Sure, you want more loyal customers. But are you building the right kind of loyalty?

Just ask grocer Green Hills Farms (GHF) of Syracuse, New York. This family-owned store of 22,000 square feet has a heritage of more than 75 years of outperforming the competition and earning weekly sales of $16 per square foot. The industry average is roughly $8-10.

The company categorizes its customers into four buyer groups: Diamond, at the top of the spending scale, followed in descending order by Ruby, Pearl and Opal. Roughly 300 customers qualify as Diamonds, regularly spending $100 or more weekly. About 1,000 customers are Rubies, spending $50-99 on average each week.

Although some customers consistently shop the store every two months or so, some top spenders visit three to five times a week.

When the store first started categorizing customers, management was convinced that lots of customers could be graduated to a higher level, but experience proved otherwise. The gap proved too wide, and trying to get lower-spending households—many of them price shoppers—to spend more was ultimately self-defeating.

So the company works hard to make sure that the big spenders get lavish attention. For example, it hosted a black-tie party in the store to get better acquainted with more Diamonds and Rubies. More than 200 customers attended.

Read the Full Article