Four ways to increase customer value
Your existing customers are people that already know, like and trust you. By focusing more effort on increasing their total customer value, i.e. the amount of money that they spend with you, you are virtually guaranteed to increase your profits.
There are four ways to do that:
- Retain them for longer;
- Increase the price of the product or service;
- Increase how often they purchase from you;
- Increase the referrals you get from them.
Let’s look more closely at each option.
1. Retain them for longer
Many soloists offer a service that pays on a recurring basis. Either the customer is on a regular payment plan, or you receive an ongoing commission from the supplier of the service that you sold to the customer.
Clearly then, if you can ensure that your customer remains happy with the service, they are more likely to stay with it.
For those who have “brokered” a service from a third party supplier, the challenge is to remain in contact with your customer after the sale.
Take the example of a mortgage broker. It’s very tempting to just collect the commission from the home loan lender without doing anything. But what happens on the day your customer refinances to another lender and your commission ends?
Having a regular “non-salesy” contact program in place is a good way to ensure your customer can get in touch with you first to explain why they were no longer happy with their current lender (service, interest rate?). This would give you the opportunity to make amends.
2. Increase the price of the product or service
If you are directly providing the service, when was the last time that you increased your prices? Would your customers leave you if you were to raise your prices?
"Remember, once a customer has got used to a certain service, then it is actually a big effort to move suppliers - so putting your prices up may not cause the mass exodus you fear."
Remember, once a customer has got used to a certain service, then it is actually a big effort to move suppliers – so putting your prices up may not cause the mass exodus you fear.
Don’t believe me? Hands up who uses one of the established telecommunications companies even though we all suspect they’re not the cheapest? We just don’t want to go through the pain of moving. I’ve recently been offered 30% off my telephone bill by some “never heard of them” supplier – I don’t think I’ll be taking the risk, thanks!
Want more articles like this? Check out the business relationships section.
3. Increase how often they purchase from you
How can you encourage them to buy from you more often? Do you offer a service that can actually save them money or increase their enjoyment? Think of ways you can package it (e.g. buy one, get the second one for 50% off) to make them buy more, and more often. Can you create a “gold” option of your service, and then up-sell customers to use it?
Also, are there other products and services that you could offer? If you don’t want to become an expert in these additional offerings, can you simply organise to receive a referral fee for passing the lead along?
There are lots of other related services that you can promote. For example a pet minding service could promote pet grooming, vet services, home-delivered pet food, dog training, pet equipment and toys, etc.
4. Increase the referrals you get from them
Selling to a referred prospect is a lot easier than selling to a new prospect. The referral already knows that you do a great job for the person who gave you their name, plus he/she probably already has a need for your product or service.
Brian Tracy, the well-known sales trainer, estimates that a referral is worth up to 15 “cold-call” prospects.
But although we know that referrals are great, we don’t maximise the number we get. This is a whole topic in itself, and one that we’ll return to in another article.
Rather than just focusing on acquiring new customers we should all focus some more time on maximising the value that we can get from our existing customers. Then we can truly be taking advantage of the “Acres of Diamonds“ in our own backyards.