Why do many small businesses struggle to make it during their first few years in business? There are many variables
such as insufficient capital, no marketing experience, barriers to entry and so forth. This article will focus on one of the
more important variable and that is the need for repeat customers.
What Business Needs
If you are a small business owner in almost any field of endeavor at the retail level, then obtaining and maintaining loyal followers of great customers is paramount. The real struggle that most small businesses have is the issue of attracting, acquiring and maintaining a sustainable customer base.
We need to address the issue of the importance of repeat customers and why focusing on the quality of value versus the number of customers would be good advice for any entrepreneur. I will first explain this from my own experience in the business.
The Typical Experience!
The average business owner will spend a lot of marketing dollars on obtaining a customer. Once they have the customer
they assume that the customer will be loyal to them and not their competitors. Customers are fickle sometimes and to
assume that they will be a repeat client can be a costly assumption.
It is these assumptions about the customer and the customer’s experience that many businesses fail.
Control Your Costs
The first is probably the most important.
- It is more cost-effective to maintain an existing client than it is to obtain a new client.
- Keeping happy clients will by default bring you additional clients through word of mouth.
In the financial services business, most advisors do not have under management all of the client’s assets. In fact, it is not uncommon for a client to have more than one advisor from more than one firm.
In any retail situation, do clients go to your place of business only? Most do not, but why not?
In any retail situation, are you the product or service provider of choice or number 3 on their list?
Do they think of you when they need your service and do they tell others about your service?
If not, then why not?
It Is A Matter Of Trust
The reason this is because it is a matter of trust. Clients need to trust you before they will allow you to be the advisor of choice in their lives. Customers need to trust that the product or service provider will offer the solution to their needs.
It is only after the acquisition of a new client that the real issue of repeat business comes into play.
- Can the client trust you with their future wealth?
- In the case of any retail business, can the client trust you to bring the product-solution to address their needs and concerns?
Expectations Of Value
So this brings us to the next two points.
- Repeat customers trust you and will bring you more of their business.
- Trust is based on the expectation that you have their best interests in mind at all times.
In the sales business, this expectation of their best interest is always foiled if you have “commission breath.” This is the attitude that any customer, new or repeat can senseon whose interest the next transaction is actually benefitting.
The next issue of the importance of repeat customers is that they will always come back to you if you are able to bring in many times over the value of their financial investment. Why do people go to a place like Starbuck to buy a $.50 cup of coffee?
Because of the ambiance and pleasure of the environment sitting in the coffee shop with friends or even business contacts! I personally have moved hundreds of thousands of dollars from one advisor to my firm of client’s assets as an advisor time after time sitting in a coffee shop. Starbucks brings many times over the value of the expensive cup of coffee.
- This means your product or service has to provide a strong value proposition to maintain repeat customers.
- A strong value proposition will continue to bring in repeat customers.
Top Of The Mind
So in my time in business, I fully understood that I always had to market to new and repeat clients. Even Pepsi, McDonalds or any other retailer is constantly advertising. One would think the entire world has heard of these companies.
Why do they need to advertise? It is because one needs to have what is known as the top of mind marketing.
- Repeat customers will think of your business as a top of the mind proposition.
- Keep in contact with your repeat customers to add the value of your business for them
This means that when people have a need that your business will solve, do they think about you first? We would hope so.
So in the financial advising arena, rest assured that all life events create a financial need or issue. A life event is something like a marriage, a divorce, a newborn, a death in the family, a new home purchase, an upcoming lifetime vacation, a broken washer, furnace or vehicle. The list goes on and on.
- Life events create a need for your product or solution
- Be available to offer the solution
A solid base of repeat customers will make you their solution of choice in their time of crisis or event planning.
Let’s get real on this point. Most, if not all careers can be boiled down to two words and these words are “repair job”.
Real people have real problems or needs and every career is there to fill it as a “repair job”.
This does not matter if you are doing financial services, online marketing or even brick and mortar retail business, or an open heart surgeon,the life cycle of successful profit for the business owner is basically the same.
- Provide the “repair job for the life event need”.
Are you at the top of the client or customer’s mind when it comes to solving a need or problem or a life event?
Three Universal Truths
There are a few major retailers that fit the department store genre. In the USA they are Target, Walmart, Meijer’s and others nationally. Some of these offer food and grocery and compete with that industry as well. For myself, there are only a few retail stores of all the markets in this area I go to consistently for my needs.
The reason is product solution (they have what I am looking for) and value (good prices for what I am looking for) and customer service (they treat me like I am special).
So what would a client or customer look for in giving you their business time after time after time? They will look for everything I stated hereof plus:
- Product solution
- Value for the price paid
- Customer service.
Of these three, repeat customers will actually be willing to pay more for high-quality customer service.
If your clients think you value them, treat them fairly and focus on them and not your competition, they will become repeat customers. I know this from my own experience in business as a product provider and as a consuming customer as well.
The lowest price does not guarantee a repeat customer. I call this the principle of the “O-ring”.
In 1986 the space shuttle tragically burst into flames in midair during its ascent. Among those were a civilian teacher and professional astronauts. Without going into detail this catastrophe was caused by a low-bidder on a government contract that provided defective O-rings to a certain part of the shuttle design.
This caused a serious setback in public opinion on the space shuttle program and I am sure created a huge problem with the government procurement office and the vender itself. Had the government not used cheapest price only as the main criteria, we would not have had this disaster.
So understand that repeat customers are not looking for the cheapest price on any product or service.
Clients and customers are looking for the greatest value at the finest price for a product or solution that will best solve their needs and from a provider who puts the customer’s interests as paramount.
This is the basis of free-market capitalism and proves that capitalism is the best system in helping people and that the profit motive is just one of the reasons to be in business. In fact, if profit is the only motive, in my opinion, bankruptcy or business dissolution will be your future.
Lifetime Value Of A Client (Customer)
So what is the lifetime value of a single repeat customer to your business? There are many ways to calculate this from complex to somewhat easy. I have attached a link here as an easy way to calculate customer lifetime value.[i]
Part of the calculations is the cost to acquire the customer in the first place.
If you do not have a steady flow of repeat customers, then your business costs will go up and your profit margins go down. It is that simple.
Here is a simple formula:
Customer revenue minus the costs of acquiring and serving the customer = CLV[ii]
Repeat customers simply cost less than acquiring new customers. It is in your business’s best interest to work on achieving a large pool of repeat customers. In this article, I have given you at least 15 bullet points and concepts to think about in your business. Employ them.