Turning purchasers into customers

Companies have many purchasers. People who come by and for a whole raft of reasons stumble into buying something. These people are not customers. There is no “custom” in the act. No repeat behaviour or “habitual practice” (which is the root meaning of the word custom). No relationship beyond the transaction that’s been carried out. And definitions aside, purchasers might be all a business thinks it wants or needs – after all, as long as people are buying it’s all good, there are always more where they came from!

Not so fast.

The dedication with which businesses pursue purchasers is worth a thought or two. After all, huge amounts of business resources (defined for the purposes of this article as money, people and time) are thrown at the endeavour. More purchasers equals growth and growth is the grail we seek.

But all purchasers aren’t created equal and contributing to the inequality is the way the word customer is currently used to describe everyone from a one-time purchaser to that loyal repeat customer. This makes it difficult for businesses to engage and appropriately allocate those resources, resulting in a disparate percentage being applied to the process of trying to acquire more purchasers at the expense of building customers.

And here’s the rub. Those purchasers cost a lot to get. Which makes the way they are often treated once the money changes hands nothing short of a waste. “We value our customers” you say, and that may be true.

But riddle me an answer to this question: Who takes ownership of the purchaser in the business once the purchase is made and what does your business do to ensure that the first purchase becomes a custom?

Once the purchase is made they generally don’t belong to marketing anymore; sales have moved on to the next target; and if they don’t have a problem chances are customer service will never know their name. The most likely part of the company where the purchaser will land (if anywhere) is in the back office – maybe as part of a finance database on sales, or if it is a retail business they often just walk back out the door and disappear.

So here we have a businesses’ purchasers wasting away in the dark corners of the back office, occasionally dusted off when marketing decides to try some up-sell, cross-sell campaigns.

Cynical? You bet. And of course there are exceptions to this pattern, however the truth is out there in too many of our experiences. Most businesses have purchasers not customers, with no idea what makes them different and no idea how to change things.

I think we can all agree on the importance of the customer to the business. The statistics are clear and overwhelming. It costs six to seven times more to get a new purchaser than it does to keep a customer. So the question becomes, why aren’t more businesses working to build purchasers into customers?

Understanding your “customer” base is not easy – and for many businesses the models out there are impractical and too resource intensive to implement. Even customer segmentation and marketing guru Seth Godin’s model has seven layers! The result is a fall back to the tried-and-true “marketing communications” approach of continually expending resources to attract new purchasers at the expense of building customers.

So, what makes a purchaser a customer?

Here are few things that don’t. Just making a purchase doesn’t change it. Asking for a postcode when you make a purchase doesn’t change it. Having a name in a database in the back office doesn’t change it. Getting the occasional email “newsletter” or offer doesn’t change it.

Being a customer means having a custom, a habitual practice or behaviour that is repeated. It means having a reason for that custom. That reason could be need, desire, proximity, or any other number of custom drivers. It is characterised by a level of engagement with the business.

So more complex segmentation clearly isn’t the answer and neither is the endless loop of feeding new purchasers into the hopper. Even new relationship and communication tools in social media are being used ineffectively because they are largely being applied to the purchaser end of the equation. The result is more noise, more “talk”, more messages, but little progress in making purchasers into customers.

Three practical ideas

Most businesses don’t have the seemingly endless supply of resources and purchasers that are enjoyed by large corporations. So here are three ideas to get your business off the purchaser path and start building customers.

These won’t fit all; there are clear differences between a small retail operation, a niche manufacturer, a services franchise and a technology developer. However these ideas are all applicable in some way to any business. The ways of implementation will vary, but the core idea and the reasons they will work are constant.

1.  Get your purchasers out of the back office.

2.  Dedicate a specific percentage of revenue to support building customers.

3.  Do what you say you will do and purchasers are more likely to become customers.

• Get your purchasers out of the back office.

It is clear who owns the target audience or prospect in a business – sales and marketing. It is less clear what happens once a purchase has been made. The usual path is for the purchaser to become a line item on a sales or customer database in the finance area. Or for retailers, they may be a one-off purchase never to be seen again.

There is a movement to put in place “Chief Customer Officers” which is great when there is a CXO suite. But if the business is an SME, it’s just another hat to add to the many hats already being worn. And what does a Chief Customer Officer do anyway.

