You cannot view your customers as a single, one-time
transaction. No business can afford to allow a single
customer to stop doing business with you without making an
all-out effort to keep them. What does it cost to get a new
customer and what can you afford to give them to stay with
you?
Could you imagine a restaurant spending their
advertising budget to get a customer through the door and
then having them only eat there one time? Of course not, the
value of a customer is repeat business. Once they arrive,
the main reason you want to dazzle them with superior
service is because you need valuable word of mouth
advertising, which compounds the value of your original
advertising as well as the repeat business. Can your
restaurant afford to spend as much as $100 in advertising to
get each new customer through your doors for a $50 meal? The
only way that would even begin to make sense is if you can
be statistically certain they will continue to come back, at
least twice a month, for the seven-year average they will
probably live in the neighborhood.
The lifetime value of each customer's
business justifies the higher cost of quality advertising.
The intangible multiples of increased business through good
word-of-mouth advertising increase the value of a single
customer. This is true in retail, sales to the public
businesses, as well as business-to-business sales
applications. I am willing to spend a lot more to get a new
customer because I have calculated the lifetime repeat value
of their business.
A basic philosophy in keeping customers for
life is to be able to identify exactly when customers stop
doing business with you. If you can find out why they left,
then you can invent ways to recapture their business
immediately before they form other loyalties. Recently while
watching late night television, I heard that the average
American has an immediate circle of influence of about 250
persons. Truthfully, I don't know where that number came
from, or if it's even valid, but let's pretend for just a
moment that it's an accurate statistic. An angry customer
has the mathematical power to become a nightmare. While
we're still in the pretend mode here, let's also pretend one
of your angry customers has told half of the people they
know about a bad experience they had with your company. Now,
let's imagine those people telling only half of the people
they know about the bad things they'd heard about your
company.
Now, repeating third-hand, embellished
information, those people tell the story to only 10 percent
of the people they know. Congratulations, you've just
potentially blown out 406,376 customers. That could equal
the population of a small country...and now, theoretically,
they all hate you. Of course, that is humorous and
exaggerated but it does hammer home the point. In reality,
any amount of bad word of mouth is devastating, especially
since most of the people who hear it probably live within a
couple of miles of where you do business. One customer
badmouthing your company becomes an infection. The reason
you go to extremes to satisfy them is not only to get their
business back. I would usually be just as happy if they
never came back. The reason I want to go overboard to make
them happy, at any cost, is to shut them up. Great word of
mouth won't always necessarily grow your business but bad
word of mouth will always kill you.
Contact Jim Ziegler at 800.726.0510
|
