Digitized by the Internet Archive in 2012

http://archive.org/details/1001waystokeepcu00donn

FOREWORD

There's only one idea in this entire book.

Fortunately for you, it's a great idea. An idea that will make your small business bigger or your big business more profitable. An idea that's been overlooked by most marketers, and one that doesn't require an awful lot of investment, machinery, or risk. The fact is that most companies are obsessed with getting new customers. They advertise, plead, cajole, bribe and bend over backwards to get a new customer. And then, once they get them, treat them like dirt. Wish that they'd go away. Disrespect them. Cease to invest. In general, marketers act like idiots when it comes to great customers.

And this book will open your eyes to the problem and give you not ten, not twenty, but literally one thousand ways to do something about it.

Let me tell you a story. United Airlines found a great customer when they found me. I fly nearly 100,000 miles a year on United, and often fly full fare or business class because of my speaking schedule. People like me account for less than 20% of United's passenger load and more than 80% of their profits.

On a recent transatlantic flight, 1 paid a whole bunch of money for a round trip. And the service was terrible. The seats were broken, the cabin was filthy, the food was awful— even for airline food. So 1 wrote a letter. I calmly described how disappointed I was. And sure enough, a few days letter, I got a response. You know what they sent me?

A form letter that said they appreciated hearing about how horrible the flight was. And coupons (with a full page of rules) worth about 4% of what I paid for the flight.

The same day that they spent a hundred bucks to keep a super-great customer, how much do you think they spent in a vain quest to find a new customer to take my place? How many TV ads, billboards, promotional giveaways and discounted fares

Foreword

do you think it will take them to find someone who will switch to United and fly 75,000 full-fare miles next year?

Sure, it's common sense. Invest time and money to keep your best customers happy, spend less replacing them. Common sense, unfortunately, isn't that common. So here's your chance. Go ahead and decimate the competition. Figure out how to keep people coming back and win.

Have fun!

—Seth Godin, author of Permission Marketing and coauthor of The Guerrilla Marketing Handbook

ACKNOWLEDGMENTS

First, we'd like to thank all of the companies and professionals featured in the following pages for providing so many great examples and so much expert thinking. As businesspeople, we appreciate your help in making our company better at keeping customers; as customers, we appreciate the value you place on our patronage.

Second, we are grateful to everyone who helped us find so many creative ideas. They told us with which companies they like to do business and why; they also freely shared their personal experiences. Thanks to all of you — in particular, Frank Cumiskey, Pam and Jeff Hegedus, the Tim Kinni family. Ken and Shirley Lyon, and Lois Snyder

Finally, thanks as always to super agent John Willig, who so wisely judges our book ideas and unfailingly finds the right publishers for them.

INTRODUCTION

Keep Them Coming Back

There is a saying in China: "To open a business is very easy; to keep it open is very difficult." This book is aimed at keeping a business open, or more accurately, keeping the customers who support the business coming back.

If you are searching for ideas to build repeat business, expert thinking on the subject, or a look at the companies that are best at that task, you've come to the right place. There are 1,001 proven ideas, techniques, programs, strategies, facts, and quotes for building business with existing customers in the chapters that follow.

The 1,001 ways come from around the globe, from big and small businesses in big and small markets in just about every industry you can imagine, as well as governmental and nonprofit institutions. And yet, there is really no need to search out the strategies that come from companies just like yours.

In fact, the best ideas for you may well be from a wholly unrelated business. They will be ideas that are just waiting for you to put them to work in your company, for those new twists or small tweaks that will make your business perfect for your customers.

Discount brokerage Charles Schwab & Company president David Pottruck found that out when his company focused on customers. "We pay close attention to the Wal-Marts, Home Depots, Intels, and Microsofts," he said. Those companies offered the ideas that helped Schwab attract and keep roughly half of all customers in the U.S. discount brokerage market.

The 1,001 ways include a wide geographic diversity. They come from companies in Europe, Asia, South America, and North America. They come from companies dealing with customer bases that are international, national, regional, urban, suburban, and small-town.

xlll

xiv Introduction

We also included ideas we found here in Williamsburg, Virginia. As a business market, Williamsburg is fascinating. It is a small town, a college town, and a resort town all wrapped up in one. There are the residents who comprise the year-round customers, the students who are regular seasonal customers, and the tourists who can double the population on a summer weekend and return on irregular schedules. Accordingly, the businesses here use a wide diversity of retention techniques to prosper throughout the year.

Further, Williamsburg is the home of the Colonial Williamsburg Foundation, a preeminent nonprofit that attracts around a million visitors a year, many of whom are repeat customers. Its customer and donor programs are world class, and we include several of them in this book.

How can you use the 1,001 ideas that follow? Think about how you might recreate them in a scale that fits your business, how they would work with your product or service, or how they could be applied in a different medium and a different industry. The answers to those queries will turn these ideas into another 1,001, and after that, 1,001 more.

We collected the ideas in this book over the last half of the 1990s, but did not try to impose any order on them until we started the book itself When we finally began sorting them, we found that they fell into categories on their own. Those categories ended up covering the entire gamut of customer retention ideas and also created the organizational structure of the book.

Here is an overview of that structure and an advance look at what you will find ahead:

We start, in Chapter 1, by looking at how companies keep customers and build business with them by creating unique bundles of product and services. The best companies tailor these to fulfill a whole list of their customers' needs without forcing them to do business elsewhere.

In Chapter 2, we jump into the wide world of incentives, showing how companies use them to drive repeat business. The chapter details the use of free offers, value-added bonuses, coupons and rebates, sales, special financing, and a perennial favorite—contests.

Introduction xv

Chapter 3 covers communities of interest—that is, creating and catering to groups of like-minded customers. Although there have always been communities of interest, the concept is just beginning to capture the attention of companies, and the consultants and academics that serve them, in a big way. Expect to hear a lot more about this in the future.

Chapter 4 examines guarantees and how they help convince customers to trust you with their repeat business. We look at examples of price, product, and service guarantees and how companies design and manage them.

Chapter 5 is the most uplifting in the book and a joy to research. It examines how companies do good and do well at the same time. The range of corporate philanthropy is wonderfully diverse and generous, as is the response from customers.

In Chapter 6, we look at how companies turn a single sale into a loyal customer by offering rewards. It starts with the basics of customer care, including getting personal with customers. This chapter presents ways to turn one sale into a second and continues with a free-ranging romp through the world of frequent buyer programs. The chapter concludes by showing how a few companies are capturing customers for life by buying back the goods they sold to them in the first place.

Chapter 7 is devoted to trophy customers—those who reside among the 20% of customers that provide 80% of your sales. It looks at how companies court their very best customers with recognition and gifts, rewards for high volume, and elite programs designed to pay off in kind.

In Chapter 8, we explore how companies create loyal customers in a hectic world by making their work and personal lives easier. Simplification and convenience are the two keys here, and there are plenty of ideas for both.

Chapter 9 covers how companies build repeat business by going to their customers. It examines how they tell customers when it is time for them to buy again. It also looks at how they keep customers coming back by not making them come back at all.. Instead, the company goes to the customer.

How to keep them coming back by giving them what they want is the topic of Chapter 10. In it, we learn how companies

xvl Introduction

build business by listening to customers and how they turn customer problems and complaints into future sales. It also surveys the current state of innovation, examining the products and services that result from listening to customers. And finally, the chapter turns to the cutting edge of customer retention—mass customization, the large-scale production of custom products for individual customers.

We close the book in Chapter 11 by looking at how companies earn reputations as customer service champions. We explore how such companies are led and how they are structured. And we end the chapter by celebrating customer service excellence and offering ideas for how you can, too.

Two final comments:

First, with so many companies, products, and programs, it would have been very distracting to interrupt the text with trademarks and other proprietary symbols. The reader should assume that all capitalized names are the property of their companies.

Second, you won't find negative examples here. Don't put your energy and resources into avoiding problems. If, instead, you put them into creating customers who are excited about doing business with you, most common problems will never appear.

1

Create a Better Bundle

Bundling is the act of building an added-value package around the products and services you sell. When you offer customers a bundle, you are giving them more reasons to come back to do business with your company. Every time a customer uses and is satisfied with one of the benefits in the bundle, he or she comes another step closer to becoming a customer for life.

As we quickly found out, the possibilities of bundling are limitless. Obvious bundles include packages of products and services that naturally go together—accounting software and preprinted invoices, for instance. But, there is no reason to feel constrained by direct links. As you will soon see, just about everything can be combined in one way or another to create a bundle (how about stock trading and air travel?) that makes customers happy.

Bundles can be the simple, yet convenient addition of a small service that complements your product. Perhaps you sell postage stamps at your card shop. Or, they can entail the establishment of a series of complex partnerships between leading producers of products and services—for example, a credit card company and almost all the major airlines teaming up to offer air miles for purchases of all kinds.

Create a Better Bundle

Also, creating your bundle needn't increase your costs. There is no reason why you shouldn't make money on the services and products you add for your customers' convenience. The key, however, is to focus on what adds value from the customers' perspective before you start thinking about how much money you will make.

In any case, the fmal goal of bundling is always the same: to increase the reasons why your customers should return to you when they are ready to buy again. And, here are some great ideas how:

With almost 400 country store/restaurants in 30-odd states, Cracker Barrel Old Country Stores

has built a billion-dollar business catering to highway travelers. One of the chain's best ideas for bringing travelers who are just passing through back into one of their locations involves audio books. Buy any one of the 200-plus audio books on display in one Cracker Barrel Old Country Store, listen to it on the road, and when you're done, simply drop it off at any other Cracker Barrel and collect a refund of the entire purchase price, minus a $3 rental fee.

Maryland-based Irak Auto Corporation is

driving growth at its $300 million auto parts chain by adding the information customers need to its bundle. Its stores offer free access to Mitchell On-Demand, a computerized system packed with information on parts and how-to instructions for repairs. Customers who prefer the books to keyboards get free, unlimited access to the store's shelved Reference Library.

Customers keep coming back to Los Angeles' Paramount Car Wash because they don't

Create a Better Bundle

get rubbed the wrong way. While their car is washed, customers can get a five-minute Shiatsu/ Swedish massage for only 75 C in one of their fabulous massage chairs.

Our local Nottingham Hallmark store provides the typical huge selection of greeting cards and gifts for every occasion. But recently the store went a step further, providing postage stamps and a daily mail pickup for customers. It's a simple and complete bundle: Buy a card and a stamp, personalize it, and mail it without leaving the store. Here in Williamsburg, where the long lines at the post office are the stuff from which legends are made, this simple added service is a real loyalty builder.

Delaware's Dover Downs racetrack expanded its appeal in and out of season by adding slot machines to its bundle. Throw in the Dover Downs Slots Capital Club, which offers members a chance to earn points redeemable for free gasoline to help defray their traveling costs to the track, and you've got a front runner.

World's leading software maker Microsoft Corporation creates bundles that keep customers coming back so regularly that some people figure it's got to be illegal. The company landed in hot water for its Windows and Internet Explorer software bundle. Another notable Microsoft bundle is the Office suite that includes leading word processing, spreadsheet, database, and presentation software in one neat package.

#

Another natural bundle in the software industry is software and the support so many

If a man goes Into business with only the idea of making money, the chances are he won't.

—Joyce Clyde Hall,

founder of hallmark

Cards, Inc.

Create a Better Bundle

Managers from companies in reciprocal industries should be plotting common approaches to customers through relational databases, not plotting how to take each other over.

— Benn Konsynski, Emory University professor

customers need to make it work. Intuit, Inc/s popular small business program QuickBooks keeps customers coming back with its Quick-Books Support Network plans. The Gold Plan, at $99 per year, includes five telephone sessions with QuickBooks experts and is available during extended hours. The Platinum Plan, at a cost of $189 per year, includes 10 sessions, a QuickBooks Learning Guide, and a 10% discount off QuickBooks printed supplies.

At a time when everyone seems to be playing the stock market in one way or another, Amencan Airlines found a way to bundle stock trades and air travel to keep customers coming back. Customers trading with discount brokerage firm Bull & Bear Securities also earn American's AAdvantage frequent-flyer miles. Customers trading stocks, bonds, and options earn 500 air miles for each of their first five trades at Bull <& Bear. After that, investors get 100 miles for every trade, up to 35,000 miles in any 12-month period.

Cars and credit cards make another good bundle. The General Motors Corp., the world's biggest automaker, created the GM MasterCard. Every time you use your GM Card, 5% of the purchases accumulates toward the purchase or lease of a new GM vehicle. Each year for seven years, cardholders can earn up to $500 toward the purchase for a total of $3,500. That's a welcome bite out of the high cost of buying a new car.

On its home soil, German car maker Porsche partnered with MasterCard to create the Porsche Card. The $100 annual fee includes perks such as free parking and cleaning

Create a Better Bundle

on AVIS' airport lots, reservation services for hotels, car rentals, restaurants, sporting events, air travel, and emergency roadside assistance. Those cardholders who combine the Porsche with the Lufthansa AirPlus VISA also receive priority for standby travel and use of airport clubs.

#

DaimlerChrysler created its bundle for Mercedes owners in Germany around the Mercedes Card, which comes with or without a credit card feature. Cardholders receive a bonus bundle that includes a bimonthly newsletter, annual calendar, movie premiere tickets, invitations to Mercedes special events, along with exclusive vacation offers. #

Bundling can be the key to turning a mundane service into something with more zing. There are few places as boring as the typical Laundromat, where the deadly hum of washers and dryers can numb even the most alert mind—except at San Francisco's Brain Wash. There customers can fire up the washers and step into the cafe for a specialty coffee and a snack while enjoying live music and poetry readings. Chicago-based Rock & Fold puts another spin on the same business by adding five movie screens and piped-in gospel music.

