Customer Lifetime Value
The key to long-term growth for your business is repeat customers. In 1937 Dale Carnegie stressed that if you embark on a sales career, try to make sure that you get into a business where you can establish a relationship in order to generate new sales from repeat customers. With a business service, you will be able to do this because your type of business lends itself to repeat customers.
We will now explore the value of customers and how you can strengthen your relationships with them to create real partnerships. As we discussed before, many buying decisions are made emotionally. As effective salespeople, we must create relationships built upon trust and service to encourage repeat sales. Following is a list of what customers want and do not want from you and your business:
What Customers Want…
- Only pertinent facts that describe the benefits of your product or services…solutions to their problems
- The truth
- No bashing the competition
- Testimonials that back up claims
- The opportunity to contact customers who do business with you
- Appreciation for their business
- Follow up
- “Going the Extra Mile”
What Customers Do Not Want…
- A tremendous amount of information (“information dumping”)
- How you took advantage of their competition
- How badly you want to keep their business
- How they will receive a better deal from you than from anyone else
- Over-promising and under-delivering
- Making excuses
- High-pressure sales tactics
The number one reason why a business will lose a customer is not because of inferior quality, prices, or lack of service selection, but because of an attitude ofindifference shown by an employee or the employer of that company. In fact, 68% of all lost business is because of an attitude of indifference that is felt by the customer.
- It generally costs five times more to create a new customer than it does to keep a present customer
- Remember this concept: “Business goes where it is invited, but it stays where it is truly appreciated”
- The American Management Association says that an estimated 65% of the average company’s future business comes from its present customers
- The average business will lose approximately 20% of its customer base per year
- Effective customer service departments should solicit customer criticism, which allows problems to be solved. You can win back as many as 74% of your dissatisfied customers with this technique
- According to a recent study, for every one complainer or dissatisfied customer, there are 26 who will feel like complaining to the company, but who do not – they just take their business someplace else
- The 3/11 Rule states that if you have a good experience with a business, you will tell 3 other people, but if you have a bad experience with a business, you will tell 11 other people
Upselling & Cross-Selling Techniques
Remember the principle that states, “It’s generally five times easier to sell to a current customer than it is to find a new one.” The two techniques you can use in selling to your current customers are upselling and cross-selling.
By upselling we mean that you can sell more products to your current customers; perhaps by offering them a quantity discount.
The second method of driving more revenue from each of your customers is to cross-sell different products/services to the same customer. If a customer is only purchasing “A” from you, suggest to them that they could receive additional benefits by also purchasing “B” and/or “C” from your company. Again, you are leveraging a relationship with your customers to provide more value to them and increase your company’s revenues at the same time.
“Business goes where it is invited…but stays where it is appreciated.” As we all know, some of the greatest needs we have are to feel appreciated, wanted and needed. Your customers are no different. They do not want to be taken for granted, and most of them will appreciate you expressing some form of thank you for their business. If you follow up and express appreciation in a visible manner, you will be truly unique in the competitive marketplace and your customers will remember you.
Ways to Show Customer Appreciation
- Thank You Notes: Send a handwritten note card to each new client, thanking them for their business
- Lunch/Dinner: Take your clients out to lunch or to dinner to show appreciation and to create a more relaxed environment to increase the quality of communication
- Industry Articles: Copy relevant publication articles and send them to your customers
- Holiday Cards: Send a holiday card at the end of the year thanking each client for their business
- Gifts: Divide all of your clients into 3 categories: A, B, and C. Your “A” customers should represent the top 20% of your clientele, or those customers that generate the most revenue for you. These “A” customers should receive a special type of gift. Customers in categories “B” and “C” should also receive gifts, although they can be less expensive ones. The best types of gifts are ones that have staying power throughout the year. By using the gift method, you are “touching” each customer once again while budgeting your dollars effectively.
One of the most effective ways to generate new customers is to get referrals. In a survey, business owners have said, by a margin of up to 5 to 1, that word of mouth referrals beat every other form of marketing, including telemarketing, direct mail, print advertising, emails, etc. But you have to ASK for them and develop the habit of asking on a consistent basis.
Consider the following facts…
- Less than 20% of businesses have formal programs to ask for referrals
- 40% of businesses don’t measure referrals
- Only 6% of all business owners ask their customers for referrals
- Fewer than 20% build referral networks and centers of influence, such as key customers etc.
Just like any program that a business implements, a best practice referral program should become an important part of your company’s business strategy. Here are some practical word-of-mouth best practices that you can start to implement immediately to drive new sales and profits.
Create a Habit
You need to ask and ask in a way that requires them to think and give you some good suggestions: “By the way, I enjoy working with you and value our future business relationship. Who do you know that I could also call on that you think might be a good fit for our products?”
If you do this with every customer, within a certain period of time (about 3 weeks), it will become a good habit.
Referral and Incentive Programs
Develop a strong incentive program for referrals that you receive from your customers. Some examples include a Gift Card for a local restaurant or cash rewards for a referral who then becomes a new customer.
Measure & Track
About 20% of your customers will become the strongest promoters for your company. Know who these key promoters are and continue to develop strong relationships with them and the people they know.
Spheres of Influence
Spheres of influence include contacts who have a significant number of business relationships in the community and they act as “trusted advisors” to many people. These people can be bank presidents, accountants, attorneys, presidents of chambers of commerce, etc. Develop a targeted list and stay in contact with them frequently.