Co-Opetition - Adam M. Brandenburger [71]
3. Say thank you in a way that builds your business. Often, businesses give potential customers a free trial. That’s a fine strategy for increasing sales. But even better may be to give loyal customers a guest pass and encourage them to bring someone else along. Health clubs often do this.
You can also reward loyal customers with products that encourage them to do more business with you themselves. For example, the long-distance phone companies could reward loyal customers by giving them free, or at least sharply discounted, voice mail. With voice mail, no call goes unanswered. Thus, the phone company doesn’t lose the business because someone wasn’t home. Even better, someone has to make a call to pick up the message and perhaps even another call to answer it—or leave voice mail in return. Just as voice mail solves the problem of no answer, call waiting solves the problem of a busy signal. Now more calls get through, and so again there’s more business. We suspect that giving free three-way calling to loyal customers would further stimulate phone usage.31
4. Don’t say thank you too quickly, or too slowly. If you say thank you before you’ve had enough time to build a relationship, it’s more like offering a discount up front. Similarly, if you wait too long to say thank you, it won’t mean much.
5. Say that you’re going to say thank you. Yet another well-designed feature of frequent-flyer programs is that they tell you right from the start how big a thank-you to expect. The more traveling you do, the bigger the thank-you you’ll get. With some other programs, the thank-you is a surprise—a welcome one, but still a surprise. For example, American Express recently sent one of us a reward for being a ten-year member. Nice, but unexpected. And we don’t know whether there’ll be another thank-you down the road for being a fifteen- or twenty-year member.
If you’re planning to say thank you, you should let your customers know in advance so they’ll stick around for it. You don’t have to treat your customers as though you’re throwing them a surprise birthday party. You might be the surprised one if they don’t show up. Telling them that you have a present waiting for them down the road doesn’t ruin the sentiment.
6. Recognize that you may have to compete for loyalty. Saying thank you to customers is a way to make them loyal to you. Of course, you may have to compete with others who’d like those same customers to be loyal to them.
One way to compete is to give deep discounts to attract new customers. The problem with this strategy is that others will be forced to do the same, and then some of your existing customers will leave to become someone else’s new customers. The result is likely to be no net shift in share, simply an expensive reshuffling of customers and a loss of loyalty all around.
A better way of competing for customers is through creating a more attractive loyalty program. That way, the end result of competition for customers is more, not less, loyalty. But don’t go overboard on this, either. That’s our next point.
7. Allow your competitors to have loyal customers, too. Just as you benefit from having loyal customers, don’t begrudge others this opportunity. This isn’t just a matter of being nice. Consider the alternative. If your competitors don’t have loyal customers, they certainly won’t have an incentive to raise price. Indeed, with little to lose, they’ll be more likely to cut price in an attempt to attract your loyal customers. It’s to your benefit if your competitors develop their own loyal customer bases. As we’ve said, rivals who live in glass houses don’t throw stones.
8. Don’t forget to say thank you even if you have a monopoly. You may have a monopoly today, but there’s always the possibility of entry or competition from a new technology tomorrow. Having loyal customers will put you in a better position in tomorrow’s game. It may even dissuade others from entering your game altogether. The best time to develop loyalty is while you have a monopoly. You don’t have