If They Don’t Use It, We Lose Them

We’ve all done it – slashing prices to get folks to buy our products and services. We offer 2-for-1 deals, creative financing terms, quarterly or monthly installments, mail-in rebates, free “cheesy” gifts with purchase, entertaining commercials – anything to get them to buy for the first time.

But is that the best way to conduct our business? Are we solely building our business on new customer growth? What if our customers buy, but then never use our products or services? The odds are they aren’t going to buy again – and eventually our business goes bye-bye.

According to a recent “Capital” column in The Wall Street Journal by David Wessel, “The obvious goal is to get you to buy. A smarter goal may be to get you to actually use something.”

David Wessel gave several excellent examples to illustrate this point, one of which dealt with health clubs. He stated that “Health clubs often offer a price break to those willing to pay for a full year instead of signing up for a month at a time. The idea is to hook you for the whole year and get paid upfront. Is that smart business?”

According to the research Wessel cited – no, it’s not. John Gourville, a Harvard Business School marketing professor, reviewed the records of 200 members of a Colorado health club that offered annual, semiannual, quarterly, and monthly payment options. Basically, out of all the payment options, those who paid monthly exercised most often during the year and were more likely to renew, “because people tend to go to the gym when the memory of paying the bill is freshest. The psychological pain of paying the bill declines over time.”

“As it fades, you feel less of a need to justify the cost by going to exercise,” Mr. Gourville suggested.

Wessel summed it all up like this: “The trick for businesses is to strike a balance between enticing consumers to make that initial purchase, and encouraging them to use a product so they’ll buy it again. Business often goes to heavy on the first part because it’s simpler to understand. But often it’s getting consumers to use – and buy again – that builds the business.”

We all have to constantly acquire new customers to grow our business, but we also know how costly it is to acquire a new customer versus renewing our current ones. We must strike the balance. If they don’t use it, we lose them.

By the way, I’ve got a Pets.com sock puppet hanging on my office wall at home, but I only used their service once – to buy the puppet.

And instead of asking me directly to come back again and use their online service, the Pets.com marketers had the sock puppet sing old Commodores love songs to Diane Sawyer on “Good Morning America.”

Entertaining, but marketing dollars down the drain, and shortly thereafter, the business went bye-bye.