In essence the idea is that someone, or a group of someones, have line accountability for building customers from purchasers and for what the customer experiences across every interaction with the business. So when a business asks, “Who owns the customer?” there is a clear answer. What might that look like for a business without a CXO executive suite?

• Assign a clear path of ownership from the first purchase.
• Look at what information is being collected and what it is being used for.
• Define where the information goes to so it can be used by the people who need it.
• Know the retention and repeat custom statistics for the business.
• Have a clear strategy and process for follow up and contact with purchasers and customers.

In many businesses there are huge numbers of past purchasers who lie gathering dust in back office records. They were attracted to the business in the first place for a reason – by trying to understand why they were and what their needs are in greater detail, a business is likely to find a number of customers in waiting, and at the same time get better at building future customers.

• Dedicate a percentage of revenue to support building customers.

Most businesses can tell you what percentage of revenues they spend on marketing (it averages out at about 5-10%) but far fewer can tell you how much they spend in service of the customer.  We’re not talking about “customer service” here, but a customer-orientation that focuses on how to better serve and engage your customers.

The purchaser focused business has a marketing-communications bias and corresponding resource allocation. From advertising and direct marketing to use of social media (and everything else on that “marcomm” checklist) more resources (again money, people and time) seem to get dedicated to telling prospective purchasers about the business.

To be clear, marketing communications has its place. It is important prospective purchasers know that a business is out there and what it does. To use a favourite quote from futurist Thornton May, “You might be the best thing since sliced bread but if I don’t know about you it doesn’t do me a damn bit of good.”

The problem is that allocation of resources to this area is often at the expense of building customers. Imagine for a moment the corresponding shift in focus to more of a customer-orientation, if a specific budget were allocated to serving the customer and engaging with them outside the immediate purchase.

What to spend the budget on would vary hugely depending on the kind of business and type of purchasers. It might be used to put a discount voucher for a next purchase in the bag of every new purchaser who comes through the retailer’s door. It could be used to rework the forms and contracts of the business so that can be easily understood (ever tried to understand your Terms and Conditions?). It could be used to conduct a monthly random “customer” survey. It might be used to develop a “Customer Bill of Rights” that clearly sets out what the business will and won’t do so every purchaser knows what to expect.

• Do what you say you will do and purchasers are more likely to become customers.

The process by which people make a decision about who to purchase from has been undergoing a radical shift. Where in the past people have “listened to what the company said”, compared it to what other companies said and then made a decision, today there is a new dynamic in the mix.

Thanks to the internet and social media, people now have another easily accessible reference point – “what others say”. This new and influential information point is changing the ways people make purchasing decisions. And while the perception is that businesses have relatively little control over “what others say,” in point of fact, by simply doing what they say they will do, they exert a lot of influence, while at the same time increasing the number of purchasers who become customers.

In a recent HBR article called “Stop trying to delight your customers”, the authors clearly demonstrated the value in focusing on those core experiences that go to meeting customers’ expectations. Sure “delighting the customer” sounds like a cool idea, but the reality is that for most businesses the biggest gain is from ensuring the business is consistently meeting expectations.

In today’s climate of broken promises the business that meets expectations is a rare story. The blogsphere and Twitterscape is littered with stories of disappointment and frustration. And a customer is 3 times more likely to complain when something goes wrong than share when it goes right, and will tell more people. The opportunity out there is huge for the businesses that grab this particular bull by the horns.

The fact remains that short of a contractual obligation, proximity or some other barrier to change, the likelihood of a purchaser developing into a customer for a business that doesn’t meet expectations is pretty slim.

We are of course talking about loyalty – the clearest mark of difference between a purchaser and a customer. That someone will make the deliberate choice to seek out what you are selling over and over.

Michel Hogan is an independent Brand adviser and advocate. Through her work with Brandology here in Australia and in the United States, she helps organisations make promises they can keep and keep the promises they make, with a strong sustainable brand as the result. She also publishes the Brand thought leadership blog – Brand Alignment. You can follow Michel on Twitter @michelhogan

Cyrus Allen is a leading thinker around the topic of Customer Experience and is currently working at ANZ Bank. You can follow Cyrus on Twitter @cyrus_allen 

Any views expressed in the article are those of the individual authors only, and unless expressly stated are not those of Australia and New Zealand Banking Group Limited.