The Art Bar in Philadelphia got nationwide press when it debuted its unique bundle in 1998. Owner David Simons gave artists a free alternative to formal classes by giving them a place to buy a beer and draw a nude at the same time. In a bid to earn the patronage and loyalty of artsy customers, the Art Bar supplies the models, hosts poetry readings, plays alternative music, and sells beer for $1.50 a bottle.

You don't need to be in the entertainment business to make your business more entertaining. The idea is to make your place of business fun to visit, a place where your customers can feel good.

—Joe Vitale in

There's a Customer Born

Every Minute

Create a Better Bundle

In an industry dominated by huge companies, such as Dell and Compaq, you might think that a small, local company would have a hard time competing. Not so, at College & University Computers, Inc. (CUC), which bills itself as "Williamsburg's Super Computer Store" and recently made the Inc. 500 list of fastest-growing small companies. Understanding that computer buyers often need instruction, CUC teamed up with Virginia's Thomas Nelson Community College to open a Computer Training Center just two doors away from its retail store. CUC provides the space and the equipment, and the community college provides the instructors and administration for courses in popular software, the Internet, and group training for businesses.

The bundling of banks and supermarkets is pretty commonplace these days and most chain food stores contain a bank branch, but First Market Bank of Virginia, which operates inside the Richmond-based Ukrop's Super Markets, Inc. grocery chain, is unique. The bank itself was created to add to the Ukrop's service bundle. It is a joint venture between the supermarket chain, which owns 51% of First Market, and National Commerce Bancorporation—the first bank to ever be owned by its host store.

First Market builds repeat business for itself and the supermarket with its Market Share Program. The plan awards points based on every $25 spent at Ukrop's and every $100 in average quarterly balances in First Market accounts, in addition to points for other bank services. Points are redeemed in grocery discounts and up to $200 a year in gift certificates for free groceries.

Create a Better Bundle

Ukrop's also builds repeat business for its in-store pharmaq^ by adding medical services, in the form of health screenings, to its product bundle. The chain schedules a new screening each month covering simple diagnostic testing for high blood pressure, diabetes, and cholesterol, and commonly needed vaccines, such as flu shots. The events are co-sponsored by area health industry partners and customers get them free or at a very small charge.

Target Stores, Inc. offers the same service with a twist: It bundles them into free Medical Fairs and invites anyone in the community to attend. A recent fair included diabetes and cholesterol checks, blood work, hearing tests, and free consultations with a chiropractor and a dentist. The services run concurrently on a Saturday.

#

Small business Berkeley Pharmacy made simple, low-cost and free health services a permanent part of its business. A wellness center inside the store offers five health-screening procedures, including tests of bone density, lipid profiles, cardiovascular disease, and body composition, including body fat analysis and facial skin condition.

Dr. Patricia Deckert, an Alpine, California-based osteopath, turned the above idea on its head by expanding her medical service to include products. She added a "lifestyle educator," who advises patients on diet, exercise, and spiritual well-being, to her staff and sells products such as vitamins, nutritional supplements, and natural medicines. The sale of the products offsets the lifestyle educator's salary, and

8 Create a Better Bundle

customers get valuable guidance and convenience when buying supplements.

Shaia Oriental Rugs made sure its customers kept it in mind by adding cleaning and repair services to its inventory of new and antique rugs. The service helps protect the customers' investments, keeps them coming back to the store, and further establishes the company's expert reputation.

The nation's leading bookseller Barnes & Noble, Inc. makes much of its $2.8 billion in annual revenues in its superstores, a bundle that transformed the industry in the early 1990s. Suddenly, bookstores featured a staggering selection of books and magazines; cafes serving coffee, soft drinks, snacks, and sweets; music; and steep discounts. They became destinations in and of themselves, even for less-than-avid readers.

Follett Corporation is testing the superstore concept for its over 500 college bookstores at its University of Illinois location. The store offers Internet stations with free access, on-demand publishing, music, books, software, a "cyber-wall" featuring sports and educational programming, and electronic message boards. And, in the midst of all of this is a cafe serving tasty fare including fruit smoothies and sandwiches.

The nation's independent bookstores are fighting back with bundles of their own: Cyrano's Bookstore, Cafe, Cinema & Off-Center Playhouse in Anchorage, Alaska, thinks of itself as a "cultural mini-mall." The store's own theater group stages live plays in its 86-seat nonprofit theater, plus there is an art gallery

Create a Better Bundle

that didn't make the name. The 44-seat cinema speciaHzes in foreign and lesser-known films and the Anchorage Storytellers Guild conducts readings in the summer months.

And, joining the menagerie: Minneapolis-based independent bookseller Wild Rumpus entices youngsters to keep coming back to buy its children's books with its own petting zoo.

The second revolution in deep-discount book selling is driven by another high-profile company whose business strategy is all about bundling. Online giant Amazon.com started with books, but quickly added a music store, then a video store, and then a card shop. The latest is their online auction house. And, who knows what's next in the company's fast-track march to its first billion-dollar year.

Banks offer credit cards, so . . . Discover Card, through its issuer. Greenwood Trust Company, offers its cardholders banking. The Discover Savers' Account, which can be accessed via ATMs and free checks, pays competitive interest at tiered rates. And, for a slightly higher return. Discover Card Certificates of Deposit lock in higher rates for terms of three months to 10 years.

Discover is also using bundling to drive use of its "ShopCenter" Web site. Nationally known retailers such as Eddie Bauer, Camelot Music, and Hickory Farms join service providers such as Discover Brokerage Direct and CBS Sports-Line to offer online merchandise and services that change year-round and offer special discounts and incentives. And, ShopCenter only takes the Discover Card.

Cutting prices is usually insanity if the competition can go as low as you can.

—Michael Porter, Harvard Business School

10 Create a Better Bundle

The author once asked a man pumping gas at a filling station why his station was always so busy while the one across the street selling comparable gas at an identical price was almost always empty. This sage businessman replied, "They're in a different business than us. They're a fillin' station—we're a service station."

— Norman Augustine,

former chairman of

Martin Marieha in

Augustine's Laws

You might think that building the world's largest pet supply chain would be enough to keep customers coming back, but PETsMART emphasized the second half of its name by building its bundle with the founding of Vet-Smart Pet Hospital. Now, customers of the $1.7 billion Phoenix, Arizona-based chain of superstores can get veterinary services at the same place they shop for any of 12,000 pet products.

It seems like every gas station has a convenience store attached to it these days, but most of them pale before the upscale bundle Virginia-based East Coast Oil created to keep customers coming back to its 40 stores. In addition to low gas prices, bright lighting, clean restrooms, and employee dress codes, customers can buy an espresso, T-shirts, greeting cards, and brand-name fast food from Subway, Dunkin' Donuts, TCBY, and others.

For something a little more satisfying than fast food, check out the San Ramon, California-based Chevron that expanded into the growing need for take-out dining by attaching a Foodini market to its gas station. Gas up and grab the family a freshly prepared ail-American meal, such as turkey and all the fixin's.

Look to the Far East for this interesting bundle: a gas station chain that sells designer apparel and accessories. Japan's Oura Oil communicates regularly with customers through its frequent buyer program, the Five-Up Club. When Five-Up surveys indicated that Oura's customers were also big buyers of designer consumer goods, the company started a mail-

Create a Better Bundle 11

order operation to fill that yen—and linked it directly to the Five-Up point program to build revenue for both businesses.

The strategy of bundling is turning the inconvenience of going to the bank on your lunch hour into a lunch stop in its own right. Stop in at select California Wells Fargo branches and you can get yourself a Starbucks coffee and snacks from Briazz while you do your banking. Might as well drop off your dry cleaning at Pressing Business, too. Each operation has its own counter within the bank.

Banco Bradesco, Brazil's largest bank, created its own shopping mall online, partnered with major retailers to feature their wares, and named it BradescoNet. BradescoNet eliminates security concerns by simply transferring the amount of the transaction from the customer's Banco Bradesco bank account to the retail partner's Banco Bradesco bank account. Customers can also use the network to pay taxes and motor vehicle fees to governmental agencies.

As we've mentioned, partnering is an excellent way to create value bundles. The Quality Services Network is a residential services bundle that includes Merry Maids, Terminex, Tru-Green-ChemLawn, ServiceMaster, Brinks Home Security, Furniture Medic, and AmeriSpec. Merry Maids gave their customers a free "We Serve" membership (a $39.95 value) that includes a quarterly newsletter and special discounts on the services provided by member companies.

Looking for a good bundling partner? Think customer synergy. Some examples of good matches: hair salons and clothing stores; household services and lawn care; restaurants

12 Create a Better Bundle

The good news is that customer partnering IS more than an Interesting idea—it works.

—Ron Zemke in Presidents

n

and entertainment providers; and sporting goods retailers and ticket services.

Cable TV's Discovery Channel teamed up with Rosenbluth International to offer its armchair explorers some real-life adventures. So far, Discovery viewers can sign up for any of 14 trips, including journeys to Alaska, the Galapagos Islands, China, and Egypt.

The Smithsonian Institution is a national treasure and a must-see stop on any visit to Washington, D.C., but the vast majority of the Smithsonian's visitors live too far away to be regular customers. Or do they?

Enter a bundle of benefits so juicy that it entices even those with no concrete plans to visit the museum. The Smithsonian's National Associate Membership costs $24 annually. In return, members get an annual subscription to Smithsonian magazine (which is worth the entire cost itself) and discounts on purchases from catalogs and gift shops.

Can't get to the nation's capital? The membership offers exclusive access to travel tours and programs around the world, and free admission to the Cooper-Hewitt Museum in New York City. And, to encourage a visit, there is also the specially priced Smithsonian Anytime Weekend in Washington that includes two night's lodging, meal coupons, an IMAX film, a behind-the-scenes tour of the Smithsonian "Castle," and two guidebooks.

No need to be a world-renowned cultural institution to build a better bundle. The Contemporary Art Center of Virginia (CAC) attracts support and visits with a $20 annual membership that includes (among other things) free

Create a Better Bundle

13

admission to all the year's shows, its newsletter, unique members-only receptions, and discounted tuition to art classes. Even better, the membership in the nonprofit is tax deductible.

Set up a hotel-style concierge in a real estate office and you may never have to worry about homebuyers and sellers staying loyal again. At Coldwell Banker Jon Douglas Company, in Mission Viejo, California, the concierge offers referrals to over 150 home-related services ranging from locksmiths to the Asian art of feng shui to the office's customers. The service is free to the customer, and many of the recommended vendors give discounted rates under the program.

Columbus, Ohio-based H.E.R. Realtors offers a similar service known as HOMElink. With one phone call, HOMElink connects H.E.R. customers to a range of services and utilities they are sure to need as they turn house into home. Internet service, cable, gas, electric, alarm systems, newspaper delivery, and recycling are all represented. After home-buyers are settled in, HOMElink keeps working for them with discounted services from area vendors and contractors. Again, the assistance is free to the customer.

Here's a neat newspaper bundle: The Richmond-Times Dispatch packages offers of goods and services from its advertisers and brings them to its subscribers through its Press Pass Membership Club. Subscribers can show their free membership card at over 400 local merchants to receive exclusive discounts, free samples, and special services.

A highly successful real estate broker once told me, "Kill your customers with service. Service, service, service. Give them so much service they'll feel guilty even thinking about doing business with someone else."

—C. Britt Beemer in Predatory Marketing

14 Create a Better Bundle

The Automobile Association of America is

such a master of bundling that it recently has begun emphasizing its well-known initials, AAA, so that customers will think of it for more than its original claim to fame, emergency roadside repair service. AAA of Tidewater, Virginia, our regional branch, is typical in its large bundle of international, domestic, and local services.

There are all the logical extensions that travelers value, such as free, customized maps dubbed TripTiks, free guidebooks, and free American Express Traveler's Checks. Then, AAA adds in all those destination goodies. Around here you get discounts on local historical sites, tours, and museums; member rates at the Anheuser-Busch amusement parks; and a discount on oil changes at the local branch of Jiffy Lube.

AAA takes a still broader approach to bundling by addressing its members' needs at home. Now, the bundle includes discounts on such diverse items as formal wear, telephone service, and home inspections. And much more, including auto, student, and home loans, and preferred rates on financial investments such as CD's and money market funds.

Sprint Corporation has added roadside assistance to its cell phone bundle. Enroll in the Sprint PCS Roadside Rescue, and for $2.99 per month, you get immediate assistance either by calling a toll-free number or by dialing #ROAD on your Sprint cell phone.

Credit card companies are pros at bundling. In fact, the bundles they create are often developed into new products altogether, such as American Express' Gold Corporate Card for

Create a Better Bundle

15

Small Business. Pony up $55 annually for the card, and you get a basket of benefits including discounts on Mobil gasoline, Kinko's copy services, and FedEx shipping. Small business travelers get discounts on Hertz car rentals (and a free membership in Hertz #1 Club Gold) and at Hilton Hotels. Add in $100,000 in automatic travel insurance and free extended warranties on goods purchased with the card, and AmEx has a pretty compelling bundle.

American Express doesn't forget the merchants who accept their cards and provide the lion's share of their revenue. The $18 billion company recently offered our company, along with all the other AmEx merchants, a 20% annual rebate on long-distance telephone service from MCI.

The credit card giant doesn't stop there, either. The American Express Connections program bundles up the telephone business with a calling card featuring all the basics plus voice mail, conference calling, speed dialing, and news services. In addition to the competitive long-distance rates, the program offers members six Rewards points for every dollar spent, and your telephone bill is added to your monthly statement to cut bill paying.

Now throw in college, too. A recent American Express newsletter offered an educational loan program known as PLUS, a Federal Parent Loan for Undergraduate Students. The total cost of the education less any financial aid may be borrowed at interest rates that may not exceed 9%.

Bundles don't have to last forever. MasterCard International offered customers a good reason to grab their cards during the 1998 holiday season with its Holiday Savings Card

Find businesses who are already serving your market and create an alliance with them.

