The Secret's Out The one marketing rule you absolutely must know for the new millenium.

Want to grow your small company with the brilliance of amarketer from Mensa? Want a business-building strategy that wouldhave Bill Gates groveling at your feet? Want to pull it off withoutbreaking a sweat or breaking the bank? No problem. Just reach outto your existing customer base--whether that's three customersor 3,000--as Entrepreneur's marketing experts have longrecommended. As we begin a new era of more sophisticatedcompany-to-customer interactivity, this approach becomes even morepotent as a marketing tool . . . and, we felt,merited a special update to brief you on all the possibilities aswe quickly approach the new millennium.

We've all seen and admired examples of marketing genius overthe past few decades--like that of Walter E. Diemer, who diedrecently at age 93 and who sold us on a gooey pink substance called"Double Bubble" chewing gum. And let's not forgetwhoever talked us into potbellied pigs for pets. But in 2000 andbeyond, the golden statuettes for marketing genius will be handedout to entrepreneurs of another sort: those who realize thesmartest marketing move is to develop unbreakable relationshipswith their current customers.

Yes, start-up companies will always need to beat the bushes fornew customers. But once you're up and running, selling moregoods to fewer people is not only more efficient, it's also farmore profitable. Plus, for many companies, old customers are oftenthe best source of new customers. But more on that topic later.

The High Cost Of Prospecting

You've heard it before. It costs at least five times as muchto get a new customer as it does to keep one you already have--orto reactivate an old one. Yet the majority of companies still spenda fortune chasing after new customers and concentrating on thatfirst sale.

Add it up. You offer deep discounts to get new customers intoyour bakery. You create loss leaders to increase traffic in yourminimart. You offer a duplicate item for just a penny or a dollarmore. Or you start giving stuff away: free ice tongs to the adultsand face painting for the kids. All this costs money, not tomention the expense of promoting it through advertising. Andit's all done without an ounce of assurance that even one newcustomer is going to pledge allegiance to your business.

On the other hand, staying in touch with your satisfiedcustomers and making them devotees costs you relatively little. Theidea to keep in mind is that a happy customer is like a perennialin your garden: With proper care and feeding, you can usually counton it to bloom year after year. When a customer buys from you thefirst time, he or she is saying "I like you; you have mytrust." This is an invitation not just for a sale, but for arelationship.

New Profits Right Under Your Nose

The revelation that it is often costlier to obtain new customershas caused many small-business owners to take a step back and lookat their most priceless yet overlooked business builder--theircurrent customer base. And from this enlightenment has sprung awhole new branch of marketing called relationship marketing.It's a field of vast profit opportunity for even the newestentrepreneur, and it's ultra-easy to implement. Best of all,there are a number of experts on the subject whose knowledge canhelp you maximize your use of relationship marketing.

Martha Rogers, Ph.D., co-author with Don Peppers of The Oneto One Future: Building Relationships One Customer at a Time(Currency/Doubleday), is one of those experts. Rogers, a foundingpartner of management consulting firm Marketing1to1/Peppers andRogers Group in Stamford, Connecticut, believes your goal, ratherthan to increase your customer base, should be to ensure that eachcustomer who buys your product or service buys more of your productor service, buys only your product or service, and is happy alwayschoosing your company over others. In a word, loyalty. In fourwords, a customer for life.

In the future, says Rogers, more businesses will focus on the"lifetime value" of each customer rather than theshort-term profits they can get from new customers. She sayscreating one-to-one relationships is key and will be helped byevolving interactive technologies that small businesses can takeadvantage of. Today's fax machines, cell phones and e-mailtechnology are just the tip of the interactive iceberg that you andyour customers can use to stay chummy. And interactive televisionis just around the bend.

Remember When . . .

The key word to etch in your mind, insists Rogers, is"remember." Remember the dress that needs specialhandling for your regular dry cleaning customer without her havingto remind you. (You can note this on your computer or on a 3-by-5card you make for each customer.) Remember the occasion thatprompted your flower shop customer to buy a bouquet so next yearyou can send a reminder that you'd be happy to send one again.Remember the rattle in the wheel well that your gas stationcustomer was complaining about last time he or she was in, and askabout it the next time that customer comes in for a tune-up.Remember to ask your plumbing customer if that upstairs sink isstill leaking and if he or she would like you to take a look atit.

Just as a doctor writes down details of a patient's healthon his or her chart, so should you record information about yourclients. Then the next time you connect with a client in person orby e-mail (you are routinely asking for their e-mail addresses,aren't you?), ask how the customer's daughter is doing inher first year of college, inquire about that nagging lower lumbarproblem he or she previously mentioned, ask if he or she has beenhappy with that new sport utility vehicle . . .Well, you get the idea. In this increasingly impersonal world,every me-to-you query adds strength to a customer relationship thatno amount of discounting from your competitor can weaken.

