Join Jill Griffin for an in-depth discussion in this video Learning from your best customers' buying behavior, part of Building Customer Loyalty.
What do you do when you know what you're selling, and where, when, and for how much, but you don't know to whom you're selling? That's the quandary that Cornell's, a prominent hardware store in Eastchester, New York, grappled with for years. John Fix's family own Cornell's. Their store is one of 5,000 co-op retailers that are part of the trusted True Value Hardware brand, but in 2003, all that changed when True Value introduced its True Value Rewards program.
Suddenly, John had a means to collect customer data through a red, white and blue card attached to the customer's key chain. John told me, "We now have the sales data "to understand who our best customers really are. "I can coach our paint clerk with, "'Mr. Smith over there is one "'of our top 20 customers, so do your best.'" Years in retail has taught Cornell's that it's wasted effort to get lower-spending households to increase their purchases.
Instead, the better strategy is to encourage top spenders to spend more. John said, "We want our top customers "to know we appreciate them. "That's why we send our top 100 customers "a holiday letter of thanks that includes a message "that a gift is awaiting them at the register." The redemption rate on that letter -- 50 percent. And there's more. On customers' birthdays, Cornell's sends $10 gift certificates to the top 15 percent of customers.
John tells me that the gift certificate always provides some fun rapport-building. For example, if a customer comes to the register with a toilet repair kit, the staffer often jokes, "Do you really want that for your birthday?" and shares a good laugh with the customer. John and staff understand the more customers buy across the store's various product lines, the less likely it is they'll shop elsewhere, so they use customer data to enhance cross-sale effectiveness.
For example, Cornell's has a rental store and promotes rental offers to customers who are top buyers of the hardware store's power tools. Rather than send the annual paint promotion to top paint-buying customers, Cornell promotes the savings to top customers in the housewares department. Having this best customer data has given them confidence to drop advertising spending.
Cornell's has slashed its advertising cost by 25 percent, while still enjoying annual sales increases. Customer commitment is up as well. When comparing the purchasing behaviors of their top 10 percent of customers, they found the large majority remained top customers. Average sales of top customers have grown year to year, and average store visits of top customers are growing.
As we conclude, here's what I want you to take away. If you're a retailer, you need to create some kind of system that enables you to identify and track purchases so that you can get familiar with your best customers. That way, you can recognize and reward them, but if you're selling any kind of service, you've already got that information in your files. Pull it out and identify your best customers and what they're buying. Start recognizing them and say thank you, and make it easy for them to try your other products and services that they aren't currently buying.
Believe me, striving to sell more to best customers should be your first investment before reaching out to sell to new prospects. It's what building customer loyalty's all about.