Wednesday 26th Jul 2017
Yes, despite what so many people say there are only 4 ways to grow any business!
Four questions which focus on the acquisition, maximization and retention of your customers. I often refer to this as the 4 BIG questions of your AMR strategy.
There are a number of answers to each of the questions – a number of multiple strategies which you can implement in your business – however when you peel back the layers you’ll always arrive at the 4 BIG Questions.
Implementing the 4 BIG questions in your business will help you;
So, let me dive in to question number 1;
How do you increase the number of customers?
This is where most businesses tend to spend their time – in attracting new customers through the front door of their businesses.
My question for you is this; What are the various strategies you’re currently using in order to attract people to your business?
I’ll share a few of my key acquisition accelerators….
The first and number 1 Low/Cost no cost strategy for increasing the number of customers is of course referrals.
86% of my business comes from referrals – was it always the case – of course not but we’ve been 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? And…
How can you form an Alliance Partnership together to cross refer business? We could spend days and days talking about this strategy however I’ve seen some of our clients achieve double digit growth just by leveraging the power of this one idea!
Running special events.
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 the customers and potential customers how to recognise good wines. These events are extremely popular and the conversion rate of new customers is over 90%.
What special events could you hold for your potential customers?
The list is endless – but I’m sure you can personalize this method and come up with a number of ideas that could be tested at little cost.
Now question 2 (along with question 3 of the 4 big questions) focuses on how you can maximize the value from your existing customers.
How do you increase the average order value?
Here are another three accelerator ideas for you.
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, (I’ve worked with tens of thousands of businesses across 27 countries) most people do not buy ALL the products and services they could from you, simply because they do not know everything that you sell.
Could this be the case in your business?
Do you have a systematised process to educate and up sell customers and clients on your full complement of products and services available to them?
You’ve already invested the time and money in acquiring the 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 parcel or bundle products and services together?
Let’s say that we have a product that sells for £100 and we can make it or buy it for £50, then the profit on a single sale of that product would be £50.
|Increase in Profit|
However, if there was a second product that we also normally sell at £100, which we buy at £50, then we could bundle these two products together to increase the average order value and more importantly the average order profit.
|Increase in Profit||40%|
As you can see we’ve bundled the products together and sold them at combined price of £170 a discount of £30 or 15% and yet the profit on this sale has increased from £50 to £70 an increase of 40%.
Naturally if we believe 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.
The third questions also focused on customer maximization – get more value from your existing customers and asks;
How do you increase the average order frequency?
So, we’ve already attracted the new customer through the front door of our business – we maximised the average order value at the front end – now is the time to leverage the average order frequency – or in other words programme the customer to buy more and…more often!
We can start looking into what the potential lifetime value of a customer is worth to your business – something I call the LTV.
So let’s 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 haven’t we – a trolley full which resembles nothing like the list you went in with, why does that always happen! And…you’re now £100 lighter in the pocket.
However, the experience was great – you agree with your friends raving endorsement and your now a convert – Tesco’s is defiantly for you.
Here’s where the LTV (lifetime value) kicks in. How many times do you go to the supermarket in a year?
Well for a family with 2 children probably once a week. And how much do they spend? An average order value of £100
What is their average order frequency?
Well for our family, taking out 2 weeks for the annual holidays the average order frequency is 50 times per year.
Tesco’s are delighted! New customer – average order value £100 – 50 times a year – That’s £5,000.
How long have you been going to your current supermarket for?
So, let’s spin this into a focused question, which can relate and apply 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 or client how it changes your focus within the business. You can then calculate what your prepared to spend in marketing to attract new customers through the front door.
The final question focuses on customer retention and makes you consider whether your customers are slipping silently out the back door of your business.
Client retention… or most importantly 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 and clients are constantly UNDER ATTACK from rival organizations 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/clients – FACT!
WHAT IF – through increased focus – through a well thought out Customer Retention Strategy and through effective implementation of that strategy – you could reduce the attrition rate of your customer base by small percentage point?
This, coupled with effective front-end new business activity is how many successful businesses now attack the market – and by so doing achieve exponential growth instead of linear growth.
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 really drive your business to levels of growth that previously you’d only dreamed possible.
Here are an additional two accelerator ideas focused on retention of existing customers;
Customers who rate the service from a supplier as “satisfactory” have a retention rate of 65%. However – those customers who rate the service they receive as “Very Satisfactory” have a loyalty rate of 95%.
Yes – a 50% uplift in retention or loyalty – from 65% to 95% – just by an increase in perception of service – from ‘satisfied’ – to ‘very satisfied’.
Where do your customers rate their satisfaction level on 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 – you guarantee delivery for the day after tomorrow – however it arrives next morning – Speed Stuns!
The proposal your client needs by the end of the week – it’s in their inbox within 24 hours – Speed Stuns
You go to an important meeting – next morning the customer receives a hand-written card from you thanking them for the meeting – Speed Stuns!
I know you have the point. What a great expression and what a simple strategy to build loyalty.
So, there you have it – the final question of the 4 Key Questions of Business Growth:
Are you asking these questions in your business?