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:
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.
Think about retaining them. Have they stopped communicating, are they buying lower margin products or not buying at all?
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.
You are just reaching out to them, not selling. You want to remind them that you exist, and keep your brand in their thoughts.
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.
Focus on reconditioning the situation, so the customer is getting more value and is giving you more value in return.
Don't place your emphasis here but do have a strategy; these customers may become more valuable in the future.
Reach out with minimal effort.
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.
There always comes a point at any party when you realise numbers are thinning out. Various people, friends that perhaps you haven’t had a chance to talk to yet, seem to have gone — just walked out of the door without a by-your-leave or a thanks-for-having-me.
In Poland, according to a good friend of mine, they call this an English exit! I’m not sure whether this says more about our lack of manners or our inability to let our hair down.
But when you think about it, it’s what we do all the time as customers — we quietly slip away.
Hosting a party is a bit like running a business — there’s tons to do and you can’t be everywhere at once. But keeping your guests happy is vital — you can’t just conjure up a new bunch of friends just like that. And nor can you easily drum up new customers either.
So how do you keep them satisfied? Here are some lessons that you can apply to parties and your small business:
Guests arrive. You greet them effusively and lead them to the food and drink. You promise faithfully to catch up with them later. And then you forget all about them.
A PR chap I used to know would greet everyone like a long lost friend while at the same time looking over their shoulder to see who else had arrived. Give everyone your full attention, even if it’s just for a few minutes. Don’t stand there with a glazed look on your face while you mentally tot up how long the booze is going to last.
Why did so-and-so leave early? Was it the food? Was it something I said? Did they go on to another party? Don’t get paranoid — get in touch, say thanks for coming and review the night with them.
One of your friends never showed. Perhaps they texted with a lame excuse. Perhaps they hate parties. Don’t be bitter. Suck it up and call them. Tell them they were missed, ask how they are, fix up a time to meet and look for other ways to connect with them.
You can’t force people to stay. But don’t give them a reason to head for the door either — keep the food, drink and conversation flowing. Reward your friends’ loyalty. And check the exits!
Rachel Miller is the editor of Marketing Donut.
What is this obsession with chasing after new customers all the time? Driving the children to school the other day I was incensed by a Direct Line advert, bragging about introductory discounts, presumably for new customers.
Remember the Nationwide advert for “Brand New Customers Only”? That ad worked because we’ve all experienced the injustice of special deals being offered to new customers and not us loyal ones.
And is it just me or do you also go through the same rigmarole every year of needing to take out a new car insurance policy (often with the same provider) because it’s cheaper to sign up again online than it is to renew?
Seriously? It doesn’t make sense and financial service providers are some of the worst culprits. But I wonder if small businesses aren’t just as bad? Do you spend your time and energy on looking after the clients you have, encouraging them to do repeat business with you? Or is your marketing strategy all about the new business?
New customers cost up to seven times more to win than leveraging business from your existing customers. And your existing customers, who presumably know you, like you and trust you, are likely to spend up to three times more than new clients. So if the financials don’t add up, why do we do it? Why do we spend so much time and energy chasing new business rather than nurturing our valuable client base? And if we should be nurturing our client base, then how do we do it?
I’ve recently run a Customer Retention conference with customer management expert, Liz Machtynger, so this is a subject that’s very close to my heart.
Here are seven ways you can nurture your valuable client base:
Has this got you thinking?
I have been thinking about the brands we love and how to improve customer retention. Let me tell you a couple of stories.
Three years ago, I took delivery of a car and on the way home it literally died. I did not see the car again for four months. However, the gentleman who looked after my “case” was exceptional. He updated me regularly, kept me totally informed on progress and made a bad situation OK. The car firm also sent me a range of well thought-out sorry gifts that were actually appropriate and of suitable value. I am now very loyal to this brand and I have a good opinion of them.
The other day, my wife and I were chatting about Clark Plc expenditure. We had decided to tighten the belt in a few areas and Sky TV was first on the list. With three kids of different ages, all of us have different viewing requirements ranging from football, Disney and South Park to Grey’s Anatomy. We currently have the full Sky package. It was going to be challenging to cut back.
In fact, my wife had a very, very good experience with Sky TV. The man on the phone listened and came up with a superb idea that was appropriate to the situation and our request. It was surprising and well delivered. To be frank I think we were expecting a bit of a challenge. It was the opposite. So now I have a great opinion of Sky, Clark Plc has the viewing requirements sorted and I will tell people about the positive experience.
So this got me thinking about two things: why we become loyal to certain brands and how businesses can improve customer retention.
In order to establish a loyalty scheme of any kind we need to establish who it is we actually want to reward and what it is we want to reward them for. If our most valuable customers are 100 per cent loyal to us then do we give them rewards just for being there, or do we concentrate on making the less valuable customers more valuable? We must ensure that we are adding value to our business and not simply creating a discount scheme.
Defining our objectives needs to be the first step – are we looking to reward behaviours that are good for our business, such as a customer spending more within a certain time frame, for instance?
We then need to understand our audience segments. Customers are all different and treating them as one entity means that we may be missing the main motivational factors for some of them.
After we have segmented the audience we need to look at who is the most valuable to us and why – is it the segment that makes up the highest proportion of our base? Those who spend the most? Those who are the least hassle? Or those who we feel we might be in danger of losing soon? How do these customers stack up against our objectives?