— Joe Vhale in

There's a Customer Born

Every Minute

16 Create a Better Bundle

promotion. The program included discounts at over a dozen popular retailers including Gateway 2000, JCPenney, Sam Goody, The Nature Company, KB Toys, and just in case you work up an appetite from all that shopping, a price break at Pizza Hut. All you had to do to earn the discounts was use your MasterCard for the purchase.

There is only one boss: the customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.

—Sam Walton

Wal-Mart Stores' Sam's Club is another master of bundling that takes a broad definition of its customers' needs. The fee-based wholesale club keeps customers coming back by continually adding new, discounted services to the membership bundle. For instance, Sam's Club teamed up with TTI National Long Distance to offer domestic phone rates of 9.5(t per minute for a fee of $1 per month. Members get 100 free minutes just for signing up. Time to get online? Sam's and EarthLink Network offer members unlimited Internet access for $17.95 per month and waives the normal setup fee. Traveling on business or vacation? Call Sam's Club Travel Services for discounts of up to 30% at Ramada hotels and discounted rates at National Car Rental.

Sam's bundle keeps going: It's Club Auto program will hook you up with a participating auto dealership willing to give you a no-haggle, discounted price on the new or used car of your choice. And, its Impact Preferred Card for business customers offers supplemental healthcare coverage for everything from prescription drugs to physical therapy.

Issaquah, Washington-based Costco Companies, Inc. jumped into residential real estate for its Costco and Price Club wholesale chain members. Costco built a network of realtors

Create a Better Bundle 17

and lenders willing to give commission rebates in exchange for Costco-Price Club customer referrals. Club members receive cash bonuses for using realtors and lenders referred by Costco-Price Club.

New Yorker magazine gives its advertisers and readers a good bundle with its "On The Town" section. A special advertising space, On the Town offers a selection of discounts and promotions designed specifically for the publication's readers. A recent issue included a discount coupon for a Broadway musical, an American Express travel package to Los Angeles, and a contest sponsored by the Jack Daniel's Distillery.

Martha Stewart Living Omnimedia LLC

merits at least a tiara as "The Queen of Bundling." Anyone serious about the domestic arts need only take a look at the Omnimedia Guide in Martha Stewart Living magazine. There are the radio programs, television shows, a Web site, and personal appearances where Martha holds court. Need the products to create the lifestyle? There are the Martha-by-Mail catalogs, books, and all the tools, including that just-right bunny-shaped cookie cutter needed to make those Easter cookies in the magazine.

On first thought it sounds crazy to suggest bundling your products with those of your competitors, but the crazy ones may end up being those companies that reject the idea out of hand. Take a lesson from U.S. Airways Group, v/hich recently started allowing its frequent flyer program members to swap its miles with Amencan Airlines AAdvantage program,

Five Questions to Make Bundting Work for You

1. What services are closely associated with your products (or products with your services)?

2. When customers use your products and services, what process do they follow? How can you make it more efficient/effective?

3. What unrelated products and services do most of your customers buy and use?

4. What annual events do most of your customers observe? Can you create a special occasion bundle for each?

5. What services and products does the competition offer? How can you partner with them to bring the same to your customers?

18 Create a Better Bundle

In the global economy, a well-developed ability to create and sustain fruitful collaborations gives companies a significant competitive leg up.

—ROSABETH Moss KaNTER IN

Harvard Business Review

and vice versa. Combining miles gives customers faster rewards that are good to more destinations, allows customers to combine flights on both airlines and still earn miles, and builds business for both companies.

2

Use Incentives TO Drive Sales

Human beings are an extraordinarily diverse lot, but we've never met anyone, rich or poor, who didn't like to get a special deal. That's why as long as people have been selling goods and services, there have been sales.

Sales are just one kind of incentive that encourages customers to do more business with you. There is, in fact, a wide array of incentives that bring customers back and even more twists and combinations on those. This chapter looks at six distinct categories of incentives. They include:

1. free gifts

2. added-value bonuses

3. coupons and rebates

4. sales

5. special financing

6. sweepstakes and contests

Incentives need not be expensive. In all the contests and sweepstakes we examined, one of our favorites involved a stuffed animal worth only

Use Incentives to Drive Sales

$6.99 at retail. In fact, you may already be giving your customers certain value-added extras that they don't value properly—a little publicity could go a long way in these cases.

Like every other technique for building repeat business, incentives only work when the customers find them valuable. Be sure to create yours from the customers' perspective.

There is a dark side to incentives that we should mention. They can be overused and cause customers to refuse to pay the regular selling price for your goods and services. How often have you put off a purchase, waiting for that sale that you knew would be running sometime in the near future?

When misused, incentives can also have a negative impact on profits. Witness the price wars in the airline industry in the 1980s. Special sale fares by one carrier were often matched and even bettered within the day by competing airlines. The resulting airfares were so cheap that the entire industry bled red ink.

That said, let's browse through the world of incentives.

GIVE A GIFT

They're baaack! In 1998, McDonald's Corporation had customers lined up for its Happy Meals, particularly when they included oh-so-popular Teenie Beanies from Ty, the maker of Beanie Babies. The freebies became instant collectibles, driving Happy Meal sales off the drive-through lane. The promotion was so successful, the company came back with a new set in 1999.

Here's another well-targeted bonus: Irak Auto stores recently gave customers who pur-

Use Incentives to Drive Sales 21

chased select products and one fiill-price ticket a free general admission to a spectacular evening of car racing—the Friday Night of Fire. Black tie optional.

Cosmetics companies have been playing the gift game for decades and few are better at it than The Estee Lauder Companies, Inc., which accounts for roughly 45% of women's cosmetics sales in U.S. stores. Free gifts with purchase are a standard strategy in the company's Clin-ique hypoallergenic cosmetics line.

For example, Hecht's Department Store recently offered a Clinique Double Bonus promotion. With a purchase of $16.50 or more, customers received a bag including lipsticks, cleansers, moisturizer, powder, and a brush; with a purchase of $35 or more, customers also received a tote bag and portable mirror. Not only do customers go home with more than they paid for; Clinique gets to introduce them to a wide range of new products at the same time.

New York City's chic make-up boutique Shu Uemura installed sinks throughout the store to help sell its salt scrubs and facial cleansers. Customers are invited to wash their faces, trying out as many products as they like. Afterward, they can put on a new face for free, using the store's cosmetics.

Sometimes, the smallest gift is all it takes to show your customers that you appreciate them. Merry Maids, one of the nation's leading home and office cleaning franchises, knows that its customers have a nose for clean and so, spray an aromatic room freshener during their visits. Customers get a complimentary spray

Good customer service IS no longer enough. It has to be superior, WOW, unexpected service. In a nutshell, it means doing what you say you will, when you say you will, how you say you will, at the price you promised—plus a little extra tossed in to say "I appredate your business."

—DiANNA BOOHER, AUTHOR AND CONSULTANT

22 Use Incentives to Drive Sales

Everyone loves a free gift. Those who receive yours will feel good about your company.

— Louise Bullis Yarmoff in BusiNESsQQ

f

bottle of the freshener and free refills for when that newly cleaned scent fades.

Campbell Soup Company made its computer-literate clientele an offer they can't re-hise. Send in 10 labels from selected company products and $1.50 shipping for four free software programs. With a total retail value of over $100, each program targeted a different age group from age four to adult, so that the entire family got a gift.

London-based Grand Metropolitan PLC's

Haagen-Dazs ice-cream brand keeps it customers spooning with its recent Passport to Indulgence promotion. Send in four pint-size UPC codes or the "Passports" on specially marked containers, and the company will send you a certificate for a free pint. As a bonus, you also get an entry in a $30,000 design-your-own-vacation contest.

Hong Kong-based Tommy Hilfiger Corporation earns close to $850 million a year selling the popular designer's men's clothes and licensing his name. During April 1999, the company gave away men's haircuts and styling in the department stores that carry the company's personal products. The "Clip Scenes" promotion, which kept the customers entertained with movie clips and popcorn, helped generate attention for Hilfiger's new line of men's hair-care products.

Erno Laszlo LLC uses a similar strategy in the high-end cosmetics market in which its products compete. Company representatives visit the department stores selling its products

Use Incentives to Drive Sales

23

and pamper clients with complimentary facials, masks, and hand massages, followed by personalized makeovers with the brand-name cosmetics. It's all free to clients, and there is no obligation to make a purchase.

Attracting customers to a mall is no great feat during the holiday season, but January is a whole different story. Hampton, Virginia's Coliseum Mall builds business in both critical seasons with its "Mall Gift Certificates." On four specific shopping days in December, shoppers at the mall earned a free $ 10 gift certificate for every $150 they spent. Not so unusual, except for the fact that the gift certificates must be redeemed in the first 15 days of January, a notoriously slow shopping month.

Inner city malls have two common disadvantages: Customers disappear into the suburbs on the weekends and parking is expensive. Cleveland, Ohio's The Avenue at Tower City Center takes its shot at solving the problem by mailing customers "Free Weekend Parking Passes" each year. Once in the mall, customers can enjoy special events such as live performances by the famous Cleveland/San Jose Ballet or a visit with Santa, along with free gift wrapping for any purchase made at the mall.

During the 1998 holiday season, discount music chain Music for a Song attracted free-spending shoppers to its mall locations by offering a free CD of holiday music to its customers. In the chain's Prime Outlets location, shoppers who went to the store with $200 in same-day receipts from any of the other 85 stores in the mall received the gift.

Always do more than Is required of you.

— George S. Pahon

js

24 Use Incentives to Drive Sales

Customers got an incentive to restrict their spending to the mall and Music for a Song got a chance to entice them with the rest of the store's merchandise.

#■

Here's a smart offer from Perdue Farms, Inc.: Send back the company's advertised mail-in certificate with a grocery receipt that includes its chicken, and the company will send you its free Perdue Passport booklet. Inside, coupons and special orders and best of all, a collection of recipes from around the world— all of which require . . . that's right.

Christopher's Tavern, located in a Williamsburg hotel, has no problem generating capacity crowds during tourist season. But, it keeps residents coming back during the off-season and on a slow night, with complimentary peel and eat shrimp on Tuesdays from 5:30 to 6:30 p.m.

The Whitehall Restaurant accomplishes the same objective by adding entertainment to the menu. One night a week, the eatery brings in a band and offers dancing for diners who are light on their feet.

And, don't forget pizza, pizza! Detroit-based Little Caesar Enterprises, Inc. built the country's third largest pizza chain around its two pies for the price of one proposition. It even upped the ante to celebrate its 40th Anniversary: Buy one, get one free and get coupons for a free pizza and free dessert on the next visit.

Dallas-based superstore chain CompUSA makes sure software training customers keep coming back, even in the face of pending soft-

Use Incentives to Drive Sales

25

ware changes with 2-for-l offers. A recent offer covered the upcoming release of a new version of MS Office by promising a second class free when the software hit store shelves.

#

Omaha Steaks often jogs repeat business for their gourmet frozen foods with extra gifts tacked on to the order. Sometimes, it's a package of hamburgers; sometimes, a New York-style cheesecake. Recently, the company advertised a free pair of "Sparkling Star Crystal Candleholders" by Mikasa as a gift incentive with the purchase of steaks.

Gifts are also a good way to encourage former customers to come home. Washington D.C.-based MCI Communications woos long distance defectors with a personalized letter that begins, "We value you as a customer and we want you back." That powerful opener is followed up by an invitation to enroll in the American Airlines AAdvantage program, earning five frequent flyer miles for every dollar spent with MCI. Join back up and get a 4,000-mile bonus (paid 2,000 immediately and 2,000 after six months).

Credit card companies are devoted gift givers, and they often tie those gifts to repeated uses of their cards. Cleveland, Ohio-based National City Corporation said "thank you" to its credit card holders for using their cards during the first quarter of 1999 by giving an Air Check to everyone who charged $100 on the card. The check was good for up to a $ 100 discount on tickets from most major airlines.

National City also gave the gift of free phone time over the 1998 holiday season.

No customer ever goes to a store merely to please the storekeeper.

— Kazuo Inamori, founder

26 Use Incentives to Drive Sales

There Is no such thing : Those who used their credit card at least three

as a free lunch. times received a free 15-minute phone card;

—Milton Friedman those who charged using the card at least six

ECONOMIST times received a free 30-minute phone card.

: Customers did not need to do any tracking

: themselves; the company automatically mailed

: the gift in February 1999.

Discover ran a similar gift promotion in September 1998. It offered a complimentary Rand McNally Road Adas to those who used their card three times during the month. In October, six purchases earned a magazine subscription. In November, nine purchases earned "Box Office Bucks," two complimentary movie admissions good at any of over 1,000 participating cinemas. It wasn't quite as simple as the previous example, however; customers had to mail in a Redemption Certificate and copies of the dated receipts.

Who says there's no free lunch? During a recent promotion, customers spending $55 or more at Ukrop's Super Market got a free meal. The $5 coupon got customers a burger, a Rueben, a stir-fry, a salad, or any of a number of other choices at the Ukrop's Grill located inside the supermarket. A smart gift that makes sure grocery shoppers get a taste of the store's extensive prepared food selection.

Freebies are a good way to introduce customers to new products. Miami-based Burger King International received national media attention by giving away orders of its new French fries. The "Free FryDay" promotion ran at each of BK's 7,600 North American restaurants, and they gave away an estimated 15 million orders. Would you like a burger with those fries?

Use Incentives to Drive Sales 27

The nation's #2 electronics superstore chain Circuit City teamed up with Motorola and American Express for this recent freebie. Customers who bought a Motorola pager at the chain found it came with an American Express Gift Cheque for $25. The gift check was claimed by mail and could be used anywhere the customer wished.

Virginia-based Pomoco Auto Group cross-markets its automotive repair and servicing business and thanks the buyers of new and used cars with its "Peace of Mind" Value Package. Included are four certificates good toward a free loaner car when their vehicles are in the shop.

