Think about the value of a customer for a moment. Customers take money out of their bank accounts and put it into your bank account. Big ticket buyers transfer large sums to fill your account and regular customers put money in your account all the time.
Aside from some interest and similar minor income, customers provide the only money coming in, which allows your business to survive and grow. Customers are really important, probably more so than we realise on a day to day basis. By contrast, new business development may be exciting and command a lot of attention, but does not fill your bank.
Why would a customer transfer money to you? This sounds like an irrational act, cash is crucial to their business. Simplistically there can be only one reason. The goods or services you supplied are, at that time, more valuable to the customer than money in their account.
The moment your offering no longer has the right value to the customer they will stop buying from you and that money will go to competitors.
“Before that happens you should think again about things like quality, stock availability and competitiveness.”
Do you know your exact number of customers?
Do you, or any of your managers know how many customers or clients your business has right now? Not the approximate number, the exact count down to the last one? This is a trickier question than it seems because there may be customers in your debtors list which no longer buy from you, or no longer exist. You may also have some regular customers who only pay cash, so you don’t count them.
Your major, or only source of inflow of funds are your customers, and many entrepreneurs do not even know how many of them they have. That means they could be losing or gaining these providers of money without even being aware of it. How is that for a scary thought?
There is a natural attrition rate of customers so you need to have a continual inflow of new customers to replace those you lose. You also need new customers to grow the business substantially. But be careful of putting all or most of your focus on developing new business.
I see so many businesses that develop expensive and time-consuming new business campaigns which work brilliantly, but the company stays the same size. They are spending large amounts of money and effort bringing in new customers without realising they are losing existing customers just as quickly. This is not a smart strategy.
Preserve your customers
A good start to preserve your customer base is to classify customers by activity. Large regular customers are extremely valuable and should be protected.
Customers who have not bought for a while are worth investigating. Some may still be loyal to you but have put purchases of the things you sell on hold. Some may have an unresolved issue with your company. Others may already have switched to competitors, or gone out of business.
You are likely to find lots of opportunities among the occasional customers — those who buy every couple of months. You may be an alternate source when their prime supplier is out of stock. This is a great prospect to work on and convert into a regular customer.
Develop single purchase customer into lucrative regulars
You are likely to have some customers that only buy a single product from you. It sounds bizarre, but many customers do not buy more from you because they are simply not aware of the rest of your product range, despite catalogues, brochures and all the things you produce to inform them.
Smart sales people can develop this type of customer to become major regulars. Preserving your customer base is vital, and if you classify customers and deal with them as discussed here, you are likely to get well-rewarded for your efforts.
Author: Ed Hatton is the owner of The Marketing Director and has consulted to and mentored SMBs in strategy, marketing and sales for almost 20 years. He co-authored an entrepreneurship textbook and is passionate about helping entrepreneurs to succeed.