My credit card & wallet have had a busy few week lately. Some of this expenditure was planned, but the majority of it wasn’t. Some of these recent interactions with suppliers have got me thinking about the price / cost of loyalty. Here’s some background context on just a couple of my transactions:
Broadband. I moved from BT Business Broadband to BT Residential Broadband. A few years ago I moved in the other direction as I was having some technical issues that – according to BT – would be easier to resolve as a business customer. They weren’t, and as the contract period has now ended, I decided to move back. Why? The price decreased from £25 / month to £16 / month. BT even have a special department to help you do this (BT Migrations). When I asked what differences there would be if I moved back, I got the answer “Nothing, the only difference will be the department that sends you the bill”. Oh and as a ‘new’ customer to BT Residential Broadband the first 6 months are free.
It seems that BT are charging their regular customer more than their new customers. The regular, loyal, customers are subsidising their acquisitions of new customers.
Car Insurance. I changed car recently (and that’s another – very – long story) so had to get insurance for my new vehicle. I’ve been insured with one company for over 10 years (and with an equally as long ‘no claims bonus’) and it was always easier to stay with the devil you know, rather than look around. I know the folks in the office that handle my insurance as they are based in my local high street. But, in this instance, I decided to look around and happened to land on one of many price comparison web-sites. I was doing this more to make sure I was paying the market rate and would be happy to stay with my current supplier even if it was a few quid more. But, I was amazed that I could save over £250 / year my by moving supplier. I also moved up from 3rd party cover to fully comprehensive as well to another one.
It seems that my insurance company is offering special deals to new customers as well. Deals that are not available to me. Weird.
There are other examples here and I am sure you will have some of your own as well.
So is loyalty being penalised these days? I can only conclude that: yes it is. This is mainly true in commodity markets (phones, banks, insurance, utilities etc.) where it appears that the main differentiator is price. If price is the main motivator – it comes at a cost. The cost of penalising current customers for their loyalty. Something feels wrong to me about this. Surely, a business model is not sustainable if you penalise the loyal customer?
Businesses that offer a commodity product are teaching the market place to be disloyal, to shop-around and to be motivated by the ‘deals’ on offer to new / switching customers. Even the government is encouraging you to switch your energy supplier and that it should be as easy as switching banks.
Much as I appreciate the open market and competition I am not a fan of what it is teaching us as consumers or the negative effect it has on the value of loyalty. That’s because the price fixation spills over into other – non commodity – markets. Here the value of a unique service or a differentiated product is rarely appreciated and the discussion often seems to focus on ‘how much?” I see this in the sales training workshops that I run, which are attended by business professionals, wanting help in explaining, justifying and defending their price.
So what to do? In a market that encourages disloyalty how do you build a long term relationship with a new client? One answer, from ‘Red’ Adair in the oil industry immediately comes to mind:
“If you think working with a professional is costly, try working with an amateur.”
Later this evening you may be get some little visitors who knock at your door and ask “Trick or Treat?”
And as you look into the eyes of those little innocent people who are desperately hoping to be given some chocolate or something equally as sugar laden, what will you be thinking?
Me, I’m thinking two things:
- From an early age we are teaching people about the alternative close. Do you want A or B? With the assumption that you have to go for one of the options.
- Likewise we are teaching folks very early on about getting business through fear. What’s the cost of getting it wrong? Of doing nothing? Of not saying yes right now? “Of not doing what I want you to do?”
Sorry if I am spoiling your Halloween by looking at this festival through the salesperson’s eyes. But if you allow me to, there are a couple of lessons for you.
The Alternative Close
Do you want the blue or the red one? Shall I drop by to meet you on Thursday morning or Friday afternoon? Gosh, how many times have we come across this old chestnut? Yet still the training books are full of this type of ‘alternative close’ stuff. Can I let you into a secret? The client has probably read the books as well. It’s old school. Stop it. If by chance someone does try the ‘alternative close’ on you (and they still do) my response is something along the lines or “Are those my only options?” That usually takes the wind out of their sales (get it?)
The Fear Close
Although the idea tonight will be for many to get a little scared and frightened in safety – many are still using fear to motivate a client into saying “yes”. It’s far more beneficial in business to motivate people by the gains in making a decision. Focus on the upside and benefits to the client. You should never resort to fear – even as a ‘last chance’.
So, two thoughts for this special day.
Now what is that noise outside my door…..?
Glastonbury tickets sold out in under 90 minutes. It would have been faster, but there were the inevitable IT issues. This generated around £30 million of income in just 90 minutes. Not bad for a farmer, eh?
But a farmer is used to taking care of his land and livestock and making the most of them and getting the most out of them. Michael Eavis is doing exactly the same with his annual festival as he’s done with his dairy farm.
In sales there is often the differentiation between the Hunter and the Farmer type of selling (there is also the Poacher and the Trader, but that’s for another time). The Farmer salesperson looks after his existing customers and nurtures and develops them. The Farmer cultivates his relationship with the land and things that feed him. The Farmer protects his livestock and their future – as the Farmers’ future is intimately linked with them.
Most businesses folk (and sales folk) feel more comfortable in the Farmer role than the Hunter role due to the existing relationship that exists. Yet, at times the Farmer can get a little lazy and rely on the relationship to feed them, without putting the nurturing effort in and responding to the changing needs of the client. Research shows that around 2/3 of customers leave a supplier because they do not feel that they are properly engaged or cared for and that the supplier is indifferent about them.
Michael Eavis has done a wonderful job over the years of developing his festival so it meets the changing needs of the customer. I recall the outcry when dance music first came to Worthy Farm. Now, it’s an integral and lively part of the event. Likewise when “posh camping” and R&B music acts headlined the Pyramid stage. The loyalty that his customers show to the festival is impressive and is a result of this nurturing and responding to the changing customer needs.
The folks who bought those tickets don’t know who will be playing yet! How many other businesses could take £30million in advance and without announcing exactly what you are going to get?
That’s impressive farming.