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7 Card Stud Customer Loyalty
By Steve Schroeder

Although the love of money may be the root of all evil, the love of customers may be the root of all profits! Many business owners have gambled a great deal of these profits at the poker table of CRM (Customer Relationship Management) and have come up empty or been bluffed out of the game. Customers are much more demanding, but are also much more responsive to convenient savings and properly implemented gift and loyalty strategies. Over 90% of CEO’s surveyed indicated customer loyalty as the number one priority for 2004. The game has never been more important to play correctly.

I have listed the 7 most important ‘cards’ in helping business owners develop a winning hand with customers. By reading the list and checking it twice, it may help save you from a costly mistake. There are many different options to choose from, but a number of these options are simply bluffing with no real substance behind their offer. The following 7 ‘cards’ are put in the form of questions to make sure potential vendors disclose the right answers before you disclose your checkbook.

1. What system is in place for new customer acquisition?
A. 85% of advertising budgets simply remind existing customers to come back.
B. How many new customers come in as a result of coupons or other advertised offers?
C. Do you know the cost of bringing in one new customer?

The best form of advertising is word of mouth which means the best form of customer loyalty will reward your best salespeople, your most loyal customers. Almost every business has a percentage of loyal customers; the goal is to increase the percentage of repeat visits from these loyal customers while converting occasional buyers into new loyal customers at the same time. Both are equally important.

Bain and Co. have cited a small 2% increase in customer retention will lower existing advertising budgets by over 10%! The same research showed a 5% lift in customer loyalty increased the bottom line by up to 95%! Do we like the idea of reducing overhead while increasing the bottom line at the same time?

Many business owners are reducing traditional advertising budgets while directing a smaller percentage towards existing customers. The best way to acquire a new customer is to have an existing one bring them in. Why pay Val-Pac or Pennysaver when you can pay your customer?

The proper gift and loyalty partner will lay out a creative yet effective new customer acquisition strategy by having a system in place which rewards existing customers. New customers will then be plugged in to the existing loyalty machine causing a ‘Ferris Wheel’ type of effect for repeat revenue.

2. What system is in place to collect money in advance?

Starbucks has led the way, we watched them put over 50 million dollars in the bank by offering a free half pound of coffee for $20.00 advance payment on the Starbucks card. Customers will pay large sums in advance with the proper reward system. Why make the customer keep a paper card in his wallet or a stained coffee coaster with 10 stamps when you can put all the revenue in your register now? Simply give the reward first for payment in advance rather than vice-versa.

3. What system is in place for cash back incentives as compared to discounts?
Cash back or rebate programs are pure gold to business owners. They not only assure the full payment in the register at the time of purchase, but they insure a return visit while replacing dollar for dollar cash with product instead. Since cash back or rebate programs cost 2/3 less to implement, smart business owners are offering more cash back rather than a certain percentage off the retail price, here’s what we mean.

20% cash back programs on a $10.00 purchase reward customers with $2.00 of product on the next visit. The business owner not only puts the entire $10.00 in the register, they insure a second visit to redeem the $2.00 cash back. The $2.00 cash back is not actual cash, but cash back on product or inventory, saving an additional 50% or more in margin. The 20% cash back offer ends up costing much less than the 10% off while creating an incentive for the customer to return and spend even more money on the next visit! If your business does not have a system in place for cash back or rebate programs, you will not only lose a great deal of money up front, you will lose an equal amount in return visit frequency.

4. What system is in place to brand your name and logo in the wallets of your customers?
Money, savings and convenience are far more powerful than good food or good service. If you can put a convenient plastic card with your logo in the wallets of customers, you have a winner. If that same card carries any type of currency or balance to be redeemed at a future visit, you have just achieved marketing nirvana. Make sure any system you are looking to implement has the ability to create a custom card with gift and loyalty on the same card. Business owners are making a huge mistake with gift cards alone. Smart cards allow gift, loyalty, and everything else on one card.

5. What system is in place to capture customer data?
If you customers are filling out a form by hand, you need to look into something that automates the process for you as well as your customers. Customer data is a hard asset which determines the very value of your business. You must know who your customers are with as simple and automated program as possible. You must collect, track and communicate with your customers regularly.

6. What system is in place to create business synergy?
Since many businesses have yet to implement a proper gift and loyalty strategy, the ones who do can create wonderful incentives for sending their customers to a neighboring business. From free pizza to diamonds, we have seen it all. Since most businesses average $100 in advertising costs to acquire one new customer, anything that lowers this expense is often well received. The proper gift and loyalty program should open up scores of partnering possibilities with incentives paid for by others.

7. What system is in place to create memberships into your business?
Although very similar to strategies which collect money in advance, there are some very important differences. Costco is a perfect example of dual membership privileges. The proper gift and loyalty partner will lay out a complete strategy for developing and creating the demand for occasional buyers to convert to loyal customers by joining your place of business. The proper gift and loyalty strategy will open up instant revenue with incentives. All of these features should be tracked on one card.


Steve Schroeder is founder and President of Permission Required Consulting. As the former VP of Marketing with Direct Access, Steve analyzed coupon distribution costs for companies such as Procter and Gamble and Coca-Cola. After seeing such poor results with traditional 'interruption based' advertising, Steve started focusing on customer retention. He founded Permission Required, designed a C.A.R.E program Customer Acquisition by Retention Emphasis and has written numerous articles on customer loyalty, retention and marketing strategies for businesses of all types. At one time Steve was a 'consumer advocate', but now considers himself a 'customer advocate'. For further information contact the author: Steve@PermissionRequired.com - 562-201-2580.




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