Consultnt's View, July, 2001

Who is my customer?

A number of years ago when mobile phones were first coming out to the mass market, I thought that Radio Shack would be a big player in the field as they had many outlets from which to sell phones.

It turned out that Radio Shack missed a major aspect of the market: phone handsets. Handsets are not sold to the public, they are sold to the wireless companies and then to the public. The cost of the handsets is then subsided by the use of hours and hours of time on the airwaves.

Do you ever find yourself in a similar position—we have got the goods and a lot of advertising, so why aren’t people buying stuff from us? Often, when major changes are happening to a technical landscape, it can be confusing to know who is actually putting up the money for all the changes we see.

Understanding who the customer really is is important for making a business work, and who that customer is may change from year to year.

How to find out who your customer is differs from industry to industry. In the retail arena loyalty programs are a way to find the good customers. In many other industries, it means asking questions about how the decision was made to go with us.

In some cases, one person has the "Go" decision while another person has the "Stop" decision. Without recognizing all the important players in the decision, the sale might not stay sold.

Ask the question of your clients: who made the choice to go with us and why. In the consumer industries, often the customer does not know—which is why market research can get quite deep. The point of asking is to both know how to work with this customer better and to find out any trends that you need to know about. The future of your business may depend on knowing these answers.

Prairie Trail Software can help you find your customers, and we can help you with a loyalty program. Call us if you want more information.

Vol. V no.2

July, 2001

You want a Loyalty Program...

Big deal. Yeah, we have built a number of loyalty programs and we are always glad to take your money. But what is your return?

We often see a manager or sales executive come in and ask for a loyalty program. They heard about all sorts of good things happening with another loyalty program and they want those results too—they want to add a loyalty program on to the rest of the things they are using to promote sales—well, it ain’t gonna work.

If the implementation of a loyalty program does not cause major changes in the structure and operation of your organization, it is likely a waste of time and effort. The good things that come from a loyalty program, come only after changing how your organization operates.

You have several types of customers. There are those who buy just the stuff on special (the customers you lose money on), a bunch of customers who purchase just what they need from you, and those who purchase your high margin items.

The first benefit of a loyalty program is the knowledge of whom your good customers really are. Surprisingly, intense customers are not the good customers. Many of the really good customers do not fit the profile of what most of us think our good customers are: show up often, are friendly, and make sure that we know that they are buying something.

The second benefit is in changing how to measure business success. Normally, the way that a lot of companies measure their success is by looking to the sales volume.

When more sales are made, then the business is getting better. But what if those sales are just more people using store coupons and buying the stuff on sale? Such sales lose money which you can’t make up on volume.

A good loyalty program can give you hard data on who is buying what. If you have the data on what items bring you the most profit, then find out who is buying the stuff that brings you the most profit and reward those people.

In an economic slowdown, this information is far more important. Last decade, the airline industry could sell almost every seat they put in the air. So, they concentrated on getting more seats in the air. The result was full airplanes, with cramped seating, and a general turnoff of the most profitable customers. Have you noticed the recent airline ads? Now, they are boasting about how much room you have in their seats. They found out that their most profitable customers were choosing to avoid them.

The purpose of a loyalty program is to find this information as fast as possible in order to minimize the damage of bad decisions and to reinforce decisions that these customers like.

But, this means changes to your organization. What good is a program to increase sales if you don’t know if what your customers are buying is bringing you profit? What good is a loyalty program if nobody is listening to what these customers say with their purchases? Who decides whether an idea is good or bad, the manager who proposed it, or the customers who decide to, or not to, buy it? In essence, a loyalty program is a “reality” feedback program for managers who need to be listening to it instead of to corporate politics. Is your organization ready for that change?

It's a Risky World

The titanium Apple powerbook can be a problem. At one airport, the X-ray operator couldn't get enough detail out of the X-ray of the computer, so they tried for other tests. After causing much trouble and delay of hours, security was convinced that a powerbook really was a computer.

A Consultant's View is published by Prairie Trail Software, Inc., a business and computer consulting firm

Making information from streams of data

For inquiries call 1-888-300-4645 fax: 972-419-0390 mail@prairietrail.com www.prairietrail.com

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