How To Forge Iron Cage Customer Retention (1 of 2)

Welcome to the Magnetic Marketing Podcast. In this episode, we're going to talk about how to forge iron cage customer retention, part 1 of 2. You get to listen in as Dan Kennedy and Bill Glazer discuss the top 5 reasons your customers, clients, and patients quit doing business with you. Now, in part 2, we'll talk about the 5 stages for combating the whys and creating your ironclad customer retention plan. But as you listen to this episode, you're going to learn the 5 key holes that most businesses have in their fishing nets and why acquiring customers usually isn't as difficult as retaining them. Let's jump in.

I don't think there's anybody that has had a bigger impact in the field of direct response than Dan Kennedy. The legend of Dan Kennedy should be ignored at your own peril. They're not really lessons, they're kind of laws that you live by. Dan opened my eyes to what small business marketing looks like. Dan teaches strategic direct response that is timeless. His ripple effect touches people who don't even know his name.

The world as we know it was changed because Dan Kennedy became obsessed with marketing.

Welcome to the Magnetic Marketing Podcast with your host, Dan Kennedy. Well, hello, Razor Kennedy Gold Plus members. This is Bill Glazer along with Dan Kennedy bringing you another one of our Monthly Gold Plus calls. Today we have a terrific topic that I think will be extremely timely for many of our members and especially given what Dan has called the emerging new economy. So a lot of this I think will be specifically appropriate for your thinking with dealing with your customers, patients, and clients. During the emerging new economy, and that is strategies for iron cage customer retention and increasing total customer value. And let's sort of dig right into it. And the first part of this is we want to talk about the chief reasons why customers, patients, clients leave. And so, Dan, the first one on our list here is geographic relocation or industry job change, which is just for whatever reason they move away. And the second one is genuine irrevocable dissatisfaction that they're just unhappy with you. And the first one I think, you know, there's not much that we need to talk about when people sort of move away. I mean, that's a very difficult thing in order to actually control and, you know, you actually will lose clients because of that. But the second one is genuine irrevocable dissatisfaction. Dan, what do you find is some of the main reasons why people do get dissatisfied with dealing with people?

Well, first of all, I don't think that— I think that it is a sudden occurrence is rare, you know, where somebody just has one horrible experience that couldn't be fixed, repaired, or made right, you know, under any circumstances. And in the other cases, it's sort of a slow build where the customer is gradually getting ready to leave. But much like sitting through a bad movie, most people keep hoping it's going to get better and that the bad thing that just happened to them is an aberration. They'll actually make excuses for the vendor, the supplier, the place that they're doing business with for a little while. So you have a window of time to identify this and react to it and respond to it before it becomes, as you put it, irrevocable. And that, you know, requires sort of taking the pulse on a regular basis of customers through various and sundry means to try and spot these things before they escalate. I think generally the reason that most customers and clients finally scratch a business off their list as someone they won't do business with and they go in search of someone new is a repeat of the same dissatisfaction multiple times. So be that quality of product, quality of service, speed of service, keeping of commitments, meeting deadlines, environment when you come into the place of business, whatever. It has occurred to them, the same cause of dissatisfaction has occurred multiple times over a period of time before it really causes somebody to go.

Well, you know, it's interesting you say that because, you know, as everybody listening to this call probably knows that every other month in the NBS marketing letter I write a column called the Sales Prevention Department. And as you were saying that, Dan, and I was thinking of all the different stories and examples that people have sent in to me and now I have a whole big folder of them. When I am thinking of all the examples that are sent in, in most cases, really in all cases now that I can think of it, it is not the one instance like you said, Dan. It is sort of like a combination of things. Whereas they ignored me and they didn't treat me right. I am thinking of the one guy that I wrote about, I think it was this past month, about the guy with the car dealership. So they ignored me, they didn't treat me right in the service department, and it's like a long list of things that they did wrong before it built up to the part where it is irrevocable. And he actually— I don't know that he didn't articulate this, and I don't want to put words in his mouth, but he almost took joy in the fact that the car dealership was going out of business, showing it as proof that they didn't deserve to be in business.