Pomoco offers a second bonus with its unusual offer of an answering service for vacationing customers. Customers can use the dealer's toll-free telephone system to set up a phone mailbox and leave and receive messages while out of town.

Hall Auto World competes for car buyers with a value-added bundle it calls the Value Guarantee. Worth up to $1,920, the program includes a 7-day/1,000-mile exchange privilege, free lifetime state inspection, oil changes, towing services, discounts on routine maintenance and parts, and a free loaner car if repairs aren't done properly the first time.

And, here's a simple, but well-chosen gift from Piano Today magazine. Realizing that pianists surely know other keyboard lovers, the publication encourages them to give subscriptions as gifts with a free book of piano music entitled "Great Piano Encores."

28 Use Incentives to Drive Sales

k 1997 survey for the Incentive Federation found that U.S. businesses spend $4.23 billion annually on customer promotions.

GIVE ADDED VALUE AS A BONUS

Many purchases have "hidden" fees, those necessary extras, such as shipping, that make great added-value bonuses. College & University Computers offered a "dollars-and-sense" bonus in a series of ads that Hsted all the extras— among them, free shipping, set-up, and an extended four-year warranty—that it gives its customers. The ads tallied the free services against the actual charges for the same extras from its larger, national competitors and publicized the savings, which ran as high as $350.

In the retail book business, authors are a common added-value bonus. Like others, Books-A-MUlion, Inc. regularly hosts author readings and book signings for customers. The customers get to meet their favorite authors, autographed books are often valuable on the collector's market, and the chain keeps customers coming in.

Speaking of books: When the mass customization marketing gurus from The Peppers and Rogers Group released The One to One Fieldhook, they inserted a unique serial number in each copy. The number served as a password on the company's Web site and unlocked an added-value bonus of additional content, including "electronic tools, spreadsheets, [and] discounts."

How about a free computer with that Internet service? New York-based Simple Solution LLC is offering customers "The Whole Enchilada." For $19.99 per month for 48 months, you get unlimited Internet access and the computer you need to surf it. The deal includes free

Use Incentives to Drive Sales

29

installation in your home and a trade-in option on the computer after two years.

Free installation is a powerful draw for complicated and heavy products. Bernina sewing machines offer the state-of-the-art in the consumer market with a price to match. They sport a myriad of attachments for specialty stitching and a touch-sensitive computer screen where the thread used to be. As part of the purchase, trained technicians deliver your new machine, help set it up and situate it most advantageously, and offer a brief introduction.

New Jersey-based The Hertz Corporation

eliminated one of those pesky costs that plague customers in this value-added bonus created specially for AAA members. Members who flashed their cards and a promotional coupon received a free tank of gas with their rental.

The Washington Post gives some extra bang for the buck to buyers of its classified car ads. It posts them at no additional charge online at washingtonpost.com's cars.com site. Buyers can use a search engine to narrow choices and sellers get greater exposure.

Here's a simple bonus that customers appreciate: Sunglass Hut International says, 'stop by anytime for a free tune-up" when it sells a pair of shades. The staff will happily clean and adjust your glasses without charge as long as you own them. They will also be happy to show you the newest technology and latest styles, as long as you're there.

Leading book wholesaler Ingram Book Company encourages larger single orders by offering

Render more service for that which you are paid and you will soon be paid for more than you render.

—Napoleon Hill

30 Use Incentives to Drive Sales

Good products, bad products. Businesses survive with both. But there's one thing no business has enough of: customers.

—Harvey Mackay in

Beware the Naked Man Who

Offers You His Shirt

free shipping on telephone orders of 100 books or more over the telephone. Order electronically, a practice that cuts the company's costs, and free shipping kicks in at 50 titles.

Competitor Baker & Taylor, Inc. set its free shipping offer at a lower level. Telephone orders of 50 books from your assigned Baker & Taylor warehouse receive free freight regardless of whether the books are available or not. Order 100 books from any two warehouses and get free freight from both.

Take a step back up the supply chain and you'll find publishing giant Simon & Schuster, Inc. offering free freight on its trade book orders from booksellers. Anyone who has ever hefted a carton of books knows that free shipping is a powerfril incentive for repeat business.

Even high-style women's attire retailer Cache, Inc. jumped on the free shipping bandwagon. The New York City-based store chain and American Express teamed up to build catalog sales and card use with the incentive. Customers using the American Express card for catalog purchases automatically received free shipping on their order.

And, finally, place your order for well-known clothing brands such as L'eggs, Champion, and Hanes on cataloger One Hanes Place's Web site, enter the special code on your catalog, and you get free shipping. Both company and customer save money on the orders, which do not require a customer service operator.

We thought it was excessive when even shipping companies started adding shipping fees to

Use Incentives to Drive Sales 31

their shipping rates, but then overnight package shipper FedEx waived its $3-per-package pickup fee to build volume among small business members in the FedEx Spotlight Program. "Eliminating the $3 package pickup charge is another way for us to show how much we value your business," says the company's personalized letter.

The invitation to join the free program also included a coupon for $20 off a FedEx package shipment and a calendar filled with small business success stories, FedEx news, and tips on free services and special benefits.

Tandy Corporation's RadioShack chain encourages customers to use its in-store Answer-Plus credit card with a basket of value-added bonuses. AnswerPlus customers get special discounts, express checkout, no payment/no interest for up to 90 days at the customer's request, 10% off batteries, free gift boxes, and priority repair service.

The customer who is willing to pay list price for products and services is a valuable commodity, and Northwest Airlines knows it. So, it makes sure the full-fare traveler has a good reason to fly with them. Customers who buy a full-fare Coach ticket on qualifying flights get an automatic upgrade to First Class at no additional charge, along with 1,000 extra miles in their WorldPerks frequent flyer account.

Northwest teamed up with VISA to target business flyers with this bonus: Frequent Flyer club WorldPerks' members using the VISA card to purchase a First or World Business Class ticket to Asia received a free roundtrip domestic ticket on the airline.

Mix It Up

It's helpful to categorize incentives into two broad types: hard and soft.

• Hard incentives are

benefits that customers would normally pay for and therefore, cost you hard dollars. They include a sale or a cash rebate.

• Soft incentives are

value-added extras that the customer may value highly, but whose cost may be negligible to you. For example, customers value both a ride home from the auto dealership where their car is being serviced or a free upgrade to an otherwise empty seat on a jet.

So, it pays to create a mix of both benefit types when designing incentive programs.

32 Use Incentives to Drive Sales

Every company's greatest assets are its customers, because without customers there Is no company.

—Michael LeBoeuf,

AUTHOR OF The Greatest

Management Principle

IN the World

Celebrity Cruises took the free upgrade idea out to sea when it teamed up with American Express to create its own free upgrade incentive. Customers who used the American Express card to buy an Alaskan cruise vacation on the Celebrity ship Mercury received a free upgrade to the next level of rooms.

For those who prefer to ride the rails, Am-trak ran this special designed to attract families. Buy one full-price ticket, get the second one for half price, and the third free.

Knowing that there are plenty of two-cellphone families out there. Little Rock, Arkansas-based telecommunication company Alltel Corporation put second numbers on sale for its existing customers. Alltel offered six months of free access on each 18-month contract.

Long-distance phone service provider Spnnt rewards small business customers who sign up with them with free domestic long-distance calls every Friday for up to 110 consecutive weeks. As long as customers commit to spending at least $50 per month, they qualify for up to $1,000 worth of free Friday calls per month.

SAnSFY COUPON-CUHERS AND REBATE-COLLECTORS

Coupons are a time-honored tradition in the grocery business and quickly add up to substantial savings for those shoppers who can muster the discipline needed to collect and redeem them. The Jacksonville, Florida, supermarket chain Winn-Dixie Stores, Inc. is one of many in the industry that keeps customers

Use Incentives to Drive Sales 33

coming back by periodically doubling and tripling the face value of coupons. In one recent promotion, coupons up to 50C were tripled up to the full purchase price of the item on sale. Winn-Dixie doesn't rely completely on its vendors for incentives. It also builds business with its own coupons. A recent mailing offered four $5 savings certificates applicable to purchases over $25.

Casual eatery Shackleford's introduced its newest location to our local market with money-saving newspaper coupons. Patrons had a choice of a second dinner entree at half price or $5 off any two lunches.

Point-of-purchase coupons are a fine repeat business builder and virtually any company can use them. If you ate at a Hard Rock Cafe during September 1998, you received a $5 discount certificate valid for food and beverage purchases on your next visit.

Everybody's got his or her own credit card these days. Use the Omaha Steaks' Platinum Plus Visa card, and 5% of all Omaha Steak purchases and 1% of all other purchases made on the card rack up points towards $25 "Omaha Steaks Certificates" that may be used for any item sold by the company.

The Discovery Channel, one of the popular cable stations owned by Maryland-based Discovery Communications, Inc., also uses coupons to promote its Platinum Plus MasterCard. Once approved, new cardholders receive a $20 coupon for purchases made at company's Nature Company and Discovery stores and catalogs. To keep buyers using their card, a new

An America's Research Group study found that when supermarkets began offering double coupon promotions, readership of the advertising inserts in the typical Sunday newspaper rose from around 40 to 74%.

34 Use Incentives to Drive Sales

Customer service is American Express's patent protection. Our goal, simply stated, is to be the best.

— James Robinson, former CEO OF American Express

$20 coupon is sent each time purchases add up to $1,500. Transfer the balances from other credit cards and get another freebie—a $50 Discovery Channel fleece pullover.

Here's a neat twist on double coupons: From February I, 1999, through April 30, 1999, members in the American Express Membership Rewards program got double points (redeemable in air miles and merchandise) for using their card at supermarkets and drug stores. Not only did the promotion encourage customers to use the American Express card; it built the company's share in specific market sectors.

Morgan Stanley Dean Witter Co.'s Discover Card built its business on the Cashback Bonus, a rebate check for 1% of its cardholders' annual purchases, but it doesn't stop there. For every purchase up to a maximum of $2,500 charged on the card in August and September 1998, Discover automatically credited customers' October and November billing statements an additional rebate of 1%—in effect doubling their own Cashback Bonus in order to stimulate card use.

i Although Bentonville, Arkansas-based Sam's

I Club doesn't accept manufacturer's coupons

: meant for retailers, they have found a great way

: to drive sales with manufacturer's rebates. The

: wholesale club highlights manufacturers' re-

l fund offers in a monthly flier including a

: photo, amount of refund, and exact purchase

I requirements. Members who buy those items

: simply fill out the single rebate form in the flier

I and mail it to Sam's Club along with their re-

: ceipt. The company does the rest, sending re-

! bate checks to members within two months.

Use Incentives to Drive Sales 35

Bank of America unveiled a new service exclusively for its Advantage-level customers, dubbed Advantage Values. Advantage Values are discount and rebate offers made to clients by nationally known companies—from which the bank receives no compensation.

One of those offers from the Holland America cruise line offered Advantage Values Travel Credits for Alaskan cruises. Members earn credits in the amount of 3 to 5% of the price of trip, which can then be applied toward a second cruise within 24 months.

Teaming up to distribute coupons is a good idea. Recently, outlet mall shoppers at Liz Claiborne received point of sale coupons for a 15% discount at the Mikasa Factory Store just across the way.

RUN A SALE

Who deserves sale prices more than your existing customers? Within weeks of sending you a shipment of their premium meats, seafood, and other specialty food items, Nebraska's Omaha Steaks, Inc. starts an incentive blitz. The company figures out how long it should take you to finish off your order, and then offers specials and discounts ranging up to $30 off the regular price to earn a re-order.

Retailers are pros at using sales as incentives to bring customers back into their stores. Hechf s department stores recently ran a "lowest prices of the season" spring sale on selected, popular merchandise and raised sales in a slow part of the day with "early bird" specials in the morning hours of the first day of the event.

Use Incentives to Drive Sales

German media giam Bertelsmann's BMG Music Service keeps its members buying with regular sales. Deals such as "Buy I, Get 3 FREE" and "Get Unlimited Selections at 70% Off" are common; and even when no special promotion is in progress, any CD purchased at regular price enables customers to receive a 50% discount on all other CDs purchased at the same time.

Sneaker emporium Just For Feet created a sure-fire way to keep customers coming back. It ran a "Spend a Dollar, Get a Dollar" sale, where any amount spent in the store generated a gift certificate for that exact amount. The catch: the gift certificates could not be used until several months later, generating two visits out of one for the chain.

Here's another idea from the sneaker king: Just For Feet was giving trade-ins to customers bringing in their old, worn-out athletic shoes during a recent promotion. It discounted a new pair by $5 to 15 depending on their cost.

Even an education can be put on sale: Virginia is one of several states offering sale prices to resident parents willing to pay in advance for their children's education. The Virginia Prepaid Education Program uses an advance lump sum payment or installment plan to guarantee tuition costs as low as 30% of today's rates. Parents get peace of mind and a great price; the state's educational institutions get the customers they will need in the future.

Want an educational savings vehicle with more flexibility? Try the Virginia Education

Use Incentives to Drive Sales 37

Savings Trust, a new trust offering tax-deferred growth on up to $100,000 in contributions. This one is good for in-state or out-of-state students and can be used for room, board, books, and other college expenses beyond tuition.

Sales are a good answer to those natural lulls in the business calendar, such as weekends at airport hotels. The Wyndham Garden Hotel works to fill its empty rooms at the Richmond Airport using $64 room rates on Friday, Saturday, and Sunday. Guests also wake up to a complimentary full breakfast and a leisurely, late 3:00 p.m. checkout on Sunday. #

The Ritz-Carlton Hotel Company put special weekends, such as a Spring Getaway, Memorial Day, and Labor Day, on sale exclusively to American Express cardholders. It includes rates as low as $88 per night at any one of 24 Ritz-Carlton City Hotels and Resorts. Not bad for a first-class hotel in some of the world's most desirable locations.

