Maters of Loyalty
Preface – There’s something strange about this loyalty thing.
By the time the plane reached cruising altitude, dawn had broken. The passenger in seat 2-A turned his attention from the window and asked the flight attendant in the first-class cabin for another cup of coffee. His clothing had already pegged him as a business traveler, but now something in his manner caused the attendant to update her appraisal. Another worried executive, she thought. Like so many these days. Is it just me, or did the guys in good suits used to look a lot happier?
Her perception was accurate. Mike was, indeed, an executive — a vice-president of marketing, to be exact—and he certainly was worried. But the flight attendant could not have guessed just how peculiar this particular business trip was.
Mike himself could scarcely believe the reason he was on the plane to Phoenix. My job depends on some mysterious sales rep I’ve never met, he thought. Tony, my man, whoever you are, I hope you can show me a way out of this mess. Because I sure can’t figure out the answer.
The flight attendant was right about another thing. Mike used to be a lot happier. Only a year ago, he was a corporate hero. It was at his urging that his company trained and certified its sales force in a new system called Action Selling ®. At the time, the company’s annual rate of sales growth was stuck at 2.5 percent, average for its mature industry. After the training, the growth rate more than doubled to 5.1 percent. The new system was a tremendous hit with the sales force, and Mike’s CEO was delighted with the results. At least for a while.
But the CEO wanted more. He was under pressure from stockholders to increase both revenue and profits at a faster clip. When the quarterly numbers came in 90 days after the training was completed and showed that the new sales system was a smashing success, there had been jubilation. But a month later, the CEO called Mike into his office.
“We still need more customers, and we need more business from current customers,” he said. “I suppose it doesn’t exactly surprise you that those two things are at the top of my list,” he added with a smile.
Not exactly, Mike thought. You’re a CEO, after all.
“Let me explain,” the chief executive continued. “Analysts no longer evaluate companies in our industry purely on sales growth. They want to see us grow our base of customers as well as the revenue from our base. The sales growth that we have accomplished with Action Selling ® needs to continue, but specifically with our current customers. If we want our stock price to rise, we have to do it with what’s called ‘organic sales growth.’ That means we need more business from the customers we’ve already got.”
I couldn’t ask for a better opening than this, Mike thought. Am I a proactive marketing VP or what? Get ready, Boss, because here comes Mike’s Greatest Hits-Volume 2.
‘The solution to organic growth lies in customer loyalty.’
“You’re reading my mind,” he said. “I’ve been thinking the same thing. And I believe the solution to organic growth lies in customer loyalty. We need to elevate our sales and service goal from ‘satisfied’ customers and start creating more genuinely loyal ones. We need to bind them to us somehow so that we get more of their business, more consistently and over a longer term.”
Mike noticed the CEO’s eyes brighten.
Eagerly, he began to outline the new program he had been planning. Pulling out a document he had brought to the meeting, Mike pointed to research showing that 40 percent of “satisfied” customers will leave a company for a competitor without hesitation. And 75 percent of customers who switch suppliers do so despite being “satisfied” or “very satisfied” with the original one.
“Our customer-satisfaction surveys have been measuring the wrong thing,” Mike said. “We have to turn satisfied customers into loyal customers.” The way to do that, he argued, was with a loyalty program. In the same way that airlines use frequent-flyer programs and retail stores offer discount cards, he said, “we should offer customers a special incentive to give more of their business to us and less to the competition.”
Mike’s proposal was a loyalty program he called TechShare. To high-volume customers, TechShare would offer elite status for pricing and delivery, automated ordering with instant access to supply chain inventories, online access to training and technical help, and more. The program wouldn’t require adding any expensive new capabilities. It was essentially a new way to package services that the company already could provide.
“The Action Selling ® system doubled our rate of growth,” he concluded, a not-so-subtle reminder of his recent victory. “I think if we give the reps TechShare to sell, we can double our rate again.”
The CEO was sold. Six months ago, TechShare had launched—with $2 million worth of advertising and marketing support. The program was Mike’s baby, his pride and joy.
