The Loyal Customer Myth
This article was originally posted on the PARA Dealer Education Website
Creating and growing loyal customers has long been a core strategy for home systems specialty stores. The combination of knowledgeable sales consultants, exclusive products and advanced services allowed many specialists to prosper despite decades of assaults by national retailers and more recent internet competitors.
Until now…. In the last five years many of these stores have seen dramatic drops in retail traffic that is only partially explained by depressed consumer spending. Specialists are seeing reductions in sales, door counts, and close percentage that indicate migration of their “loyal” customers to alternative retail and internet channels. The drops often occur despite continued efforts to improve customer satisfaction and increased direct marketing to their customer database. In the last three years this exodus of repeat customers and the failure to attract new ones has resulted in the closure of an increasing number of specialists nationwide.
Discovering the cause for this decline requires a re-examination of the fundamentals of the home technology market and the specialist’s relationship to it. Specifically, we must understand what drives customers to specialists, and what is causing more of them to shop elsewhere. It starts by looking at our customers.
Customers v.s. Clients:
Dictionary.com defines customer as “a person who buys goods or services.” Depending on the kind of goods we are buying; the choice of what to buy and where to buy may be simple and instantaneous or drawn out and researched. The purchase process of home technology systems tends to be longer and well researched because of their complexity and cost.
For years customers came to specialty retailers very early in the decision-making process, as the search for the perfect product had just begun. They came in not only to get information, but to get perspective; a better understanding of what was available on the market in order to narrow their decision to a manageable list of choices.
Specialty retail stores are well up to this task. Their show rooms display a wide selection of choices; and a knowledgeable sales staff can guide customers through the maze of technical specifications to find the best home technology systems solutions.
During this process, many of these potential customers became something far more valuable than customers, they became clients.
Dictionary.com describes a client as “a person who uses your professional advice or services”. The difference between customers and clients may not be obvious at first. It does not necessarily affect the profitability of any sale. However, this distinction is crucial to understanding loyalty and how the market has changed.
The fact is that more and more home technology purchases are made by customers, not clients. These customers are every bit as interested in understanding their options and gaining perspective as they were 10 years ago; they just do not get this information from us. Vital buying information on specifications, dimensions and compatibility are no longer treasures that can be found only in the closely guarded file cabinets of specialty dealers. This information is freely available on the web. Perspective is just as easy to find; through user forums, social network sites, and the extensive owner feedback found on retail web sites
The good news is that at least two thirds of these customers still buy technology products from specialists, not on the web. The challenge is that specialists may be quickly becoming merely product delivery systems for customers who are clients of the purchase information they found on web.
Clerks v.s. Consultants:
The magnitude of this change is reflected in the faces (and uniforms) of electronics retail store employees. 10 years ago the majority of retail home systems sales were made by commissioned sales consultants who provided clients with advice and perspective. Today more and more customers are satisfied with clerks who provide friendly smiles & efficient check out. To many customers, this is not a problem. In fact, online retailers and low-service high-volume warehouses frequently rank higher in customer satisfaction than do specialty stores. These satisfied customers are not loyal; they will buy from whoever delivers the product they want fastest and cheapest.
What this means:
Despite these trends, specialty retailers can respond and grow in this new market. In fact, we have a built in advantage in creating the lasting bonds that can transform customers into clients. It is the “people factor” that has always distinguished what we do.
But it may require a change of mindset.
It starts by instilling in every member of our organization the far greater value loyal clients have over merely satisfied customers. Then, everyone on the team: sales, merchandising, installation, and senior management must develop a clear vision of their roles in creating loyal clients, and commit to do it.
For sales consultants, it could mean committing to prove their value during every customer contact. One way is to learn how to transition customer conversations from product/technology/transaction discussions to the problem/perspective solution discussions that prove value and create loyalty. It can also mean understanding that loyalty today requires more than a hurried thank you note. It requires an honest commitment to partner with clients for their success long term.
Turning customers into clients changes not only how we communicate, but where we communicate. Instead of waiting for the phone to ring, more and more specialists are becoming active online through blogs, forums, and social network sites where today’s customers go for expert advice. Each knowledgeable post on a forum becomes a permanent billboard for future client contacts. Each helpful virtual contact with clients and perspective clients strengthens the loyal bond. This kind of frequent authentic communication is rapidly replacing mass market advertising in its influence on purchase decisions.
The result is an evolved vendor - client relationship that is more highly valued by both participants. Its a relationship we call “Fierce Collaboration.”
