The number-one way to raise profits during a recession is to increase the percent of customers who are repeat buyers. Repeat buyers are nearly always far more profitable accounts because they're cheaper to market to and easier to convert than anyone else. Nearly every marketer can improve repeats with a few simple steps, no matter how tight their budget is right now. Here's a real-life story to inspire you:
A few years back, Leon Osborne, President Osborne Wood Products, conducted a quick research project to find out how many customers of his table-leg division were repeat buyers. He told MarketingSherpa, "The majority of our customers were first-time customers. Although our business was growing and everything looked good, that was alarming to me."
So, he decided to run a test. "We hired someone to come in and go through the last 1,000 invoices and talk to customers... to ask basic questions." None of the conversations was formally scripted, but typical questions included: “How did we do? Did we treat you courteously on the phone? Was the price good? Were you satisfied with the quality of the product? Was the packaging good? How do you feel about our company? Do you have anything that you'd recommend to make us a better company in the future?”
Responses were almost unanimously positive: “Great company. Wonderful prices. Customer service is wonderful.” Then, why didn't Osborne have a higher percent of repeat buyers on the books?
His theory: "We felt that probably our competitors were doing a good job, and we were doing a good job and people were not ordering based on who did they order from before. Instead, they were ordering based on who did they perceive they did business with before." Past customers might not remember the company name or how to reach Osborne. Instead, whenever they needed more table legs, they'd flip open a magazine or go to a search engine looking for likely ads to find a supplier ... and wind up ordering from a competitor by mistake.
To combat the problem, Osborne decided to dedicate a customer service rep to follow up satisfaction calls. He hoped that adding a touch of human contact will enable new customers to remember the firm's name and buy from Osborne again. "Sherry Chucci worked here for three years; she knew the business. She's like an evangelist for the company."
Sherry called each new account a few days after their shipment arrived. If she couldn’t reach anyone, she left a pleasant message on their machine and put a printed one-page survey in the postal mail with a postage-paid envelope. The conversation and survey were simply about satisfaction, never a sales message or promotion.
Results were outstanding. Osborne says that, currently, "5% of our customers are first-time customers whereas, before, it was 60% or 70% first-time customers. Within 6 months of bringing that program into play ... we saw those numbers just change." It went down to half and half, then 30%, then 20%...." The bottom line grew in reverse proportion. "Our business has grown 10% to 20% each year."
My suggestion -- in most companies, satisfaction phone calls are silo-ed far away from the marketing department in either customer service or product management. However, this story proves that satisfaction calls and surveys can actually be a successful marketing initiative. Why not conduct a test campaign, just as Osborne did, by phoning a slice of your new customers? Then, track the repeat buying habits of that slice compared to the main body of customers over the next six months (or however long repeat sales generally take.) Finally, use the resulting data to sell upper management on starting a routine satisfaction contact program under the auspices and budget of the marketing department for late 2008 and all of 2009.
Plus, of course, let Sherpa know how this works out for you.
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