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

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

"Many businesses, such as contractors and otherhome-service providers, find that referrals from loyal customersaccount for up to 80 percent of their new business," saysDaly. "[Plus,] the `close rate'--turning a prospect into aclient--from loyal-customer referrals is far higher than from newcustomer leads from advertising." However, Daly warns thatjust getting a satisfied customer into the fold is not enough toensure loyalty.

"Studies show that even customers receiving good serviceand good value can't be counted on to stay loyal," Dalysays. "Earning loyalty requires the relationship to reach awhole new level of involvement."

Daly recounts that his first lessons in relationship marketingstarted with his father, Dennis, the owner of a printing company inSacramento, California. "He was thinking of buying anexpensive new press," Daly says, "and he invited his mostloyal customers to a luncheon to discuss the pros and cons ofbuying the equipment. By the end of the lunch, his customers notonly reassured him he was making the right decision but gave himenough unsolicited orders to book the press six months inadvance."

The Simple Things

Daly offers the following four commandments to develop trulyloyal customers:

1. Naming names. In today's detached,"just-give-me-your-account-number" world, nothing is morewell-received than individual, personalized attention. Even thoughyou may already be courteous and friendly to customers, greetingthem by name is valued 10 times more on the worthy-of-loyaltyscale.

2. Custom care. Customers pretty much know what theydo and don't want from your company. If you always ask andremember what they want on an individual basis--even if it'ssomething as simple as knowing a dry cleaning customer likes lightstarch in his collars--then you have in place one of the keyelements of a strong loyalty program.

3. Keeping in touch. You can't communicateenough on a me-to-you basis with your customers. And don't justconnect to make a pitch. Clip out a newspaper or magazine articlethat pertains to a customer's business and send it to him orher with an attached note saying "FYI--thought you'd beinterested." When customers know you take time to think aboutthem, they don't forget it.

4. "Boo-boo research." Part of any customerloyalty program is taking the time to reach out to lost customersto learn why they went elsewhere. In many cases, just the contactand showing you really care about getting their business will winthem back--along with their contribution to your profits.

According to Robbin Gehrke, senior vice president, executivecreative director at Russ Reid Co., a Pasadena, California,advertising agency that employs relationship marketing andfundraising, relationship marketing has become the battle cry for agrowing number of companies. Gehrke says the activities of heragency are aimed at making clients' customers feel a sense ofincreasing equity in the company, getting them to believe there wassomething at risk in abandoning their relationship or changingtheir loyalty.

Buy Five Pizzas, Get The Sixth Free?

Should frequency rewards--giving extra stuff for getting morebusiness--be the basis for cementing relationships? On a smallscale, it can be worth it, says Gehrke, but she warns that suchprograms can be hazardous. "They're expensive if youdon't know what you're doing; they're also highmaintenance, and you can get into financial liability that youcan't possibly manage." In addition, she adds, "Theycan be easily matched by a competitor, and then you're leftwith no advantage."

The more important aspects of a loyalty program arepreferential, personal service, Gehrke says, adding that the mostpowerful secret in relationship marketing is unanticipatedrewards.

The idea, according to Gehrke, is to give regular customers somebenefit they weren't expecting, whether it's a giftcertificate, flowers or some other kind gesture. "Customersremember such thoughtfulness for a long time," she says.

Experts in this field stress the importance of making yourrelationship marketing endeavors systematic. Make it one of yourweekly routines so it becomes second nature to make regular contactwith your loyal customers. And don't ever forget the two mostmeaningful words you can utter to a current customer that,surprisingly, often get left out. Those magic words: "Thankyou."

If Einstein Had Been In Marketing...

A few brainy ideas businesses can use to generate newincome.

Business: Auto repair and maintenance
Problem: You get very little drive-by business, and currentcustomers don't come in unless there's a major problem. Thesmall ads you run in local papers don't draw customers.
Solution: Send notes to current customers saying you'regoing to start making oil-change house calls to make it moreconvenient for them to service their cars. For an extra $15, theycan get the oil and lube service for which they normally can'tfind time. Of course, some will say no. But many others willappreciate the new convenience and not be concerned with the extrafee.
Extra benefit: If the car owners are having any mechanicalproblems, the house call can double as a diagnostic visit and meanextra profits.

Business: Beauty salon
Problem: You're booking fewer appointments and find youdon't get an increase in business unless you heavily discount.What added value can you offer current customers so they'llcome in more regularly?
Solution: Invite customers to a low-cost series of lecturesat the shop on "sane weight control" conducted by a localdoctor. You get to schmooze and win back inactive customers, andthe doctor may get a few new patients.
Extra benefit: Customers tell others about your unique newoffering, and you'll book more appointments.

Business: Pizzeria
Problem: Your pizzeria has to go up against the bigfranchises, and even though you started offering delivery andfrequency discounts, they still have the edge in namerecognition.
Solution: Start attaching an unexpected reward to each pizzabox. Maybe it's an offer for an extra can of soda or a housesalad. Any thoughtful surprise gets indelibly etched in thecustomer's mind. Also, make up a 3-by-5 card about eachcustomer that lists their favorite toppings, so you can say"the usual?" when the customer places an order.
Extra benefit: Again, your generosity gets talked about, andyou're recommended by current customers.

