Jim answers questions from fellow Drillers
Topic Overview
Hi again folks, Jim Novo here.
I hear from lots of “really small” business owners who are interested in doing “loyalty programs” or similar types of marketing – particularly in service businesses – but think these ideas are too complex or too expensive for a typical owner to handle. I’d say this is not so, the trick is to think through the program features and match them to business needs and resources available. You don’t need a points program to create customer loyalty, my fellow Drillers …
Q: I came across your website while researching customer loyalty programs and I am hoping that you may be able to give me some feedback on an idea that I have.
I run a small home-based spa that specializes in pedicures, and have had great feedback from my clients. So far I have relied on word of mouth and am now ready to do some advertising as I need to be busier. I have come up with an idea for a program to help with my pedicure loyalty and referrals. This is a rough idea of it, customers will earn Points in the following ways:
For each friend or family member you send to me, earn 8 points. You will receive 7 points if you pre-book your next pedicure within a before leaving. For each pedicure you receive, earn 5 points (except those paid by Gift Certificate). When you have earned a total of 50 points, you will receive a $25 Gift Certificate!! (my pedicures are priced at $35). Your Point total is maintained on your individual file. The total is updated whenever you earn or redeem points.
I am new to the marketing aspect of all this and I would love to hear your opinions on such a program and also if it seems fair from a customer point of view. I am also looking for suggestions on a name for it or any other suggestions towards it and presenting it.
A: A loyalty program is generally a good idea, I think. But your execution of it (the details of how it works) sounds a bit complicated for this kind of “relationship” business, it strikes me as a bit “cold”. In other words, you may risk creating hassles which damage the experience by creating too much complexity. I know when my wife goes to get a pedi she does it as much for the overall experience of it as needing her nails clipped, and if on top of that you throw in a lot of “rules” and “things to remember” you might damage the experience. Like I said, I think the overall idea works though, so how about doing it this way:
Print up some “pedi gift cards”, could be just like a business card, same size, only less formal. Name of business, address, telephone number at the bottom. At the top, maybe your logo and something like:
“You’ve been given the gift of a pedicure by:
______________________________________ (your customer writes in their name on line)
a $35 value! Please arrange your appointment by calling the number below…”
That’s just an example, use any wording you feel works with the image of your business and your own personality. After all, this is a personal services business and a big part of the service is you. Print up a stack of them, and give them to your repeat customers in a personal way. Tell these customers you would like to try an experiment in growing your business, then ask, would they help if there is something in it for them?
Tell them about the cards and how you want to bring in new customers. Explain you’d like the current customer to hand cards out to people who don’t currently have pedicures done with you, and that for every one that comes back to you with a new customer holding it that you will give your customer (that gave away the free pedi card) 25% off their next pedi (or whatever discount you feel is appropriate – use your own judgment).
This approach has three benefits versus the format you proposed:
1. It is deadly simple for both you and the customer. You don’t have to track points, customers don’t have to remember points and rules, etc. yet it still creates the “stored value” idea that is at the heart of a points program – customers hate to abandon “credits” they have earned with you. Just keep the cards you get back and announce the discount when the customer comes in for what they think is a full price pedi. They will be excited! In marketing, this is called a “surprise and delight” strategy and it is proven to work, especially in a business that is based on personal service.
2. This program turns your customers into salespeople of a very special kind; they aren’t selling anything, they are giving! Do you think your customers will have a problem giving the gift of a pedi to their friends? I don’t.
3. This is very important. People generally travel in circles of friends who are like them. If you focus the program on your best repeating customers they are likely to hand out gift cards to people who are like them – likely to become repeating customers. A nurse who tells all the other nurses on her shift, the office worker who tells all the other workers on her floor, etc. Typically a person’s friends are like the person, they enjoy the same things.
Now, could there be potential problems with this idea? Sure, there is with any marketing idea, including the most frequent one – the idea just doesn’t work. I don’t think you will have that problem with this idea. But here are 3 issues you need to watch for and adjust the program as needed:
1. The people who use the gift cards come in for their free pedi and never come back. I’m assuming most will come back at least one more time for a full price pedicure. So part of the success of this program lies with you and your “perfect pedicure”.
These potential new paying customers have to like the service enough to switch to you from whoever they go to now. You can certainly sell them on coming back. Try to book a next appointment during the free pedi. If you can get them to commit for a paid pedi next time they need one and they complete that paid appointment, they are very highly likely to continue on with you well into the future.
In addition, some of those who won’t commit during the free pedi may come back as well. Not all will convert to repeat customers, so don’t be disappointed by that. But think about it, if only 50% of them convert to full time repeating customers, does that pay for your time doing the discounted and free pedicures?
Over time, you will recognize which kinds of best customers (example, nurses) that you give cards to end up handing them out to people who come in for the free pedi and continue as customers. You will also realize other kinds of best customers (example, office workers) that you give cards to end up handing them out to people who come in for the free pedi and never come back. This is what I’m referring to when I say “adjust the program” – you can tweak it a bit based on the actual results you get over time.
2. Some of your customers may try to “game the system” by giving each other free pedi cards. In this kind of “personal” business, I don’t think that is too likely, especially if you handle dispersing the cards on a personal basis, as opposed to printing them up and leaving a stack on the table for anyone to grab – do not do that. You may also get the occasional current customer (as opposed to new customer) coming in with a free pedi card, but as long as it doesn’t get out of hand you should be fine.
3. You might also get customers that hear about the program and ask for cards when you normally would not give them one because they are not “best” customers. That’s OK, try giving them some cards, see what happens. A lot of successful marketing is about testing new ways to execute the idea. Don’t sweat it and do what they want, the customer is (almost) always right. You might find the program works for most off or all your customers, it really just depends on who they are and the perception of your service. Generally, it is “safer” from a financial perspective to start something like this with your best customers and then expand it as you learn how it is working for you.
I think it is great you are thinking creatively about marketing your business in a unique way, that’s exceptional and unusual in a personal services business like yours. Let me know if you have any questions and how it ends up working for you!
Jim
Jim’s Note: This type of program can work in the personal services business where the costs and overhead are basically your own time and effort and you need a “no cost” (other than your own time) method to attract new customers. I wouldn’t do it for a business with a lot of “hard costs” such as retail; the danger of loss through subsidizing (giving discounts to best customers when they would have bought without) is too high. When you have a lot of hard costs to cover, it’s better / more profitable to customize the offer to the customer based on their behavior.
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