Creating and growing loyal customers has long been a core strategy for home systems specialty stores. The combination of knowledgeable sales consultants, exclusive products and advanced services allowed many specialists to prosper despite decades of assaults by national retailers and more recent internet competitors.
Until now…. In the last five years many of these stores have seen dramatic drops in retail traffic that is only partially explained by depressed consumer spending. Specialists are seeing reductions in sales, door counts, and close percentage that indicate migration of their “loyal” customers to alternative retail and internet channels. The drops often occur despite continued efforts to improve customer satisfaction and increased direct marketing to their customer database. In the last three years this exodus of repeat customers and the failure to attract new ones has resulted in the closure of an increasing number of specialists nationwide.
Discovering the cause for this decline requires a re-examination of the fundamentals of the home technology market and the specialist’s relationship to it. Specifically, we must understand what drives customers to specialists, and what is causing more of them to shop elsewhere. It starts by looking at our customers.
Customers v.s. Clients:
Dictionary.com defines customer as “a person who buys goods or services.” Depending on the kind of goods we are buying; the choice of what to buy and where to buy may be simple and instantaneous or drawn out and researched. The purchase process of home technology systems tends to be longer and well researched because of their complexity and cost.
For years customers came to specialty retailers very early in the decision-making process, as the search for the perfect product had just begun. They came in not only to get information, but to get perspective; a better understanding of what was available on the market in order to narrow their decision to a manageable list of choices.
Specialty retail stores are well up to this task. Their show rooms display a wide selection of choices; and a knowledgeable sales staff can guide customers through the maze of technical specifications to find the best home technology systems solutions.
During this process, many of these potential customers became something far more valuable than customers, they became clients.
Dictionary.com describes a client as “a person who uses your professional advice or services”. The difference between customers and clients may not be obvious at first. It does not necessarily affect the profitability of any sale. However, this distinction is crucial to understanding loyalty and how the market has changed.
The fact is that more and more home technology purchases are made by customers, not clients. These customers are every bit as interested in understanding their options and gaining perspective as they were 10 years ago; they just do not get this information from us. Vital buying information on specifications, dimensions and compatibility are no longer treasures that can be found only in the closely guarded file cabinets of specialty dealers. This information is freely available on the web. Perspective is just as easy to find; through user forums, social network sites, and the extensive owner feedback found on retail web sites
The good news is that at least two thirds of these customers still buy technology products from specialists, not on the web. The challenge is that specialists may be quickly becoming merely product delivery systems for customers who are clients of the purchase information they found on web.
Clerks v.s. Consultants:
The magnitude of this change is reflected in the faces (and uniforms) of electronics retail store employees. 10 years ago the majority of retail home systems sales were made by commissioned sales consultants who provided clients with advice and perspective. Today more and more customers are satisfied with clerks who provide friendly smiles & efficient check out. To many customers, this is not a problem. In fact, online retailers and low-service high-volume warehouses frequently rank higher in customer satisfaction than do specialty stores. These satisfied customers are not loyal; they will buy from whoever delivers the product they want fastest and cheapest.
What this means:
Despite these trends, specialty retailers can respond and grow in this new market. In fact, we have a built in advantage in creating the lasting bonds that can transform customers into clients. It is the “people factor” that has always distinguished what we do.
But it may require a change of mindset.
It starts by instilling in every member of our organization the far greater value loyal clients have over merely satisfied customers. Then, everyone on the team: sales, merchandising, installation, and senior management must develop a clear vision of their roles in creating loyal clients, and commit to do it.
For sales consultants, it could mean committing to prove their value during every customer contact. One way is to learn how to transition customer conversations from product/technology/transaction discussions to the problem/perspective solution discussions that prove value and create loyalty. It can also mean understanding that loyalty today requires more than a hurried thank you note. It requires an honest commitment to partner with clients for their success long term.
Turning customers into clients changes not only how we communicate, but where we communicate. Instead of waiting for the phone to ring, more and more specialists are becoming active online through blogs, forums, and social network sites where today’s customers go for expert advice. Each knowledgeable post on a forum becomes a permanent billboard for future client contacts. Each helpful virtual contact with clients and perspective clients strengthens the loyal bond. This kind of frequent authentic communication is rapidly replacing mass market advertising in its influence on purchase decisions.
The result is an evolved vendor - client relationship that is more highly valued by both participants. Its a relationship we call “Fierce Collaboration.”