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5 Ways to Grow the Value of Each of Your Customers Learn how to get the most out of the customers you already have.

By Dan S. Kennedy

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Death to the Stock Photo

In No B.S. Guide to Maximum Referrals & Customer Retention, business coach and consultant Dan S. Kennedy and customer retention expert Shaun Buck present a systematic approach to help you keep, cultivate, and multiply customers so you replace income uncertainty with reliable income through retention and referrals. In this edited excerpt, Kennedy describes five different ways you can earn more sales from each of your customers.

Businesses that fail to fully monetizing their customers often fail outright, and many more will in the challenging years ahead. This is so because nothing is more difficult or costly than new customer acquisition.

There are five specific ways to create the maximum possible customer value:

1. Increase Transaction Size

At soda fountains during the Depression, "soda jerks" were trained to ask, "In your milkshake, would you like one egg or two?" The same basic at-counter upsell is familiar to all fast-food restaurant customers. Unfortunately, what's supposed to be happening often isn't. One major chain recently found via mystery shopping that eight out of 10 employees weren't doing a simple upsell.

This is just one method of many to be creatively applied then strictly enforced for bumping up transaction size. A few dollars more per visit or purchase may not sound like much, until you apply it to the multiyear tenure of a customer and then to all customers. If you can get $5 more per transaction from a customer who engages in 18 transactions a year, that equals $90. Multiply that by a five-year retention term equals $450. Done with 222 customers, that's an extra $100,000. Done with 2,222 customers, an extra $1 million. You can get rich on the extra money made just from small upsells.

Upselling and cross-selling are the two best ways to bump up transaction size, but every possible method must be considered. And you have to know your customer to get this right. My dry cleaner, for example, has a tailor, and he constantly finds little things to fix on the clothes I take there for cleaning: a jacket lining coming loose or bunching up, loose buttons, a frayed pant cuff. These things are fixed and added to the bill without any discussion. He knows I'll welcome the service. I'm betting he's adding $10 to $20 to a lot of transactions for his affluent customers this way.

2. Decrease Randomness or Division of Spending

Customers are easily seduced by other companies. In most categories, they divvy their spending. The same person may go to Walmart and Target and Walgreens all in the same week, even though all three stores sell the same things. The same thing happens with nonchain, independent businesses of many kinds.

Airlines invented Frequent Flyer Programs to curb this, but once they all had virtually identical programs, the power was lost. Very frequent flyers accumulated points in every airline's system, so we still divided our spending, mostly based on convenience of flights for our personal needs. This doesn't negate the role of a good loyalty rewards program, but it needs constant marketing to customers. For instance, Barnes & Noble mails its loyalty cardholders monthly discount coupons, with deadlines, and it often triggers an extra trip or three for me during the year. The independent Learned Owl bookstore I also occasionally patronize never sends me anything even though I'm in their loyalty program, too. I'd wager my spending at Barnes & Noble was 20-times what I spent at Owl last year.

Customers divide their spending in various categories for a multiplicity of reasons -- convenience of a moment, a heavily advertised big sale, a friend's influence, boredom, and casual shopping, as well as feeling neglected and underappreciated. It's up to you to reduce these temptations and make customers think of you and at least feel guilty about their defection. The amount of divided spending going on in your category, the casualness with which the customer views it, and the loss of rewards it causes all affect both retention and referrals. In other words, the customer with the least divided spending is most likely to stay with you forever and is more likely to refer others to you. Conversely, the customer engaging in the most divided spending is most susceptible from being seduced away and dropping you out of the random rotation altogether, and is less likely to refer. When you reduce divided spending, you automatically boost retention and referral likelihood.

3. Increase Profits From Each Customer

Achieving maximum possible profit with each customer can be micromanaged. Somebody should do so, and marketing to each customer should be varied by use of this information. For example, if Walmart has a customer who very prudently and penuriously buys only staple commodities like toilet paper, paper towels, and a few supplies but never buys its much higher-profit margin toys, games, apparel, electronics, or seasonal gift merchandise, that customer is a problem. There's almost no profit value in that customer. If you were micromanaging that business, you would identify and isolate those customers and concoct a customized sales program just for them, designed to tempt them into buying high-profit goods, hopefully being surprised and satisfied, and then changing their habits.

Most businesses have different products and services with different profit margins. The task is to direct each customer into purchase of high-profit items.

Most businesses should have three different kinds of marketing going on with their existent customers. One would be generic messages and promotions everybody gets. These are very suitable to mass media, like email and websites. Two would be segment-specific messages and promotions crafted differently for different groups of customers. For example, when I'm working on seminar marketing for a client, I want to deliver different campaigns to a) customers who attended in prior years but skipped the most recent year, b) customers who've been around long enough to have attended but haven't yet done so, c) customers who've attended one kind of event but not another, and d) customers located in easy driving or "puddle jump" flying distance of the event's location. Three would be customized and personalized messages and offers different for each individual, based on what we know about that person.

4. Recover Lost Customers

Lost customer recovery and reactivation campaigns are rarely the highest return-on-investment activities a business can do, but that's no excuse for not doing them. Deciding what you'll spend is relatively easy; the lost customers have individual and averaged purchase history. Don't write them off without a fight.

The best lost customer campaigns include the following:

  1. Acknowledgement, if not an apology, that something must have gone awry causing them to wander off
  2. Reminding them of the core reasons they were a customer
  3. Introducing "Exciting News" about how you're "new and improved"
  4. Presenting an exclusive, extremely generous, irresistible offer and/or
  5. Offering a very appealing free gift just for stopping in, calling, etc. to see all the "new and improved" firsthand
  6. Imposing deadlines on the offers

5. Get Referrals

Let me just say a word about creating a referral culture in your business. Whatever you want from people, they have to know you want it before they can give it to you, they have to know it's expected of them before they can live up to your expectations, and they have to know they're capable of doing it successfully. So there are actually 11 things that customers need to know for there to be a referral culture in play:

  1. Our customers refer.
  2. Our good customers refer often.
  3. Our best customers refer often and a lot.
  4. Referrals are expected. From you.
  5. Referrals are genuinely appreciated.
  6. Referrals are well taken care of. (You'll only get happy reports and thanks from those you refer.)
  7. Not referring is weird and inappropriate. You should feel bad about it.
  8. There are a lot of different reasons people do business with us—not just the reason that brought you in. Keep all these reasons in mind . . .
  9. Most people don't really know how to find a good, trust­worthy provider of what we do, so you're doing others a great service by telling them about us
  10. There are easy ways to introduce people to us and to get our information into the hands of people you think we can be of service to.

I can train for an entire day just on this list, but you can glean the basic idea just from the list. It's up to you to consistently and effectively communicate these messages.

Dan S. Kennedy

Author, Strategic Advisor, Consultant, and Business Coach

DAN S. KENNEDY is a strategic advisor, consultant, business coach, and author of the popular No B.S. book series. He directly influences more than one million business owners annually. 

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