Tapping Your Most Valuable Asset...Your Current Customers!

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~~ DAVID FREY'S ~~

~~ MARKETING BEST PRACTICES NEWSLETTER ~~

'The Web's Leading Small Business Marketing Newsletter'

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This is the FOURTH installment of the 'Six Deadly
Small Business Marketing Mistakes' mini-course.

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Tapping Your Most Valuable Asset...Your Current Customers!
___________________________________________________________

Not long ago I was speaking with a client in the spa and pool
industry who expressed concern that his sales had grown
stagnant. He mentioned that he was still actively advertising
and working his lead generation process but his new
customers had slowed to a trickle. I asked him, "As a
percentage of his marketing efforts, how much was devoted to
new customer acquisition and how much was devoted to
current customer sales."

He glanced at me with a look of confusion and said, "What do
you mean current customer sales?" He continued, "Once we
sell a spa to a customer, that's it. They're not going to come
back and buy another spa one a week later.

A lot of our customers come in to buy chemicals and some
accessories, but that's it. All of our efforts are focused on
finding people who want to buy a new spa or pool."

________________________________________________________

There's Gold in Your Customer Base Waiting to be Mined
________________________________________________________

Unfortunately, my client didn't understand the value of his
customer base. There is gold in your customer base waiting to
be mined. You see, many retailers focus on the first sale or
the "front end" sale and spend a disproportionate amount of
time looking for new customers when the real goldmine lies in
the "back end" sales or continuing steam of sales.

You've probably spent a lot of money acquiring your
customers. Not only do you miss out on lost revenue when
you ignore them, but you also flush your return on investment
from acquiring your customers right down the tube.

If you have convinced a person to do business with you it
means that they have already given you a vote of confidence. If
you've provided good service and met (or exceeded) their
expectations, it's very likely that they would be willing to give
you a second vote of confidence or third or fourth. If you're
good you may even get their lifetime vote of confidence.

___________________________________________________________

To Get to the Pot of Gold, You Have to Know Where to Mine
___________________________________________________________

You must be able to contact your customers in order to
market to them. That's why one of the first pieces of advice I
give to my clients is to capture your customer's contact
information at the point of sale. This process is done
automatically in some businesses, but in others you must ask
for your customer's contact information.

If you have ever purchased an item at Radio Shack you know
that the clerk always asks for your name, address, and phone
number. They don't even give you a reason, they just ask for
it.

They just assume you will give it to them, and you know
what...98% of Radio Shack customers do give it, without any
question. The process is so automatic that you feel that giving
your contact information is just part of the purchasing
process.

Every small business in America should be doing the same
thing as Radio Shack. But to go one step further, you should
be capturing your customer's email address as well
(assuming they have one).

Capturing your customer's email address is the "holy grail"
of marketing because you can market to your customer again
and again at no cost.

If your customer is reluctant to give you their email address,
give them a bribe such as a coupon for their next visit or
something else of value. The effort to obtain your customer's
email address will be re-paid many times over.

________________________________

Focus On Your Best Customers
________________________________

Most businesses lose between 15 to 20 percent of their
customers each year. Retailers lose even higher percentages.
Depending on your business, a large majority of your
customers lie dormant having only transacted business with
you once or twice. Your remaining customers are those that
are loyal to you from whom your profits can be significant.

The old 80/20 rule certainly applies to your customer base; 20
percent of your customers bring you 80 percent of your revenues.

These 20 percent are your loyal customers that come back to do
business with you time and again. Some are even "hyper-responsive"
customers that pull out their wallet any time you make them an
offer. These are the customers that you should be focusing your
time and energy on.

Several benefits result from concentrating on servicing these
customers:

1. Your marketing costs go down because you do not have
to blast your marketing message to the world. This is called
"spray-and-pray" and is a waste of your marketing dollars.

2. Your marketing efforts become more efficient because you are
dealing with responsive customers, which increase your
conversion rate (the number of shoppers that become buyers)
dramatically.

3. It rewards customers because they receive your personal
attention and periodic special offers that other customers
may not receive.

4. Reduces your customer acquisition cost by investing your
savings (from not mass advertising) on customer retention
and loyalty building programs.

It's important to categorize your customer base to identify your
top 20% customers. However, to do this you must first be able to
uniquely identify all your customers and the amount that they
have spent with you over a defined time period (last 12 months).
If you don't have this data, start compiling it right now.

___________________________________________________________

"Business Goes Where Business Is Invited" - A Case Study
___________________________________________________________

It sounds simple but inviting your customers to do business with
you is an effective strategy for significantly improving current
sales. Take it from Max Grassfield, owner of Grassfield's an
upscale men's clothing store in Denver. Max founded the store
35 years ago, and is still running the business.

Max has become so skilled at inviting his customers to do
business that he developed a trademarked system called,
"Invitational MarketingTM." Max issues personal invitations to
his store to a carefully selected group of individuals in the
Denver area. His method works.

Several years ago, Max Grassfield asked himself, "What can
we do to make Grassfield's unique (which is a question all
small business owners need to ask themselves)." The answer,
which he evolved after much study, research, and effort was to
develop methods to know his customers "better than the other
stores know their customer."

For the last ten years, Grassfield's has been collecting a
database of information on its customers, who voluntarily
provide it. Originally, the data included name, address,
telephone numbers, sizes, birthdays, and the wife's name.
(He discovered that wives are often heavily involved in their
husband's clothing purchases.)

He regularly writes customers on a one-to-one basis that use
the customer's first name or nickname (as the customer
prefers), their sizes, wife's name, product preferences, and
references to what they bought in the previous season.

