March 19, 2024

The power of self-regulation in customer relationships

Simple things seem to be the most powerful, don’t they? I think that’s one of the reasons that when people write about an archetypal business, they often use bicycles.

Advertisement for Columbia Bicycles from 1886.
Image via Wikipedia

Clear, simple product that everyone understands, right? Everyone knows what a bike shop does. They sell and fix bikes and they offer accessories.

The bowl of quarters
But Chris Zane thinks of this simple business model differently. He sees it entirely as a service business. And he aims to give away (as in free) as many services to his customers as possible. To bring this across, he uses a simple metaphor: a bowl full of quarters.

In this video of a conference presentation Zane did (don’t bother with the whole thing, just scroll down in the box marked “Chapters” to “Zane’s Cycles”—it’s short and sweet), he offers the bowl to people in the audience and asks them to take from the bowl. He doesn’t tell them how many to take, he just puts the bowl in front of them.

The power of self-regulation
As you might suspect, nobody digs a paw into the thing and scoops out all the quarters. They each take one. This is the power of self-regulation.

The bowl represents the lifetime value of the customer. Zane did research on the bike industry and figures that the average lifetime value of each of his customers is $12,500—from the first bike they purchase to the last, as well as all the accessories. At a 45% margin, that translates to $5600 in profit.

When Zane started out, he faced competition from much larger bike shops, so he couldn’t afford to compete on price of the product.

Can you afford to hand out quarters?
Instead, he started handing out quarters. First, it was free one-year maintenance with each bike. Then when competitors matched it, he made it two years, and then finally, lifetime.

When a customer needs something small, like a nut or bolt, Zane trains his staff (and training is important) to just give them away. If a customer tries to fix a flat himself and screws it up, they get a new tube—no questions asked. After all, what’s a $5 tube when you have $5600 to spend?

For those of us struggling with B2B marketing and all its complexities, this will help clarify some core issues.

Watch the video and you will come away inspired to rethink how you relate to your customers and what your true costs are in serving them. You may even create your own bowl of quarters.

Please say what you think of the video in the comments section.

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