Are you spending time with the customers that love you?
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If you’re an established business (i.e. out of the start-up phase), there’s a pretty good chance that you’re making a major mistake that’s costing you a lot of money.
You’re setting a goal to grow next year – maybe you’d be happy with a 10% top line growth. With that in mind, you start building your marketing plan and think of all the ways you can spend money to attract the new customers you’ll need.
Of course you’ll need add quite a bit more than 10% of your current revenue base to get a net growth of 10%, what with customers leaving you or spending less…
Wait – does that make sense? You’re going to spend a lot of money on getting new customers (there’s been several studies that show that new customers typically cost 3 – 7 times more to acquire than keeping an existing customer would cost).
How much are you going to spend on keeping those existing customers?
If you’re like a lot of businesses, not much at all – and that’s the problem.
Growth from within is the way to go!
It may seem counter-intuitive, but the most profitable growth you could have is expanding and keeping the spend of your current customer base?
Let’s apply the 80/20 rule here. (note it may not be actually 80/20, but it’s close). Approximately 80% of your revenue comes from approximately 20% of your customer base. At a bare minimum, you need to keep that 20% really happy.
The good news is that these are probably the customers that really love you to begin with – that doesn’t mean they wont’ leave if you ignore them, but they’re spending well above average amounts of money with you for a reason. In fact, this is the group that might be really interested in other products and services you offer (back to the growing from within idea).
The bad news is that you are probably spending most of your time and effort dealing with problem customers and trying to find new customers (and ignoring the great ones that you’ve got).
How to get started? Segment?
The first step is to identify who your best customers are (that approximate 20%). Do you know who they are now? Do all of your employees know who they are? If not – make sure that you get that word clearly out to everyone – these are VIP customers and require extra special service.
Now’s the time to develop some ideas on how you can reward these customers – ask them what they could really use help with (from you or anyone else). Give them so much value that they couldn’t imagine making it without you. Develop ongoing processes to make sure this isn’t a one time focus thing.
Now identify those customers that aren’t so happy – the ones that are likely to leave. Maybe they’ve been gradually cutting down their spending or they just don’t interact much anymore, they haven’t dropped by in a few months. What can you offer them that might turn them around?
Remember, every customer you keep is one less you need to add to hit your growth numbers.
Remember – keeping that customer is a lot less expensive than adding a new one.
You’ll still need to market…
You may be able to grow the bottom line and hit your goal just by concentrating on existing customers, but more than likely you still need to be adding some new stream of customers.
Just make sure that the spend and focus from your employees is appropriate and relative to the priority of making those current customers happy!
Do you have any stories about unhappy customers or having customers leave and hitting the bottom line? Share them here, I’d love to hear them.
Shawn Kinkade Kansas City Business Coach