Minding Your Business
Possibly the greatest challenge facing small business owners is maximizing revenue from clients. Some companies rely on a wide marketing net to catch a little bit of business from many people. But speaker Joey Coleman and revenue generation consultant Susan Trivers have a different view – companies should spend more time on current clients to increase net profits, reduce costs, and succeed better.
Author of Never Lose a Customer Again, a best-selling book on how to turn one sale into lifelong customer loyalty, Coleman specializes in securing customer retention within 100 days of signing a contract. “Most companies spend a lot of time, money, and effort on customer acquisition,” said Coleman, “but they spend little time, money, or effort focused on retaining clients they’ve already acquired.”
In other words, the majority of companies miss greater profit potential with clients they’ve already secured and with which they’ve developed successful relationships. Instead, they spend and spread far and wide, seeking a large target market – and missing the trees for the forest.
Coleman’s research shows that, across all industries, geographic locations, sizes, and types of business, “somewhere between 20% and 70% of new customers will decide to stop doing business with you in the first 100 days.” And he cites research from Bain Company Advisory Partner Fred Reichheld, who discovered that reducing customer defection by just five percent increases profits anywhere between 25 and 100%. “Each dollar spent by an existing customer becomes more profitable, and there is no need to spend as much money on sales, marketing, and acquisition,” says Coleman. “Since most businesses run at a profit, the extra net profits which come from increased customer loyalty are icing on the cake.”
Focusing early and often on customer loyalty is a cross-industry principle which can bring massive results.
- The accountant’s customer loyalty strategy will turn a one-and-done tax return into quarterly meetings, tax strategy advice, and other services to triple or quadruple revenue from a single client.
- The candy store literally brings you in for a penny but gets you to leave with an expensive sweatshirt, mugs, and the local sugary treat.
- The carpenter repairs your roof and advises you to install a new roof, new gutters, and a new skylight.
- Verizon’s “discount” phone prices comes with price tags for the insurance policy, a line for each family member, and unlimited Internet.
“I advise my clients to spend 70 percent of their marketing dollars, time, and energy on current customers,” says Trivers, whose strategies have earned 500 clients upwards of two billion dollars in increased income. “Instead of spending money going after theoretical clients, successful companies look at what’s already working and focus there.”
But many companies fail to secure loyalty when it counts. The stereotypical example is the plumber or carpenter whose final price is far higher than the estimate – and then when something goes wrong, they leave you to clean up the mess because of a technicality in the warranty.
Coleman said this attitude pervades some industries, like insurers. “Everyone thinks what the insurance customer is trying to do is to be insured. That is one goal, but the bigger goal is that they will be taken care of when and if they need to make a claim,” he said. “Since insurance events are unpredictable, insurers must constantly remind the customer that we’ll be there with them, and when something does go wrong, get the customer as much money as they can.”
Insurance agents “should be the client’s advocate,” says Coleman. However, “most insurance agents” tell customers they won’t get their money and they “aren’t involved in any part of the insurance process. Then, a year later, they want you to renew your policy again – with an increase in premiums.”
Whether you are the candy store whose loyalty strategy is over in 10 minutes or the accountant whose strategy lasts years, choosing to invest in current clients to create more profitable revenue is a time and research-tested principle. “If you look at organizations which are really dialed into this stuff, they know who their customers are and who their customers are not,” says Coleman. “And they make no apologies for focusing exclusively on their customers.”