Yeah, well, that, by the way, you're going to see a lot of. And there are customers who have bad businesses who will celebrate their demise. But I would even go further and say that he may very well have brought his unhappiness to the attention of somebody 2 or 3 times and still not had anything rectified or gotten a very unacceptable answer. I mean, I think everybody's had the experience probably. I certainly have. I tend not to ignore it when it's bad. Mike Vance said years ago, the first time he spoke for me, he said if you sanction incompetence, all you do is make it worse for the next guy. So I really have made a point of complaining when I thought it's been justified. And the number of times that even the complaint has been ignored or sort of shrugged off always surprises me. I mean, I have two big stories about that. One is Celebrity Cruise Lines, which everything on the cruise was great except the exit. And the exit is kind of throw you overboard. And my luggage was damaged. I complained repetitively with no— I mean, I got an acknowledgement letter, but I didn't get a candy bar or a "we're sorry" or a $500 off on your next cruise or something. Consequently, they've never got another dime of my money, and I sort of relish blemishing their brand. Brand name at every opportunity. And I think a lot of customers are that way. It's why the rule of every unhappy customer tells 5 times as many as every happy customer tells because people do carry grudges.

Well, and then I think what's particularly informative to everybody that's listening to these ways when we talk about reasons why customers, patients, clients leave is that the first 2 that we I mentioned geographic relocation or industry job change and also the genuine dissatisfaction are not as controllable by you often as the rest of the things that are on this list. And although, truth be told, the second one, the genuine dissatisfaction, arguably could be controlled by you, but it's not as easily fixed as the next thing. So let's move to the next things. And the next thing is on my list here is boredom. Where they kind of get bored with you. There are lots of things that happen in terms of boredom. Kind of interesting, everybody knows that my former life, as Dan likes to say— now Dan and Lee Noltear both like to say it— is the fact that I was in the menswear business. The boredom issue wasn't as big a problem in menswear because we had seasons. So every season there was always new merchandise coming in. Preferably excitable new— exciting new things to show. So that business was kind of built into somewhat as far as our product we were selling. There was some immunity to boredom because of that was the case. But in many businesses they don't have that advantage. And so they only keep continuing to offer the same thing that they're offering over and over again, which is their product and service. And I think people do get sort of bored. With keep getting seen the same thing over and over again. The other thing is the sort of experience that they experience while they do business with you is boring to them. So if that experience is continually the same, then I think that that kind of repels them. So, you know, I think of malls today. Most malls are in deep trouble today. I think the reason why they're in deep trouble today is because of the fact that you walk into a mall today and all these malls basically look alike. They look the same and there's nothing kind of new to them as opposed to if you're like in Las Vegas and you go into Caesars Mall, you're more in an entertainment experience that's different than it was, than it is in most other malls. Even them in the years that I've gone there throughout the years, I think, Dan, you actually took one of your wealth groups there one time for a Field Trip, if I'm not mistaken. You know, as I'm going there throughout the years, they keep adding on to it. They add new things. There's different stuff. Yes, there's the same as the other stuff, but it really is more not about going into a mall, but it's really about going in to getting entertained. So that's the sort of the second thing that's on my list there. And the next thing is I would say about this is, whether or not there is a personality in the business and whether there is personality to prevent the boredom of the business. Now one of the things, for example, that Dan, you teach and I have become really bought into this, seeing it hook, line, and sinker, is the whole issue of putting personality in your regular communication with your customers. And certainly predominantly through or sort of the foundation of that being through a customer monthly newsletter that we believe every business should be sending out to their customers. And, you know, you do a terrific job of it in the OBS marketing letters where there's more personality that's put into it. I had a consulting morning this morning with a client of mine and, you know, his question to me, Daniel, This is after working with this client for 5 years, by the way, and I think you guessed who it is, Dan, but it's the— should we be sending out a newsletter to our customers? That's the first question. The second is how often should we be sending it? The third question is can it be online? And the fourth question is what should be in it? And so again, to prevent this boredom would be regular communication, throwing your personality into it, always talking about the new thing that's available that's out there. And then I think the last thing I'll say about this, and I'll turn it over to you, Dan, for any additional comments, is to combat boredom. If you're looking for a shortcut to do this where you're really, really struggling with how do I not be boring, how do I not continue to offer the same thing I've always offered to my clients? This is the case for why everybody should be in the information marketing business. Last night I was speaking at our local chapter here in Baltimore actually, which is funny because I live right here in Baltimore and the chapter meeting is 3 miles away. They've had 18 chapter meetings and it's the first time I've ever been over there. It's almost easier to get me to come to a chapter far away, but I was speaking over there and I was explaining to some of the several of the members in the room, and these were very new members, that you should be in the information marketing business because it repositions you from being a seller to more of a consultant to the business, which changes the whole selling process. But by being in the information marketing business, the other thing it does is that's a prevention of boredom tactic because if you can't change the product and service that you provide every month or continuously to your customers, What you can continually update and keep fresh is the information that you provide to them. So that's the real shortcut. So again, you know, being information marketing in your business doesn't mean being a seller of that. It just means a positioning of you for this boredom prevention. Dan, anything to add to that or anything you want to weigh in on?

