“Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight.” Henry R. Luce
A business grows or produces more income and profit in only two ways. The most common way is to do what you do for a greater number of customers. Then there is doing more for the customers you already have. The misconception that watching expenses is a way to grow confuses many business operators. What that does is preserve profit not increase it. You can’t save your way to prosperity. But you can realize greater growth by using the time and money you have effectively.
Virtually all businesses have a certain level of attrition or a loss of existing customers. This is the most damaging, most costly event in most businesses, and our business is not immune. According to the Gartner Group research, 80 percent of your future profits will come from just 20 percent of your existing customers. A Bain & Company study (in conjunction with Harvard Business School) found that a 5 percent increase in retention increased profits by 25 percent to 95 percent. The results show a wide spread mostly due to the overall size of the business, but even at the low end, the ability of a business to grow is tied to retention.
Some attrition is unavoidable. Customers go out of business, contacts leave or financial problems interfere. Replacing a lost customer is necessary for growth, but not as important as retention! According to Marketing Metrics, a current customer is 66 percent to 92 percent more likely to give you an order than a new customer. Even when you are successful getting business from a new customer, studies show that repeat customers spend 33 percent more. The faster you turn a new customer into a repeat customer the faster your business will grow.
This is where marketing matters! By letting your marketing handle the heavy lifting of acquisition, you can focus on retention, on being more than your customers expect. I am a big believer in face to face customer contact at least once in awhile. That does take time but the return in profit and growth is worth it. The preponderance of studies as well as actual experience of business owners show that the majority of your time and resources should go to retention to grow a business. But without replacing the customers that are impossible to keep, your business can’t thrive.
Marketing to the rescue. Use our media! Be as creative for yourself as you are for your customers. Get your name and a compelling message on a great item and hire a kid to drop one off at every office in an office complex. The investment in money is very low and your time even lower! Let someone else handle your networking at trade shows and business events so you can give attention to your existing customers.
There is another benefit from structuring your business with the focus on retention. It can actually cause new business to find you. To reference one additional study, a satisfied customer will mention you and your business to nine other people and talk about the positive experience. A dissatisfied customer will share the negative experience with 22 people! This is perhaps the most compelling example why retention is so important. Every existing customer is a spokesperson for your business but a customer that is dissatisfied and takes their business away can cause serious damage.
At this point, assuming that all the quoted studies and the indisputable logic of all this has hit home, you are likely wondering what the best way to retain customers is. Is it social media? What about discount coupons? Maybe a loyalty program with gifts! The truth is that there is no one answer as every business had a unique personality and customer base. There are however two things that seem to matter to customers more than everything else. First is results. That is the combination of choosing a great promotional item imprinted with an appropriate message, delivered to the proper audience and achieving the objective of your customer. The second thing is wonderful customer service. If these two things are constantly what you provide, loyalty programs won’t be necessary.
The quote from Henry Luce (journalist, publisher of Time and Life magazines) talks about “instinctive exercise in foresight” which suggests that by being actively involved with your business, the current ebb and flow of orders, conversations, referrals, problems and successes, your will be able to make good guesses on the future. You will know when it is time to add an employee, do your next marketing promotion and call your best customers just to compliment them on their latest achievements. You will take the opportunity of a satisfied customer to ask for a referral.
And one final thought, the toughest thing a business person has to deal with is rejection. Providing stunning service to existing customers is completely devoid of any rejection. Your energy levels should increase right along with your profits.
Gregg Emmer is chief marketing officer and vice president at Kaeser & Blair, Inc. He has more than 40 years experience in marketing and the promotional specialty advertising industry. His outside consultancy provides marketing, public relations and business planning consulting to a wide range of other businesses has been a useful knowledge base for K&B Dealers. Contact Gregg at gemmer@kaeser-blair.com.