Are you putting a “STOP” sign in front of your customers? If your customers do not hear from you, chances are, you are.
Statistically speaking, 68% of customers leave a company based on perceived indifference and the other 30% is a mixture of moving away, dying, buying from a family member, etc. The largest portion by far leave because they perceive from your lack of communication and attention that you will be indifferent by them leaving to your competition.
All of us, including your customers, are bombarded with so much advertising and so many distractions that you are no longer on the front of their minds. It is up to you as a business owner to ensure YOUR company is at the front of their minds for your products and services and that they know you will notice if they leave.
Why Keep Customers vs Getting New Customers
It costs 7 times more money to get a new customer than to keep an existing customer. 7 times more!
If your accountant charged you a start up fee similar to the cost to acquire your new customer and then told you every time you come back you will have to pay that same start up fee you would never agree because it doesn’t make good business sense. That is exactly what you are doing with your customers! You have paid a start up fee to get your new customers and sometimes that start up fee doesn’t allow profit on the first purchase so when they don’t return you have to pay another start up fee for the next customer.
Reversely, you can recoup the amount invested in the acquisition and start up of a new customer and focus on increasing their lifetime value to improve your profits and their level of service.
What is Lifetime Value? It is the value in revenue they bring to your business over the lifetime they are your customer.
For example, say that your customer spends $200 every time they buy from you and they buy from you 3 times a year and your average client stays with you for 5 years. Here is what we can learn of the Lifetime Value of this customer:
$200 x 3 = $600
$600 x 5 years = $3,000
That is not the only value your customers bring in their lifetime. They also refer more customers at low or no acquisition cost to you. What if this same customer referred you on average 1 customer per year. Now look at the value they are bringing:
$3,000 (customer) + (5 referrals = 1 per year) $3,000 + $3,000 + $3,000 + $3,000 + $3,000 = $18,000
So in this example, your customer’s Lifetime Value is $18,000.
So here lies the question. What if you SAVED the 7 times amount of attaining a new customer AND increased the number of times they purchase from you, the length of time they stay with you and/or the number of referrals they give over their lifetime? Could you see how if they spent another $200 what this would mean? What one more referral would mean for you? You bet! A $4,000 increase over the lifetime of your customer. Then multiply this with ALL your current customers. Wow, that is significant!
Your customers want to feel valued and they want to hear from you. It makes good financial sense for you to stay in touch with them, offer them other ways to buy from you, and implement more referral strategies to them on how to refer more business. What will you do as a next action step to start implementing what you learned?
How to Keep Customers
Start with the basics and start valuing the database you’ve paid for over the years you’ve been in business. CRM stands for Customer Relationship Management and relates to a software program or system that helps you manage your customer relationships. If you don’t have a way to manage your database of contacts and customers, this is a great tool to use and many of them are free at this point. For many business owners, you already have these in your business but how updated are they? Who is accountable to work them on an ongoing basis? Chances are up to this point, this has been very low on the priority list.
4 Easy Steps to take action now and thereby removing the “STOP” sign to your customers who are willing to buy more, refer more, and stay buying from you longer if you would stay in touch and communicate more often:
- Make it a priority – have every customer placed into the CRM with the ability to report and send out monthly emails or newsletters highlighting new and additional products and services.
- Hire a temp or outsource it – get it done!
- Assign a person – they will be responsible to stay in touch customers monthly.
- Celebrate customer wins – VIP highlights or celebration parties, anniversaries, birthdays, business milestones, and more!
Creating Raving Fans
Keep in mind, referrals make a big impact on growing the lifetime value of your customers.
Think for a moment, how many referral strategies are you allowed to have in business? That’s right, unlimited! However, most business owners we’ve worked with when asked what their referral strategies are don’t have any at all.
Creating raving fans is all about realizing that your customers move through a ladder of loyalty over the duration of their time doing business with you and you can impact what rung they get to on that ladder with proactive strategies. It is time to start learning referral strategies to implement in your business. Learn how to move your customers to members and members to advocates and advocates to raving fans! By doing this, you will create an unstoppable sales force and a profitable referral based business.
Remember, success does not happen by chance, you have to plan for it step by step. Today is the day to start taking action.
To learn more about how to take your success and wealth to the next level without sacrificing your time, reach out to us to schedule a free strategy session!
Article Written By:
Tony Tona | Business Coach at ActionCOACH Tampa Bay