Clive Jones from Jonesci Business Systems (also a certified Business & Executive Coach with actionCOACH) introduces Buying Customers by Bradley J. Sugars, founder of actionCOACH
Buying Customers is all about knowing your ‘profit per customer’, instead of your ‘profit per hour’ or ‘profit per item’.
Traditionally people think of Profit = Revenue – Expenses. Instead, understand the ‘5 Ways’: Leads, Conversion Rate, #Transactions, Ave Dollar Sale, Profit Margin.
Start at the bottom and work your way up.
Allowable Acquisition Cost
Allowable Acquisition Cost – the amount a business can spend to bring in a new customer and make a profit in the first purchase.
Investment Acquisition Cost – the amount a business spends to bring in a new customer and doesn’t recoup this in the first sale. However, this is more than made up for through repeat business.
Companies should only use an investment acquisition cost strategy if they:
- Have a good understanding of the Lifetime Value of a customer
- Have the cashflow to support buying customers until repeat business makes the customer profitable.
Conversion Rate = Number of sales / number of leads x 100
A marketing campaign’s effectiveness is judged by the number of customers that it produces, not the number of leads. Knowing your conversion rate is the first step to improving it.
People want to buy a Customer Experience, not just a quality product. Improving all aspects of the experience will improve your conversion rate and get people coming back.
Also need to understand the actual Cost Per Sale. This needs to include all of the cost in the business, not just the marketing and production costs (i.e. include all of the overheads).
This is the total amount a customer will spend with your business over the lifetime of their relationship with you. Also need to factor in the benefits of other customers that they refer to you.
Don’t just focus on market share, focus on Wallet Share. This is the amount you make from a customer over a period of time.
Repeat Business = Profits. Must collect their details and invite them back.
The Raving Fan
- Move people up the Ladder of Loyalty: Suspect ? Prospect ? Shopper ? Customer ? Member ? Advocate ? Raving Fan
- Must invite Shoppers to come back and become Customers. Not doing this risks a huge amount of customers trying once and then not coming back. Someone who makes 2 purchases is 10 times more likely to keep buying from you than one that only makes 1 purchase.
Grade your customers: A=Awesome, B=Basic, C=Can’t Deal With, D=Dead (or should be to your business)
Improve the quality of your customers by outlining your “rules” and then moving up the Ladder of Loyalty.
The Principles of Lifetime Value
The 9 Basic Needs of a Customer: Subsistence, Protection/Safety, Affection, Understanding, Participation, Leisure, Creation, Identity, Freedom. Which of these needs does your business speak to? Which ones could it speak to?
The Pareto Principle, or 80/20 Rule. Focus on the top 20% that give you 80% of your revenue/profits. Most businesses get stuck in the trap of over-servicing their lower value customers because there are so many of them. Even consider “sacking” or selling your lower value customers so you can focus on the good ones – let your competitors deal with them.
Actual vs Current Customers: Get ‘actual’ past customers to come back and become current customers again.
Don’t Be Afraid to Ask: Ask for referrals and offer them rewards.
Ways to Boost Lifetime Value
Develop relationships with your customers by writing a Blog or Newsletter
- Blogs are easier and less expensive but ideal for a younger audience. Make it easy for people to subscribe.
- Use “drip marketing” to feed information and offers a little at a time to build value and lead to a sale
- Use the Target-Offer-Copy method when developing and writing your blog/newsletter. However, instead of sales copy give valuable information.
Lifetime Value can be increased by getting customers back more often or by getting them to spend more at each transaction. Some strategies include: closed door sales, educate on full rage of products/services, promote a “deal of the week”, re-book next appointment, “until further notice” services, help customers plan future purchases, frequent buyer/VIP program, up-sell/cross-sell checklist, train the team, build a Dream Team, perceived value offers.
Getting Their Attention
Focus on a niche and understand the Whom What, Why, When, Where and How of your customers (see Brad’s specific questions on p130).
Segment your target market and design a campaign for each segment. Use the AIDA method (Attention-Interest-Desire-Action) when communicating your marketing message.
Today’s customer is highly educated because of the information freely available through the internet. They are skeptical of advertising and big claims so you need to build a long-term relationship with them using new media such as online and social media.
Focusing on a niche allows you to remove price competition. Do this by developing a strong USP (Unique Selling Proposition) and a strong Guarantee, and then communicate these to your target market.
Building Your Team
The 6 Keys to building a great team:
- Strong leadership
- A common goal
- Rules of the Game
- An action plan
- Support risk taking
- 100% involvement and inclusion
Train your team on sales and customer service and use scripts to help them achieve consistency and improved results when dealing with customers.
Strategies for Lead Generation
Use Giveaways (instead of discounting)
Referral program and rewards
Build a database
Go online and get found by your customers
Search Engine Optimisation
Host-Beneficiary (these are short-term)
Strategic Alliance (share databases and longer-term relationship)
Have a story
Test & Measure – you must measure the result from various marketing and continually refine what is working.
Steps to create a Referral Based Business
- Identify your ideal customer profile
- Segment the top 20% into A and B categories
- Offer them a reward for referring (gift, gift cheque, special pricing, incentive, etc)
Strategies for Conversion Rates
Have a Guarantee
Strong USP (To avoid price competition. NEVER DISCOUNT.)
Understand the Benefits of your USP
Testimonials (including video testimonials)
Offer a private label brand or exclusive line
Differentiate through packaging or design
Offer premium or extremely high-quality products
Offer samples or demonstrations