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Recent Articles
From My Weekly Column, “Front Lines with Larry
Galler”
Published
in the Business Section of The Northwest Indiana Times
every Sunday since November 2001
Front
Lines 406 September 4, 2009
Recession
over?
Depending
upon what you read and who you listen to, the economic
recession is over or close to over or on the upswing.
I am certainly no economic guru so I'll stay out of
the debate but my observations and the businesspeople
I talk to regularly tell me that the landscape is far
different today from what it was a year ago. Many people
have told me that they have had to change quickly to
meet the needs of their marketplace and, in many instances,
it has worked.
These
days many businesses are reporting lower customer counts,
lower average sales, or both. So the challenge is to
discover ways of attracting more people by offering
more of what they want. After typing that last sentence,
I realized that is always the challenge – in good times
and bad, but today it is even more critical. Doing the
same old thing just doesn't cut it.
Some
are offering less expensive products and services. A
wine merchant has adjusted the inventory mix with a
greater selection of lower priced wines with less space
devoted to high priced bottles on the shelves. Seems
the vintage wines are gathering dust while having greater
variety and deeper inventory of lower priced bottles
is actually increasing sales.
A
custom jeweler known for beautiful gold and platinum
designs has introduced silver into her creations, lowering
the price points yet keeping customers who desire her
level of design creativity and craftsmanship.
A
restaurant offers customers a choice of lower priced
“for the not-so-hungry” portions at a reduced price
rather than encouraging larger portions that end up
in “doggie bags” as they previously had. These lower-cost
options keep customers coming instead of staying away.
A
distributor has lowered the minimum order requirement
and is offering free freight on larger orders. They
are finding that many customers who start with small
minimum orders are increasing their purchases to take
advantage of the freight promotion.
Whether
the recession is over or not, don't wait. Change to
become more attractive now!
Front
Lines 407- September 13, 2009
Are
loyal customers profitable customers?
A
few months ago I took a new view of Customer Loyalty
when I was working on a project to look at data that
showed how profitable each customer was to a company.
I was amazed to discover that the most loyal customers
were not the most profitable. This flies in the face
of one of my core beliefs that states loyal customers
are the most profitable. What was this new data telling
me?
In
looking more deeply at the data I discovered that a
large percentage of seemingly “loyal” customers were
really bargain hunters. Whenever the company ran a low
price promotion on a popular product these people bought
heavily and loaded up. But, for the most part, that's
all they bought. This pattern repeated itself many times
in the past few years. We found that many of these bargain
basement “loyal” customers were barely profitable and
that it was necessary to change the manner in which
we view customer loyalty and we needed to create a new
strategy to turn these bargain hunters into profitable
customers.
We
changed the way the database segments customers. Previously
the database put all frequent customers into one group.
Now it ranks them based upon profitability and puts
them into two groups: bargain loyalists and profitable
loyalists. We also changed the promotions from a “buy
any quantity of these heavily discounted (and thereby
unprofitable) products” to “if you buy something at
full price you can then buy a limited quantity of a
heavily discounted item.
In
the limited amount of time since these changes were
instituted, it looks like the bargain loyalists are,
in fact, becoming more profitable and so are the profitable
loyalists. It looks like the change in tactics is working.
But the real lesson is to look as carefully as possible
at the data to try and see what it is telling us. Don't
look only at the obvious assumptions (“loyal customers
are the most profitable”), look deeper (“are our loyal
customers profitable?”). Look behind and beneath the
obvious and you might find critical information lurking
there.
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