Rapaport Magazine

Spoiled Rotten

The director of education for Jewelers of America tells retailers how to nurture their most profit-boosting customers for increased sales.

By Margo DeAngelo
RAPAPORT... The total time spent shopping has decreased almost 80 percent since 1990,” declared David Peters, director of education for Jewelers of America (JA), in a recent seminar. Peters wasn’t preaching doom and gloom. He was simply illustrating why customer loyalty is so vital to retail success.

Consumers Changing Dramatically

Peters went on to describe the ways consumers have changed in recent years. “Customers are extremely possessive of their free time. They enjoy shopping less, and spend less time doing it,” he stressed. The obvious reason is that they have less time than ever before. Harried consumers are slow to forgive mistakes in customer service and resent when their time is wasted by incompetence.

Today’s affluent consumers are shopping at discounters in ever-increasing numbers. In 2006, 89 percent of households with incomes over $70,000 per year reported that they shopped at Wal-Mart, Kmart, and Target in the previous three months, according to Peters.

“Wal-Mart has changed the face of retailing. The Wal-Mart customer is loyal for one reason, and that reason is price. How many of you can base your entire business strategy on having the lowest price? You can’t do it. So we have to build our loyalty through some other means.”

In the final three months of 2007, 80 percent of big-ticket jewelry purchases were touched by the internet, stated Peters. “That means before they walked into your store to buy, they looked for your store location, they researched your merchandise, they read about your culture and mission as a company and they comparison shopped.

They did this all on the internet.” Of the customers who abandon a store, 68 percent cite a poor shopping experience as the reason, according to Peters. “It wasn’t what you sold them, it was how you sold them,” he clarified.

The good news is the 80/20 rule. Peters contended that of all a store’s customers, 20 percent of them produce 80 percent of its profit. “Not your volume, but your actual profit. These elite, special people are your most loyal customers. These are the people we need to learn about and focus on,” Peters explained.

The Stages of Loyalty

Peters breaks customer loyalty into five stages, setting up a framework for moving shoppers to the next level of loyalty.
Managers who follow this system have a straightforward method for identifying and targeting their clients.

Stage one: “Prospects” haven’t bought yet, but they have the potential to buy.

Stage two: “First-Time Buyers” are about to make their first purchase.

Stage three: “Repeat Customers” shop occasionally in a store.

Stage four: “Loyal Customers” buy all of their product from their favorite store.

Stage five: “Advocates” tell all their friends about their favorite store.

Customizing the Message

For Prospects, Peters suggests retailers build interest in their store by creating special incentives for making a first purchase. All efforts toward First-Time Buyers should be aimed at encouraging them to return. For Repeat Customers, the goal is to expose them to a wider variety of the store’s products. Peters recommends telling Loyal Customers how much they are appreciated, rather than focusing on selling them specific products. At the pinnacle are the Advocates. Peters described them as “remarkable customers to have,” proclaiming that most of a store’s time should be directed toward retaining these customers.

“If you need to do anything in your store — from hiring employees to changing the color of the carpet — you need to ask yourself: ‘Will this impact customer loyalty? How will this foster and grow customer relations?’ That is the yardstick with which to measure all your decisions,” declared Peters.

According to Peters, a solid foundation of customer care is crucial for this customized sales approach. “Doesn’t matter what you sell, doesn’t matter how good your jeweler is, it is not going to build customer loyalty unless you treat the customer in a friendly way. Fancy merchandise is worthless unless you’re nice to people.”

In light of this, Peters feels employees must have excellent verbal and written communications. Grammatical mistakes in letters or other communications can destroy a store’s professionalism and credibility. Job-specific skills, such as classes on listening for salespeople, are also key.

Once basic customer service is addressed, managers should ask each salesperson to list their top 15 customers. Salespeople can then work on giving these people special attention. “This in itself will turn a Loyal Customer into an Advocate,” noted Peters.

Personalized experiences also go a long way toward making customers feel special. Peters pointed out that it often costs nothing for every employee in a store to have his own email address. If a store periodically sends letters to customers, they should be signed with the name of whoever dealt with the customer. And as far as voicemail is concerned, “Always present an option to speak to a human being,” he cautioned.

Seek Out Complaints

Recognizing that feedback is intrinsic to excellent service, Peters urged retailers to set up a customer service hotline and email address and include it on all communications. “Create a culture in your store that wants complaints and likes complaints. Complaints are a blessing. They are so critical to your growth and success,” Peters advised. Surveys should be sent out with an incentive in order to get the most responses. “Bribery is a wonderful thing. It works with children and it works with customers,” he quipped.

The Boss as Coach

Another important principle is employee empowerment.“We have to let go. Particularly as a young person running a retail store, I wanted to be a boss. Well, being the boss just doesn’t cut it in today’s world. Letting go works. Empower sales people in a reasonable way to make their own decisions and to fix problems. You absolutely can be liked and respected at the same time. It’s more about coaching.”

To close, Peters reminded his audience to “spoil your loyal customers rotten so it will make it virtually impossible for the competition to make them happy.” With the right plan, Advocates might just do a lot of the selling for you.

Article from the Rapaport Magazine - August 2008. To subscribe click here.

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