Harpoon or net?
It’s one of those timeless questions that endlessly cycles through sales and marketing departments in businesses both large and small. Should we be “hunting” for the big game or broadening our reach and making our offers more accessible to the masses? Price our product higher and spend more time servicing clients, or make our offerings more affordable as a trade-off for less “face-time?”
Good questions. Important questions, sure. But probably the wrong questions to be asking yourself.
At the very least, these are the wrong questions to be asking until the following has been adequately satisfied:
“Have we exhausted every opportunity to reconnect with our current customers? What about our past customers?”
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Way too often these questions are never asked at all, or are given little more than lip-service. After all, the glory goes to the salesperson that lands the next big account, while “cold” accounts usually land on the desks of our customer service reps.
It’s time this list is given the appropriate level of attention, and the people on it, given the appropriate level of respect.
This is especially true for what I consider to possibly be the most overlooked, underappreciated, and best group of people for quickly boosting your bottom line. These are the people who have purchased from you in the past, but have not ordered much (or any at all) since that first order was placed.
When you stand back and evaluate just how much effort (and money) you have most likely allocated to gaining each new customer, and how little is being done to build upon that initial relationship, you will probably feel a little sick to your stomach…as you probably should.
It blows my mind how quickly most businesses will assume that since a customer has placed an order that their job is complete, and that they are now free to turn their eye toward “hunting” for new clients rather than cultivating that hard-earned purchaser into a long standing repeat customer.
But for a moment let’s examine the good that might come from putting down the harpoon and picking up a pitchfork.
Think a little more like a farmer and a little less like a hunter.
Deep down in your business “gut” you know this stuff, yet most are still seduced by the thrill of the hunt. It’s not to say that having a focus on generating new business is somehow a bad idea either. After all, that “killer” sales instinct is probably what has helped you to create your business in the first place. But, it is a bad idea to do so at the detriment of your existing and/or “cold” customer list.
In fact, according to two separate Harvard Business School case studies on Kanthal and Pilgrim Bank:
“Customers vary dramatically in their overall profitability to a company. This variability is even more than the usual 80–20 rule (the common belief that 80% of a ﬁrm’s proﬁts come from the top 20% of the customers). Several companies have found that this variability is better described as a 220–20 rule, i.e., that 20% of the customers provide 220% of the proﬁts.”
Let me emphasize what this study just said because it is so important:
20% of the customers provide 220% of the proﬁts!
I think it can be agreed upon that it’s time to put a customer retention plan in place, or place a bit more emphasis on what you are currently doing for past customers.
Here is one common mistake I see time and again, and an interesting potential solution taking place in the insurance industry:
Problem: Offering first-time customers amazing discounts, while assuming your existing customers simply love you so much that they will not only pay full price, but accept rate increases with a smiles on their faces.
Solution: Show your customers that you do, in fact, appreciate them. Create a program that rewards their loyalty over time either by discounting their price over time.
Example: Some auto insurance companies have taken an interesting angle on this by offering “vanishing deductible” plans. Where existing customers actually see a decrease in their deductible for every month or year they remain a customer and do not have a claim on their policy. Some argue that this discount is accounted for by building additional cost into their regular monthly premium price. But that is a number that a customer can easily compare and weigh against the value created by these insurance companies, by making them feel more appreciated.
Of course discounting your customer’s pricing may not be a viable solution for your business. But how about offering a premium that is not available to new customers? What about picking up the phone and extending a simple thank you without the assumed “oh and one more thing” sales pitch? Don’t let the decision of what to do hold you up from doing something. Remember, there is 220% more sales to be had.
Have you run a successful customer retention/reactivation campaign? How do you make your customers feel loved as part of your everyday operations? Share your findings with our readers below.