The Customer Loyalty Solution : What Works (and What Doesnt) in Customer Loyalty Programs

• Business-to-business e-commerce transactions can be highly successful.

• Pure-play Web e-commerce seldom works. Success comes to established businesses that add a Web presence. To make the Web work, you have to build a very expensive distribution system. Once you have built such a system, you are not a pure-play operation anymore.

• Barriers to entry on the Web are very low. It is very easy and inexpensive to start a new Web site in any category. It is very hard and expensive to build a chain of stores and warehouses. That means that if you are successful on the Web, you will very soon have many Web competitors.

• People like to hold something in their hands before they buy it. What about catalogs? A catalog is something you can hold in your hands, pass around, and scribble on; you can tear out pages and stick them on your refrigerator. You can’t do any of this easily on the Web.

• There is precious little loyalty on the Web. To keep people coming back, you have to personalize your Web site and communicate often. Mass advertising is too expensive for most Web sites. Loyalty is very difficult to generate and maintain on the Web.

So if you have an established land-based business and want to benefit from the Web, what should you do?

• Look on the Web as more of an ordering medium than a selling medium. Put your Web URL on all your catalogs, brochures, and direct mail pieces. Provide one-click ordering to make it super fast.

• Provide a dealer locator.

• Create a profile of every customer. Give all your customers, whether business-to-business or business-to-consumer, a personal PIN, and invite them to come to your Web site to update their profile. Give them a gift for doing so. What is a profile? It contains not just the customer’s name and address, but the customer’s email address (with permission to use it), demographics, family composition, preferences, and purchasing history. Get the customer’s permission for you to remember his or her ID and password—that is, permission to put a cookie on his or her PC. If the customer is a business, use the profile to find out what it does, how it uses your products, and how often it buys. Use the profile to populate your database that is used for regular offline sales.

• Use the profile to personalize your site. As Amazon or Staples does, say, “Welcome back, Susan” (using a cookie). Then vary the site content based on the profile. If Susan has children under the age of 4, your site will look different from the way it will look if she has children in college. This is not expensive to do. Most sites that have customer profiles developed can become fully personalized for a hundred thousand dollars—not millions.

• Communicate often. When customers hit the one-click order button, thank them then and there for the order and reiterate what it was for. While they are reading this, send them an email repeating your thanks. Then send an email saying, “Your order will be shipped on . . .” Then another email: “Your order was shipped by UPS with this tracking number . . .” And another email a week later: “Did your order arrive on time? Were you satisfied with it? Click Here to let us know your reaction.”

Success on the Web

If you can’t make money selling on the Web, what should you do? Measure your success in other ways. This should not be total sales. Total Web sales are still a small fraction of all sales. For most catalogers, Web sales seldom exceed 15 percent of total sales. What the Web does is permit you to save some money, if you do it right. You have to have a Web site today. It is how companies are judged by customers, suppliers, and investors. You can’t hide your head in the sand just because you cannot make money from your site. So build it, and keep the costs down. Then do the following things:

• Put lots of free information on the Web. Every company has information lying around that could be made available to customers. Magazines and newspapers have archives. Technical companies have lots of technical reference data. Travel services (hotels, resorts, airlines, travel agencies, cruise lines) have massive amounts of information about destinations: maps, weather, activities, amenities, local lore and history, tours, and so on. Put all that on the Web for free. Why? Because it will save you lots of money. Encourage travelers to find out what it is like to go to Italy by reading your Web site and looking at pictures rather than by talking to your customer service reps all day. Once they have made up their minds, they can then call a CSR to book their trip.

• Measure your success by reduction in calls to CSRs. Begin the year by estimating the number of incoming and outgoing calls that you expect to field during the year. Analyze those calls. How much will they cost? Why are they made? Which types of call could be handled on the Web? Then set up your Web site to answer the questions most likely to be asked of a CSR. “Where is my order?” “How do I get replacement parts?” “What is the weather going to be like in Prague?” If you do this right, you will be able to save millions of dollars by shifting these calls to the Web. I worked with a travel-related firm that received more than 7 million telephone calls a year, costing it more than $48 million. This company measured its Web success by the number of these inquiries that it could get its customers to make on the Web. Each CSR call cost the company $6.50. Each Web visit cost less than $0.10. If even 10 percent of these calls could be shifted to the Web, the company could easily save millions of dollars. Some companies that have done this find that CSR calls do not decrease, but that customers use the Web to get the information and call the CSR to close the deal. This is wonderful!

• Sell parts and replacements. Any established business can profitably provide replacement parts through the Web. Look at Hoover.com, where you can find replacement parts that are not carried in any retail store. Go to GEAppliances.com, where you can find 50,000 parts that you can buy on the Web.

• Travel sites can help your travel business. Travel-related businesses can profit from being on the Web even if they don’t sell anything directly. Hotels, car rental agencies, airlines, and amusement and theme parks can benefit. I am writing this from Fort Lauderdale, Florida, where I am spending some time with my children and grandchildren. We needed a six-passenger minivan, but Hertz, Avis, Budget, National, etc. were sold out. I found a brand new minivan from Payless Auto Rental (who ever heard of that firm?) on the Web. How else would I have been able to locate such a company?

• Publicity. Every rock star today has a personal Web site. Why? Vanity? Not at all. If you register at a Web site for Sheryl Crow or Madonna, you will be added to a list. When the singer’s next album is released, you will probably get an email. Experts in the industry can demonstrate a relationship between emails to fans and retail store sales. Publicity on the Web can be made to pay.

• Sell to business customers. This is a major growth area.

Why Selling on the Web Cannot Be Easy

Using the Web to compete with established businesses was a pipe dream. It could never work. Why not?

• Established businesses spent millions to get where they are, and they will not fall down and play dead just because some Web site comes along.

• If it were easy, you would have lots of Web competitors, and you would soon find it difficult.

• Furthermore, if it were easy, the established businesses could always beat you by doing exactly what you are trying to do, because they know a lot more about it than you do.