Building revenue through repeat business means identifying and focussing on your best customers, so they'll
come back for more
THE FORMULA FOR REVENUE:
Total Revenue =
Total Number of Customer
x
Average Spend (per purchase)
x
Number of Purchases
This formula tells us that there are basically 3 ways to increase Total Revenue:
Getting repeat business means finding a way to stay on the customer's radar screen, with services
or products they want and need.
One way to get and keep customers is to offer them an exceptional deal to get them in the door, and
then impress the heck out of them with service and value so they're inclined to come back.
This strategy requires not only being excellent at marketing and selling, but also being
excellent at what you do. Most small businesses are good at one or the other, but not both - it's not often
that a really good technician is also really good at selling. So the resource limitations of most businesses mean
that cost-effective and creative ways must be found to fill the skill gaps.
Information Technology
Technology can help, by providing efficient ways to track and deliver product or services, measurement of
activities and results, and by recording and enabling you to proactively manage customer (and prospect)
relationships.
At a simple (and inexpensive) level, this can be done with a combination of accounting
software and using MS Office tools such as Excel. Further up the technology food chain are software suites which
integrate functions from prospecting all the way through to order fulfillment and beyond, and/or interface with
dedicated CRM (Customer Relationship Management) programs.
The best of the dedicated CRM programs are feature-rich, extremely flexible, and easy to use on a
Windows PC platform to contact customers and prospects in every imaginable way, from telephone to email to snail
mail.
Customer Loyalty Strategies
Retaining customer loyalty is a deliberate and genuine process of including them in your business "family",
something which can be practised by all businesses, large and small.
To start this process, have your team brainstorm several ways in which you know a customer can be
dissatisfied. For example, it could be a service issue, or the way the accounts are handled, or a product
fault. Then have your team identify several good things about your product or service which you know
create customer delight.
Once you have this list, go through and estimate the impact of each factor in terms of the numbers
of customers won or lost.
Next, calculate the lifetime value of a customer, which is a calculated estimate
of the total margin earned from an average customer over the time she remains a customer (usually expressed as a
number of years).
"Lifetime", and Attrition Rate
An estimate of the lifetime period of a customer can be determined from the attrition rate, or the rate at which
customers are lost over a period of time.
Or simply answer the question, "how long does the average customer stay a customer?". To answer
this, you will need to make an assumption about what is a customer; for example a current customer may be
defined as one who has purchased from you at any time in the last 90 days. This assumption will vary from business
to business.
The Lifetime Value is the result of the formula:
Number of years a customer
x
Number of purchases made per year
x
Average margin per sale
If you haven't made this calculation before, the result will probably surprise
you, and will definitely put your sales and marketing budget into valuable context. A relatively high
lifetime value gives you more budget flexibility when constructing customer acquisition and retention strategies -
put simply, you can afford to pay more to get (and keep) a customer.
Final steps: go back to your list of customer dissatisfactions and delight
factors, and for each factor multiply the number of customers by the lifetime value. The results are a list of
valuations, which immediately shows what actions would have the biggest impact on Revenue.
Magnify the Effectiveness, By Leveraging the Team
Involving the entire business
team in the development of customer values helps to create ownership, and is a more certain sure way of
getting up improvement strategies, an action list, and securing buy-in on the implementation.
Getting and keeping an improvement action list on track
Attaching a KPI (Key
Performance Indicator) to each improvement factor, and including a measurement of that KPI in regular reports for
all stakeholders to see, embeds the improvement process.
The "glue" which keeps the customer retention action process on track is the monitoring and
reporting over subsequent periods. This lets all stakeholders within your team know how things are tracking in
response to improvement actions, and importantly, keeps them engaged as strategies evolve.
Cash flow and budget models show that the impact of this process on the revenue generated from
customer relationships is very powerful.
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