The Secret's Out

And They Told Two Friends, And So On...

Another relationship marketing enthusiast is Patrick Daly, who oversees the Customer Care Program for the huge international courier DHL Worldwide Express in Redwood City, California. "Most profits in most companies [are generated] through current customers; new customers cost money to develop," Daly says flatly. However, he points out, the monies come not just from the customers themselves but from others they steer your way.

"Many businesses, such as contractors and other home-service providers, find that referrals from loyal customers account for up to 80 percent of their new business," says Daly. "[Plus,] the `close rate'--turning a prospect into a client--from loyal-customer referrals is far higher than from new customer leads from advertising." However, Daly warns that just getting a satisfied customer into the fold is not enough to ensure loyalty.

"Studies show that even customers receiving good service and good value can't be counted on to stay loyal," Daly says. "Earning loyalty requires the relationship to reach a whole new level of involvement."

Daly recounts that his first lessons in relationship marketing started with his father, Dennis, the owner of a printing company in Sacramento, California. "He was thinking of buying an expensive new press," Daly says, "and he invited his most loyal customers to a luncheon to discuss the pros and cons of buying the equipment. By the end of the lunch, his customers not only reassured him he was making the right decision but gave him enough unsolicited orders to book the press six months in advance."

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This article was originally published in the May 1998 print edition of Entrepreneur with the headline: The Secret's Out.

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