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 Customers
x
Average Spend (per purchase)
x
Number of Purchases

This formula tells us that there are basically 3 ways to increase Total Revenue:

• get more customers
• increase the amount they spend each time
• increase the number of times each customer purchases or visits

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 arbitrary 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.