Chris Zane began in a modest way, when, as an enterprising sixteen year old, he decided to buy a bike shop. Thirty five years on, Zane Cycles of Branford Connecticut, USA, is one of the largest cycle shops in the US, a byword in the bicycle world for service and an epitome of smart marketing.
There is a simple ring to the main philosophy of Zane, which he has obligingly laid out in his book, 'Reinventing the wheel'. The core of Zane's philosophy is building customers for life. The real factor behind his success is the fact that he thought differently about the product he was selling, namely bicycles. This different thinking also helped him differentiate himself from the rest of the competition.
Zane understands consumers and consumer psyche better than most. And it is this deeper understanding that led him to create a package of marketing and service offers that actually reinvented the business of selling cycles in the US.
He tells people to picture a 7-year-old riding on a two-wheeler for the first time. It's not just a bicycle to her; it's the "first real freedom that kid has ever experienced away from the parental grip." (Inc., May 9, 2011).
For his competition, the sale of a cycle marked the conclusion of a successful transaction. To Zane, it marked an opportunity to commence a life time relationship. How does a cycle-wala create a life time relationship?
According to Zane, the average value of a lifetime customer to his business is $12,500. He writes, "That means that my average customer will spend $12,500 on my products and services over his or her lifetime, $5,000 of which is profit. Of course the only chance I have of ever seeing that kind of return on the relationship is if that customer keeps coming back and back again. Better yet I want customers to come back with their kids, their relatives, and five friends." (Bicycle Retailer, Fred Clements, August 25, 2014)
He understood that a continuing relationship with a customer would bring in more revenue than a one-off sale. If he is able to pull the customer back for any reason, he/she is more likely to buy more and also bring in friends who may become new customers. The philosophy really scores with its deep understanding of the customer psyche.
Unbeatable service proposition
What will bring the customer back to the cycle shop? Zane's solution: free tune-ups. Free replacement of small parts like bearings (these typically get worn out, and cost less than a dollar to replace). Every bike that Zane sold was backed by a promise of life-time service - a proposition that created huge customer delight, recall and referrals. "Anyone who buys a bike from us can bring that bike back in for any needed tune-ups and repairs that result from everyday riding wear and tear for the entire life of the bike" says Zane. He managed to make this financially viable, by focussing on building top quality bikes which would need little or no service.
Unique trade-in strategy
Zane came up with a unique trade-in strategy: when the kid outgrows his cycle and is ready for a bigger one, Zane offered a trade-in for the old bike that gave full credit for the original price of the old bike. While this may look like a financial disaster, Zane says that only 20% of the bikes sold are actually returned. Many prefer to keep them, while yet buying a new one. Even when a bike is returned, another bike is sold and the relationship is further strengthened. This has increased the sales of children's bikes greatly. For Zane, the focus is on lifetime customers, not just a single sale transaction.
Another measure of his deep understanding of consumer psyche is the way he offers comfort on price. Some consumers would naturally wonder, "Is there a hidden price I am paying in the cost of the cycle, for all the lifetime free service?" Zane's solution: a 90-day price protection guarantee. "Once we were willing to guarantee that the customer could come back anytime in the 90 days after they bought a bike if they found a lower price, our customers didn't have to worry that we were somehow trying to deceive them," Zane writes. "Interestingly we have never had a customer request price protection twice...We've found that by delivering on our promise and building an unquestionable trusting relationship in our customers' minds, we become the only bike shop that they ever visit."
Missing the forest for the trees
His counter-intuitive approach has made it difficult for others to compete against him. They "don't see the $12,500 forest beyond those nickel-and-dime trees standing in front of them," he says. "We aren't better than our competitors because we offer better stuff - everybody has access to cool toys like carbon fibre frames or aerodynamic wheels. We're better than our competitors because we differentiate ourselves by offering more service than most customers consider reasonable. In other words our goal is simply to blow them away with our attention to detail as soon as we meet them." Through such innovative measures Zane has succeeded in changing the rules of the bike selling game; helping him come out on top of the competition.
Lessons for IFAs
Lets focus on Zane's quote in the last para: "We aren't better than our competitors because we offer better stuff..... We're better than our competitors because we differentiate ourselves by offering more service than most customers consider reasonable."
More service than most customers consider reasonable. That's what we need to pick up from Zane. That's what will set apart a champion IFA from the rest. Champion IFAs have shared on WF how they conduct an annual administrative check-up of client portfolios to ensure that all operational aspects - bank mandate, address, nominees etc are properly updated, such that clients do not face any hassles on redemption.
How about additionally offering to clean-up - at no cost - legacy issues relating to physical shares, uncashed dividend warrants etc? How about taking contact details of CAs of all your clients, and sending them an annual info pack every April proactively - without waiting for a single client request, to facilitate tax return filing?
The list is endless - its up to you to see how you can delight your clients with more service than most will consider reasonable. You - like Zane - have an opportunity to build lifetime and infact intergenerational clients. Offer a lifetime free service proposition the first time a client starts a small SIP of Rs.1000, and watch how this unprofitable transaction can become a hugely profitable lifetime relationship.
All content in Marketing Wiz is created by Wealth Forum and should not be construed as views of Kotak MF.
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