When is a Customer Not a Customer?

Posted by:

When is a customer not a customer?

So they have purchased your product or service and there haven’t been any complaints so another satisfied customer…..WRONG!!! A customer is “a person with whom one has dealings”. It is derived from the word custom (habit, usage, way, practice, tradition, familiarity – take your pick they are all good!!). The word “dealings” is important in this context as it implies multiple transactions.

So if they not a customer what are they? In ActionCOACH we call them shoppers because they have just bought from you once. Your challenge as a business owner is to turn Shoppers into Customers as it’s a fast track to accelerating your bottom line. One of my clients has done a bit of research into their transaction history and found that nearly 70% of their transactions are Shoppers. Woohoo – what an opportunity to grow their bottom line using people they already have a relationship with. It really doesn’t get any better than this.

So how can you do this? Well, another client of mine has a restaurant and shared the concept of the “bounce back” with me in the last group coaching session. In the restaurant trade the bounce back is an offer given to a diner on their first visit with the intention of getting them back into the restaurant again (e.g. 20% off their next meal or a free bottle of wine). So the killer question is what is your bounce back strategy for Shoppers who have bought from your business?

Here’s a few ideas to get you going:

  • What additional products or services can you sell the shopper so that you keep the relationship going (and don’t think this doesn’t relate to you if you’re selling a service – it does!)?
  • What follow up process do you have after you have sold them something?
  • What offers can you position to keep them with you rather than watch as an opportunity for a beautiful relationship drifts off into the arms of your competitors?
  • What will you do to keep in touch?

How much are you prepared to invest to gain a lifetime customer?

I was lucky enough to spend six years in the mobile phone industry where the cost of acquiring customers was a number we kept under very tight observation. After taking away the cost of the handset (which we have to pay for), dealer commission and termination charges (what is paid over to other operators for using their networks), the amount of gross profit per customer on a £30 a month contract was around £8 per month. Whilst this industry is an extreme example of acquisition cost it raises a couple of interesting thoughts.

Have you ever calculated the lifetime value of a customer to your business? Not just the value of the last transaction they had but how much profit they will deliver over their lifetime of dealing with your business? Once you understand this number you are in a powerful place to understand how much you are prepared to invest in sales and marketing strategies to get more customers.

If I was to offer you £1,000 worth of profit for £500 in cash how many times would you give me £500? I am guessing you would be off to the bank, smashing the piggy open and anything else you needed to do to maximise the money you could give me. This is the essence of using your acquisition cost calculation and once you understand it you can take your business to the level where you really want it to be, provided:

Your service delivery is good enough to keep the customers that you win. If you suck at service your lifetime value will be lower and your business will be less profitable (your marketing machine will have to be working at full bore all the time)

You test and measure your sales and marketing strategies and you invest in the ones that work and dump the ones that don’t.