October 2013 Coaches Corner
Are You Neglecting Your Clients?
Are you neglecting your clients?
If the answer is yes, then you, as a small business owner, are shooting yourself in the foot. And I'll get to why in a minute…
If no, then congratulations! You are in the top 10%. Your clients and customers are your biggest advocates and will remain dedicated for life. They look forward to your e-mails, newsletters, and promotions and share them with all of their friends .
In fact, those customers are likely to spend twice as much as new customers will spend, according to McKinsey.
That's more than double the profits for work you've already done!
Now, if you aren't focused on your clients, this newsletter could change your whole business for the better…
When a customer buys your product, do you just send them a basic e-mail with their receipt and access information, and that's it?
If someone calls, do they get an automated response and never talk to a human being?
Do you ever call them back?
Customer and client relationships are one of the most important parts of your business, and the reasons go well beyond the obvious “bottom line.”
But before I get to the nitty gritty, let's take a look at some statistics…
According to the White House Office of Consumer Affairs, a dissatisfied customer will tell between 9-15 people about their bad experience. Around 13% of them will tell more than 20.
Add to this the fact that, “…it takes 12 positive experiences to make up for one unresolved negative experience,” and suddenly you find yourself in a nasty uphill battle.
Pretty ugly, right?
That’s not even the worst part…
“96% of unhappy customers don't complain, however 91% of those will simply leave and never come back,” says 1Financial Training services.
This means that you may not even know that your customers are unhappy.
And what you don't know about your business can and will hurt you. That is why it is important to always be engaged with your customers and clients.
The Most Important Number in Your Business
To help you understand even further the value of good customer and client relations, you need to look at your customer's lifetime value (LTV).
LTV is the net profit you can expect from a customer over his or her “lifetime”, based on the average of your current customers.
Now, as you can imagine, the longer your clients buy from you, the more money you are likely to make.
Bob Bly, expert copywriter and marketer, calculates it as such, “if the average unit of sale is $500, the average number of purchases per year is two, and the average customer remains a customer for five years, the lifetime customer value is $500 x 2 x 5 = $5,000.”
Suddenly that first time purchase is worth a lot more, right?
This formula should dictate every single move you make in your business.
Not only will you understand what your client is really worth, but you will also know exactly how much you can spend on acquiring new clients.
Generally you can spend 1/3 of your average LTV on acquiring a new customer – in this example that's $1,666.66. That number probably seems high for a $500 product, but that's why you always have to think beyond the initial sale.
How Can You Improve Customer Relations?
First and foremost, you absolutely need to add personal touches to your interactions.
When a customer first makes a purchase, be sure to thank them for it and insist that if they need any help at all, you will do anything that you can to assist them.
If you are selling a product, be sure to give them some extra tips and tricks in your e-mails for optimal usage, to show them that you really care about their success and are knowledgeable in your field.
If you're offering a service, perhaps you can teach them how to get the most out of your first session.
After they've had the product or used your service for a while, follow up and ask them how their experience was. If you have a place where they can leave reviews, guide them there to share their experiences. If you don't, have them e-mail you.
Reviews and testimonials are crucial for acquiring new customers and improving your business by improving your retention.
And, yet again, if they provide you with a review or testimonial… thank them. Always be gracious to your customers for anything they do for you – they will appreciate it.
If you are dealing with an unhappy customer, make sure to remain positive and do everything you can to help them through the issue.
The White House Office of Consumer Affair states that, “happy customers who get their issue resolved tell 4-6 people about their experience.”
Don't forget that LTV can dictate how you handle those situations, as well…
Take this situation for example:
You have a customer that bought a $250 course that you put together. After a month with it, they e-mail you to tell you that it didn't work for them and they are very upset about it. You agree to discuss the issue on the phone, and through talking to them, it becomes clear that they are being dishonest and just want their
Realizing this, you might be inclined to get annoyed and argue with them. Or, you could offer them a refund and then a coupon good for 15% off another product or service that you offer.
That may seem expensive up-front, but if your customer’s lifetime value is, say, $3000, then eating around $300 would be worth it, would it not?
And a happy customer will get you more happy customers.
Beyond the Obvious
As we've discussed today, taking these steps can have a dramatic impact on the success of your business.
When you have good client relations and a high LTV, you can start focusing your efforts on improving your products, and offering bigger and better things for your loyal clients to buy.
Think about having a “product ladder”, or several products/services that increase in price, with the first one being free. A ladder of ascension, if you will.
Remember, you can afford to invest $500 on an initial contact if it means you will make $5000 in the long run. But the real kicker?
If you are designing your expert business with an exit strategy in mind (which you should be), knowing your customers' LTV will get you the most money when you decide to sell out and retire.
How great would it be to sell your expert business for millions of dollars someday? Well, this is not a dream. It can be reality for you. And I'm here to help you make that happen.