The Holiday Inn recently ran its Weekender packages at special rates. Why stay with this chain? They included a free entry in the Good Morning America Stay, Play and Win contest, which paid off in an expense-paid trip to New York City and lots of other prizes.

The Rail Europe Group celebrated the 40th anniversary of the establishment of its popular Eurailpass with this creative sale: it offered everyone else who turned 40 along with the pass in 1999 a 40% discount off of its regular price. Oh, and if you're not exactly 40, it promises discounts for you, too.

38 Use Incentives to Drive Sales

The 12-store Video Update chain slows down on weeknights, so it created sales on those nights. On Monday, Wednesday, and Thursday, customers can rent three movies for the price of two. On Tuesday, every movie is only 99C.

Today's best deals in air travel are online. Atlanta-based Delta Air Lines, Inc. fills its under-booked weekend flights with short-notice deep discounts available only through its Web site. The carrier posts its specials on Wednesday, and the flights depart that Saturday, returning the following Monday or Tuesday.

American Airlines has a similar program offering daily "NetSAAver Fares." Sign up at the company's Web site and American will e-mail you the sale fares daily. A recent roundtrip from Washington D.C. to Miami was $149; or for holders of air miles, $39 with the redemption of 13,000 miles.

There is a fiarther incentive to log on to American's site. To encourage customers to move online for ticketing and payment, a money-saver for the company, it offers a 1,000-air-mile bonus after each flight booked online. To get them started, American offers an additional 3,000 bonus miles for the first flight taken.

Continental Airlines created C.O.O.L. Travel Specials, an on-request, weekly e-letter that sells its less-traveled weekend flights at deep discounts. Continental makes a fijll package out of each flight by partnering with hotels and rental car companies that also offer discounts good for when you reach your destination.

Use Incentives to Drive Sales 39

The season ticket is another form of sale that keeps 'em coming back. The Cleveland Orchestra warms up for its formal season during the summer at Akron, Ohio's Blossom Music Center. They get listeners back for two and three performances each weekend by selling lawn tickets to the outdoor concerts in 10-ticket books for about the same price as a single cheap seat during the formal run. There's even a free upgrade deal: two of the tickets can be traded for the amphitheater's indoor seats.

Like many theme parks, Anheuser-Busch Companies, Inc.'s Busch Gardens keeps its rides full with season passes. For around $90, customers get unlimited free admissions, free parking, and 10% discounts on gift shop purchases and meals. After the first year, pass holders can renew over the telephone at a still-higher discount.

Oh, that crazy Chihuahua! Taco Bell is capitalizing on its hugely popular Chihuahua ads with a sale offer that should even satisfy the hungriest families. Dubbed "10 for 10," customers can get 10 tacos or burritos, an order of nachos, and the chain's Mexican pizza for $9.99. Need more? Add five more tacos or burritos for $3. And, that's not all folks. Taco Bell topped it off with a coupon for a free five-night Blockbuster movie rental.

Blockbuster Entertainment Corporation

loves getting its coupons into customer's hands, no matter where they are. Recently, customers renting cars at Thrifty Car Rental were thanked with a Blockbuster Value Card good for one free movie rental. Eligible frequent

i^

40 Use Incentives to Drive Sales

The only pretty store IS one full of people.

— William Dillard,

FOUNDER OF DlLLARO'S INC.

flyer renters can choose two movie cards or frequent flyer miles.

#

Dillard's department store chain differentiates its sales in a sales-driven industry by packaging them as events. One recent example was the Cosmetics Garden Party, a weekend sale that included "festive entertainment, music, and complimentary gift wrap on all cosmetics and fragrances selected." The parties also included beverages and snacks, registries to win museum passes and fragrance baskets, free gifts with $40 purchases, and free satin gift boxes for purchases over $55.

Hechfs department stores countered with "Perfect Fit Week." In addition to 30% discounts on famous brands of brassieres, Perfect Fit Week features the expertise of manufacturer's representatives and Hecht's own fit specialists. Women buying new bras are interviewed, measured, and fitted for the perfea size and style.

GIVE BEHER FINANCE TERMS

"Buy now, pay later" is a much heard refrain these days for very good reason. The purchase of high-priced merchandise is more often determined by the customers' ready cash than their desire to buy. Upscale Virginia furniture store Willis Wayside uses a common solution to that problem with promotions involving their in-store charge card. When Willis wants to build business, it eliminates the interest, and sometimes even the payment itself, on purchases made with their card. For example, purchases made on the Willis card during April 1998 required no down payment and were in-terest-and payment-free for one year.

Use Incentives to Drive Sales 41

Dallas, Texas-based cataloger Horchow Home Collection features high-priced furniture and accessories, but they keep even budget-conscious customers coming back with their flexible payment plans. To help their customers decorate their homes and offices in high style, Horchow offers the "Extended Payment Plan" on purchases of $250 or more. Under the plan, the customer's credit card is charged in five equal monthly installments. The best part of this arrangement is that there are no interest charges on the remaining balance and no additional cost for this service.

Bloomingdale's department store chain created a special financing deal to encourage customers to make their large purchases of fine china, crystal, and silver all at once. The Dining Circle Club allows customers purchasing over $200 worth of this merchandise on their Bloomingdale's charge accounts to extend their payments over 12 months without any interest charges at all. Even better, it's a separate line of credit, so you can still charge away on your card.

Reliable Home Office offers a similar program on its big-ticket furniture and electronics products. The catalog "tags" items eligible for a 0% interest, extended-payment plan. The cost is then billed over four months to customers' credit card. Add in the 30-day money-back guarantee and free return shipping for compelling reasons to buy from Reliable. #

Want to encourage business from prompt-paying customers and improve cash flow at the same time? Try the time-honored "2% 10" offer. Ingram Book Company offers customers

Satisfied customers are an organization's most successful salespeople, because they do not stand to benefit financially from recommending the organization to others.

— Eberhard Schueing in Creating Customers for Life

42 Use Incentives to Drive Sales

who are willing to pay their monthly statements by the 10th of the month an additional 2% discount off their bills. Customers reduce the cost of goods sold and Ingram cuts its receivables cycle.

And, don't forget discounts for advance payments. National franchiser TruGreen-ChemLawn's

service is based on an annual seven-visit program. To lock customers in and jump-start revenues, the company offers those who prepay their annual service in a lump sum, a 10% discount on the entire package.

HAVE A CONTEST

The online world is a hotbed of contests and sweepstakes designed to keep customers coming back. In early 1998, EZVenture, a site catering to the small business Web surfer that was created by Yoyodyne (and now owned by Yahoo!), kept its customers coming back on a daily basis with ongoing contests featuring something every small business owner needs . . . working capital. Visitors to the site could enter the contest with a simple click of the mouse once per day or via mail up to 1,000 times. The grand prize: $100,000 toward any business they choose and, of course, no purchase is required.

MSNBC keeps customers coming back to their news-based site with a similar strategy. Each daily visit entitles the surfer to a free entry in a contest for frequent flyer miles. Once a month, one lucky winner gets 100,000 miles; once a day, one winner gets 30,000 miles; and 10 times per day, even more winners get 5,000 miles each.

Use Incentives to Drive Sales 43

Microsoft did the same with its newly opened virtual store. Visitors until May 1999 earned a chance to win a daily prize of $500 of the company's software. Be the 100,000th entry each day and you get a $1,000 shopping spree. It's a great traffic builder at very little cost to the software giant.

HGTV, the home and garden cable channel, grabbed some serious repeat business on its Web site with its annual "Dream House Giveaway." Surfers were allowed to enter once daily via the site and the contest generated over four million separate entries. The 1999 winner got a package worth over $600,000 that included a brand-new, fully furnished Florida beach house and a luxury sports utility vehicle for four-wheeling in the sand.

Amazon.com drove its sales for the latest legal thriller from John Grisham with the "$25,000 Street Lawyer Contest." The best part was, even those players who didn't win got a $5 electronic gift certificate applicable to any book order made in the next 15 days. Everybody wins, including the online bookseller. m

In 1998, General Motors kept its customers using the GM MasterCard all year with the "Use It—Drive It Sweepstakes." Every time you used the card for a purchase of over $25, you received an automatic entry in the contest, which gave two winners each month a new GM car or truck and 1,000 runners-up every month a free 45-minute MCI PrePaid Phone Card.

During the first two months of 1999, Discover tapped into the big celebration of the

go

44 Use Incentives to Dr

ve Sales

new millenium by automatically entering all its charging customers in its own sweepstakes. Grand prize: a trip to New York City for the Times Square 2000 celebration along with a $2,000 Discover Card credit.

Magazine publishers are contest experts. They use them to keep subscribers re-upping each year, a prerequisite for keeping their advertising rates plump and juicy. Last year. Worth magazine enticed readers to renew their subscriptions with an offer of 50% off the cover price. They also threw in a shot at "Instant Riches," a well-targeted sweepstakes with a prize of $75,000 and a session with "one of the country's 60 top financial advisors." The winner picked the advisor and Worth paid for the entire visit, including airfare.

One of our local florists. Flower Shoppe of Williamsburg, cashed in on the Beanie Babie craze by holding a drawing to win one of the enormously popular Princess Beanie Babies that were created as a memorial to the late Princess Diana. With a value of up to $350 on the collector's market, the drawing for a $6.99 stuffed animal created long lines of customers and local media attention at almost no cost to the store.

In 1998, Charlotte, North Carolina-based Pepsi Cola Bottling Company celebrated Pepsi's 100th anniversary and made a grab for a whole new generation of Pepsi drinkers at the same time. It partnered with over 130 local hospitals to give one share of company stock to the first baby born at each hospital that year. And just so none of the newborns felt left out.

Use Incentives to Drive Sales

45

the company gave each baby born on New Year's Day a gift package worth about $100.

You can't win if you don't play. But, that doesn't mean that there aren't milhons of losing lottery tickets. City daily newspaper The Richmond Times-Dispatch used those tickets to build its readership with a creative contest dubbed "Second Chance Lotto." Every Sunday, six lottery numbers are placed in ads throughout the paper and two additional winning numbers are placed in newspaper ads each weekday. If your losing tickets match tlie numbers, mail them in, and the paper draws a $5,000 winner and a $1,000 winner from the tickets each week.

Belgian-based Godiva Chocolatier, a subsidiary of Campbell Soup Company, keeps customers returning in the lucrative Valentine's Day market with an annual contest that makes a box of its gourmet chocolates even more special. Buy a specially marked box of Godiva and get a chance to win the grand prize of a 7-carat diamond ring or one of 100 first prizes, a pair of diamond earrings.

And, never forget Mother's Day! Hallmark's Gold Crown teamed up with United Airlines to capture a bigger share of the card and gift business for that big day with its "In Honor of Mother's Day" contest. The winner received two roundtrip tickets anywhere in the continental U.S., which we're sure they used to go see Mom.

Blue Ridge Mountain Sports, a chain of outdoor recreation stores, appealed to its adventurous clientele with a contest offering a

Question: Whaf s the difference between winning a cereal bowl on Dish Night and a winning a Super Bowl ticket? Answer: There isn't any. Motivate your customers with incentives and they'll do what you want them to.

—Harvey Mackay in Pushing the Envelope

46 Use Incentives to Drive Sales

trip for two to exotic Patagonia, located in Southern Chile and Argentina. No purchase necessary; just a visit to the store.

Supermarkets have embraced the contest strategy in a big way. To encourage shoppers to use the Ukrop's Valued Customer (UVC) card and enhance the sales of certain products, the chain runs monthly sweepstakes. In February 1999, customers using their UVC card to buy specific sponsors' products were automatically entered for a free trip for two to the Division I NCAA Men's Basketball Championship in St. Petersburg, Florida. To drive Web site traffic, the grocer also offered 10 winners a $1,000 "Grocery Give-a-Way" Internet Sweepstakes for UVC cardholders who visited the site.

Not to be outdone, the Salisbury, North Carolina-based Food Lion chain encourages shoppers to use their frequent shopper card when making purchases with automatic entries in the $10 billion grocer's $1,000,000 Giveaway. Customers receive one free entry for every dollar spent and 10 bonus entries for every specially designated sale item purchased, up to 200 entries per card per person. The odds may not be a whole lot better, but it's certainly cheaper than the lottery.

NationsBank, recently merged with Bank of America, used its 1998 "Magic Moments" contest as the basis for a major advertising campaign during the holidays. For two months, each day had one magic moment, a one-second interval when any purchase made on the NationsBank Visa card was free, no matter how much was charged.

Use Incentives to Drive Sales

47

General Motor's Buick division recently kept potential customers coming back to its dealerships by giving away a car a day for 45 days. Customers collected game pieces from newspaper and magazine inserts, at a Buick dealer, or over the phone or Internet. Then, they brought one game piece per day to a Buick dealer to determine whether they had won a new car.

Sneaker retailer Just For Feet uses basketball courts, snack bars, and sports videos to keep customers coming back. It also used the game piece gambit to promote sales of Reebok DMX series athletic shoes for one week in April 1999. Customers who try on a pair of the shoes got a game piece for their trouble. The winner of the contest got a cool million for new sneaks.

McDonald's Corporation created a contest around a game that transcends generational gaps, Parker Bros.' Monopoly. The contest comes complete with a board and property/ prize pieces. Customers collect game pieces by purchasing select items at the leading fast-food chain. The pieces offer instant winnings for free food and cash giveaways, or they are matched to earn prizes up to $1 million.

I

TRICON Global Restaurants, Inc., parent of Taco Bell, Pizza Hut, and KFC, countered with a Star Wars contest that includes all three chains. The game pieces, which feature characters from the movie, include a variety of instant prizes, and when combined in complete sets, pay off in one of three $1 million jackpots.

We think it's important for people to just come in and have a good time.

—Harold Ruhenburg, CEO OF Just For Feet

48 Use Incentives to Drive Sales

Sunglass Hut International, Inc. used the instant winner technique in a recent contest. When DayUght Savings time kicked in, customers received an enticing postcard in the mail: Purchase a pair of Ray-Ban, Killer Loop, or Revo shades and get a free instant game card. Winning prizes included a trip to the Cannes Film Festival to show off those new shades.