I would say, first of all, I think this is something really, really important about customer retention. That a lot of business owners just never grasp. And it really gets to a fundamental misunderstanding of what makes a business successful and what sustains customers over time. And most business owners stay stuck within the premise that their business is about the core deliverable, about the thing that they make or do or provide. So the guy that owns the dry cleaners, he absolutely believes that his business is all about getting clothes cleaned and stuck in plastic bags and having them ready when he said he was going to have them ready. For people to come back and pick them up. And the guy that has a restaurant largely thinks it's about the food, maybe a little bit to the environment. The insurance agent thinks it's about insurance coverage and on and on and on. And that fundamental misunderstanding of why customers stay with somebody for a long period of time really gets in their way and it allows customers to become very blasé and disinterested in the business. And so they may not necessarily be unhappy and therefore they may not be motivated to go looking for replacement, but they are very easily seduced by somebody who waves some new shiny object. And so this really requires a shift in how you think about what your business is all about. And of course, it's my contention the business is all about the relationship with the customer, not the core product/service thing. That the product/service thing is actually incidental to the relationship.

Relationship.

And in order to keep customers attached, interested, active, relatively immune to seduction by competitors and alternatives, you've got to do things to keep that relationship alive and fresh. And you've got to do a lot of them and you've got to do them frequently. People's threshold for boredom is much, much, much lower. Their interest span is much shorter, it seems, with each passing year. I watched an old movie the other night that had 3 actors in it, 2 hours and 20 minutes long. One really was like watching a play turned into a movie. There were only two sets and it was all about the dialogue. Even if you go back and look at a movie like "Who's Afraid of Virginia Woolf?" with Richard Burton and Elizabeth Taylor, these were dialogue-driven movies. You could no more keep people sitting in a theater watching these things today for two hours than you could fly to the moon. It just won't happen. And even if you compare an old James Bond movie to a new James Bond movie, I mean, there has to be something happening almost every second or people are not, you know, happy. And so this tells us a lot about the requirement to hold the interest of a customer in any one given business. And even in your example of the clothing store that has forced upon it the advantage of change of seasons, I'm sure you would agree that while a decade ago 4 big here's what's new occurrences during a calendar year were enough to sustain a customer relationship. Today, anybody relying only on those 4 is going to be in trouble. They're going to lose their customers in between the changes of the seasons. And so I think people have to be very, very cognizant that if they want to retain customers and they want them not to be easily vulnerable to seduction by others, their business has to to be about something much more than the products or services that are made, sold, and delivered.

