Discover The Priceless Asset Most Retailers have... But Rarely Use!
What could you possibly possess that you haven’t already utilized in your business? The answer is simple…well not that simple, the answer is your Clients or Customers!
Now before you say “Awe, I already know this”, read on for a few paragraphs, I think you will be amazed.
First allow me to describe the difference between a Customer and a Client. A Customer is someone who buys a product from you, sometimes they purchase more than one and hopefully they are satisfied with your business to buy many more later on. A Client is someone who, after buying from you, either once or more than once develops a loyalty to your business or product and the relationship between both of you becomes more personal.
Why is it important to have Clients? Don’t Customers buy products too?
Well, of course they do. Clients on the other hand have developed a rapport with your product. They like it and will continue to use it even if there is a lower priced alternative. Customers buy also, in reality they are the foundation of your business. But how do you turn a Customer into a Client? It comes with time; along with your product you must offer a valuable service…your advice. As marketing consultant Jay Abraham calls it “A Strategy of Preeminence” this means you align your interests with the interests of your clients, advise them in making decisions that benefit them, no matter what the effects on short term profits are.
For the sake of clarity I will continue to use the word “Customer” instead of “Client” but remember, take the time, turn your Customers into Clients.
Without customers there is no profitability and without that…well you have no business.
The hardest, most expensive sale you will ever make to a customer is the first one. It’s in this first sale that you either earn or lose the trust of the customer. On the other side of the coin, once you’ve developed that trust you open many doors to future sales and even possibly, referrals.
Many businesses relentlessly work at bringing in new business while unknowingly neglect one of the most valuable assets they have…their customer list.
The Importance of a Customer database
Capturing your customers purchase behavior at the point of sale is an essential part of building lasting relationships and turning customers into clients.
The information that you collect doesn’t have to be complicated. In fact sometimes a plain and simple approach is all that is needed to ensure the process is maintained. Once you build a customer database you then can deploy very powerful marketing techniques, such as:
Frequency: How often a customer visits and purchases.
Amount Analysis and Segmentation : This refers to the amount of spent by a customer over a period of X amount of time then allows this customer to be placed in a group based on how much they spend.
One-to-one Marketing: This is the identification of a customer’s particular area of interest in order to enable specific targeting of other products and services.
Winback: This process identifies customers who have been lost and embarks on an attempt to win them back as a customer.
ROI: (Return On Investment) Each customer is placed on different levels, depending of course on their purchasing track record. ROI attempts to weed out your low ROI customers allowing you to direct resources towards the customers that have a higher rate of return.
Regionality: This refers to an area analysis of your customers and is usually segregated by zip code. It’s common knowledge that not everyone buys the same things in the same areas. Regionality helps you break your customers down to specific regions allowing a more target placement of resources.
Direct Marketing: This is a direct approach at selling your customer. This can be done by flier, phone, mail, email and any other way to reach your customers directly.
Each one of these is an important part of learning the behaviors of your customers. Combine all of them and you being to see the power you actually have.
Building Relationships with your Customers
In order to reap the benefits of CRM (customer relationship management) you first have to have a relationship with your real customers.
What is a “real” customer?
Well, a real customer is one that you know will return and has developed a loyalty to your product…or even you and your business. What this is really called?
The Pareto Observation
In 1906 Vilfredo Pareto, an Italian economist observed that 80 percent of the accumulated wealth in Italy was actually owned by only 20 percent of the population. Over the years this insight has been transformed into what is known today as the 80/20 Rule. Bringing this into perspective, 20% of your customers will generate 80% of your profits. 80% of your sales will be generated by 20% of your workforce.
The trick to this rule is to use it to your advantage. Direct a majority of your efforts and cost where they will have the most effect. This is why, as we mentioned on the previous page, knowing your customers behavior is so important.
The fundamental principal behind creating loyalty is to reward correct behavior…plain and simple.
Positive Reinforcement happens when a customer does what you want them to, let’s say buy a new product for instance. When this happens you “reward” their action. This can be a “buy one get one free” or “buy one and get another of equal or lesser value half off.”
What this all means is you literally reward your customers.
You customer loyalty program is a highly visible declaration that you intend on keeping your customers and physically states that you value their business. For a customer loyalty program to work you need commitments from your entire organization. If you do this, you will reap the rewards that only your customers can give…higher profits.
Remember these two important factors:
If you haven’t implemented a Customer Loyalty program you should develop one ASAP. Over time you will find that implementing a program will increase your profits year-to-year and consistently expand your overall asset value.
What is a Customer Life-Cycle?
Customer Life-Cycle or Customer Lifetime Value simply refers to the behavior and the purchasing by your customer over time and how that information affects your bottom line. Customers begin their relationship with you and over time either decide to continue this relationship or end it. Normally at any point in this cycle the customer is either becoming more or less likely to continue doing business with you. They demonstrate this by their interaction with you.
Data collected from point of sale purchases can be used to predict where the customer is in their life cycle. If you can predict where each customer is in this cycle then you can maximize your marketing ROI by targeting customers most likely to buy and save customers who are beginning to have a declining interest as well as saving money by not directing valuable resources to customers unlikely to continue doing business with you.
Information is Power & Profit
Many successful companies have used the Life-Cycle approach for years and have developed methods of using the information to increase profits by driving customer sales higher in conjunction with reducing marketing costs. It is a proven method…and it works.
If you understand and can predict the Life-Cycle of a customer, you can answer quite a few other important questions, including:
1) How can we compare the long-term effect on customer value vs. our different advertising approaches, product selections and pricing?
2) When will a customer stop buying or visiting and how can we most cost effectively delay this event?
3) What is the Lifetime Value of a customer compared with other customers and how do we increase it cost effectively?
Being in a position enabling you to focus on your most valuable customers can be a great advantage. You will find that some customers are more valuable than others; this is normal and can be for a range of reasons, such as the size of their purchases. A successful business is one that identifies these customers and then focuses their sales efforts towards them while working to bring in new customers with a similar profile. All this can be done as long as you have the right information…as mentioned above Information is power & Profit.
The more you understand your customers the more you sell…period. The more you know about them the easier it becomes to spot opportunities to sell to them new products and target them with appropriate offers.
Profiling existing customers also helps you find new ones; you can look for similar profiles and sell to them in similar ways.
What determines a profitable customer?
Most businesses want customers who are as profitable as possible, here are a few traits that will help you determine a profitable customer.
They buy high-margin products.
They pay full price without negotiating discounts.
They place a small number of large orders rather than many small orders.
They do not cancel or amend orders.
They pay on time, without being chased for payment.
They do not require extensive “after-sales” service.
Studying your point of sale records lets you assess how profitable each customer is. I’ll bet that if you haven’t looked at this before, you’ll probably be in for a big surprise! In most businesses the 80/20 rule applies and you can determine just “who” that 20% really is.
Segment your customers and communicate with them based on their profitability, remember after all, not all customers are equal.
Now, I’ve been saying customers to this point. But let’s go full circle. By now you should know full well who your customers are and who your clients are and the difference between the two. You want clients not customers, you want to turn your customers into clients because once that person is a client…they will value the relationship much more and stay with you a whole lot longer.
This ultimately means a considerably higher profit margin!
Always remember…Clients…not Customers and your business will go places you never thought it could!
Written by: Trent Appleton