Best Buy Company, Inc. doesn't want its customers buying ties for Father's Day. So, it ran the Digital Dad Sweepstakes. Sign up online for a chance to win a complete digital entertainment system, which Dad can pick up at a nearby Best Buy on his day.

Mobil Oil and American Airlines covered all the bases when they offered the air carrier's frequent flyers a reason to fuel up at Mobil stations. Every tank of gas came with a three-way-to-win game packet. In it was a Match & Win game good for an instant win of up to 10,000 frequent flyer miles or one of 1,300 roundtrips on American Airlines; a Collect For Miles game giving air miles for every five game pieces collected; and, an Enter & Win game which was mailed in for a chance to win the Grand Prize of free air travel for a year on American or one of five First Prizes—one-week vacations for two.

And, don't forget the time-honored one-millionth customer contest. AMC Hampton Town Centre 24 is Virginia's largest cinema, big enough to serve 1 million moviegoers a year. The theater announced the estimated month of the event and offered to reward the millionth customer with a prize package contain-

Use Incentives to Drive Sales 49

ing 24 movie passes, a shopping spree, and movie merchandise.

In a very competitive market, long distance service 10-10-345 gives callers a good reason to keep dialing in to their access number. Every call generates a chance to win a grand prize of $1 million and other prizes, including roundtrip airline tickets, electronics, and phone cards.

Tie contests to larger promotional campaigns for maximum impact. In 1997, when Sara Lee Corporation sponsored Tina Turner's "Wildest Dreams" North American tour, Sara Lee subsidiary Hanes also signed up the rock star as their spokesperson. The company built a series of contests for their retailer customers around Turner and the tour. Macy's, for example, invited their New York customers to showcase their own talents by singing in a contest to win free admission to a Tina Turner concert at Radio City Music Hall. It worked: that day, hosiery sales were up 42%.

How about letting customers choose their own contest prize? Furniture retailer Willis Wayside periodically runs its "Heart's Desire" promotion. It's a customized giveaway: Choose your favorite item in the store and register to win it. Those who cannot wait can purchase the item with an extra 5% discount and still get a full refund if their ticket comes in.

3

Tap Into Communities OF Interest

A community of interest is a group of people connected by a common thread. Political parties, religions, and nations are all communities of interest. So are less-exalted groups, such as fan clubs and Internet chat rooms.

People, and that means your customers too, look for others who share their interests. And the people who buy your services and products may well find value in sharing that experience with others who do the same.

Developing communities of interest often adds status to a product. Think about Beanie Babies. If so many people are so crazy about them, they must be valuable. Right? Communities of interest also generate customer traffic. No one goes to a Harley motorcycle rally not wanting to see Harleys.

Companies that create a connection between customers build a powerful mechanism for repeat business. A community of interest can help turn a simple transaction between buyer and seller into a relationship. At the same time, it gives customers an emotional connection to your company, a connection that may last generations.

52 Tap Into Communities of Interest

#'

If you can persuade your customer to tattoo your name on their chest, they probably will not switch brands.

—UNIDENTIFIED PROFESSOR

ON Harley owners

CREATE YOUR OWN COMMUNITY

The loyalty of the owners of Harley-Davidson motorq^cles is legendary. Just ask a Harley rider if they would buy another make of mo-torq^cle, and be prepared for a pithy response. And, we're not talking outlaws these days; the typical Harley owner is married with children, has at least some college, and earns over $60,000 per year.

The loyalty of Harley owners generated its own community of riders, who have little trouble recognizing each other, especially those on the low-slung, heavyweight "hogs" with the distinctive roar. And, these days, neither does the company, which flirted with complacency and bankruptcy in the 1970s, and then saw the light.

Purchase a new Harley-Davidson and it comes with a free, one-year HOG (Harley Owner's Group) membership. Members are invited to any of 50 company-sponsored "HOG" events annually; they attract about 400,000 riders every year. After the first year, membership is $35 per year. And, last time we checked, member rolls had swelled to over 360,000—a huge audience for new bikes, branded clothing, toys, and even H-D deodorant!

Creating a family of owners also became an early retention strategy for General Motor's subsidiary Saturn. Buy a Saturn, and every year, you are invited to the company-sponsored Saturn Homecoming in Spring Hill, Tennessee. Owners attend from across the nation, gathering for family fun, country western music, picnics, and factory tours.

Germany's Volkswagen Group offers customers in its home country a free membership

Tap Into Communities of Interest 53

in the Volkswagen Club. The Club's service center is open every day and offers directions, ticket and event reservations, a club card, magazine, and special partner incentives. Members earn points for automobile service, parts, and maintenance purchases over $50. Points, valued at $1 per 100, can be used to pay dealers for service or new cars.

Volkswagen of North Amenca has its own VW Club. The American version includes 30 minutes free long distance on a "rechargeable phone card," an official club T-shirt, a road atlas, a travel book, a newsletter, an optional credit card, and special event invitations. There is a fee of $25 per year.

DaimlerChrysler's jeep division created Camp Jeep, an exclusive event for Jeep owners and their guests. In 1999, the fifth annual three-day romp was held in Virginia's Blue Ridge Mountains. For $225 per Jeep (the price includes everyone in the vehicle), participants enjoy 4-wheeling, tubing, fly-fishing, and other outdoor activities befitting fun-loving. Jeep-owning adventurers.

Irish crystal-maker Waterford, whose distinctive designs are often flattered by imitation, started catering to the community of collectors interested in its products by establishing the Waterford Society. Customers who join the club at the $45 annual membership rate get good value for their money. On enrollment, they receive a hand-cut vase valued at $65. In addition, members receive Waterford Reflections, a quarterly magazine, invitations to special events, and exclusive access to private collection and limited-edition purchases.

54 Tap Into Communities of Interest

Make a customer, not a sale.

-— Katherine Barchetti, FOUNDER K. Barchetti Shops

Hungarian ceramic figurine maker Herend Porcelain Manufactory Ltd. has created the Herend Guild for its community of collectors. In return for the membership fee, collectors are offered a new limited edition piece each year, as well as regular news about the company's products.

It sounds contrary, but sometimes community building means refusing to fulfill demand. When Enesco Group's Precious Moments figurines generated extraordinary demand, the founder of the company refused to ramp up production. By channeling customer demand into new figurines instead of filling the demand for each existing figurine, the company fed collector fever and drove sales in the long term.

The current craze for Ty Inc.'s Beanie Babies is a similar situation. The company is selling hundreds of million of dollars worth of the small stuffed animals by "retiring" them. Its customers can't walk into a store and simply buy one of each, and collector fever grows.

How about building a community around the packaging for your product? When Austrian Eduard Hass invented PEZ mints for smokers in 1927, he probably never envisioned PEZ-heads, collectors of the pop-up dispensers of the candy. Connecticut-based PEZ Candy, Inc. gets a big boost from its community of collectors. They help buy something like three billion pieces of the candy in a wide variety of dispensers, topped with such favorites as Disney and Star Wars figures, each year.

Tap Into Communities of Interest 55

Small communities can be just as strong as their bigger kin. Pottery Wine & Cheese Shop,

a small chain of wine merchants, created a community with its Wine Tasters Society. For $30 per month, the store offers two bottles of specially chosen wine, delivered to its members before it is offered to the general public, and special pricing on additional bottles.

This is not your usual sports equipment store. There's a 65-foot climbing wall to try out the climbing equipment, a biking trail to try out the wheels, a Rain Room to test the waterproofing, and even a pool of brackish water to check out the water purifiers. Recreational Equipment, Inc. (REI) is a Seattle-based sporting goods cooperative founded on the idea of community by a group of mountaineers in 1938. The cooperative's 1.4 million members pay the $15 initiation fee in exchange for a 10% annual rebate on purchases and a vote at company meetings. But more importantly, it created a community that supports the company with loyalty and over a half-billion dollars in annual revenues.

You don't have to go so far as to create a cooperative to become a destination for a community. Rockville, Maryland-based Hudson Trail Outfitters also brought the outdoors in for their customers. The store's rain cave and climbing wall encourage customers to get hands-on with products and blur the line between shopping and entertainment.

The very nature of your product may create an instant community. Witness the software industry, which derives much of its value from the captive market for ever-more potent product

56 Tap Into Communities of Interest

We need a good story and we are willing to pay for it.

— Rolf Jensen in The Dream Society

upgrades. Intuit, Inc. captures a lion's share of the repeat business by going directly to its customers. When the company releases a new version of its financial software, it mails customers the news, along with early response discounts and freebies.

A little personality can go a long way in community building. Fast-growing furniture and housewares retailer Restoration Hardware adds personality to its marketing mix in the form of personal notes. Founder and CEO Stephen Gordon writes one for each of the over 900 items the store sells. The notes are between 100 and 400 words long, and they describe the appeal of the merchandise, a history, a warm memory. The notes create a sort of community among the shoppers who relate to them. They aren't just shopping; they are learning and sharing fond memories at the same time.

Specialty retailer Wild Birds Unlimited is expert at focusing in on its well-defined community of customers. In addition to just the right seed or mix to attract just about any bird in the area. Wild Birds Unlimited also takes their patrons to the birds. It regularly sponsors walks, lectures, and trips designed to educate and delight its bird-watching clientele. In early 1999, our local store offered regional trips to the James River and Point of Rocks Park and a presentation on backyard bird feeding.

Newport News, Virginia-based Hutchens Chevrolet turns the inevitable questions owners have about their new vehicles into a community-building event. Customers of the dealership are invited to regularly held open houses known as "Getting to Know You." In addition

Tap Into Communities of Interest 57

to refreshments and door prizes, customers can talk to dealer representatives about their new cars. Questions about their new vehicles as well as advice on maintenance, safety, and warranty issues are addressed in a relaxed atmosphere; and Hutchens gets a chance to win a customer for life.

Santa Monica, California-based retailer Big Dog Sportswear sells specialty clothing that prominently features the chain's red-tongued dog logo. For consumers who go for this sort of thing in a big way, the company has also created the Big Dogs Club. The Big Dogs Club costs members $15 every year, and in return they receive a newsletter, decals and a handbook, exclusive product offers, advance sales notice, and discounts from partners, including lams Pet Foods, Hawaiian Hotels, Polaroid, Sea World, and others. Give an additional $3 to Big Dog's nonprofit foundation and you're a Top Dog.

Yahoo's VP of Direct Marketing Seth Godin is a leading advocate of Permission Marketing and author of a book of the same name. In it, Godin describes five incremental steps to "dating" customers, a process we think is a lot like community building:

1. Give them an incentive for joining up—a sweepstakes entry or e-letter.

2. Over time, start to teach them about you.

3. Reinforce permission with fresh, and customized, incentives.

4. Get more permission with more valuable incentives.

58 Tap Into Communities of Interest

Our Poiicy

Rule 1: The customer is always right! Rule 2: If the customer IS ever wrong, reread Rule 1.

—Stew Leonard's Dairy Store

Norwalk, Connecticut-based Stew Leonard's Dairy Store is legendary for its fabulous customer service. One way it bags customers is the store's quirky photo exhibit: When a Stew Leonard's shopping bag found its way into a customer's vacation photograph, the store put it on display. Soon, customers were taking the bags on vacation to add to the impromptu collection and the "Bags Around The World" exhibit was bom.

If you've got a charge card, you've got a community! The nation's fourth largest department store chain J.C. Penney Company, Inc. creates special sales for its community of credit cardholders. A recent two-day sale offered J.C. Penney cardholders an extra 10% savings over and above the already reduced sale prices.

BUILD COMMUNinES

around education

Education is a smart community builder. The NMR Instruments Unit of Palo Alto, California-based Van'an Associates used the Internet to create a worldwide community among the highly specialized group of scientists who use its nuclear magnetic resonance spectrometers. (The equipment is used to analyze molecular structures and can cost up to $25 million.) The "Virtual Customer Support Network" features an electronic newsletter and support services, as well as e-links to NMR employees and other customers.

General Electric Medical Systems (GEMS), a Wisconsin-based medical equipment manufacturer, created TiP-TV to engender loyalty

Tap Into Communities of Interest 59

among its hospital/clinic clientele. TiP, short for Training in Partnership, uses a television network to broadcast live and interactive training sessions that teach customers to use GEMS equipment as effectively as possible. This fee-based training qualifies toward hospital personnel's continuing education requirements and keeps GEMS close to its customers.

The nation's oldest existing mail-order operation, The Orvis Company, Inc., founded in 1856, shows customers how to get the most from its high-end fishing and hunting equipment with fly-fishing and hunting schools across the country. Orvis began teaching the sports in 1968 to ensure a steady stream of new customers; and since then, the schools have turned into a profit center all their own.

Printing giant Quad/Graphics build its customer communities around free three-day educational seminars run annually in April and May. The $1.2 billion company calls the program "Camp Quad" and uses it to teach customers about new products and printing processes.

The fast-growing community of do-it-yourselfers is always looking for good working advice and smart home center retailers, like the nation's 2nd largest home improvement superstore chain Lowe's Companies. Lowe's keeps its handy customers coming back by offering new home improvement projects and tool demonstrations each week. The clinics are free, and recently included such diverse topics as water heater installation, hanging wallpaper, organizing storage space, and Stanley tool and Troy-Bilt mower demonstrations.

Goodwill is the one and only asset that competition cannot undersell or destroy.

—Marshall Field

60 Tap Into Communities of Interest

Four Ways to Grow Profits from Communities

In their Harvard Business Review article, Arthur Armstrong and John Hagel describe how online communities contribute to company profitability:

1. Earn revenue by charging entry fees to join the community.

2. Earn revenue from the sale of the community's content.

3. Earn revenue from the sale of goods and advertising.

4. Cut internal expenses by letting the community replace a more expensive operation-such as online vs. telephone support.

