There’s an old story about an African farmer who heard about
other farmers making millions by uncovering new diamond mines. The farmer became
so excited about the idea of finding diamonds, he sold his existing farm and
spent the rest of his life traveling around Africa prospecting, unsuccessfully,
for the new property that would make him rich.
Sadly, after a lifetime of searching, the farmer ended up
penniless and threw himself into a river and drowned.
Now in the meantime... the man who purchased the farm one
day happened to notice a sparkle in the stream running through the property. He
waded out into the water and literally picked up one of the largest diamonds
ever discovered!
Turns out the farm was already sitting on what turned out to
be one of the largest diamond mines in the world.
So what’s the moral of the story?
The moral is: you can often find a fortune, literally, in
your own backyard if you just take the time to look for it!
Unfortunately this "grass is greener" behavior is also
much too common among many businesses today.
Businesses who spend so much of their time, money, and
energy on the pursuit of new customers, day after day... when their high ROI
(Return on Investment) customers are actually right in front of them — with
their wallets already open!
Earl Nightingale once wrote, “It's been said that if the
other guy’s pasture appears to be greener than yours, it could be because it’s
getting better care.” I would argue that this same statement could be made about
any businesses’ existing customer base.
So with the Acres of Diamonds story in mind… here’s 3 tips
for using the principle of Customer Lifetime Value Maximization (CLVM) to
increase your businesses’ revenues, gross margins and total profits… by selling
more to your existing customers.
1) Calculate
Your Customer Lifetime Value (CLV)
a.
Customer Lifetime Value is the most important
metric you’ll ever calculate
b.
It’s the starting point for everything you do in
marketing your business
c.
You can’t make effective marketing plans without
knowing this number
Unfortunately, Customer Lifetime
Value is one of the most often overlooked and least understood metrics in
business even though it’s one of the easiest to figure out… and although many
in the academic world make calculating it sound like rocket science, it doesn’t
have to be that complicated.
For a quick tutorial on how to
easily calculate Customer Lifetime Value, Geoff Fripp at the University of
Sydney has some great tools and video tutorials you can see here: http://www.clv-calculator.com/videos-clv
2) Have a Customer Retention Marketing Plan
For most U.S. businesses today, Customer
Retention Marketing continues to take a backseat to new customer acquisition and
typically has a much smaller budget allocation than new customer acquisition.
This is a big mistake because study
after study continue to show that 80% of your businesses’ future revenues will
come from just 20% of your existing customers.
In fact, in his book The Loyalty Effect, Fred
Reichheld states that “a 5% improvement in customer retention rates will yield
between a 25% to 100% increase in profits across a wide range of industries.”
So if you really want to move the needle
on your businesses’ future growth… take the time to uncover the “diamonds in
your own backyard” by giving your existing customers the time and attention
they so richly deserve.
Start a customer loyalty program
with special offers and discounts… institute
a better customer service or complaint process — and most of all, engage with
your existing customers using as many communications channels as possible.
3) Create Customer Experience “Chain Reaction”
Referrals
Lastly, if you want to maximize the
full Customer Lifetime Value of your existing customers, you need to have them
actively advocating for, and promoting, your business by referring you to their
friends and colleagues.
Unfortunately, soliciting referrals
from existing customers is a huge marketing opportunity not being exploited
adequately by most businesses today.
In fact, a study by the Wharton
School of Business found 83% of satisfied customers are willing to refer
products and services to others, but only 29% actually do so… mostly because no
one is asking them to!
Just imagine the impact on your business
if 83% of your existing customers sent you just one new referral and then that
referred customer sent you one referral… and so on… and so on... starting a
Chain Reaction of constant referrals!
So the questions is… how do you get
more referrals from existing customers?
The answer is… you need to make
sure your customers have positive emotional experiences throughout every aspect
of the customer lifecycle “chain of reactions” they have when doing business
with your company — Chain Reactions that start at their first visit to your website,
office or store, and ends when they no longer want or need your product or
service.
If you’d like to learn more about
generating more loyal customers and referrals, check out my latest book Chain Reactions.
Alternatively, you can simply start
by just asking your existing customers. As the Wharton study shows, 8 out of 10
will probably say yes.
So that’s my three tips:
If you're tired of spending money on new customer acquisition
advertising and marketing that just doesn't work anymore... try spending a
little more on your existing customer “Acres of Diamonds” in your own backyard.
You may just find your fortune.
About John
Weisenberger
Author of “What is
Global Marketing for Small Business?” and “Chain Reactions: How Create Massive Customer Loyalty and Profits using
Customer Experience Management”, John Weisenberger is passionate about
sharing his experiences and systems any business can use to immediately improve
their results.
With over 30 years of Fortune 500 and small business
management experience in a variety of industries and global markets, today John
is best known today as the creator of the Chain Reactions Marketing System™
visionary business owners and their managers use to expand their customer base,
increase customer loyalty and drive higher profitability in virtually any
market or industry. Learn more at http://www.JohnWeisenberger.com
