Don't work so hard at getting brand new customers, and stop worrying about customers who leave. Do this instead.
In my last column, I showed that failing to connect and cultivate your existing customers is the easiest way to miss out on incremental profits. Deepening your involvement with your current customers, increasing their average spend, and locking them in for the long-term is the real key to building an increasingly valuable business.
I call this strategy “knocking on old doors” because these customers are already in the tent and you’re already touching them. Now you simply have to up the ante and the incentives, and you’ll see some amazing results. This doesn’t have to cost you a dime. It’s usually just a matter of attention and focus.
This is way more productive than wasting time worrying about why customers leave. Of course it hurts to lose any customer, especially when you’re small. But customer defections generally account for only a few percentage points of total revenue. You can more than offset that amount by redirecting the money and energy you spend trying to figure out why customers have left on better engaging with the next higher tier of remaining customers. That’s always a much larger and more valuable population. A small overall improvement in this pool of customers will mean a lot more, economically, than trying to chase a few people who've left.
In one consumer survey I conducted for large banks, we found that more than 55 percent of customer defections were caused by death, job transfers, or other geographic relocations. All the fretting in the world won't keep an account in town if the breadwinner’s new job is halfway across the country.
The happy customers who stay with you boost your business and your profits in a multitude of ways. Here’s how customers increase your profits when you knock on old doors:
You can even charge your happiest customers more for certain types of status and premium offerings, and they will stand in line to pay the tab. They’ll bring their friends, family and co-workers as well.
Constantly migrating your customers up the spending curve needs to be an on-going part of your marketing strategy. This is technically “internal” marketing, and for that reason, unfortunately, it often gets overlooked or pushed aside. But if you want to own your customers for life, great service, careful listening and continual customer maintenance are crucial.
HOWARD A. TULLMAN is the General Managing Partner of G2T3V, LLC – Investors in Disruptive Innovators and of Chicago High Tech Investors. He is the former Chairman and CEO of Tribeca Flashpoint Media Arts Academy. Over the last 40 years, he has founded more than a dozen high-tech companies. @tullman