Michael Phillips, CEO of Pro Commerce. Photography by Hiromi Iguchi
“Individual clients don’t increase or decrease their purchases because of the loyalty card system,” said Phillips, a San Francisco-based marketing consultant, at an ACCJ speaker’s event held in The Westin Tokyo on April 23. A select group of members attended the speech entitled “Marketing To Short Term And Long Term Clients.”
Phillips’ sentiment rings especially true in Japan, where almost every retailer—from your neighborhood taiyaki stall to Nihombashi department stores—employs the membership card or points collection system in a bid to lock in clientele.
Moreover, the loyalty card system fails to reach out to who businesses really want to, or should, engage the most—the new customer.
“A better way would be to empower your sales or counter staff, who would be able to tell a new customer from a regular one, to give out random gifts to clients—either new or old ones—in an effort to reward them for shopping with you,” said Phillips, 72, who has been a business consultant for over 35 years, and counts over 1,500 businesses as clients around the world, such as consumer electronics giants Sony and NTT.
“I can appreciate that companies feel they should be rewarding their regular customers, but it doesn’t work. The person they really want to reach out to is the new client, who may feel alienated by the membership system,” said Phillips.
“You want to put more effort into rewarding the new customer, it’s like going all out to impress somebody when you meet them for the first time,” he said.
Indeed, there is a subtle but significant difference in marketing to new customers versus regular clients that warrants different marketing approaches. Phillips, who has authored 11 business books—including “Marketing Without Advertising,” now into its 6th edition—cited six key approaches catering to different categories of customers.
In the same vein as “Marketing Without Advertising,” Phillips’ marketing strategies can be implemented without an expensive advertising campaign. The basics of such an approach involve attracting new customers and building trust, encouraging customer recommendations, improving customer service and converting even dissatisfied customers into active supporters of the business, listing products and services widely, planning marketing events that will keep customers involved and using the Internet to market services and products. In a nutshell: Letting your customers advertise for you.
Throwing in the random freebie—such as a special wrapping or a bigger serving—is one strategy for winning over the newbie customer. Another is to display referral from others, known as kuchikomi (口コミ) or word of mouth in Japan.
“It’s not easy to get a new client, either in your shop or on your website, you need to show reference from other customers so that the potential client feels assured that he or she is in the right place,” said Phillips.
Moving from the front-end to the back-end, ensuring that your customers know they have a route of recourse should they be unsatisfied with the service or product—either via a superb return or refund system—is also a simple yet significant way to winning over new business.
“Letting the customer know that there is something they can do, some route of resource, if they are not happy with the product or service will help put them at ease,” said Phillips.
The next step is to engage the potential customer’s interest, and a good way to do this is via including “curious info” either on your website or storefront. “Raise your customer’s curiosity with something that involves a sense of mystery,” said Phillips, citing the case of a unique enomatic wine serving system at a French restaurant he dined at in Tokyo which served as a unique centerpiece as well as a message to customers that the restaurant could keep and serve topnotch wine by the glass.
This can be as simple as having an intriguing feature on your company’s website that draws in the reader’s curiosity. Then maintain that interest by laying out as many ways as possible to connect with your target client. This could also take the form of uploading information about your staff—such as which universities they graduated from, to what train line they take to work or anything that your client could possibly identify with.
Finally, to measure the success with which you have engaged your new client, the ultimate raincheck is whether they return. One restaurant in Akasaka has a literal raincheck system: Patrons are given a discount coupon which can be used if they come on rainy days. “Always look for ways to get people to come back, even if it’s apologizing for the bad weather,” said Phillips.
Above The Regular
Reeling in the new client is just the first step. Marketing to the regular client poses a challenge of a more complex hue. “You have to keep showing your regulars that you have what they want by generating constant up-to-date expertise (in your field),” said Phillips. Next, give your regulars reason to complain—incentives, in fact. After all, the statistics have it that one out of every 10 customers who have complaints make them, nine out of ten don’t complain, but that one person who complaints will call six people and tell them about their bad experience. “You want to be able to identify the problem quickly before it gets out of hand,” said Phillips.
Also, find a way to recognize how long your client has been with you. Phillips cited online store Amazon which gives a 10 percent bonus for every $200 purchase. “Give out longevity bonuses,” he said.
The final three strategies are: Reinforce to your client as to just why they should choose you with explanations on why your business is distinctive or better, expand your service with links to related products and expertise, and lastly, reinforce to your regulars that your business is still viewed favorably and is relevant to the market through the continued support and recommendations of others.
Phillips, who has uploaded some of his books onto the web, said he chose the company he is using to transfer the book into PDF version because the company explained and highlighted the fact that despite transferring the book into PDF files, the copy would still be machine readable and hence detectable via online search engines.
During the question and answer session, Andrew Hankinson, Managing Director of global office supplies manufacturer Esselte, asked why companies continue the system of loyalty or membership cards if they don’t contribute to higher sales.
“Companies feel they should be rewarding their customers, which is correct, but individual clients don’t increase ordinary business because of a loyalty card. If you’re going to spend some of your revenue rewarding customers, its better to empower your counter staff to use random gifts to reward new and old customers,” said Phillips.
Phillips then cited the example of a café in San Francisco where employees can give out free cups of coffee randomly to whichever customer they felt deserved the perk—be it the new customer the café wants to impress, the regular that deserves a reward or simply the client having a lucky day.
“I’d go to the café never knowing whether I’d have to pay for my coffee that day,” quipped Phillips. Asked if there was a difference between marketing a service and a product, Phillips said, “I don’t see a big difference. Often a service is required as a result of buying a product, for example, in the case of getting a photocopier, or the applications that come with an iPad or iPod. Services and products will be increasingly difficult to separate in the future.”
Commenting on the hour-long presentation, Hankinson told the Journal, “Phillips’s presentation had a lot of relevant information coupled with concrete examples retarding customer service. His presentation on marketing strategies for first time customers and loyal customers was very insightful. Some of his ideas I see working easily in the U.S. and would love to see implemented in Japan.”
Phillips, who helped start MasterCard as an executive at the Bank of California, is known as one of the first business gurus, and started a business network in the U.S. called the Briarpatch that counts over 1,000 members from its foundation in 1974 to today.
Phillips said his next book will focus on the Internet and Internet commerce. “Start a website for your business, it needn’t be expensive, but do include a menu and be sure to submit your site to search engines so people can find it, and bring something new to the blog everyday,” said Phillips. His views on business and commerce can be read on his blog called Pro Commerce at http://phillips.blogs.com/, which is updated daily.