Communication parts and assemblies maker AMP, Inc. builds sales and brand recognition among the contractors that use its products with its Netconnect Design and Installation (NDl) program. NDl is a loyalty initiative that includes free training, co-op advertising, and a rebate on purchases to contractors AMP identifies as desirable partners. In return, the contractors use the $6 billion Harrisburg, Pennsylvania company's products and build AMP brand recognition among their customers.

Winnipeg, Canada-based Conviron's customers add up to the largest group of users of controlled environment equipment in the v^orld. The company built on that franchise by connecting those scientists into a network and fosters that network with conferences and online communication. Says CEO Richard Croft, "Stuff is flying around the world, and scientists are constantly moving around. We go to great lengths to see that they carry the knowledge of our products with them."

The country's largest retailer of crafts supplies, Irving, Texas-based Michaels Stores, Inc., makes sure its customers know how to use the 40,000 items it stocks by sponsoring its own free project demonstrations. These are often timed to coincide with holidays, like the two-hour program on a Saturday in mid-March, when customers learned how to "create a whimsical bunny centerpiece."

General Nutrition Corp., the leading retailer of nutrition products, knows that its customers share a concern for good health and wellness. To keep that community coming into their chain, it recendy ran an in-store seminar called

Tap Into Communities of Interest 61

"A Lifetime of Health and Well-Being." Participants got samples, personal training tips, and refreshments along with lectures from specialists, including dentists, massage therapists, bodybuilders, and chiropractors. By creating a learning environment and making the store a clearinghouse for health services, GNC gives its customers a reason to stop in, even when they don't need a new supply of vitamins.

Franklin Covey Company's Franklin Planner family of products is the world's best-selling calendar system encompassing time management, goal setting, and planning. The Salt Lake City-based company, which merged with 7-Habits guru Stephen Covey's consulting firm, drives sales of planners and the .annual refills through a never-ending series of educational seminars. The fee-based time management workshops teach new and existing customers how to use the products as organizational tools in their daily lives. Sign up and you also get a complimentary Planner and 30 days of technical support.

The Web is all about community. Vancouver, Washington-based CompuPetS "sells Web-presence services to the pet industry." To help generate the traffic their site needs to build ad revenues, the company regularly hosts online seminars with pet breeders, veterinarians, and other experts, and offers chat rooms to keep surfers talking.

BORROW SOMEONE ELSE'S COMMUNITY

Communities of interest needn't be permanent or even focused directly on your product or

Consumers are statistics. Customers are people.

—Stanley Marcus

62 Tap Into Communities of Interest

service in order to tap into their power. Take the time-honored bridal registry, a temporary community of interest centered around one wedding. Cranston, Rhode Island-based Ross-Simons, a retailer of tableware, jewelry, and collectibles, attracts these communities with a free bridal registry kit and a dedicated number, 1-800-82-BRIDE.

Once registered, the bride receives a $25 gift certificate toward her own shopping and free shipping on completion purchases. She also has access to bridal specialists who are available to help choose china, crystal, and silver as well as attendant gifts and favors. Of course, that is in addition to typical services, such as creating and tracking the gift wish list and making it available to her family and friends.

AAA Travel unveiled its take on the bridal registry with the AAA Travel Registry. The happy couple begins by putting a deposit on a honeymoon trip offered by the agency. In return, they receive registry cards that can be included in announcements and invitations sent to friends and family advising them how they can purchase the perfect wedding gift. Gift givers can contact the Registry and purchase gift certificates in any denomination toward the honeymoon trip. The AAA Travel Registry cards may also be used for other special events, such as anniversaries, birthdays, and graduations.

Mail-order giant Eddie Bauer knows you don't need to be a bride to attract your personal community of interest. So, now any customer can set up a gift registry on Eddie Bauer's Web site by providing their name, applicable sizes, and a list of all his or her preferred merchandise. Friends and family can log

Tap Into Communities of Interest 63

on anytime, look up the recipient and order the perfect gift, all from their PC.

J.C. Penney Company subscribes to the same philosophy with its Perfect Match Gift Registry program. Any and all J.C. Penney customers are invited to take advantage of the chain's hand-held scanners to create their own gift registry. The larger stores also have personal gift consultants to help customers make their choices. The gift registry is nationwide and includes a completion program.

Even Microsoft has boarded the registry train. Its Personal Computing "Gotta Have It" Gift Registry allows customers to create their own list of must-have software online and e-mail it to anyone they'd like.

Toy superstore chain Toys 'R' Us came up with a good twist on the bridal registry that answers the age-old question, "What do you want for Christmas?" Kids are loaned portable scanners that let them wander the store to build a computerized wish list by scanning the toys of their dreams. After the canvassing is done, a computerized list of the desired goods is generated and transmitted to all the chain's stores nationwide. Now, even distant relatives can give just the right gift.

Discount retailer Target keeps customers coming back with a similar scanner-based system for bridal and baby shower registries. Go to Target's customer service desk, sign up for Club Wedd or the Lullaby Club and you are on your way. As an added incentive, the Lullaby Club offers a 68-page gift guide, tote bag, and assorted coupons to those who register.

64 Tap Into Communities of Interest

Local theaters have been informed which cinemas will have the [new Star Wars] film on its opening date, but they have not been given permission—from director George Lucas, who controls every aspect of the film's marketing strategy—to announce it. When advance tickets go on sale, probably May 12, it is expected to touch off a frenzy.

—Daily Press, May 2, 1999

Ukrop's has turned extended families with new babies into a community of interest. Parents and grandparents of children under age two are eligible to join Ukrop's Baby Club. Baby Club members receive a $ 10 gift certificate rebate for every $100 spent on baby products at the store. They also receive quarterly newsletters, coupons on sponsors' products and special sweepstakes entries. The sponsors include Ger-ber, Drypers Diapers, Johnson & Johnson, and American Greetings, among others.

Can you build a temporary community around an event? Virginia's Colonial Downs racetrack did with its "Kentucky Derby Bash." The track, which wasn't running any of its own races on Derby Day, offered free admission, racing programs, and prize drawings throughout the day. And, brought in race fans to generate OTB (off-track betting) revenue.

Norfolk, Virginia's Sheraton Waterside capitalized on the Star V^ars mania with a package including advance tickets to the movie, a gift certificate for theater snacks, and a one-night stay in the hotel—starting at $99.

How will it do? The hotel created a similar deal when The Phantom of the Opera came to town, and sold over 600 packages.

Toys 'R' Us knows well what kind of business Star Wars-branded toys generate. So, in its first-ever fit of Midnight Madness, the entire chain opened at 12:01 a.m. on the toys' release date to grab the first customers.

Borders Group Inc. book chain isn't one to miss a party. It invited their customers to "Join

Tap Into Communities of Interest 65

in on some intergalactic fun with our Star Wars Party at Borders! We'll partake of some tasty snacks, play a trivia game, hold Chewbacca and Darth Vader impersonation contests, and end the evening with fun light saber duels! Remember to come dressed up as your favorite Star Wars character, 'cause we're giving away lots of cool prizes! Don't miss out!" (With permission of Lucasfilms, of course.)

Direct marketer Lands' End, Inc. borrows communities of interest through its sponsorships of modern adventurers. In 1997, it backed the Carter Viking ship voyage that sought to prove that the Vikings were able to reach North America centuries before Columbus. In 1998, it sponsored a team on the 1,100-mile Iditarod Trail Sled Dog Race. The progress of each journey was featured on the company's Web site and attracted plenty of positive attention.

Colonial Williamsburg (CW) created a com :

munity of ambassadors with its "Good Neigh :

bor" program. Residents of the city of :

Williamsburg get free admission to all of the :

historic sites and free use of CW's bus service. ]

In addition, there is a variety of special pricing, :

including 40 to 50% discounts on up to 10 :

guest passes per year; a dedicated reservation :

telephone number for area restaurants and tav :

ems; and a 25% discount on events. How do :

you earn revenue when you give away admis I

sions? Good Neighbors bring a steady stream :

of their guests to the historic area and those I

admissions are paid. :

Historic sites close to CW immediately saw :

the value of the community addressed by the :

Good Neighbor program and joined up, too. l

Every business can indeed be a stage for offering economic experiences. Whether selling to consumers or customers, firms must recognize that goods and services are no longer enough; customers now want experiences.

—B. Joseph Pine and

James Gilmore in

The Experience Economy

66 Tap Into Communities of Interest

You can close more business In two months by becoming interested in other people than you can in two years by trying to get people interested in you.

—Dale Carnegie

The Good Neighbor pass, and all CW admissions, include free admission to the Jamestown Settlement and the Yorktown Victory Center.

Belle Plaine, Minnesota-based Excelsior-Henderson was so impressed with Harley-Davidson's community of loyal customers, it joined the group to sell its version of the long-gone, highly collectable Indian motorcycle. The company set up at the annual Harley rally in Sturgis, South Dakota, to introduce their product and are borrowing liberally from the H-D model. "We're fostering the Excelsior-Henderson lifestyle," company co-founder Dan Hanlon told Inc. magazine in November 1997.

Netpulse, a maker of the computerized monitors found on exercise equipment in gyms, borrowed its customers' customer community to build sales. Here's how it works: If your gym has a Netpulse-equipped exercise bike, you can join Netpulse's free Mile-a-Minute Program. Cycle for 500 minutes and Netpulse will send you a 500-mile frequent flyer voucher, good on either American Airlines or United Airlines. What's in it for Netpulse? Exercise equipment with Netpulse monitors generate business for the gyms, gyms generate business for equipment makers, and equipment makers buy Netpulse.

Cleveland, Ohio's Medic Discount Drugstores chain borrows the employee communities of its corporate neighbors to grow repeat business. Companies and their employees are invited to join the free Medic Value Prescription (MVP) Plan. On enrollment, employees

Tap Into Communities of Interest 67

receive personalized MVP cards for themselves and any immediate family members, which entitle them to 30% to 50% savings on generic prescriptions and Medic brand products, as well as a 10% discount on home health-care products.

Delta Air Lines and American Express

teamed up to build a community for female business travelers with their Executive Woman's Travel Network. A fine mix of content and incentive, the Network is based online. It offers members resources, such as travel advisories and city profiles, and plenty of perks—starting with savings certificates for Delta flights for signing up. There is also a well-focused bundle of partner offers, such as discounts from Canyon Ranch Health Resorts, Royal Caribbean Cruise Line, Radisson, and others.

Found a community of interest, but don't have a product or service for it? Invent one. The Bank of New Castle teamed up with Novus to offer an affinity card with enormous appeal to the nation's many home gardeners. Using the Yard Card earns points that can be redeemed for catalog merchandise aimed at the devotees of the backyard, such as Black <& Decker tools and Meadowcraft outdoor furniture.

Efax.com tapped into the community of folks that have e-mail but not fax machines to create its business model. Sign up at the company's Web site, and you are given a telephone number to receive faxes. When a fax arrives, Efax turns it into an e-mail and sends it to you. All for free. How does Efax make money? It

68 Tap Into Communities of Interest

Monopolies Collapse

Even when your customers have little alternative but to come to you (think utilities and cable, for example), you better not take them for granted. Treat them like "hostages" and when the situation changes, they may well turn into "terrorists," according to Thomas Jones and W. Earl Sasser, Jr.

^

sells advertising that is shown on the ''envelope" in which your fax arrives. Sound like a losing proposition? Efax pulled in 300,000 subscribers in its first two months of business.

Even in a town that attracts over a million tourists per year, Williamsburg's Fort Magruder Inn needs to keep its local clientele coming back. It reached out for the resident community during the annual February tourist lull with its "License to Please" lunch buffet promotion. Simply flash a current Virginia driver's license, and walk away with a 25% discount from the standard price, or $5.95 instead of $7.95.

Another of our local eateries, Hayashi Japanese Restaurant, targets specific communities by offering different discounts on various weeknights. Monday is Hospitality Night when all employees of hotels or hospitality-related businesses receive a 15% discount off their bill. Tuesday is William and Mary Night when students and faculty of the college receive 15% off their entire bill. Wednesday night is for Senior Citizens who receive 15% off their bills.

Miami, Florida's AvMed Health Plan created a community around the senior citizens enrolled in its medical plans. The HMO's 1-to-l Program reaches out to its older clients with a selection of free services, including contacts with volunteers to help with errands and chores, personalized health risk assessments, and (when indicated) referrals to outside health or social service agencies. It also raised the organization's retention rate among seniors.

Tap Into Communities of Interest 69

Hecht's department stores give seniors a good reason to come to the store with an annual one-day sale. On that day, seniors get an extra 10% discount on everything in the store. Says the chain, "If you're 55 years of age or older, take advantage of an extra 10% savings on any charge or cash purchase. Just show proof of age to any Sales Associate."

The Target Stores discount chain has been reaching out to senior citizens with a 2 5-year holiday tradition. Each December, every Target store dedicates one morning to a shopping party for seniors. You can't get in unless you are a senior and the party includes complimentary entertainment, food, and gift wrapping.

If a 200,000-member HMO, with an average premium of $120 per month, has 8% of its customer defect per year, the loss //? annual revenue is dose to $24 million.

—HSM Group

WHITE PAPER

Just in case you still haven't gotten the spark :

that you need to tap into your own community of ;

interest, prepare to be inspired by the keep-your I

customers-coming-back virtuosity of Chicago cab :

driver Ellis Miller. Miller attracts repeat business \

on his run to and from the airport by playing :

matchmaker for his riders. Riders complete a ♦

"love resume" and review an in-cab portfolio of \

potential mates. In the event of a match, the driver :

arranges the date. It tumed out to be such a good :

idea that Ellis added a fee for the service. :

4

Stand Behind Your Work

0

ne word: Trust! Trust is a critical factor in building repeat business. Think of it as a simple two-step process:

Step 1 in building trusting relationships with customers is delivering what you promise—the exact products and services at the price and time agreed upon.

