Turn Old Customers Into New Business
If you’re like most small business owners, you want to build a business without spending a fortune on advertising and promotion. Instead, you want to cultivate repeat business and maximize referrals from satisfied customers.
Frederick Reichheld of Bain & Company suggests that it costs 6 to 7 times more to acquire a new customer than retain an existing customer. His research also indicates that businesses lose as much as half of their customers over a 5 year period but businesses who boosted customer retention rates by as little as 5% saw their profits increase by between 5% and an incredible 95%.
There are some valuable lessons for business owners in this research. Firstly, your marketing strategy needs to focus on retention before acquisition. If you think, once a customer, always a customer – think again. Secondly, you need to have regular ‘touch points’ with your customers through newsletters and emails to remain top of mind.
Incredibly, the vast majority of business owners don’t keep in contact with their customers after the first sale is over. For example, when was the last time you went to a restaurant and they asked for your contact details? When was the last time a tradesmen sent you a newsletter or any correspondence (other than the invoice) after the job was completed? The fact is, most trades people don’t maintain a customer database and simply ‘retire’ the business when they stop working. In most cases, if they maintained a good quality customer database (complete with customer history) they would probably be able sell the business and the goodwill they created over years of service. It’s no coincidence that most franchises incorporate some form of database management into their operations.
From the moment you acquire or start your business you should assume that one day you will want to sell or merge it with another business. To maximise the return on your investment you need to keep the business ‘investor ready’ and a customer database is an essential part of any valuable business. The database essentials include your customer’s name, postal address, purchasing history and email address. From there, the type of information you will want to store in your database will vary depending on the type of business you run. Maintaining your database can sometimes seem tedious, however, it will always be a work in progress and combining your customer database with a consistent and targeted marketing effort will pay handsome dividends over the life of your business.
A customer retention strategy is all about ‘working smarter not harder’. Using reliable systems to capture and update the data will let you sort your customers into groups like how often they buy from you, the types of products they prefer, their location and their average dollar sale. At a mouse click you can identify clients in that group and target them with specific marketing messages. Your database program also needs the functionality to generate emails or print mailing labels.
Your database can be a consolidation of everything you know about every contact, prospect and customer combined into one, easy-to-use computer program. It might include the customer sales history from your accounting software, email addresses from Outlook and the content from your contact management program.
Microsoft Office applications like Microsoft Access are commonly used and ‘off the shelf’ programs like ACT are not expensive. Most of these programs offer a standard way of capturing customer information, sorting information and producing reports.
In summary, your customer database is a valuable asset and the marketing possibilities are endless.
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|IMPORTANT DISCLAIMER: This article is published as a guide to clients and for their private information. This article does not constitute advice. Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of these areas.