Business: Carpet cleaning (or any other homeservice)
Problem: You're a new franchisee of a carpet-cleaningcompany that is sending out fliers the franchisor recommended, butyou're not booking much business. With few current customers,how can you use relationship marketing?
Solution: Personally visit carpet sellers and make thefollowing proposal: "You'll sell more carpet by offeringthe first cleaning free, and that's what I can provide. Inreturn, I get that base of customers to cultivate on my own."Start relationships with customers by offering an every-six-monthscleaning for a lower cost.
Extra benefit: "Upsell" by calling ahead to ask ifcustomers would like their windows cleaned while you'rethere.

Business: Chiropractor
Problem: Your practice is not getting a lot of repeatbusiness, and ads are ineffectual unless, by luck, they happen toappear when someone is having a problem.
Solution: A phone call--as simple as it sounds--can workmagic. Have your assistant call previous customers to say "Dr.O'Connor asked me to find out how your neck is feeling and ifthere are any other problems or concerns he can help youwith."
Extra benefit: Some customers will respond with a need, plusthe call can be an excuse to inform the customer about a newtreatment or service.

Business: Catalog sales
Problem: You don't get enough repeat orders, even thoughyour catalog is sent out quarterly to remind customers of specialvalues.
Solution: Think about how many of your customers wouldconsider stocking up on a product of yours they use throughout theyear if they could save some money. Research shows a good number ofpeople would be interested.
Extra benefit: You don't lose future sales from people"stocking up." Instead, all your wares are perceived inthe same positive light as the great volume discount you gave.

What's The Buzz

By G. David Doran

Just because you run a small business doesn't mean youcan't use some of the cutting-edge marketing techniquesemployed by larger companies. We asked Bradley Johnson, technologyeditor and columnist for Advertising Age, a weekly magazinecovering the advertising industry, to clue us in on some of thestrategies--aside from relationship marketing--the industry giantsuse to snare the attention of media-savvy consumers.

• Unbundling media. In the past, companies used large,established ad agencies to both create the ads and buy the mediathat would get the message out to consumers. Now advertisers canchoose to use smaller, more creative agencies that don't havemedia-purchasing capabilities; these firms will create the ads,then link up with a media-buying firm to complete the process. Theresult is often hipper, smarter, more youthful ads that are morelikely to take risks to sell the product. "Not surprisingly,the larger ad agencies don't like this idea," saysJohnson. "They want to sell the full services of theiragency."

• Branding. Brand messages tell you something about whatthe brand stands for but nothing about a product, like AppleComputer's iconoclastic "Think Different" TV andprint ad campaign, which uses great thinkers (and noncomputerusers) like Albert Einstein to suggest that the company designs itsproducts for users who think out of the box. This type of ad worksbest when the company name is already familiar to the public.

Product messages, on the other hand, tell you about a productand give little or no information about the advertiser. DellComputer's print ads, which offer nothing but productspecifications and a toll-free number, are a good example. In thiscase, Dell, a direct marketer of PCs, doesn't have the namerecognition of Apple, so it must sell the product instead of thename. The ideal ad, according to Johnson, is one that blends bothbrand and product messages. In general, only larger companies havethe budget to produce separate brand and product ads.

• Integrated marketing. Sending consumers a coherentadvertising message requires a unified approach to all yourcommunications. TV and print ads and direct mail should all looklike they came from the same company, even if you work withdifferent agencies. All three types of ads should refer customersto the company's Web site, where they will see similar messageswith the same logo and graphics. Integrated marketing is becomingincreasingly necessary to reach consumers who are bombarded withmedia messages.

On the Internet:

• Direct response banners. Banner ads are supposed toattract customers to a company's Web site, but the relativelylow response rate indicates that people are reluctant to click onthem. Why? Because clicking through a banner ad takes customers outof the Web site they were looking at, forcing them to backtrack totheir point of origin. Direct response banners, on the other hand,allow customers to learn about a company without leaving the Webpage they're viewing. These banners also allow customers tofill out forms for e-commerce, contests and requests for moreinformation. According to Johnson, this concept is relatively new,so there isn't a lot of data on its attractiveness toconsumers, but it seems to address the low-response problem ofcurrent banner ads.

• Product placement on the Web. Nearly every movie made inthe United States in the past 10 years has used a brand-nameproduct as "set dressing," and now this subtle marketingtechnique has reached the Internet. In 1997, Oldsmobile made a dealwith NBC to feature its Intrigue model on the network's Website, which was promoting a show called "The Pretender."By linking their product to the content of NBC's Web site,Oldsmobile received just as much (or possibly more) attention as itwould have if it had paid for commercial airtime during the show,at a much lower cost.

Contact Sources

Advertising Age, brad@crain.com, http://adage.com

Marketing1to1/Peppers and Rogers Group, http://www.m1to1.com

Pat Daly, c/o DHL Worldwide Express, (415)802-4789, pdaly@us.dhl.com