Step 2 kicks in if (or more accurately, when) you break the promise you made in Step 1. The "when" is not meant as an insult. It is the practical recognition of all that is unforeseen. Products are sometimes flawed; computers crash; people make errors. Mistakes happen, so plan ahead for how to make things right again.

In any case, it's a pretty good bet that when a company stands behind its work, the customers will stand behind the company. Guarantees and warranties are two of the most widely used and easily recognized ways to show customers that you are confident in your work and are ready to support their relationship with your company. Guarantees and warranties take many forms, but we found that

72 Stand Behind Your Work

almost all fall into one of three categories: product, service, and price.

Product warranties are commonplace these days; they are perhaps the most familiar to consumers and are expected on just about all products. The challenge today is to find creative vs^ays to use warranties to differentiate your company from your competitors and keep customers coming back because they are sure of getting a high-quality product.

Customers are often more worried about purchasing services than products. After all, defects in service are often subjectively defined and outcomes are not always predictable. All the more reason to stand behind your services.

Sometimes the most important guarantee you can offer customers is that they are receiving the best price. Price guarantees give customers the confidence to make their purchases immediately and reduce a company's risk of losing sales while customers go shopping for lower costs at a competitor's business. Further, price is usually one of the most important considerations in making a purchase. Guarantee the price and loyal customers will always know that they can buy from you without remorse.

STAND BEHIND YOUR PRODUCT

Nobody doesn't like the Coach Leatherware Company, a subsidiary of the Sara Lee Corporation. Ask customers why they are willing to pay a premium for the company's goods, and the lifelong warranty is sure to come up. The company brands each of its expensive handbags and other leather goods with its own unique serial number. Fill out the warranty card, return it to Coach, and the company will repair the produa

stand Behind Your Work

73

free of charge (except for a small shipping charge) for as long as you own it.

Hartmann, which has been making high-quality, handcrafted leather goods for over 120 years, also enjoys a reputation for standing behind its product. It guarantees all products to be free from defects for the life of the product. In addition, items that have deteriorated due to normal wear and tear can be returned to Hartmann at any time for repair. If, after inspection, the company determines that there is a charge for the service, Hartmann will call the customer with a quote within five to seven days.

Fine men's footwear maker Allen-Edmunds takes a stand on the quality of its workmanship. Starting in 1991, it extended the life of its shoes with its recrafting service. The recrafting process turns worn wingtips into new ones for a fraction of the cost of buying a new pair, and the company offers four economical repair packages to customers. The company even pays the cost of getting the shoes in for recrafting. Post-paid shoe bags are available from the dealer or a call to the toll-free number. "Imagine that," says president of the 77-year-old company, John StoUenwerk, "a shoe company that retains its shine."

We particularly liked the wording of the full-refund guarantee Worth magazine uses to attract repeat business: "If Worth doesn't help improve your net worth during your renewal year, just tell us and we'll refund your money in full." Now that's putting your money where your magazine is.

One bad experience and poof ... customers are history. Sure, you can replace them—but at five times the cost.

— Paavo Hanninen,

DIREaOR AT THE

Small Business

development center,

University of Alabama

74 Stand Behind Your Work

The customer is the final inspector.

—Source unknown

It's all the more important that mail-order companies stand behind their products. After all, they ask customers to buy products before they can actually touch, see, and in the case of Omaha Steaks, taste them. No worries with this company however. Customers who are not completely satisfied with their order get a replacement or a full refund, whichever they prefer.

Plow & Hearth, a direct marketer selling "Products for Country Living," offers the "Spirit of Country Living 100% Guarantee." Any item purchased from the company may be returned for any reason at any time if the buyer is not 100% satisfied. Customers may return the item for exchange or full refund.

By the way, the cataloger also offers price protection. Find the same merchandise cheaper somewhere else and the company promises to refund the difference.

Smith & Hawken, a retailer of everything one needs to garden in high style, makes its promises in plain English. If customers are "less than pleased" with any item, the company "will cheerfully accept it for an exchange or refund of the full price of the merchandise." Further, if in the customers opinion "a product fails to hold up under normal use for a reasonable period of time," Smith & Hawken will replace the item. And, for good measure, "if you simply decide you don't want the merchandise, please return it within six months."

Kids love stickers, and Nevada's Vending Supply, Inc. makes and sells millions of them each year through its customers' vending machines. Customer tastes change quickly in this

stand Behind Your Work

75

market, so Vending Supply encourages its vending machine owners to try out the latest, but as-yet unproven, designs by guaranteeing that the owners would not lose money on them. In an interview for Management Review, CEO Robert Winquist said, "We improved our service to vendors themselves, ultimately offer[ing] a 100% refund policy, unthinkable in this business."

You should be able to play rough with a sports watch, so Swiss watchmaker Burett offers a lifetime warranty on its high-end Burett 2002 watch. Repairs are free with a copy of the sales receipt. For those customers who abuse the watch beyond all reason, the company will be happy to offer an estimate for the service after they receive it.

Book lovers are sure to be familiar with Del-ray Beach, Florida-based Levenger, Inc., which sells "Tools for Serious Readers" through catalogs and its retail store. From the start, the company wanted to be sure its customers were completely satisfied and so created a full-refund policy that includes return shipping costs.

Palantine, Illinois-based Weber-Stephen Products Company shows its commitment to the quality of its outdoor barbecues with a warranty program that includes a 45-day money-back guarantee and a 2 5-year limited warranty. The company went a step further, creating 1-800-GRlLL-OUT (a hodine for grilling tips) and a toll-free customer-service number for problems.

Competing with the myriad of office-supply superstores popping up around the country

76 Stand Behind Your Work

isn't easy, but Ottawa, Illinois-based Reliable Corporation backs up its catalog operation with an unconditional guarantee. Anything purchased from this subsidiary of Boise Cascade is subject to a 30-day free trial. If not satisfied, the company refunds the purchase price and pays for the return shipping.

Like most prescription medication, the cholesterol-reducing drug Zocor is expensive. But, it differs from other prescription remedies because the nation's largest pharmaceutical company, Merck & Co., Inc., has decided to back up its effectiveness with a "Get-to-Goal Guarantee." Merck will give customers (or their insurance companies) their money back, if they use Zocor for 30 days and it doesn't work.

Bradford, Pennsylvania-based Zippo Manufacturing Company is the only remaining American maker of refillable lighters. Maybe that's because it prides itself on the fact that none of its customers has ever spent any money repairing its products—since 1933. Other than the exterior fmish, every part of a Zippo lighter is guaranteed for life. "It works or we fix it free," declares the company. Customers take them up on this guarantee to the tune of 1,000 lighters per day, most of them needing only a new hinge. Even if customers send the lighter with money for postage or repairs, the Zippo Repair Clinic returns the money with the restored lighter.

Sometimes a lifetime guarantee is simply the price of admission to a market. Several generations of hand tool buyers are familiar with Sears, Roebuck and Company's Crafts-

stand Behind Your Work 77

man brand tools. Break a Craftsman hand tool, even those that get notoriously heavy use such as utility knives and aluminum snips, and Sears will replace it with a new one—no charge.

A subsidiary of the Lowe's Companies, LF Corporation matched that with its KOBALT brand tools. The company offers a simple guarantee: The tools will work forever. And, just in case they don't, customers can return the tool to the place of purchase for a free replacement ... no questions asked.

Atlanta-based The Home Depot, Inc. knew what it had to do to launch its Husky brand tool line. If a Husky tool ever breaks. Home Depot will replace it free of charge.

The largest do-it-yourself chain. Home Depot, extends its tool guarantee to merchandise throughout its stores. As founders Bernie Marcus and Arthur Blank say in their book Built from Scratch, "The key to our no-holds-barred return policy is that people talk about it. It gets them hooked; they know they can never make a bad purchase at The Home Depot, because we don't ever want to give them a reason not to come back."

Lowe's Companies' Lowe's Home Improvement Warehouse lawn and garden departments keep customers coming back with their "One Year Plant Guarantee." Any tree, shrub, and houseplant purchased from Lowe's that does not live for one year will be replaced free of charge. And, no lugging around dead trees; the only evidence customers need is the original receipt.

No sale is really complete until the product is worn out and the customer is satisfied.

—Leon (L L.) Bean

78 Stand Behind Your Work

When product quality Is similar, it's customer service that tips the scale in your favor.

—Michael Smith,

PRESIDENT OF LaND's EnD

IN Customer Service

Firm and clear are the two hallmarks of a strong guarantee. Listen to the world's largest postage meter maker Pitney Bowes, Inc.: "This five-year guarantee means that if you are not satisfied with the performance of this product Pitney Bowes will promptly replace it at our expense. If we provide a replacement product and it does not fully perform according to specifications, we will promptly give you a full refund. You will have no concerns after you acquire this product. Our customer satisfaction guarantee means that your problems are our problems and will be resolved promptly. In short, it means no excuses from Pitney Bowes."

Land's End, Inc.'s guarantee is even simpler: "If you are not completely satisfied with any item you buy from us, at any time during your use of it, return it, and we will refund your full purchase price."

Land's End doesn't just stand behind its products; it also stands behind its service. During the 1997 UPS strike that crippled the direct marketers around the country, the company quickly created a shipping partnership with the U.S. Postal Office to make sure that the 40,000-odd orders shipped each day still arrived at customers' doors in good time. Because the company was unable to fulfill most rush shipping requests, it offered free shipping instead.

Lebanon, Ohio-based Frontgate's catalogs are filled with luxuries designed for "Enhancing your life at home." They include pool toys, leather-bound remote control boxes, and state-of-the-art personal electronics. The cata-loger keeps customers coming back with two confidence-builders.

stand Behind Your Work 79

First, the company offers the "395 Day Signature Guarantee," a creative extension that means customers can Hve with their purchases for a full 13 months before deciding whether or not they'd like to keep them. Then, Front-gate ups the ante with price protection. Customers may request a refund of the price difference for any product sold for less in another catalog, including taxes and shipping. Price protection is available for 90 days after purchase.

Those companies that are best at standing behind their work know that the mishaps that are bound to occur occasionally are really opportunities to build customer loyalty in disguise. Consider The Popcorn Factory's response to a customer's complaint. The direct seller of popcorn and a catalog full of related products quickly responded to a phone call about a stale product. The day after the call, the customer received a letter of apology along with two new tins of fresh popcorn.

When Volkswagen Group introduced the New Beetle, it harbored a wiring bug that could cause fires. The company not only fixed the bug; it authorized dealers to spend $100 per owner to apologize for the inconvenience. "We were hoping they would buy them flowers, or buy them lunch, or maybe, if it was New York, give them a cab ride," Volkwagen's Tony Fouladpour told the New Yorker. "But we know some of the dealers just gave them the cash."

Personal experience: After wearing a 3. Crew barn jacket for over a year and finding it impossible to keep clean, we finally called the company for advice. "Are you unhappy with

Leonard Berry's Three Rules of Service Recovery

1. Do it right the first time.

2. Fix it if it fails.

3. Remember: There are no third chances.

80 Stand Behind Your Work

Never underestimate the power of an irate customer.

—Joel Ross

your purchase?" asked the rep. Our "yes" produced a wholly unexpected response. The company asked us to send the jacket back for a full refund and apologized for the inconvenience. We've been customers ever since.

Another: We bought a pair of Pottery Barn curtains that looked great in the catalog, but not so good at home. We figured we could work around them, but months passed and we couldn't. Finally, we called the company and told a service rep the story. After a very short period of deliberation, she assured us that they wanted us to be happy with their curtains and authorized an exchange. Customers ever since.

One more: Living in Cleveland, we liked to eat at the Cooker Bar & Grille, a regional chain serving a wide-range of American specialties. Every meal, a manager stops by the table and asks how it was. One night, we looked at our now-empty plates and mentioned that the meatloaf was okay, but not quite as tasty as usual. It came right off the bill. If only they'd open a location in Virginia.

Not all employees are as amenable: Marshall Fields, founder of the Chicago-based department store chain, once came upon an employee arguing with a customer.

"What are you doing here?" Field demanded.

"I'm settling a complaint," came back the reply.

"No, you're not," said Field. "Give the lady what she wants." And, that phrase became the chain's motto.

Century Furniture in Hickory, North Carolina, builds quality furniture and it made its attitude toward its workmanship clear in this

stand Behind Your Work 81

incident: After six moves and 16 years, when one of the hinges on a Century armoire finally gave up the fight, friends of ours say the company quickly responded with a personal note containing two identical replacement hinges— one extra just in case. Guess what brand of furniture they recommend?

We had a similar experience when we lost the rubber straps that secure our bicycles to the Rhode Gear 2~Bike Shuttle on our car. The one-year limited warranty was long expired and anyway the defect was in the owner's memory. We couldn't buy replacements, however. The customer service rep insisted on sending the four replacement straps, and four extras, without charge. Which racks do you think we recommend?

Buy fiber-optic cabling from Lexington, South Carolina-based Pirelli Cable Corporation, and it comes along with the company's 'Twenty-four By Seven" emergency response teams. Knowing that cable mishaps can translate to vital communication outages, Pirelli established a toll-free number that generates urgent messages to team members no matter where they are. Once a team member takes the call, that person manages the response from start to finish.

Greenville, South Carolina's Hartness International backs up its product guarantees with a video response system to cut the downtime if its high-volume packing machines (that load bottles and jars into cartons) stop running. Installed at the customer's site, the system includes a wireless camera, a remote control, and a monitor, and allows Hartness to conduct

82 Stand Behind Your Work

Customers don't want their money back; they want a product that works properly.

—Dan Burton,

BUSINESS WRITER

remote repair sessions that solve up to 80% of their service problems.

Bicycle retailer Bike Beat makes this promise: ''All bikes are professionally assembled at Bike-Beat and come with a lifetime warranty and service protection." The free guarantee not only saves customers money, but also gets them back into the shop anytime they need repairs.