Finally, after all of the holiday commotion, I was able to find the quiet needed to create part three of the series. Let’s quickly recap, in Part 1, I talked about why we all want to cultivate CLIENT relationships and how those actions lead to higher long term value. In Part 2, I discussed the need to understand and quantify that value and know what it costs you to acquire a new customer and what the lifetime value of each new client is in your business.
Hopefully you did the calculations so that you have an idea of ‘your numbers’, you did, didn’t you? Well, play along at home either way.
As an example, let’s say that in your business it costs you $798 to acquire a new client, their average transaction value is $250 and they buy from you 4 times a year or $1,000 annually. If you know those numbers AND you retain your clients for an average of 3 years each, then you know that paying $798 to acquire $3,000 of new business is a good ROI.
Your goal, in developing the relationship with each and every client is to learn enough about them to suggest appropriate additional products or services that will legitimately make their life or business better. Every dollar that you add from an existing client is a dollar that was acquired for almost nothing. There is no $798 acquisition cost, there is only the outreach to inform them of the opportunity and to explain why they need it. You should be regularly communicating with your clients anyway.
This is why building a relationship based on trust and having their well-being at heart easily leads to increased volume at a decreasing cost. The process makes you more profitable and makes clients less likely to defect…they have too much invested with you to want to try and find other vendor(s) to replace you.
Now comes the next big part of a client relationship, cultivating referrals. I can’t begin to tell you the number of small business owners who will not ask for referrals. Why? If you’re doing right by your clients, if they are happy buying from you, it’s insane not to talk to them about other people that they know that could benefit from your products or services.
In sales, it’s all a numbers game. You spend money on marketing and advertising, hopefully targeted, well placed and well written. Once released on the world these efforts should generate a certain number of leads which will turn into a certain number of interested prospects. A certain number of prospects will turn into customers and a certain number of customers will turn into clients. It’s a cyclical process and, after some analysis, a predictable one. Improve your odds by adding in referrals and by tracking all of your marketing and the leads each source produces for you.
By doing this you will talk to greater numbers of warm leads and your marketing will be spent where it is generating the highest numbers of leads that convert to customers. If a lead source is not generating more sales than it costs, fix the message or dump the media.
I recently met with a prospect to discuss their sluggish marketing efforts. They work with both commercial and residential customers but they NEVER ask residential customers for referrals. It’s their corporate POLICY!!!
[By the way, their business is off by 20% overall and 40% on the commercial side.]
Needless to say, we ended up not doing business together. They firmly believed that I was nuts by suggesting that if they began listening to the complaints, fixing the issues and then asking for referrals they could easily replace the 20% and more. I even offered to bet them part of my fee to prove my point…nope.
Let’s see, a recession, numbers of commercial projects are down but we don’t want to talk to the residential clients who;
1) Are still spending
2) Are talking to their neighbors about either great service or poor follow-up
3) Are present in greater numbers than all of the commercial accounts
4) Who all work somewhere that could lead to commercial work
Please, as a reader of this Blog, please capitalize on the good work and communication that you’re already doing and ASK for a referral or two. Referrals are warm leads, they don’t require the full acquisition cost, yet they still represent the same client value and are obviously not being sought out by huge numbers of your competitors.
Look through your client files today, make a list of clients who are thrilled to be doing business with you and set an appointment to see them…the agenda… “I wanted to touch base with you to see how we’re doing, to see if there is anything else we can do for you this year and, I need your help”. You’ll get the appointment, some insight into new sales opportunities and they will be more than willing to help you grow your business by providing referrals as well.
Next week, in Part 4 of this series, we’ll be talking about client retention.
I wish you a safe, fun and prosperous 2010. Happy New Year!
Bob Holdsworth is the founder of The Holdsworth Group. He is a successful entrepreneur and a marketing and business growth consultant who specializes in getting his clients and their businesses UN-stuck .If you want to learn how to “Do business on your own terms!®, you want to talk to Bob. He is also the author of several nationally published articles, a sought after speaker, a veteran paramedic, a very happily married husband, the dad of two awesome twin boys, a dangerous golfer, avid reader, and is severely allergic to neckties.
Bob can be reached at bob@holdsworth.com
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