How to boost the profit from your existing customer base

By: Shweta Jhajharia

Date: 8 February 2016

How to boost the profit from your existing customer base{{}}Many business owners assume marketing is all about lead generation; pulling in new enquiries and gaining new customers.

But this is not the whole picture. Marketing is actually about getting more business. And that includes getting more value out of your existing customer base.

To achieve this you need to be able to identify two customer types. Firstly, you need to know who are your most profitable customers - those that are bringing you high value. This is the absolute gross profit taking into account the volume of sales. Then you need to know who are your "active" customers, those that are engaged with you in some way within a set period of time.

How you approach each of the four main customer segments depends on their profitability and levels of activity. I call this the four Rs - retention, reactivation, reconditioning and reach. Here's how it works:

1. Retention: high profit, active clients

These are the customers who are bringing you high profit and are active. Generally, these will be the 20% of customers that give you 80% of your business. You need to keep these.

Your mindset

Think about retaining them. Have they stopped communicating, are they buying lower margin products or not buying at all?

Strategies

  • Loyalty. Think personal gifts, loyalty programs, rebate points, special deals and freebies. Highlight the higher margin products to prevent them dropping into a lower profit category;
  • Referrals. Decide how, who and when to ask for referrals. You can download a simple 3-step referral system here;
  • Closed-door sales. Take the 15-20% that give you 80% of your business and really making them feel special. This is what customers stick around for and how you create raving fans.

2. Reactivation: high profit, inactive clients

These are the customers who may have once been purchasing at a profitable level, but have started to communicate less with you. Find out why.

Your mindset

You are just reaching out to them, not selling. You want to remind them that you exist, and keep your brand in their thoughts.

Strategies

  • Email sequences. Prepare three emails; make them punchy and straightforward, offering real value to these customers when they re-engage with you. The point is to appear in their inbox and become associated with valuable content. So when their need does arise, you will be the first one they think of;
  • Telephone calls. A phone call can double your reactivation rate. This is a customer care call. Extending a free invitation to an event is a great reason to call and a good reactivation funnel;
  • Find out if something has gone wrong; then rectify the problem.
If you really believe in your product or service, then sales is an education process, and not reaching out is doing your customers a disservice.

3. Reconditioning: low profit, active clients

These are your "comfort zone" clients. You may be afraid to touch them in case they stop buying from you altogether, but the truth is there is more that you can do.

Your mindset

Focus on reconditioning the situation, so the customer is getting more value and is giving you more value in return.

Strategies

  • Change the product mix or options so that they become more valuable to both you and the customer;
  • Increase your prices. Remember most customers are more interested in value than cheap;
  • Negotiate with suppliers to bring the price down; your customer does not undergo any change, but you increase the value they are giving you.

4. Reach: low profit, inactive clients

Don't place your emphasis here but do have a strategy; these customers may become more valuable in the future.

Your mindset

Reach out with minimal effort.

Strategies

  • Automated follow-up. This should not be a hard sell. You are simply regularly showing them you are of value, until they have need for you again;
  • Social media. Post regularly to remind them about you. Use automation software such as Buffer and Hootsuite to save time.

Once you can clearly place your customers into these categories, you will be far better positioned to achieve stability and smart growth.

Copyright © 2016 Shweta Jhajharia, principal coach and founder of The London Coaching Group.

Related articles and resources

You may find the following articles and resources useful: