them 20 percent tomorrow and not lose existing or potential customers.
Making Price Irrelevant means:
Based on the experience your business consistently provides at every touchpoint, by every employee, your customers have no idea what your competition charges.
Most of us as a customer, are acutely aware how much the companies we do business with charge compared to their competitors. However, we all have a few businesses we are loyal to because of the relationship they have built, the consistency they deliver, the peace of mind they give us, or how they make us feel. In those cases, often times, we have no idea what their competitors charge, nor do we care.
Stop Competing in Price Wars and Start Competing in Experience Wars
Every business has to decide where they want to compete—in the price wars or the experience wars. I prefer to compete on the basis of an outstanding customer experience. There’s a lot less competition. Many times, when a customer complains about the price, it isn’t because they were not willing to pay for something; it is because the experience didn’t justify it.
A great example of this, in the first business I started, John Robert’s Spa, occasionally we would have a customer who expressed disappointment about a haircut they may have received from one of our lower level (less experienced) designers, who charged around $50 for a haircut. To make it right, we would give them their next haircut experience with one of our higher designers ($75 haircuts) complimentary. Three years later, that same customer is still going regularly to the higher-level designer, who now charges over $100. It is not about price!
In fact, 85 percent of US consumers say they would pay 5 to 25 percent more to ensure a superior experience. Price is something you offer when you have nothing else.
Price Match Guarantee with a Twist
I do believe in price guarantees. How can that be? Am I a hypocrite? Not at all. I do know a paradigm shift is needed from selling a commodity someone can get anywhere to an experience customers can only enjoy with your company. Everyone in your organization needs to have this mentality:
“We are the premium experts and ultimate experience provider. We will not be oversold. In fact, if you can find it more expensive somewhere else, we will raise our prices and match it.”
Sound crazy? Well, if that truly was the mind-set of everyone in your company, it would change your approach to the experience you provide. It would force us to deliver the ultimate experience. Personally, I would get upset if I found out that someone was charging more for something my business sells. That doesn’t mean I would just raise our prices.
First, we would have to figure out what they are providing that we aren’t. Is it quality, consistency, or an experience? Then we would need to improve our game—make it better than anyone else’s. Once we do that, we would be able to charge the most and be proud of what we charged relative to the total experience we delivered.
Have you Educated your Employees on the Value of what you Sell?
Ask your employees this question: If your customers told you that they could get what you sell from someplace else for significantly less, what would you do to keep them? You will probably be disappointed with your employees’ answers. Too often when faced with that scenario, employees act apologetic and start offering the customer more. Or even worse, they discount to justify the price gap. The problem is your customer-facing employees may not understand the true value of the services and products they are selling to the customer.
How good of a job are you doing at creating the perception of value for the expertise and experience of your services? How well is this value articulated to your employees? Remember that the value your employees perceive is going to be projected to your customers. Do you sell a commodity similar to your competitor, or are you the premium expert and experience provider? Doing business with your company should mean the customer has peace of mind about the expertise and quality you provide.
Discounting is the Tax you Pay for Being Average
Are your customers an incentive away from going elsewhere? If they are, you have nothing. You have no customer equity. There is always someone who can make something a little crappier and sell it a little cheaper. That’s why it is a mistake to act as if cheap imitators are your competition and to play into their hands by reducing your prices. You are only giving them credibility and removing yourself as the leader of your industry. If you feel your products and services are superior, then your prices should reflect that. Everyone expects to pay more when they are dealing with the best. But when the best is similar in price to the rest of the pack, customers get suspicious, the perception of excellence disappears, and you are left with merely a commodity.
Are you Zero Risk?
Nothing can cost a brand more than a bad experience unrecovered. One of the best benefits of building strong relationships with customers comes when you inevitably screw up, when you or your business drops the ball. Loyal customers are so much more forgiving and understanding of mistakes if you have built emotional equity, and the only way to do that is through building relationships. When something doesn’t go right, you have a golden opportunity to demonstrate to your customers that you pose zero risk to them. What does zero risk look like? As a customer, it means you are sure that when you deal with a company and something goes wrong, they will make it right.
When Customer Retention Increases, Advertising Decreases
When it comes to a company’s budget, every department annually fights for an increase in its own budget. That’s not surprising; the outcome will determine what the department is allowed to spend for the following year. This is especially true of the budgets for advertising versus customer service training. The only way to win the battle is to prove which expenditures will produce a better return on investment (ROI) for the company. The fact that this is even still a debate is a sign of old paradigm thinking by too many senior executives. A shortsighted obsession with constantly bringing in new customers to your business is significantly more expensive than building a consistently positive customer experience.
In Our Social Times article titled “Can Online Customer Service Deliver a Higher ROI than Marketing?” Tom Eggemeier, EVP Global Sales at Genesys, says that global budget expenditures on marketing and advertising were $500 billion a year compared to $9 billion spent on customer service. How does your company compare to that percentage?
Start asking yourself if you are constantly offering incentives to “New Customers Only.” What about rewarding the customers who have been loyal to your business for years—those who do business with you regularly, no questions asked, and refer others to your firm? You ignore them at your peril.
It is a fact that:
- Repeat customers spend more than new customers.
- Repeat customers give higher satisfaction scores.
- Repeat customers give referrals more often than new customers.
- You need five new customers to produce as much as one repeat customer.
In a study titled The ROI from Marketing to Existing Online Customers, published by Adobe, it was reported:
- A 5 percent increase in customer satisfaction can increase a company’s profitability by 75 percent.
- 80 percent of your company’s future revenue will come from just 20 percent of your existing customer base.
Branding has changed. Advertising does not justify the cost if consumers have bad experiences. It is no longer about building a perception in your customer’s mind. Customers are defining the brand to the business and everyone else, and we can find out what a large percentage of them think about any brand within minutes by simply searching Google.
Brands put billions into boosting awareness, satisfaction, and loyalty, but they often overlook the most powerful driver of customer value—emotional connection. Research shows that consumers who are emotionally connected with a brand are anywhere from 25 to 100 percent more valuable in terms of revenue and profitability than those who are “merely” highly satisfied with it.
Having a Customer Experience Strategy
The best brands have a customer experience strategy that produces an experience epiphany. An “experience epiphany” fills a gap customers didn’t know was there. What was once considered impossible is now the standard experience everyone else is trying to duplicate.
Quote of the week
“Each customer deserves a great experience and to be treated as a human being in a world that can feel dehumanizing.”
