Value Creation and Keeping Customers

Getting and keeping customers is an expensive endeavor and keeping the doors open in a time of local crisis makes it even tougher. The average U. S. business loses half its customers in five years. Generating a new customer costs five times as much as keeping a current one and firms pay a steep price when customers stray to other brands, or stray to other communities to make their purchase. In a slow economy, creating unsurpassed value for a customer so that they stay with you is even more important. So how do we create value?




Value creation in a firm takes a minute to think about. Ask yourself this question: Why does an individual make a purchase? The short answer is to fill a need. But the real answer is found in what motivates a person to do something to fulfill that need.



Psychologist A. H. Maslow developed a theory that characterized needs and arranged them in a hierarchy to reflect their importance called Maslow’s Hierarchy of Needs. Maslow identified five levels of needs, beginning with physiological needs and progressing to the need for self-actualization.



Physiological needs are the most basic. They fulfill the needs for survival like food, water, shelter and clothing. Pepperidge Farm French Toast Swirl Bread appeals to this need by stating “It doesn’t go with breakfast. It is breakfast.” Campbell’s Soup hits the mark with “Mm, Mm, good!” as does, “Got Milk?” Food is the most basic of need and as we like to say here, “Full Stomach, Open Mind.”



Next up the ladder you find safety needs which include security, protection, and avoidance of the unexpected. State Farm Insurance appeals to this need by saying, “Like a good neighbor State Farm is there.” In the wake of our damage recovery, maintaining a sense of security in our communities is a key element of recovery. The presence of the National Guard as well as the local elevated sense of social responsibility has been a critical element of pulling us up by pulling us together.



Third are social and belongingness needs which include the need to be accepted by an individual or group. Think about Olive Garden and their tagline, “When you’re here, you’re family.” We also see this come alive with the wonderful belongingness and leadership given by our Churches to support our tornado relief efforts. Many of them continue to request anonymity in their efforts, but rest assured, we know who you are and we thank you!



Fourth is the esteem need such as a need for a sense of accomplishment, the need for respect from others and the need to perform better than others. This is a universal human trait that emerges after lower order needs are satisfied. This may present in the purchase made to upgrade an airline seat, to have premium concert tickets, or as Sony touts, “Like no other.” I have found myself reassessing how I view this for myself in the events of the past few weeks and those in our community. Even in tragedy, this need is still obvious all around. I am reminded of Shakespeare and Twelfth Night where we read that “some are born great, some achieve greatness, and some have greatness thrust upon them.” If you are a leader in your community, please remember that the best help may come from the least obvious place.



Lastly, and also the very top need, is self-actualization. This is the desire for a person to reach their full potential. Many educational tours appeal to this need with an appeal to a person’s talent or capabilities. It may include a trip that includes a course of study such as language, history or cooking. Nike’s famous “just do it” is right on the mark for reaching potential. Self-actualization appeals to the desire to experience and learn something new such as at GE where “we bring good things to life.” Or, it may appear as the nice neighbor that you really don’t know who shows up with his chainsaw to help clear some trees from your driveway. And he also offers to get you some water and a sandwich. How cool and inspiring is that!



Understanding how your product fills one of these needs, and fits into the experience desired by your customer will help you to understand how to motivate that customer to act on a purchase. In light of the damage to our communities and continued recovery, I am reminded that this is not just about products, but it is in fact also about US. It is about our elected officials, our churches, and all the elements of our community. It determines who we are and how we react when the chips are down.

Customer Loyalty

The essence of marketing isn’t about goods and services. It isn’t about selling. It isn’t even about profits or beating the competition. It’s about developing a relationship with customers so that they will grow loyal to a company’s goods and services. It’s about developing trust between customers and the firms from which they purchase goods and services. Let’s face it, getting and keeping customers is an expensive endeavor. The average U. S. business loses half its customers in five years. Generating a new customer costs five times as much as keeping a current one and firms pay a steep price when customers stray to other brands. In a slow economy, creating unsurpassed value for a customer so that they stay with you is even more important. Contemporary Marketing, Boone & Kurtz, p. 3.

How do we keep our customers? An important trend in marketing planning is relationship marketing. Relationship marketing looks at customers as equal partners in the buyer-seller transaction. When this process works the way that it should, what you see is a motivated customer entering a long term relationship in which they repeat purchases and buy multiple brands from the same firm. This allows marketers to get a more clear understanding of their customer needs. This intern leads to better customer service and improved products. The end result is increased sales with lower marketing costs.

You can develop an intentional approach to retaining customers by cultivating your relationship marketing plan. Your plan can be centered on some straight forward strategies such as routinely offering small, but noticeable, favors for your customers. Fulfilling orders early, upgrading software before it is requested, thank you notes, calling customers when sought after items arrive in the store, answering the phone with a person instead of an automated system, all of these are just a few ideas of an intentional strategy to understand and manage your customer preferences. Don’t stop there. As we have discussed before in this opinion, empower your first line sales people or service representatives to creatively add value, boost referrals, and create retention. Think about how you feel when you go to your favorite restaurant and ask for “YOUR” waiter or waitress; the one that really takes care of you, and makes your visit unique.

An important measure of relationship marketing is the “lifetime value of a customer.” This refers to the revenues and intangible benefits such as referrals and customer feedback that a customer brings to the seller over an average lifetime, less the amount the company must spend to acquire and service the customer. In keeping with our restaurant theme for example, let’s suppose that a customer eats at O’Charleys in Fultondale twice per month and spends $25.00 each time over five years. That business translates this calculation to revenues of $600 per year or $3000 in five years. When the business owner then subtracts out the average cost for labor, food, and overhead, she is left with a per-customer profit. This type of information helps the business owner to focus on drivers to enhance the customer relationship, control marketing costs and ultimately lead to increased sales.

Bottom-line is this: If you have an infinite stream of potential customers you can probably keep them happy only once and perhaps still grow your business just fine. But, if you are like the rest of us, a strategy to include some relationship marketing strategies that will keep your customers coming back could really help to drive your sales, fine tune your customer service, decrease your marketing cost and sell a good bit more.

Remember to take care of your customers or someone else will.