It's funny you say that because when I was heavily entrenched in the menswear business, although in Baltimore I think people still know me more for being in the menswear business than being in the marketing business, but when I was heavily entrenched in it, I would go around and meet people outside of my business and oftentimes inside the business. The thing that they would talk about more than their investment in the clothing was how much they enjoyed getting all my mail all the time. They said they loved getting the crayon letter and they loved getting the 5-page handwritten sales letter and they loved getting the pop-up envelope and the placemat from the restaurant and the list goes on and on and on and on. So really what I was doing with my marketing was I was entertaining them., and I was getting them out of the boredom business, and I was having them look forward to getting my mailing. Really, I always sort of fought the battle, which a lot of people will probably relate to, is that the first person to get the pile of mail in the home is usually the wife, not the husband. So I had to always think in terms of how am I going to get it past the wife to make sure the husband saw it because unfortunately I had the kind of store where the husband was the predominant shopper. Not like a department store where the wives were buying most of the menswear in department stores. And so what I had to kind of do was get past it, create personality in the marketing so that the wife would not dare throw it away because her husband so enjoyed seeing this stuff. And the truth of the matter is she did, too. So that was one of my strategies to always sort of combat the whole boredom that the thing didn't look like everybody else.

Yeah, and I'm going to make an unpopular point about that too, and that is that what you just described is critically important for most businesses, and that while it can supplement it, email is no substitute for it, and the businesses that have drifted into relying exclusively or nearly exclusively on email communications with their customers sacrifice a lot because they cannot create that, oh boy, what is he up to next, in-fun experience. There are obviously so many things that cannot be done, pop-ups, lumpy objects, games, toys, gadgets. Little pieces of candy that just cannot be done electronically. And the kind of communication that you were sending does not get taken for granted. It even creates a level of obligation to do business with you that you cannot replicate by sending them email.

Well, and listen, since we're on the soapbox of this, you know, one of the things and that my sales associates on our selling floor, we used to require of them is that any sale that went over a certain threshold, they were required to send a handwritten thank you note to the customer. And of course, they always wanted to send out an email thank you. And just think about it yourselves. I mean, if you got a handwritten thank you note in the mail from the salesperson, how does that perception of somebody really caring about you compared to somebody getting on a computer and just, "Thanks so much for your business, Sam," type email. I mean, it's all the difference in the world. So I agree with you, Dan, although as you know, I'm a big believer in online marketing and I also— we use email a lot at Glaser Kennedy. It's just as part of a marketing funnel, not in lieu of a marketing funnel, and direct mail, snail mail will always have much more of an impact than email will have. Let's move on to item number 4 on this list of chief reasons why customers, patients, clients leave, and it's called perception of being ignored or taken for granted. And it kind of loops a little bit to the last one, but Dan, I'm going to let you get started on this one if you would explain it.

Well, I mean, your point about the thank you note ties directly to it, so the taken for granted part is— almost as soon as a customer finds themselves in a relationship where the place or person they're doing business with takes for granted the fact that they will continue to do business with them, the customer begins to feel unappreciated and therefore sort of restlessly dissatisfied. So again, there's a perception, say, by the dry cleaner, a presumption that because I come every 2 weeks, I'm going to come every 2 weeks. And there's no particular— there's no communication in between, there's no particular expression of gratitude. And so I'm not unhappy enough about that to go looking for his replacement, but I would be very susceptible to a replacement if they arrived at the right time, at the right place, with the right offer, and/or were more interesting in one way or another. His hold on me is reduced. To my laziness in replacing him, and that's pretty tenuous. People first on a subconscious level, even before a conscious level, don't like being taken for granted by anybody, and resentment gradually sets in and ultimately surfaces and has bad effects. You know, whenever it does. And so we're really talking about now not the customer's satisfaction or perception of, again, the quality of the product or the service or the value proposition or any of that. We're talking about how the customer feels about the relationship. And if the customer feels taken for granted, it's only a matter of time before bad things happen. And of course, one of the ways that they are most certain to start to feel taken for granted is if they're being ignored. Now that could be standing at the podium when you enter a restaurant that you patronize on a regular basis. And there's some people in front of you, but you're seen, somebody obviously notices you and you're left standing there. It could be something as simple as that, too many minutes, all the way to something more involved like no communication in between purchases. And so being ignored in any way is going to cause the customer to be very susceptible to going elsewhere. And in the conditions we find ourselves in right now, that susceptibility goes up especially regarding price. And so customers that might not be tempted by a bargain offer, a lower price offer arriving at their door under more normal circumstances, may very well be tempted now. And so the local pizza shop who has customers that order from it regularly and have superior pizza and the customers really like the pizza, those customers might not be tempted by a Pizza Hut 2-for-1 offer under ordinary circumstances, but under current circumstances they might very well be tempted. There's even sort of a sense of— Gee, to be a responsible consumer, I should be more prudent about my money right now and I should not ignore this savings invitation that has fallen into my lap. So what stops that person from keeping that coupon when they might ordinarily chuck it and now calling Pizza Hut this Friday night instead of calling the local place? That they usually patronize on Friday night? What stops them from doing that? And it's not the quality of the pizza. And so if they're being taken for granted by that pizza shop and Bill and Mary always come here on Friday nights and always will come here on Friday nights, they stand a real good chance of suddenly not seeing Bill and Mary. And then, by the way, something that you teach all the time very well, if that business owner is not really alert and doesn't notice that Bill and Mary who are supposed to be there Friday night aren't and doesn't do anything about it and Pizza Hut gets them 2 Friday nights in a row, now he's got some real heavy lifting on his hands to go get them back.

