the use of the telephone
we had a unique store visit. We observed one employee who was on
the telephone the entire time we were in the store. While all of
the customers were being taken care of by other employees, we thought
it odd and asked the shop owner about this. "He's hard at
work bringing back some old customers," was the answer the
had they gone?" was our question, and "How do you know
they are gone?" The owner of the store explained they had made
a point of tracking every customer they had ever had. Each customer
was tracked by name, as well as any other relevant personal information.
where does the phone come into play?" we asked. "Every
month, we have the computer print a list of customers who have been
inactive for at least six months. The report gives us all the information
we have tracked, and from there we go looking for the missing customers."
store owner told us he had studied ways to reduce costs. In an article
he read, there was a quote from John Wanamaker, the famous department
store owner. Wanamaker said he knew half his advertising did not
work; he just didn't know which half it was. What caught this store
owner's attention was that, in studying industry reports giving
the averages for businesses, he found advertising was an expense
that as a percentage of sales was often equal to the net profits
of the business. A second report that caught his attention said
the cost of obtaining a new customer was approximately $20; yet
to retain a current customer, the cost was only $4.
idea of retaining customers seemed to be a lot more affordable and
profitable than looking for new customers. The logical question
in his mind was to ask where had these customers gone? To answer
the question, he created a stack of names and phone numbers and
began to call the customers. The list of questions asked went through
several changes before it got to a sequence that seemed to work
best. The surprise in the process was when he found out he was not
the best person to be asking these questions.
newest employee was given a list of 100 names. In a period of 10
days, all 100 customers were to be contacted. The phone script went
something like, "Hello, Don Blair? This is Danny Lyons, calling
from Cox's Store. I am the new salesperson here at Cox's; and as
I was looking at our files to see who our customers were, I noticed
we had the opportunity of selling you [name of item] last February.
How did that work out for you?" Danny then listened carefully
to what the customer had to say. Danny then said, "I also note
you have not been back in the store since then. We have gotten some
really sharp new accessories in since then, and I would welcome
the opportunity to show them to you."
there had been any problem with the previous transaction, it was
at this point the customer usually expressed his or her unhappiness.
Again, Danny listened, took notes, and said, "Well, I would
really like to have the opportunity to earn back your business.
Do you think we could do that?" Of the 100 customers Danny
called within two weeks, only two expressed a complaint. Danny and
the shop owner were not
to make every customer happy again, but Cox's Store had done what
the majority of shops fail to do: attempt to gain the customer back.
go to all this trouble to find two unhappy customers? Actually,
it is not just for these two customers. The surprising part of this
attempt to have customers return is that approximately 16 of those
100 will actually show up in the shop within the next two weeks.
They will have told Danny-as do the majority of the 100 customers
called-that they had not needed anything of late; but these 16 will
show up because the thought of shopping again with Cox's has been
planted. The cost of this unique effort is minimal. The results
are tremendous, especially if you think about the alternatives.
If you were to utilize a newspaper ad, you would be thrilled with
even a 3-percent response; and the 3 percent may only look, instead
of buying from you. This group of 16 are already strong candidates
to buy, as they have frequented the business in the past.
may not have solved the problem of determining which half of the
advertising works, but we have surely demonstrated a method of prospecting
for customers that will work for you, too. John Wanamaker would