Here at ScaleFactor, we’ve dubbed 2020 as the “Year of the Customer.” We predict that from high-growth startups to established SMBs the world over, the focus of businesses this year will be on finding ways to delight and retain their customers.
The reason? Customers have more choice than ever before. Software solutions and new technology pop up every day, threatening to take the place of traditionally human-led work. Other technology advancements make it easier to work with and hire people who are best suited for the job, regardless of where they’re located. Want to hire a consultant in Belgium to help your Austin-based company? No problem.
With so much choice, it’s incumbent on businesses to give their customers a reason to stick around, and that reason has to be more compelling than convenience. As your business plans for the year ahead, we’ve put together some ideas for how best to keep your customers coming back day after day.
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1.First, Some Math: Calculate Your Customer Acquisition Cost (CAC)
Do you know how much it costs your business to bring in a new customer? If not, it’s time to grab a calculator and do some math. (We’re a finance software—are you surprised we love numbers?)
Here’s the basic formula for customer acquisition costs, or CAC:
CAC = Total Marketing Investment / # of Customers Acquired
How often you calculate this will depend on the volume of customers you bring in. A consultancy that brings in a few new clients every quarter may opt to calculate it quarterly or annually. A high-volume ecommerce site may keep this number on a live dashboard that can be seen 24/7.
No matter how often you calculate it, here’s why it matters: new customers are 5x more expensive to acquire than current customers are to keep.
Not convinced? Here are a few other reasons to pay attention to acquisition costs according to Invespcro:
- Existing customers are easier to sell to. Businesses selling to existing customers have a 60-70% chance of closing the deal—and only a 5-20% chance of closing a deal with a new customer.
- Existing customers have big effects on profits. On average, businesses that increase their customer retention rates by 5% see a boost in profits of 25-95%.
More Math! Calculate Customer Lifetime Value (CLTV)
Long story short: new customers are expensive. Put yourself in the shoes of the consumer, and this makes a lot of sense. Very few people will fork over $300 on new boots after the first Facebook ad they see. Almost no one will hire a consultant after one short phone call.
Customers like to be wooed.
But once you’ve sufficiently wooed them, keeping them happy and loving your company can pay off big time down the road. There’s one more formula that will help you see the long-term value of every customer you manage to attract—customer lifetime value, or CLTV.
CLTV = Purchase Value x Purchase Frequency x Customer Lifespan
If a customer buys a $5 latte from your coffee shop once a week for a year, their lifetime value would be $260 ($5 x 1/week * 52 weeks/year). High-frequency businesses like this are a perfect example of the compounding effect that repeat customers have. Imagine if they liked you so much that they started coming twice a week—that’s a lot more money in your pocket.
Here are some ideas to make that a reality.
2. Do Your Research
A common mistake businesses make is failing to tailor their message to a very specific audience. Business owners think, Everybody needs this product. They look at the total market size and see endless possibilities for sales—and their marketing and messaging efforts reflect that broad, general audience.
Trying to appeal to every person who fits your most basic customer profile will, more likely than not, yield fewer customers than appealing to a smaller subset. Think about it. There is no universally loved book. Or movie. Or business.
While a huge number of Americans may have iPhones, for example, there are plenty of people who fall squarely in Apple’s target market that still opt for Android. There is no satisfying everyone, even if you think that everyone could benefit from what you have to offer.
Instead, focus on the customers that you already have and that you love working with. What kinds of customers are your strongest brand evangelists? Who do you have the fewest complaints from? Who’s willing to give a testimonial?
Here are some ideas to get to know your best customers:
- Send surveys. You’ll never know how your customers really feel unless you ask. Don’t wait for something to break to hear from them—proactively ask for feedback on a regular basis.
- Make phone calls. Maybe this doesn’t work if you have a high-volume coffee shop, but high-touch businesses can benefit from conducting customer surveys and market research by picking up the phone and talking to customers one-on-one. Many customers will feel valued and appreciated and will happily participate.
- Collect data. It’s a lot easier to know which customer types are your most profitable if you have clean data feeding your CRM. Train your sales team to collect important information like customer industry, referral source, and demographic data so that you can analyze it later on. Data isn’t just for the big guys anymore—businesses of all sizes should be using it.
Once you get to know your best customers—like, really get to know them—you’ll be better able to not only continue delighting them but also to attract new customers just like them. What could be better than even more of those customers you love to work with?
