Think about your favorite truck. Imagine the company that makes it. They want you to keep loving them and always choose their truck. But sometimes, they try to trick you instead of just making awesome trucks. They might lower the price a little or add tiny improvements, but it’s not enough to delight you. Now, what if they focused on your needs and made you feel really good about driving their truck? What if they listened to what you liked, understood why you loved their trucks and made sure you were always satisfied? That would be nice, right? When companies do this, they build a strong connection with people. And when you feel that connection, you’ll want to stick with them. [Don’t miss the Pro Tip at the end of this article.]

1. Is Customer Loyalty Vanishing?

Today, when you want to buy something, you can easily check out all the different things for sale and compare prices online. If you don’t like what one seller is offering, you can just click away. Disturbingly, a study by Accenture found that 77% of customers now change their minds about being loyal faster than they did three years ago. However, profitable customer loyalty is a key driver of customer lifetime value. Profitable, loyal customers tend to:

• Make repeat purchases, spend more over time, and are willing to pay premium prices
• Cost less because they are familiar with your process (Some studies claim 5 times less)
• Forgive you if something goes wrong
• Buy brand extensions and new products
• Tell their friends (referrals are free marketing)
• Resist competitors’ offers and stick with you—they’re loyal

Some companies like Apple and Amazon have proven that customer loyalty has not vanished — it’s just more difficult to achieve and maintain. Most companies lose their loyal followers because of short-sighted choices that dramatically impact the long-term value of their relationship. In tough times, the reflex is to cut expenses with a machete when a scalpel is the better blade for long-term success. For instance, reducing staff with the strongest relationships would be unwise even though they have the highest salaries and would lower your payroll expense the most. Instead, always think about how cutting an expense will affect your customer’s loyalty and their lifetime value to you.

2. What is the Secret to Building a Strong, Loyal Customer Base?

It starts with your attitude — you must be willing to listen, learn, change, and adapt to serve your customers better. A challenging market is your chance to show the value and expertise you provide to your customers.

• Be the expert, the customer’s go-to person for advice
• Put your customer’s needs first instead of pushing products
• Be honest and sincere—even if it doesn’t serve your bottom line
• Value Beats Price: Think beyond just the cost. Make sure what you offer is valuable
• Listen Up!: Pay attention when people talk and collect info—you’ll learn so much!

Imagine you’re the customer. What would make your experience better? It would make a big difference if your dealer showed that they cared about you! That empathetic attitude sets the stage for everything else. Apple training teaches: “Your job is to understand all of your customers’ needs —some of which they may not even realize they have. Probe politely to understand all the customer’s needs, present a solution [not necessarily a product] for the customer to take home today.”

3. Strategies to Retain Customers During Tough Times

In tough economic times, customers naturally cut back or delay their spending. Therefore, your focus must shift to retaining their business and the long-term value of the relationship.

• Help them save money. Often, the best strategy is to work forward in the life cycle of their equipment to help them plan trades and maintenance.
• Be Honest and Clear: They must see the value and what your services bring to the table. Let them know upfront what they need versus what they can do later. Building trust on the front end allows you to show your customers that you are not just selling to them, but you have their best interests at heart.
• Cash Flow Matters: Understanding your customer’s is essential to timing your solution.
• Value Over Discounts: People buy stuff because it’s valuable to them. Even when money’s tight, they’ll invest in things that matter. Discounting in lean times is not a good idea because when you discount, you cut margins and have to sell far more to make up for that profitability. Moreover, your competitors can always offer discounts, but can they beat you on value?
• Stay Connected: Communicate routinely and meaningfully to stay current on your customer’s evolving priorities in lean times. Work with them to develop more targeted approaches to deliver value. With collaborative creativity, lower spending does not need to translate into less impact.

4. Bad News: Loyalty Doesn’t Always Equal Profit

Despite what many consultants and every client relationship management program (CRM) salesman says, the data doesn’t show that loyal customers always generate more profit. The relationship is more nuanced. A lazy loyalty program based on mass mailing and unquestioningly offering perks to frequent customers will likely cost more than it benefits. The power of the CRM allows us to easily contact customers, count transactions to identify “transactional loyalty”, and determine how much your relationship efforts are costing. (Relationship costs include discounts, perks, goodwill, mail, and the non-billable time your staff spends on the relationship.)

In addition to cost and “transactional loyalty,” you must also understand how your customer feels about your business — their “attitudinal loyalty.” You can rate “attitude” using surveys or generate a score based on staff feedback, but you need a consistent measurement to reference. A Harvard study found that when customers have both “transactional” and “attitudinal” loyalty, they are 54% more likely to be effective word-of-mouth marketing for you.

Remember, you want profitable, loyal customers. Many lazy loyalty programs rely on RFM (recency, frequency and monetary value). However, RFM is a poor measurer of loyalty, especially for equipment dealers, because it ignores customers’ buying patterns. RFM statistics also typically consider revenue as the monetary value instead of profit. The better approach is to consider per-period profitability.

5. Choosing a Loyalty Strategy

If you know your customer’s needs and understand their cash flow, then predicting what they are likely to buy in the future is the final piece of the puzzle. Now, you just need to do some math and analyze the profitability of each relationship. Your customers will fit into one of the four quadrants shown in the diagram below:

Understanding that customers are different, it’s clear that a tailored approach is necessary. Focusing on profits will guide the loyalty strategy to boost earnings. Managing profits and loyalty together strengthens their link. With today’s technology, tracking and analyzing customer behavior is becoming easier. Yet, a personal connection with customers remains vital for mutual value.

Ag Guard stands as the pioneer of independent extended service contracts. Ag Guard has been at the forefront of crafting cutting-edge solutions tailored for industry experts for a quarter-century. Our commitment to quality is evident as Ag Guard contracts are exclusively available through equipment dealers dedicated to their clients’ prosperity. For more information about Ag Guard products, contact info@agguard.com or 816-223-1978.

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