SUCCESSFUL FRANCHISING – A QUESTION OF RELATIONSHIPS

(Part 3 of a 4 part series)

Advice on franchising by Pieter Scholtz, Master Licensee for ActionCOACH SA. ActionCOACH is one of the fastest growing and most successful business coaching franchises in the world today.

In part one and two of this four part series on customer relationships we discussed external relationships, ideal customers, satisfying customers and explored the concept of winning customer service. In this article we will discuss a customer plan and the ladder of loyalty.    

Any business owner knows they need to do more than just provide great customer service. To be truly effective you need to implement a customer service plan, and an effective customer service plan will incorporate the following points:

·         Identify your ideal customers.  Find out who they are.

·         Create a customer service vision. Remember, customer service is about understanding that little things are important. You need to make an impression on your customers.

·         Conduct market research by asking your ideal customers what they would regard as excellent customer service.

·         Now create your customers’ customer service vision.

·         Combine the two visions above to create the ultimate customer service vision.

·         Decide what it is you can promise your customers. This must be something you can deliver each and every time. My rule is, under promise and over deliver.

·         Involve your team by presenting them with the vision and ask for their ideas on how it can be delivered. Work consistently with them on this.

·         Make sure you have continual “checkups” to ensure that you are delivering on your promises.

·         As your level of service improves, move the goal posts and keep improving.

·         Always give your customers more than they expect, like surprising them with a free gift.

·         Always smile, people love to feel special.

People are willing to pay for service when it’s the service they desire. If the service exceeds their expectations, they will stay with you and they will say good things about your business. However, if you deliver poor service, they’ll walk away never to return and speak negatively about your business.

The Ladder of Loyalty

In an effort to generate repeat business, most good businesses spend time and money in the pursuit of good customer service. Understand, however, that good customer service in itself does not foster customer loyalty. Let’s say that out of two competing businesses the first delivers average customer service and the second prides itself of delivering good customer service. The first business, however, writes a follow-up letter to its customers inviting them to shop there again, whereas the second does not. Where do you think the customers are more likely to shop next? 

So let’s take a closer look at this very important concept of customer loyalty.

How do you develop loyal customers? I like to explain this using the Loyalty Ladder concept. Think of it as an ordinary ladder. If you were to step up onto the first rung of the ladder, would you just hang around there?  No, you would want to climb up right away or get off. You have to move your customers up this ladder, and you need to keep them moving upward all the time.

Now ask yourself why it is you want to build a Loyalty Ladder for your business. I’d suggest it is because the first sale you make to a customer is made at a loss. Statistics show that after you have accounted for advertising and marketing costs, overheads and maybe even commission, nine out of ten first sales are made at a loss. Unless that same customer comes back to buy again, you have not profited from that customer.

Let’s now consider the various stages of the Loyalty Ladder.  There are six.

6. Raving Fan

5. Advocate

4. Member

3. Customer

2. Prospect

1. Suspect

1.         SUSPECT

When they first start out on the Loyalty Ladder, right at the bottom rung, people are called suspects. How do you identify them? They are only potential customers at this stage; they fit within your target market and they are willing to buy from you if they are in your geographic area.

2.         PROSPECT

We then move up the ladder to prospects. Prospects are suspects who have taken some sort of action like phoning in or visiting your business. Collect their details so you can stay in touch. This is an important step as building customer loyalty is all about prospects. You now use all your sales skills to move your prospect one rung up the ladder to the next stage, that of a customer.

3.          CUSTOMER

To be classified as a customer, your prospect needs to have spent money and you need to have recorded the sale in your records. While this last step may seem strange it is necessary to distinguish between your prospects and your customers in your database. If you are planning to send a letter to your prospects offering them an incentive to buy, you don’t want to also send it to people who are already customers. This record will also tell you when they last bought, how often they buy and what their average rand purchase is. Interestingly most businesses put up a huge ‘STOP’ sign at his level. The salespeople seem to sit back and wait for these customers to return instead of being proactive about inviting them back. Understand that at this level the customer has cost you money, and if you are content to stop at this level, chances are your business will eventually go broke. I have eaten out at many restaurants and guess what, I am not on any database. I’ve never received a letter from them saying we would love to have you back. This is, in my opinion, insane. They seem to be saying: “You’ve bought, now I am going to just hope you come back”. The ‘STOP’ sign is the scariest thing I’ve come across in any business. You need to eliminate it and do so fast.

4   MEMBER

When your customers make their second purchase, they move up another rung to the member level. They now have a feeling of belonging. Understand that customers who make two purchases are ten times more likely to make more purchases than someone who has only purchased once. So, put some extra effort into your members and perhaps give them a membership card and a membership pack. Chances are that very few of your customers know all your products, so consider including a product catalogue and samples or vouchers in the membership pack.

5. ADVOCATE

Members must be moved up the ladder to the next level of advocate. An advocate is someone who sells you to their friends and acquaintances. The criteria for advocates is that they give referrals, promote your business and continue buying. Advocates are one of your major capital assets.

6. RAVING FAN

The next step is the top of the ladder, known as raving fans. While an advocate is someone who will sell for you, a raving fan is someone who can’t stop selling for you. The exciting thing about a Raving Fan is that they can almost be regarded as part of your team. They want to see you succeed. Of course, they continue buying from you.  

Remember, the aim of the game is to move people up the ladder of loyalty from Customer to Raving Fan. This is where you begin to make profit.  And remember, people are prepared to pay for service.

We have now looked at your external relationships in some detail, but this is just one aspect of the business relationships you will need to concentrate on. Internal relationships are also important. The way you interact with your internal stakeholders, your staff and your franchisor is just as important as your relationship with your customers.    

In the next issue of SA Franchise Warehouse I will be discussing the importance of good internal relationships.  

Pieter Scholtz is the Master Licensee for ActionCOACH in South Africa. Pieter acquired the master license in 2007 and successfully launched what was an unknown brand into the South African market, establishing 18 franchises in only four years. In 2008, Pieter was honoured with the ActionMAN award at the ActionCOACH EMEA Conference. Pieter is a member of the International Business Coach Institute and COMENSA.

Phone: 086 122 6224

www.actionscoachsa.co.za