SMALLBIZCOL/1stjc/mark2nd
PRODUCTION — SEE ME ON THE CHECKLIST BELOW…JOHN
First of a three-part series
In today’s competitive business environment, you probably understand the cost in terms of time, effort and money of attracting customers. But what about the cost of losing customers?
It costs six times more to acquire a new customer than it does to do business with an existing customer. Added to this, regular customers place frequent, consistent orders and therefore cost less to service. They often refer new customers, at no cost to you. They are willing to pay premium prices. They make it harder for your competitors to gain market share.
And how do we appreciate them. McGraw Hill Research explains that a staggering 67 percent of customers who move do so because of indifference or a lack of contact.
Customers want information from the companies they deal with. Customers are more likely to buy from companies that keep in touch. So in business, communication would appear to be everything.
If you make a list of all your existing and potential customers, broken down into categories representing turnover, chances are you’ll end up with a customer base split into four sectors:
– Small numbers of high-volume customers.
– Large numbers of medium-volume customers.
– Even larger numbers of low-volume customers.
– First-time buyers, who may turn into any of the above – or never buy again.
You need to get your prospects and customers into the above system and then move them up through the categories, until they reach high-volume status. Your company needs to become highly customer-oriented and this is only possible if you build a solid base of information about your customers and prospects. A database is fundamental to deliver this.
To approach your prospects, you have an array of media to choose from – from face-to-face appointments, to e-mail to running TV commercials. To determine what is best, you need to evaluate the number of customers and prospects, the quality of your customer data, approaches that your competition is taking, customer preferences on how to be approached, and the cost of the various approaches.
There are no easy answers to what is best. But put yourself in the position of your customer and ask how would I like to be approached. Then test it and see if it works. Learn from what your competition is doing. If they are doing it over and over, it’s probably working for them.
Ogilvy & Mather Direct’s approach to this is called Differential Marketing. Its role is to apportion marketing budgets alongside customer groupings. One tip – you probably shouldn’t spend the most money against your most valuable customers. You will want to spend most money against those customers who have most potential to grow into even more valuable customers.
Use this checklist to evaluate your keep-in-touch efforts with your customers:
We record: Always Usually Occasionally Never
Name and address
of each customer p p p p
All purchases made
by the customer p p p p
All transactions
with the customer p p p p
Customer’s birth date p p p p
Customer’s hobbies p p p p
Customer’s family
details etc. p p p p
We talk to customers on:
Anniversaries p p p p
New products p p p p
Sales or special offers p p p p
Pre-launches p p p p
We ask customers for their views via:
Surveys p p p p
Focus groups p p p p
Once you’ve completed the checklist, you’ll be in a position to draw up a plan of attack:
1. Evaluate the potential value of each customer.
2. Identify how you currently communicate with your customers – by design and default.
3. Assess the message you are currently conveying and modify it as necessary.
4. Identify all other methods and opportunities to communicate.
5. Tailor an approach that is in proportion to the value of that customer.
6. Use the approach.
7. Experiment with different media.
8. Measure the effect.
Mistakes to avoid
There are numerous traps you can fall into when you’re trying to keep in touch with your customers. Here are some of the most common to avoid:
– Don’t begin communications with Dear Customer if you know the name of the customer.
– Don’t respond to an inquiry from a prospect using a pre-designed, impersonal letter.
– Avoid describing product features. Explain customer benefits.
– Avoid newsletters that are too technical. You can’t bore your customers into buying from you. Try to make your messages stand out – make them interesting, informative and noticeable.
– Don’t inundate your customers. If you overkill they will cease to have any impact.
– Don’t communicate with your customers on the cheap. Invest in quality.
Good companies understand that their second sale begins the moment they make their first sale to a customer. And they have a structured program of surveys, customer calls and keep-in-touch letters which leave an excellent impression.
Make your checklist today. Because the key to a solid customer base is appreciating the value of your existing customers – and making sure that they appreciate the value of you.
David Brown is managing director of Ogilvy & Mather Direct, the world’s largest direct marketing firm.
The Small Business column is a regular feature contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact Dan Rabinovitch at (213) 743-2344 with feedback and topic suggestions.
