Price-sensitive customers are far too often ignored by marketers. The common thread of thinking is that they are tough to sell to, but with the right strategy that is not the case! In fact, this customer segment has much more spending potential than you might expect.
Let’s say that your stingy customers have shown in the past that they are able to visit your locations three times per month, but generally they come in one time per month (these numbers align best with a quick-service restaurant concept – adjust them to fit your company’s business model). These stingy customers – the people who either visit infrequently and/or spend very little with each visit – have a lot of room for growth because they’ve shown that they are capable of spending more.
In order for these price-sensitive customers to reach their spending potential, they must be challenged in a relevant way. Your marketing tactics should ask them for something you know they are capable of achieving. If you ask a stingy customer to behave the same way as a loyal one, the daunting task could be a turn-off altogether. You’ll need to track customer behavior with either a loyalty or CRM program and then analyze the resulting data. When you’ve identified the true spending potential of your stingiest customers, here are the two best ways to compel them to spend more:
- Spend Challenge. Incentivize your customers to spend more per visit. If your stingy fans spend an average of $8.00 per visit, challenge them to spend at least $10.00 on their next two visits within a certain time period. Upon completion of the challenge they can then receive a reward. If that reward is a free item, even better, because stingy folks especially love free offers.
- Referral Challenge. Leverage your customers’ stinginess and turn it into advocacy. Because they can be rewarded without having to spend anything, referral programs are a great tool to use on the penny pinchers. They’ll refer more people to your loyalty program, which in turn generates more revenue for your organization. It can be especially useful to use a flexible referral feature like the one we offer at Paytronix where the referee isn’t rewarded until the referred completes an action like redeeming a coupon or visiting twice.
One challenge to be wary of is a visit challenge. They can be great tools when paired with other tactics like a spend challenge, but a visit challenge alone could cause problems like the one Starbucks encountered. With Starbucks Rewards, members originally were rewarded simply for visiting a location no matter the amount they spent. That meant that the person who bought coffee for his whole office received the same amount of stars (i.e. points) as the person who only bought a small black coffee. Visit challenges alone can be tough for marketers because you can’t control the ROI of the promotion. You might give them $1 for every ten visits, but those ten visits could add up to be worth $10, $100, who knows! With a spend or referral challenge, however, you can set exact dollar benchmarks so you can calculate the ROI down to the penny.
It’s important to collect and analyze data about your audience, and then figure out a way to reward good behavior that appeals to all of your customer segments. All customers, even the most price-sensitive ones, can be pushed to engage and spend more.