Well, and so with this whole issue of being ignored or taken for granted, I think that the two key points I want to make about this is that frequency, which is clearly what Dan pointed out, the frequency of communication is really important in your business, how often you can communicate with people. And the second thing is, which I first heard Dan teach and You know, I've— you know, it really has become a real mantra of mine throughout the years is the whole issue of diversity, you know, in your marketing. So not just being a one-trick pony in terms of just offering one kind of marketing. And, you know, your point about the fact, you know, part of your marketing is even if you're a restaurant owner is how you greet the person at the front of the door, but certainly direct mail. If you're not in a— I mean, you're in a business where CDs or DVDs, sending them out is appropriate. Use that as part of your marketing, to where teleseminars are appropriate, where webinars are appropriate, where emails are appropriate, where online video is appropriate. All that stuff is to make it as diverse as you can in your marketing as well as the frequency that you use. Then you want to actually do those two together. The next one is— should be a relatively short one for us to talk about. Which is legitimate superior value offered by the competition. This is one of the reasons why customers, patients, clients leave you. And the big thing I would say about this is where most people are extremely lazy at is not paying attention to their competition. So they could very, very well be having competition that is providing something that's superior to them and don't even realize it. And they're losing customers because of it. And I know, you know, Dan, you have often talked about playing prospect with your competition. I remember, you know, when I first got into the information marketing business and I wanted— before I was even in the information marketing business, I was in the product creation mode of creating the first BGS marketing system, which now has been met several updates to, but the very first one. My very first thing I did is I went out and bought a bunch of other people's marketing systems for other niches to sort of see what they were doing and seeing what they were doing really, really well and maybe also identifying some things which was very valuable also, more valuable maybe so, and what they weren't doing as well so that I could sort of fill a void in the marketplace. But once again, most people are very, very lazy about this. I'll tell you sort of a little inside story that I'll only share with a couple hundred people on this call, and so you're all sworn to secrecy on this. At the Info Summit, one of our speakers— I won't tell you which one it is— but one of our speakers, when I was chatting with him, I said to him, "I've been a member of your— subscribing to your information now." I'm paying you for it, by the way, for 13, 14 months. He was surprised to hear that. He said to me, Bill, he said, listen, had I known that, just let me know and I would have given it to you for free, which I wasn't, you know, I don't like doing that kind of stuff. But more importantly is I wanted to see how I would be treated like a customer of this person. And so, because we're always looking at how do we treat our members best, so I'm out there being in the information marketing business, trying to see what— I don't know if you call them competitors, but other people out there providing information also do. And I think that's a real, real important thing for people to be doing. Dan, before I move to my last point, anything you want to add to that?

