from “The Bob Pritchard Radio Show”
But, right now let’s talk about a few of the challenges facing small business today. I’m sure a lot of you can relate to some of these issues. One question that keeps coming up is “How do I get and retain customers?” This is often raised in relation to the increasing difficulty in getting results from advertising.
When it comes to attracting and retaining customers, two things are important to realize. Firstly it is very expensive to attract a new customer. Advertising is expensive and unless you really know what you are doing, it is highly inefficient. History has proven that it is between 15 and 50 times more expensive to get a new customer than it is to retain an existing one.
Secondly, research shows that 62% of customers across all sorts of industries do not repurchase from the same company they bought from last time. So 6 out of 10 people that come into your store or business got what they were after and received acceptable service, never came back. Most business people do not understand the importance of these facts.
Most businesses have a budget for advertising but very few have a budget for customer retention, yet it is 15 times more expensive to get a new client than retain an old one. If you put just 50% of the money you invest in advertising into customer retention, you would make a fortune. Why? Because existing customers cost next to nothing to get in the door, their average spend is higher, they do not have to be enticed with discounts, your return on investment is significantly increased and you save a lot of money on advertising.
Businesses who are successful today do not satisfy customers, because satisfying customers does not build your business, it is a recipe for going out of business. Today, you have to knock the customer’s socks off.
They need to conclude the transaction with you and say “WOW” that was a great experience. There are a lot of ways to do this, but you really have to “think” about it. Too many people today are spending all their time working in their business and not on their business.
So, going back to the original question, “how do I get and retain customers” it is really easy….. focus firstly on retaining existing customers, not attracting new ones.
The second question I hear a lot is along the lines of “I’m great at what I do, but not so great at bookwork, creating the right structure to save taxes and I really don’t know what I’m doing when it comes to marketing. I design my own advertising but it doesn’t seem to work and the list goes on.
But I’m too small, or I can’t affort to get experienced advisors, or hire an advertising agency. These are major problems because the reality is that while having a great product or service is important, running the business sucessfully is much more important.
The world is full of great products and service companies that have gone out of business because they didn’t run the business well or didn’t market their business well. There are also millions of businesses out there that have ordinary, even lousy products but run a great business with great advertising and are very profitable.
Excellent advisors are more important than a great product, but select your advisors carefully. A lot of people become consultants because they are hopeless at running a business, so check out their credentials before you hire them. The good ones might cost twice as much and that might appear to be important initially, but the good ones produce great results.
There is also no need to spend a fortune on consultants. I work with some of the best in the world in a business called Marketforce One Business Strategies where for just $2000 per month you can get advice by skype on any aspect of your business any time you want it. And you can do it for just one month if you like. If you would like more information just send me an email at firstname.lastname@example.org and I will be pleased to get back to you.
Another comment I hear regularly is that it is hard in business right now because of the state of the economy. What bullshit is that? The economy overall my be sluggish but this week there is a trillion dollars circulating around in America. How much do you want? Forget about the overall economy. If you sell widgets and you need to sell 100 a month to make a good profit, that’s three a day. If there was 100 people buying 100 widgets each before the downturn, there is still 80 eople buying 80 widgets each after the downturn. Just focus on them. There is still a huge amount of business being done every single day. You might have to look little harder, you may have to work a little smarter, but the business is out there. If you cut your staff, cut your marketing and play it safe, I can guarantee you will go out of business.
Now is the time to get out there, get amongst it. There are more millionaires made during recessions than at any other time.
It is the time for you to use expertise, and use creativity to take advantage of the vacuume created by companies who cut back and play it safe. Also be careful about playing into the “times are tough, I need to discount to get sales’ trap. A recent Citibank study showed that 70% of all companies that began discounting, went out of business within 12 months.
If you cost of goods is $50.00 and you sell your goods for $100.00 many businesses think their profit is $50.00. But….. it could be costing you $20.00 for rent and overheads, taxes, staff holidays etc. So….. if you offer a 25% discount, you are not still making $25.00, you are actually losing $5.00 on every sale. Before you start discounting, ensure that you understand the cost of running your business and of each item, including the cost of holding inventory, credit card costs and so on. This is why many businesses need outside expertise.
Finally before I get to my first guest, I would like to talk with you about the need for mentors. All of the really clever people I know have people around them that they ask for advice. Successful people like to help other people become successful.