Thursday 19th Jul 2018
Without customers, businesses don’t exist. FACT. The challenge is that most business owners, leaders and entrepreneurs over-engineer their business growth model, making it more complex than it needs to be. Having in place a structured and sustainable business growth strategy to help you grow your business organically year-on-year is now more important than ever.
Yes, you can reduce costs to increase profits, but reducing costs is finite. You can only cut back so far.
Yes, you can buy a competitor or similar business to drive growth, but with this comes additional cost. Plus the significant amount of effort it will take to manage the integration.
What I want to focus on in this weeks blog are simple, practical ideas to give you insight into how you can deliver consistent, repeatable and predictable results to help you grow your business.
Implementing these 4 questions in your business will help you increase your turnover and profits, increase your customer retention and penetration rates and make easier sales – than ever before!
So, let me dive into question number 1;
This is where most business owners and leaders tend to spend their time – in attracting new customers through the front door of their business.
What are the various strategies you’re currently using in order to acquire new business and new customers?
I’ll share a few of my new business acquisition strategies…
The first and number one Low Cost / No Cost strategy for increasing your number of customers is of course referrals.
86% of my business comes from referrals. Was it always the case? No, of course not but I’ve focused on building a referral only business. Could you do the same? What percentage of your business comes through referrals today? What could it be in the future with an increased focus in this area?
Alliance Partnerships or sometimes referred to as Strategic Alliances.
Who has a target market of customers who fit the profile of customer you want to attract to your business? How can you form an Alliance Partnership together to cross refer business?
I could spend days and days talking about this strategy alone. I’ve seen some of my clients achieve double digit growth just by leveraging the power of this one idea!
Host a special event for current AND potential customers.
One of my client’s holds wine learning evenings for current and potential customers. Not just wine tasting but wine learning, where a wine specialist comes along and teaches their customers and their potential customers how to recognise good wines.
This is an experience driven strategy with the results based not on what you said but on how you made them feel.
Now question 2, how do I increase the average order value of our customers (along with question 3 below) focuses on how to maximise value from your existing customers.
Here are a few ideas…
Increase your prices – an instant quick win! “I can’t do that” I hear you say! “It’s a competitive market!”
When was the last time you had a price increase in your business? Do you think your market place could handle just a 1%, 2%, or even 3% increase? More, depending on the nature of your business of course?
Increase the number of products and services your customers buy from you and your business.
In my experience most people do not buy ALL the products and services they could from you, simply because they do not know everything you sell.
Could this be the case in your business?
Do you have a systematised process to educate and up sell customers on your full complement of products and services relevant to them?
You’ve already invested the time and money in acquiring them as a new customer, you’ve already invested the money, now is the time to capitalise on all the effort you’ve invested to date.
Can you bundle products and services together?
Let’s say you have a product that sells for £100 and you can make it or buy it for £50. The profit on a single sale is £50.
However, if there was a second product that you also normally sell at £100 and buy at £50 you could bundle these two products together to increase the average order value and the average order profit.
Bundle the two products together and sell them at a combined price of £170, a discount of £30 or 15%, and yet the profit on this sale increases from £50 to £70, an increase of 40%.
|Increase in Profit||40%|
Clearly if you know that customers would normally buy both products at normal price, this wouldn’t be a strategy to employ. However if the discounted price prompts additional sales then an increase in 40% profit would be very welcome I’m sure.
So, you’ve attracted your new customer and maximised their average order value. Now it’s time to leverage their average order frequency. Or in other words get the customer to buy more and…more often!
The first step is to identify what the potential lifetime value of a customer is worth to your business, something I call the LTV.
Lifetime value of a customer.
So let’s me make this real for a moment and take a simple example.
Let’s imagine for a moment you’ve always shopped at Sainsbury’s, however one of your friends is raving about Tesco and how good they are, so you decide to test them out yourself. You go along to your local Tesco with your list of 40 items and 30 minutes later you’re at the checkout packing all the items into bags, all 80 items!
Yes, we’ve all been there, a trolley full of items which resembles nothing like the list you went in with. Why does that always happen! Anyway back to my example…you’re now £100 lighter in your pocket.
The experience you received was great, and you agree with your friends raving endorsement and you’re now converted, Tesco’s is defiantly for you.
Here’s where the LTV (lifetime value) kicks in.
How many times do you visit the supermarket in a year?
Let’s say for a family with 2 children I’m guessing once a week with an average order value of £100. This family after taking out 2 weeks for their annual holidays, has an average order frequency of 50 times per year.
Tesco’s are delighted!
New customer – average order value £100 – 50 times a year – That’s £5,000.
So, let me re ask the same question but applying it now to your business…
What is a customer worth to your business?
Not just year one but over their lifetime? Their LTV? Not just the turnover figure, but what are they worth in terms of profitability? That’s the real measure.
It’s amazing when you calculate the REAL lifetime value of a customer how it changes your focus.
Using this insight you can then calculate what you’re prepared to spend in marketing to attract new customers.
The final question focuses on customer retention and makes you consider whether your customers are slipping silently out the back door of your business
Customer retention, or more often than not, the lack of it is costing businesses millions in lost turnover and profits each year.
The market place is bigger than ever and as the market grows, so does the competition.
The list is endless and the competition is on the march!
Your customers are constantly UNDER ATTACK from rival organisations attempting to steal them from your business. In many businesses and organisations as fast as customers are persuaded in through the front door – others are silently slipping out the back.
You’re going to lose some customers. FACT.
But through increased focus, a well thought out customer retention strategy and effective implementation of that strategy you can reduce the attrition rate of your customer base.
Think of it like this, would you rather spend year after year bringing in new customers just to stand still or…
…focus on a number of multiple strategies to drive your business to levels of growth that previously you’d only dreamed possible.
Here are a couple of additional business growth ideas focused on retaining your existing customers
‘Satisfied’ or ‘Very Satisfied’
Customers who rate the service from a supplier as “satisfactory” have a retention rate of 65%. However, those customers who rate the service as “Very Satisfactory” have a loyalty rate of 95%.
Yes, an uplift in retention or loyalty from 65% to 95% just by an increase in the perception of service from ‘satisfied’ to ‘very satisfied’.
Where do your customers rate their satisfaction level in your business? What strategies are you going to implement to move the needle on your satisfaction meter to ‘Very Satisfied’.
You’ve heard the expression under promise and over deliver. Well here’s another take, over promise and over deliver!
Your customer places an urgent order and you guarantee delivery for the day after tomorrow. It arrives next morning, Speed Stuns!
The proposal your client needs by the end of the week is in their inbox within 24 hours, Speed Stuns!
You go to an important meeting and next morning your customer receives a hand-written card from you thanking them for the meeting, Speed Stuns!
What a great expression and what a simple strategy to build customer loyalty.
So, there you have it – my 4 essential questions of business growth.
Are you asking these 4 questions in your business?
Implement all 9 of my business growth strategies or just a handful, I guarantee your business dials will move upward as you start growing your business.
Check out these blog posts…