Having understood who our customers are, we need to understand their motivations – this allows us to be relevant. What do they value most?
We are a business, so we also need to understand our own motivations – what would we like our customers to do? Spend more? Stay with us long-term? Again, we need to look at this against our objectives.
Adding all this up we can see who we should be targeting, what we want to encourage them to do and what is going to motivate them. Our aim is to identify positive behaviours we want to reward and habits we can seek to change in order to make our business more profitable.
In an environment where winning new customers will get harder, it is more vital then ever before that we cherish our current customers. Some are happy, some are apathetic and some may be disappointed. As spring approaches it would be wise to look over your customer base and reward them, tackling any issues with empathy and understanding. We do long for loyalty from them; let’s give them some reasons to love us and importantly to tell their friends and associates about the great experience they have had with you.
I don’t think it takes a huge amount to make us feel valued as consumers. Know my name when you can, talk to me as a human being, I have been loyal to you, please be courteous and considerate and offer me a fair deal. It’s not a big ask and it’s not rocket science either.
Actually it’s just the little things. Perhaps it’s worth making the point that these little things are worth far more than the constant discounts and money-off offers that we are being bombarded with.
I heard a story a while back about a guy who had worked in Las Vegas as a porter for years. He was a master at remembering faces. Importantly he knew if someone had stayed before. So if a guest arrived and indeed they had stayed before he would put the luggage trolley in the hall on the left, meaning they were a previous guest. The receptionist would then greet the guest with a simple “hello Mr Clark, welcome back”. If they had not stayed before then the trolley was left on the right and the welcome here was equally effective — “Good morning Mr Clark, welcome to our resort and thank you for choosing us, can I show you around?” or words to that effect. Nice, very nice.
Here’s a thought. Think of the challenge as a festive lunch. The doorbell goes, you open the door, the house is warm — you greet your guest with a huge smile and a kiss (kissing customers is optional). You chat, feed them, give them gifts — they might not like the gift but they appreciate the gesture – and at the end of the evening you part as friends having had a great time.
So yes, you’ve put a lot of effort into the relationship, but my you are rewarded. Your guest leaves feeling loved, cared for and appreciated, and the Brucey bonus is that they will probably tell their friends that they’ve had a good time as well.
Let’s call this the Festive Lunch strategy. Consider these things:
In analyzing your data have you segmented it accurately? Do you want to invite everyone? Do you invite the ones who you know will never ask you over for lunch? You really should invite the ones who had you over for lunch a year back — they would really appreciate it.
Are you rewarding your loyal valuable customers with appropriate offers or rewards? Are you using the knowledge you have of them in the most appropriate way, showing them you understand them? Defining their traits might lead to some great insights. If you’re a busy working mum you might want to save time rather than money, so offering money off wouldn’t be as effective as offering a means of saving time (priority parking or bag packing).
The key is not to discount current behaviour, but to reward new or valuable behaviours (to us) for a change of habit.
Well good luck. If they have been loyal this will be unwelcome. Offer them a surprise, an amuse bouche, and they’ll be feeling the love. Use your knowledge of them appropriately, and make sure you offer them an appropriate product and pricing strategy. They will stay a little longer.
Are the channels you communicate to them in appropriate? Do you offer choice, and rewards or value back if you have a low cost to serve channel?
We are all hit with a lot of communications these days. Is your message clear and concise? Is it easy to understand and digest (sorry!)? Present the facts and costs clearly, separate the important from the not so.
Finally it is vital to avoid the trap of “well my competitor’s got a reward card/scheme, we better get one”. That simply gets you to a me-too place. Drill down the USP – what would drive the competitive advantage you are seeking? And the point here is that if you are simply paying for loyalty with no increase in acquisition or retention rates then what’s the point, especially if you have not set any measurement or tracking metrics. It will cost you dear.
Yes building loyalty can be hard but most of the time a smile and a handshake go a long way. Remember my name and feed me well. I’ll remember you, I’ll remember the care you took to make me feel welcome and valued, and you know what, I will stay a little longer.
How hard can that be?
Shoreditch’s bustling café society is thought to be the first place to offer customers a disloyalty card in order to drum up business for local independent baristas and reward customers for trying new places in the area.
The loyalty card is a well-established consumer psychology tool but the idea of collecting stamps from eight different coffee houses in order to gain a free coffee was dreamed up by award-winning barista Gwilym Davies to combat the homogenised high street coffee culture.
The reason behind teaming up with fellow independent coffee shops arose due to the overwhelming demand and lengthy queues at Mr Davies' shop on the back of winning the World Barista Championship.
Initially he tried suggesting nearby alternatives that he recommended on a whiteboard, something that might be the last thing a small retailer might want to do in a very competitive and cost-sensitive industry. But as a supportive gesture for fellow traders and to help satiate the increasing lust for good coffee, it still wasn’t enough and so the disloyalty card was born.
Speaking to the Evening Standard, Mr Davies' business partner, Jeremy Challender, said: “There are a lot more places opening, and as prices are the same, it seems a shame a lot of people haven’t experienced high quality coffee. It’s totally different to what you get in a high street chain.”
The partnership has seen eight independent coffee shops join in with the venture which, if successful, could see the consumption of 45,000 coffees and a new culture of using local coffee traders and award winning baristas that are passionate about the content of the cup they vend.
As a retailer, would you try a similar scheme with fellow businesses?