Well, few people do good competitive research even at the beginning as you've described. Even fewer do it on a continuous basis. Continuous and constant basis. And clearly you want to be alert to the other people in your category, the other businesses in your category that may be talking to your same customers. You know, Monaghan tells a story. When he was starting Domino's that he went around the country and went to I forget how many hundreds of pizza places and checked into motels and ordered pizza for delivery and all of that. But not only did he do it when he started Domino's, he drove his spouse crazy the entire time he was running Domino's because every time they went on vacation he was ordering takeout pizza. To see how he was treated and see if anybody had figured out a better bag or a better box or a better ordering system or a better upsell or whatever. I just don't think enough business owners do that. Now you don't want to be obsessed with your competition and worrying about them endlessly, but if somebody figures out something that is an improvement or an advancement or is offering something you aren't offering, you may very well want to know about it at the earliest possible moment and either be co-opting it, plussing it some more, or figuring out how you're going to counter it. Disney in Florida originally put in, well, essentially a giant aquarium, the Living Seas exhibit, because SeaWorld was there. Their whole theory is we prefer to keep everybody on our grounds the entire time that they're in Florida and not have them going anyplace else. So if people want to see fish, by God, let's get some And that's just the kind of thinking that you don't see going on a lot.

And I tell you, and I added one more to the list since, Dan, you and I talked about this list, which you really already mentioned and alluded to, but I think it's one of the very number one reasons why customers, patients, clients leave you is not because they want to leave you. It's just that they simply forget about you. And, you know, we all make a huge mistake of thinking that we can provide a great product and service and that the next time somebody needs us, they will just automatically think of us first. And I think that's a huge mistake. And I think that it's not up to them to remember to do business with us. It's up to us to remind them to do business with them. Now this sort of really leads to, you know, one of my things I love teaching, which you mentioned, Dan, which is the whole lost customer reactivation campaigns where I always find there's like hidden gold in everybody's business. As soon as you identify customers who— you identify the frequency that they should be buying from you and just about every business, I think every business even has that frequency that somebody should be buying from you. And you take those customers that haven't bought within that period of time and put them in a very separate campaign, which is what I call lost customer reactivation campaign, letting those people know that you know that it's time for them to come back. And then also once again putting them in what I call a campaign, not just a one-hit communication, but over a series of communication, which I usually find that 4 steps is about the minimum you should be thinking about. But in all cases, tied into a very, very, very good offer to these people because they forgot to come back, you will be ecstatic with the results that you will get with those same customers. Most people ignore those customers or they treat them like regular customers as opposed to treating them in this new subgroup, which kind of leads into, I guess, we'll be talking about at the Superconference on the bonus day of advanced list segmentation strategies. I'll show everybody that day a couple examples of how you can be segmenting your list out to find these segments within your list and how you need to talk to them differently.

Everybody is usually too late in different businesses. My example is if If it's your menswear store, maybe it is 4 times a year, it's the change of seasons. If it's the local diner and Billy comes there Monday, Wednesday, and Friday for breakfast and he doesn't show up on Wednesday and he doesn't show up again on Friday, sending him a postcard 2 weeks later is too late. Now he might be dead. In which case maybe you want to check on him and maybe you don't. But he may have got invited by a buddy to go over and have breakfast at Dunkin' Donuts and he liked Dunkin' Donuts and so he went back a second day and he went back a third day and now it's too late. And so you got to be right on top of this. I'm amused Right now, I'm sure there's a ton of business owners complaining about how bad business is who are absolutely guilty of bungling this entire sixth thing of being on top of when the customer is supposed to be back and being too late to do anything about it if they ever do anything about it. Right here in the neighborhood. We have a neighborhood independent jewelry store. I know you, BGS Marketing, deals with the jewelry niche, so this will be no surprise to you. But based on purchases I have made, they now know when my wedding anniversary is. They know when Carla's birthday is. They obviously know when Christmas is and there's been a pattern of purchases spanning several years. However, I've now skipped and previous years I would already have been in there dealing with a piece of jewelry for Christmas. And I have not been in there, and I have of course not heard a peep out of them. And my wager is Christmas will come and go and I won't hear a peep out of them, and maybe the spring wedding anniversary will come and go and I won't hear a peep out of them. And but they'll be sitting in meetings talking about how far off their sales are and how bad business is. So many are guilty of this. As you say, so much opportunity is there, but you've got to be on it the minute the customer should have been there and isn't, not weeks or months later.

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