3. Deliver, Then Over-Deliver
According to AmEx, 33% of customers will consider switching to another company after one bad customer experience. Some will ring the alarm and tell you they’re upset. Others will simply leave quietly. That coffee shop customer that comes by once a week likely won’t file a complaint or leave a negative review if service is bad—they’ll just stop showing up one day.
The most important and foundational aspect of keeping customers happy is delivering on what you promise. Every single time. No matter what business you’re in, customer service needs to be a top priority if you want to keep customers around—and if you want to have a shot at selling them more in the future.
If you can consistently surprise them by going above and beyond their expectations, even better. You’ll be in a strong position to cross sell and upsell.
Cross Sell & Upsell
There are two key ways to sell more to your existing customers. They are:
- Upselling: Getting your customers to buy more of what they already buy. For example, maybe you convince your coffee customer to order a large instead of a medium drink.
- Cross-selling: Getting your customers to buy other products or services you offer. For example, getting said coffee customer to order a muffin, too.
How you go about cross selling and upselling will vary from business to business, but you’re more likely to be successful at it if you stay in touch with your customers on a regular basis.
4. Marketing Doesn’t Stop at the Sale
There’s the old adage in sales, “Always Be Closing” (or ABC). We think this phrase could use a bit of a refresh. Instead, try adopting this: Always Be Marketing.
After you close a deal with a customer, your competitors will still continue to market to them. So why should you stop? Your existing customers need to be reminded often of the value that you bring them, so resist the urge to focus all your attention on the next new customer.
According to Invespcro, the three most effective ways to market to existing customers are through email, social media, and content.
If you don’t already have a customer newsletter, now might be a good time to start one. Share valuable content and exciting company news through it.
Make it a practice to follow new clients on social media or put incentives in place to get customers to follow you.
Write content for your best customers—the ones you researched and asked for feedback. Keep them in mind as you develop a customer-facing content strategy.
Whatever you do, don’t ignore your customers. Always Be Marketing.
5. Fix More Problems: Introduce New Offerings
One of the best things about getting to know your best customers and staying in touch with them is that they can give you a clear roadmap for how to expand in the future. When you know the problems that your customers experience, you can develop new product or service offerings to help them.
If you run a consulting firm that focuses on talent acquisition, you might consider offering services that deal with rewards or succession planning.
Your customers will tell you what they’re struggling with. Listen for patterns and repeat complaints. Consider expanding your offerings in places where you can add real value. Don’t forget that anything new you offer must also meet—and exceed—their expectations.
Your ultimate guide to SMB accounting
Let’s get those books in order.
6. Referrals & Rewards
Happy customers make the best brand ambassadors. Word-of-mouth marketing is a powerful tool, and it’s one that you should consider for your business. How do you track where your customers heard about you? How do you reward referrals? How do you reward loyalty in general?
If your customers are truly happy, they’ll spread the word about your business whether you offer them an incentive or not. Nevertheless, showing gratitude to your most loyal customers can make them feel valued and can boost their willingness to talk you up.
Here are a few ideas to show your gratitude in a tangible way:
- Offer discounts. Loyalty discounts can not only help retain customers, but it’s also a useful incentive when trying to upsell or cross sell to someone. For example, you might offer all customers who purchased something from you in the last month an exclusive discount on your newest product.
- Offer referral incentives. When a customer refers someone to your business, there are several ways to say thank you, ranging from a discount code, a gift card, or a referral payment.
Not sure what they’ll appreciate most? Try out a few options and analyze what gets the biggest response. Or simply ask them.
7. Share in Your Customers’ Wins
When your customer is successful, that is a huge win for your business, especially if you run a high-touch, customer-centric business. Sharing your customers’ successes not only shows them that you care and want to celebrate alongside them, it also shows new customers what they could be getting from you.
According to recent studies, testimonials have the highest effectiveness rating of content marketing methods at 89%. Put simply, the word of your current customers is the single most effective way to attract new customers. That’s powerful.
If you’ve taken all the steps above, you should have some pretty happy customers on your hands. Don’t forget this critical last step in the process and ask for a testimonial, whether that’s a simple Yelp review or a full-blown case study.
We’ve got a feeling 2020 will be a great year for your business. With these tips in your back pocket, we think it will also be a great year for the customers you serve. Check out our blog for more tips to grow your business this year.