Posted on Apr 14, 2011
The Real Key to More Profits Is Repeat Business
What if you started looking at each of your business or franchise's customers as a real asset? Each bought at a fair price that generated profits for your company over time and, most importantly, repeat business. Wouldn’t you make sure you kept track of what you bought that asset for? Would you make sure that asset gave you a return on your “initial investment”? Would you make sure that asset was maintained and taken care of over the course of its useful life?
Profit is measured in many different ways. Profit per hour, profit per quarter, etc, but how about measuring profit per customer? When you begin measuring your business in this way, you can effectively plan to buy customers. Once you know just how much profit you generate with each customer, you can figure out how much you can spend to get them. Many businesses fall into the trap of paying for advertising or marketing without ever really knowing what they are getting in return.
To paraphrase the famous saying, half of all advertising works, but which half? If you don’t know what part of your advertising works, or if any of it works at all, you have a serious problem. Many franchises opportunities and businesses have failed because they spent money on cool or interesting advertising instead of developing a marketing plan that works.
Start off with your current customer base, or database. For most companies, especially in a service category, the most valuable asset is their customer database. By mining your database, you can build your profitability over the long term simply by creating a low cost system to generate repeat business. Because most customers aren’t profitable until the fifth or sixth purchase, any business’ marketing goal should be to buy the best customers at the lowest possible price who will buy repeatedly over the course of their “lifetime” as a customer. Remember, once you’ve gotten them in your store, you’ve got to keep them coming back.
By viewing your marketing this way, your “customer acquisition” program isn’t really a “new customer” program anymore, is it? Instead, it’s more a “how can we sell more to our current customer base” program, and a “what can we do to keep our customers happy” program. But this strategy pays another dividend, one that involves new customers. The better your service is to your existing customers, the more they will rave about your business to their friends, leading to referrals. As you generate referrals, you won’t have the need to go out and pay for advertising.
Your “word of mouth” marketing will do the trick, but you’ve got to start by valuing your customers as an asset.
Brad Sugars is the Founder, Chairman and President of ActionCOACH, the world’s number one business coaching and executive coaching firm, with more than 1,000 offices in 32 countries. ActionCOACH specializes in coaching small to medium size business as well as executive teams and group coaching. You can follow Brad on Facebook and Twitter.
NEXT POST: Franchise Fridays for April ...