Most owners use one word, customer, to describe seven completely different relationships. Somebody who has never heard of you and somebody who sends you three referrals a year end up in the same sentence and, worse, in the same marketing plan.
The ladder of loyalty separates them. It is not a segmentation exercise for its own sake. It exists so you can see which rung people are stuck on, because moving somebody from rung two to rung three is nothing like moving them from rung four to rung six, and doing the wrong one is how marketing budgets disappear.
The seven rungs
1. Suspect
Somebody who fits your profile and has never heard of you. There are thousands of them. All advertising is aimed here, which is why advertising is expensive.
2. Prospect
They have raised a hand: downloaded something, asked a price, walked in, replied. They have declared themselves, and most businesses lose more people at this rung than anywhere else — usually to slow follow-up.
3. Shopper
They have bought exactly once. This is the most misread rung on the ladder. Owners see a sale and file the person under customer. They are not a customer. They are somebody who took a risk on you once and has not yet decided whether to do it again.
4. Customer
They have bought more than once. That second purchase is the single biggest psychological step on the ladder, because it is the point at which buying from you stops being an experiment and becomes a decision.
5. Member
They behave as though the place is partly theirs. They know a name, they have a usual, and they tell you when something is not right instead of quietly leaving.
6. Advocate
They recommend you without being asked, though usually only when the subject comes up. They are doing your marketing for free, and almost no owner has any idea who these people are.
7. Raving fan
They actively bring you business. They introduce people, they defend you, and they take it personally when a friend uses somebody else. A handful of these is worth more than a marketing budget.
Why the ladder matters commercially
Every rung has a different job attached to it, and only the bottom two are solved by spending money on advertising. Rung two is solved by speed of response. Rung three by delivering exactly what was promised. Rung four by having any mechanism at all for a second purchase. Rungs five to seven by being remembered, and by asking.
The commercial point is blunt. Almost all the spend goes to the bottom of the ladder and almost all the margin lives at the top. A raving fan costs nothing to acquire, buys without haggling, complains usefully rather than publicly, and brings other people with them. A suspect costs money every time you want their attention.
So when growth has stalled and the plan is more leads, the first question is which rung is actually leaking. More often than not the business is pouring people into a ladder that loses almost everybody between rungs three and four.
How to use it this week
Count your database by rung
Seven numbers. How many prospects, how many bought once, how many bought twice, how many have ever referred. Most owners cannot produce this, and that inability is itself the finding.
Work out your rung three to four conversion
Of everybody who bought last year, what percentage bought again? Divide the number who came back by the number who bought at all. That single percentage is the health of the ladder and the cheapest thing in the business to improve.
Fix your rung two response time
Measure how long it takes you to reply to a new enquiry, honestly, including evenings and weekends. Speed at this rung is worth more than cleverness at any other.
Name your advocates
Write down every person who has ever sent you somebody. Look at how long the list is, and how long it has been since any of them heard from you personally.
Build one mechanism above rung three
One. A rebooking rule, a ninety-day check-in, a review of what a customer has not bought. Something that happens without you remembering to do it.
Ask for the referral properly
Not “recommend us to anyone”. A specific question at the moment the work has visibly landed, naming the kind of person you help. Vague asks get vague answers.
The mistakes to avoid
The first is buying more leads to fix a retention problem. It is the most expensive error in small business, because it works just enough to hide the leak. Revenue holds up, so nobody investigates why last year’s buyers are not this year’s, and the cost of standing still keeps climbing.
The second is assuming loyalty is a feeling that happens to you if the service is good. It is not. It is a designed sequence of moments after the first sale, and if you cannot describe what happens to a customer in the ninety days after they buy, you do not have one.
The third is treating the top of the ladder as an accident. Advocates exist in every business. They are simply unidentified, unthanked and never asked, and so they generate a fraction of the business they would happily generate if anybody made it easy.
Questions to ask yourself
- Out of 10, how well do you actually know who is on which rung of your ladder?
- What percentage of last year’s buyers bought again, and what did you do in between to earn it?
- Who are your five biggest advocates, and when did each of them last hear from you personally?
- If you were banned from advertising for six months, where in the ladder would you go looking for revenue?
Marketing brings people to the foot of the ladder. Almost everything that determines whether the business is profitable happens further up it — and that part is usually the part nobody owns.
Where this fits in coaching
Marketing brings people to the foot of the ladder; the profit is made further up it. It is worked through in Business Coaching, and it sits alongside two related mindsets: How Customers Buy and Innovation.
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Frequently asked questions
What is the difference between a shopper and a customer?
One purchase against two, and it is the most misread distinction on the ladder. Somebody who has bought once has taken a risk on you and has not yet decided whether to do it again, but most businesses file them under customer the moment the invoice is paid and stop working on the relationship. The second purchase is the biggest psychological step anybody takes with you, because it is the point at which buying from you stops being an experiment and becomes a decision. That is why the percentage of last year's buyers who bought again is the single most useful number about the health of your ladder.
Should I spend more on advertising if growth has stalled?
Find out which rung is leaking first, because advertising only solves the bottom two. If people are declaring themselves and then going quiet, the problem is response time and no amount of new names will fix it. If almost nobody buys twice, you are pouring people into a ladder with a hole between rungs three and four, and more leads simply widen the hole while hiding it, because revenue holds up. Buying leads to fix a retention problem is the most expensive error in small business. Count your seven rungs, find the leak, then decide where the money should go.
How do I ask for a referral properly?
Specifically, and at the right moment. Recommend us to anyone is a vague ask and it produces vague answers, which is why most owners conclude referrals do not work for them. The moment to ask is when the work has visibly landed and the customer is pleased, and the question should name the kind of person you help rather than leaving them to work it out. Before that, do the groundwork: write down everybody who has ever sent you somebody, and notice how long it has been since any of them heard from you personally. Advocates exist already. They are simply unasked.