A Frequent Buyer Program for Service Customers
Frequent buyers are your existing customers, those already under a base contract for an on-going service.
Base contracts provide revenue, non-contract services (aka project work, TAGs, etc.) provide profits.
Customers under contract are as close to a captive audience as contractors will ever get. You have a relationship, you’re already in their A/P system, and you have credibility (hopefully). Why not sell more of the profitable work?
Most contractors say they do focus on selling to existing customers. But you can bet it’s more of a piecemeal process. One that responds to customers’ requests rather than a proactive approach.
A World Class Frequent Buyer Program
Nordstrom doesn’t waste selling opportunities. It builds stronger, more loyal customer bonds by selling more rather than timidly waiting around.
Nordstrom’s Fashion Rewards is an example of a world class frequent buyer program.
Yes, Nordstrom sells to consumers. Yes, they have tens of thousands of items to sell and millions of consumers to sell to.
But they recognize the lifetime value of customers. They recognize their need to capture as much of their customers’ spend as possible.
Worthy aspirations for every service contractor. A frequent buyer program must be:
- Formal & thought out, not someting tossed off between emails
- Branded & marketed with a name, logo, tagline & collateral
- Committed to the long-term with incentives for your sales staff, as well as customers
3 Keys to a Frequent Buyer Program
Here’s a quick look at three keys to help contractors build their own frequent buyer program modelled after Nordstrom’s Fashion Rewards.
1) Incentivize customers to make more non-contract purchases
How NORDSTROM does it:
Nordstrom’s Level 1 in their Fashion Rewards program provides customers $20 gift certificates for every 2,000 reward points earned.
Points are earned in Nordstrom purchases. They’re tracked and monitored using data from the Nordstrom credit or MOD cards. These are the only forms of purchase allowed in the program. (A MOD card is a Nordstrom card that direct debits from a customer’s bank account, just like a bank’s debit card, except the MOD is good only at Nordstrom. Customers voluntarily sign up for those $20 certificates.)
SERVICE CONTRACTORS can:
Easily track and monitor non-contract services as it’s included in your monthly billing.
Create a points system (like Nordstrom) or a dollar volume discount, rewarding total spend with lower per unit pricing. This is your Level 1 incentives.
Make it easy and visual for customers to tell what they’ve earned. Is that a quarterly email or printout with certificate?
2) Increase customers rewards for reaching higher purchasing levels
How NORDSTROM does it:
Customers reach Nordstrom’s Level 2,3, and 4 when their annual purchases reach a certain volume. For example, in addition to the $20 certificates, incentives at Level 2 include:
- Free trial size beauty products (no purchase needed)
- Nordstrom On Call to a Peronal Stylist for help with last-minute wardrobe needs, gift shopping, etc.
- Complimentary shipping for online or in store purchases (actually a charge with a $10 refund on the next statement,clever huh?)
- Early access to shop the Nordstrom Anniversary sale
- Invitation to the Private Holiday Shopping Party
SERVICE CONTRACTORS can:
For customers attaining specified purchasing goals, consider:
- Labelling the level attained, make it special, such as Most-Favored Client status, or Corporate Platinum level
- Providing a valued service free (possibly one the customer had never before used)
- Provide faster access to your account service rep, either through more frequent site visits, emails or calls
- Include customer contact on your firm’s Customer Advisory Board
- Invite customer to new product/technology demos your suppliers put on
- Invite customer to participate in service roundtables hosted by your trade associations
3) Plan customer incentives for specific times of the year.
How NORDSTROM does it:
Nordstrom has a yearly calendar identifying dates were double and triple reward points can be earned. These are in addition to regular purchases throughout the year.
These dates appear aimed at the slower summer season as well as increasing buying during retail’s high season over the holidays.
SERVICE CONTRACTORS can:
If there are identifiable purchase seasons, incentivize the off season, as well as the high season for those types of purchases.
The profitability of non-contract services will offset a volume discount offered.
And as importantly, the more services customers buy, the more they’ll value you as a service partner.
The critical part is to schedule out special times where your discounts are greater than usual. You need to get customers’ attention, as Nordstrom does with its Double and Triple reward points boldly marked on their collateral’s calendar.
Getting Started
Once a comprehensive Frequent Buyer Program is developed, branded and formalized, your ready to take it to your customers.
Customize a portion of the program for each contract customer. Make the minor changes to incentives, services, schedule and fees required for a particular customer. The goal here is to have a program that’s 97% static and 3% customized.
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Chris Arlen
President, Revenue-IQ
Add comment January 25th, 2010