And it bombed. In the wake of TechShare’s launch, the growth rate barely budged. After six months, the average sales rep, company-wide, had sold the TechShare program to exactly three clients. (Three? Mike thought, the incredulity rising yet again. Three?) Most reps had signed up only one or two accounts. A number of them had sold none at all.
Needless to say, the CEO wasn’t interested in sharing blame for the decision to run with the program. “This is your $2 million dog,” he told Mike. “Cure it or shoot it.”
Reports from the field indicated that customers saw nothing specifically wrong with TechShare. But competitive suppliers offered loyalty programs, too, and customers couldn’t see much difference between them. Like the products Mike’s company sold, special incentive programs had become commodities. The Action Selling ® system had helped the sales reps tremendously when it came to differentiating their products. But they seemed at a loss when the “product” was TechShare.
There were exceptions, of course. And in the entire company, Mike thought, his mind skipping to his present mission, the biggest, most glaring exception is you, Tony.
‘Like products, special incentive programs have become commodities.’
For the past year, the Phoenix office had been the company’s star operation, reporting the highest revenue and the best margins. Phoenix also had sold twice as many TechShare programs as the second-best branch. Why? How? When Mike called the branch manager to investigate, the answer was simple enough. But it only raised more questions.
“It’s Tony,” the manager said. “I have five sales reps, but he’s the reason we’re outstanding. Without him, we’d be about average. I wish I could clone him.”
While each of the other four salespeople had signed up three TechShare accounts, Tony so far had sold 30. But it wasn’t just TechShare, the manager explained. “Tony gets more business and better margins out of almost all his accounts, regardless of whether they sign up for the loyalty program.”
Why? “I wish I knew,” the manager said. “His customers just seem to love him.”
Tony was some kind of born superstar salesperson then?
Not at all, the manager said. “That’s the strange thing. He’s been with us four years, and until he got the Action Selling ® training he was average. It’s just in this past year that he caught fire.”
As Mike knew, the manager pointed out, since the new system was introduced, the average rep’s sales performance had improved significantly. “But Tony’s performance skyrocketed. He gives all the credit to Action Selling ®. But why does he seem to get more out of it than the others? Like I said, if I knew that, I’d clone him.”
And if I knew, and I could clone him, Mike thought, maybe I could rescue my job before it’s too late. For the first time in months, he saw a ray of hope…by the name of Tony.
With the branch manager’s OK, Mike had called Tony. He explained that he was doing some research into how TechShare could be sold more effectively. “You’ve outsold our average reps 10 to one,” he said. “What are you doing that the others aren’t?”
As the manager had warned, however, Tony seemed genuinely at a loss. “I just use the Action Selling ® system,” he said. “Hey, it has helped every rep in the company.”
Yes, but why was the boost in Tony’s performance so exceptional? Tony had no idea. Mike probed, but got nowhere. In some way, Mike began to suspect, Tony must understand the system on a deeper level than most. If he couldn’t explain how or why, maybe it was for the same reason a fish couldn’t describe water. Is it something so obvious to him that he can’t imagine the rest of us don’t know it? Mike thought. I need to see this guy work.
Mike asked if he could come to Phoenix and shadow Tony for a day—accompany him on some sales calls as an observer. Tony was happy to oblige. “Are you kidding?” he said. “My clients would be happy to meet one of our executives. You’d be helping me with Act 5.”
Act 5 was Action Selling ® terminology for a step in the sales process called “Sell the Company.” Well, he sure thinks in the system’s terms, Mike thought.
His reverie was broken by the pilot’s announcement that the plane was on final approach to Phoenix.
I’m counting on you to have the answer I need, Tony, even if you don’t know what it is, Mike thought. If I can figure out what you’re doing differently, maybe I can replicate it. And if I can do that, I can save TechShare—and my job. One more remark about $2 million dogs, and I’d better sharpen up my resume.
As the plane touched down, Mike turned his gaze back to the window with a mixture of hope and desperation. At least it was better than the pure desperation he had felt for months.