Most communications are programmed to include messages
designed only for the particular customer addressed: "I've
been keeping my eyes on the 44 long suits..." Every letter is
personally signed by the customer's salesman who he met
while visiting the store.

Recently, he sent a wave of three different oversized postcards
in one month intervals, to 4,100 regular customers. Each card
greeted the customer by name, and was signed by his salesman.

There were 117 respondents (a 2.85% response rate) with an
average sale of $451. It was an outstanding success. The final
cost per piece mailed was just 48 cents including postage. For
a $1,986 investment, he brought in $52,767 in sales. (Compare
that with the cost of full page ads!)

A couple of months later, Max selected eight suit sizes that
were overstocked. Using the database, he drafted a special
note to each customer whose size fit one of these eight
groups.

The incentive was $100 off any suit in that inventory,
and $200 off the high-end Hickey Freeman suites. He mailed
1,164 invitations at a cost of $558 and sold 56 suits in 39
transactions. The average sale was $1,110 with a total volume
of $43,307!

This case study is a great example of the power of marketing
to your current customer base. Max knows who his good
customers are and he takes advantage of that by personally
inviting them to do business with him, again and again. It also
demonstrates the power and importance of collecting
information about your customer and how it can be used to
make you a lot of money.

______________________________________

The Prodigal Customer - The Lost 20%
______________________________________

The average number of customers that stop doing business
with you is about 20 percent annually. To achieve just a 10
percent increase in sales you have to add 30 percent more
customers!

These statistics are startling considering the average
business spends six times more to attract new customers than
it does to keep old ones. What is your customer attrition
costing your business?

*Factoid*: A survey on "Why customers quit" found that of the
20% that stop doing business with you...

Three percent move away five percent develop other friendships
nine percent leave for competitive reasons 14 percent are
dissatisfied with the product or service 68 percent quit
because of an attitude of indifference toward the customer by
the owner, manager, or some employee.

__________________________________________

The Silent But Deadly Unhappy Customer
__________________________________________

This means that 82 percent of your customers that stop doing
business with you are unhappy. Unfortunately, unhappy
customers don't usually complain about their feelings. A study
from the Research Institute of America says that the average
business will hear nothing from 96 percent of unhappy clients
who experience rude or discourteous treatment.

Not only is having unhappy customers not doing business with
you driving up the cost of customer acquisition but it is
costing you potential lost sales. The same study found that
unhappy customers will tell their experience to at least nine
other people, thus, jeopardizing further potential sales.

So, what do you do to get all these people buying from your
business again? You assume the statistics are right and that
you did something to offend them in one of your business
transactions. What do you to make your spouse start talking
to you again after you have offended them? That's right, you
humble yourself and apologize and ask for forgiveness.

________________________________________

Telling the Truth Has Magical Results
________________________________________

Tell them the truth - that they haven't been buying products or
services from your firm for quite a while and you sense
something is wrong. Make sure that you communicate this in
a way that absolutely conveys your genuine concern for their
well-being.

After you caringly express concern for the lack of contact and
business that you company has had with them ask the
question, "Is anything wrong?" Follow that up before your
customer responds by adding, "Have we done something
wrong or did we offend you? If we did, it certainly wasn't
intentional. Is everything all right with your business, job,
family, health etc.?

Believe it or not, this simple approach has a magical affect on
your inactive customers (just like it does on your spouse).

Don't underestimate this strategy. Even big companies use it.
When Continental Airlines was about to go under in 1994,
Greg Brenneman, a former consultant suggested to Gordon
Bethune, CEO of Continental, that they win back their
customers by calling them and personally asking for
forgiveness and for a second chance.

Greg Brenneman, who later became Continental's Chief
Operating Officer, and Gordon Bethune both got on the
phones with their executive staff and started to call their best,
inactive customers one-by-one.

It worked like gangbusters. Inactive customers who were
dissatisfied with Continental were impressed by the personal
phone call and came back in droves. Since then its stock has
risen 1,700%.

_____________________________________________________

Be a Full-Service Provider Without All the Hassle
_____________________________________________________

Let's go back to my client in the spa and pool industry who
mentioned that he didn't know what more to sell his customer
because they had just purchased a spa, a one-time item
purchase. He did have a valid point.

He personally couldn't sell his customer much more than chemicals
and accessories, BUT, he could be a full-service provider by
offering complimentary products and services in which his
customer might be interested.

How? I advised my client to meet with the owners of other
businesses that provide complimentary products and services
that his customer might be interested in and strike up a
commission or referral deal.

This way he could still benefit economically from his
relationships with his customers and continue to provide his
customers other products and services.

To maximize this strategy you might consider asking your
customers what they are lacking and then find out how to
solve it. As the sayings go...

Find a need and fill it. Find a hurt and heal it. Find an itch
and scratch it.

Virtually every successful small businessperson you ask will
tell you that finding and meeting unmet wants is the name of
the game when it comes to winning customers. The better you
do this, the more customers' you'll win.

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Conclusion
______________

Don't make one of the biggest mistakes in the book by
ignoring your customers. You paid a lot to get them. You'll
pay a lot if you offend them. Why not make a lot by delighting
them.

__________________________________________________________

Using OPC (Other People's Customers) to Cash In Big Time
__________________________________________________________

Hang on for the FIFTH installment of 'The Six Deadly Small
Business Marketing Mistakes.' In our next installment
you'll learn how to use other businesses to bring you new
customers. It's simple once you know the secret.

Happy joint venturing!

David Frey

http://www.MarketingBestPractices.com
Mailto:David@MarketingBestPractices.com

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...who would like to attract more new customers, sell more to
existing customers, and bring back your customers more often,
with less effort -- mo matter what product or service you sell.

Visit http://www.MarketingBestPractices.com/MarketingBible.htm

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