Marketing is about getting more business – and that includes getting more value out of your existing customer base – through delivering them multiple times the value you get.
If all you did was chase new clients, then you would be regularly losing the ones you already have, which means you would need to be constantly building. This is hard work.
There is an important model that will help you understand what to do in terms of sales and marketing for your existing customers, and it is one that every business owner should know and understand.
Later in this article I will explain this model for getting the most out of your existing customer base using the “4 Rs”. First, however, there are two customer terms that need to be defined:
In the context of your existing customers, this means that the customer is bringing you high value. This is the absolute gross profit from that customer, not to be confused with the margin. This takes into account the volume of sales as well.
So a high profit customer could be one that buys low margin products, but buys enough of them that they become high profit. Equally, a low profit customer may buy high margin products but buys so infrequently that they cannot be categorised as profitable.
This is very dependant on the business. Generally, it means that the customer has made contact with you, or otherwise engaged with you, within a set period of time. That period of time will vary according to how long a customer can go without interacting in your business and still be considered engaged. This could be within the quarter, six months, or even a year.
So with these two factors in mind, let us explore the 4Rs that you have to think about when segmenting your customers and marketing to them:
1. High Profit, Active Clients – Retention
Your clients who are bringing you high profit and are active will be your perfect, superstar clients. Generally, by the 80/20 rule, these will be the 20% of customers that give you 80% of your business. You need to keep these ones.
You need to be thinking about retaining them. You do not want to let them drop off and become inactive, or stop being profitable.
That is an important point: attrition does not just occur when a customer stops communicating. It can also happen when they continue being engaged but they start buying lower margin products – or not buying products at all. You must keep an eye out for that as well.
Think personal gifts, loyalty programs, rebate points, special deals and freebies. These should be designed not only to keep them engaged, but also to highlight the higher margin products so as to prevent them dropping into a lower profit category.
You want to ask yourself, “How do I make my customers stay with me? And actually spend more? And have a win-win scenario – they get something and I get something in return.”
The beauty of asking people for help is that most people like to oblige. If you ask for it, and your approach is genuine, you will usually find it.I am not suggesting that you ask everyone for referrals; it is important to have a process in place to decide how, who and when to ask for referrals.
This means taking the 15-20% that give you 80% of your business and really making them feel special. Create a community for them and build a real, genuine relationship with them and not just a transactional one. This is what customers stick around for and how you create raving fans.
This may involve customer-only invites to special events and experiences, for example. It may cost you some money but the point here is not just about increasing revenue – it is also about having fun. This is where you get to start enjoying your business and building relationships with people, not just ‘customers’.
At the end of the day, you are dealing with humans here, and if you really care for your customers, then have some fun with them and give them something more than just your services.
2. High Profit, Inactive Clients – Reactivation
Apart from retention, reactivation is the other area to focus on when it comes to marketing to your existing clients.
These are for the customers who may have once been purchasing at a profitable level, but have started to communicate less with you. This may be a result of your own inaction or could even be because you made a mistake with them along the way. Alternatively, it could be that a competitor has drawn them in, or that they just do not require your services anymore. You need to find out.
You are just reaching out to them – not necessarily selling anything. You are competing for mind share, which equates to wallet share (them spending with you), which equates to market share. You just want to remind them that you exist, and keep your brand front and centre in their thoughts.
Collate the addresses of those you want to reactivate and prepare three emails to go out to them. Three is important as there will be many people who do not see your emails, or are too busy to interact on the first email.These emails should be short, punchy and straightforward, offering real value to them when they re-engage with you.
Even if only 10% open your email and only 2% actually take action – it doesn’t matter. The point is to be appearing in their inbox, and being associated with valuable content. So even if they ignore you now, when their need does arise, you will be the first one they think of.
While emails are still proving effective in reactivating clients, taking a step to follow up with a phone call could double your reactivation rate. These were high value customers once, so this is not cold calling and this is not pitching your services. This is a customer care call.
Be prepared before you call them. Have a script and have a collection of offers or reasons why you are calling. Having an upcoming event to extend a free invitation to is a great reason and a great reactivation funnel – the event could lead to further direct sales.
Find out if something has gone wrong
When you start reaching out to reactivate clients, it will be inevitable that you will face some of your old clients who have been turned off from you for whatever reason. However, it is still very important for you to continue with the follow up and find this out for sure – on the chance that you can rectify the problem.
You may end up with an answer of, “Stop contacting me, I don’t want to work with you.” However, if you have reached out genuinely to try and offer the best value you can, you can know that you did everything you could.
Do not just assume it is a no; remember that if you truly believe in your product or service, then sales is an education process, and not reaching out is doing a disservice to your customers. Put your own pride and ego aside, and do what is best for them.
3. Low Profit, Active Clients – Reconditioning
These are what I call your Comfort Zone clients. They do business with you so you feel good about doing work, but they are not, in fact, providing real value to your business. You may be afraid to touch them in case they stop buying from you altogether, but the truth is there is more that you can do.
You need to go in with a focus on reconditioning the situation. That is, conditions needs to change so that the customer is getting more value and is giving you more value so that they can become more profitable to you through a win-win scenario.
You need to figure out what is the main reason why your customers are not profitable to you, and let that inform your tactic. You need to ask yourself, “What is the lever I need to move here?”
Change the product mix
You may want to consider creating cross-selling or upselling opportunities. Or maybe you need to remove some of your lower margin products in favour of combined, higher margin products.Either way, this is about changing your product options so that it becomes more valuable to both you and the customer.
Increase your prices
There is a lot of fear around changing prices, but as long as you position it correctly – as a price change (not increase), and as an informative update rather than an ‘apology’ – your customers will gladly accept it.
It is expected from a business that is doing well to increase prices as not only value increase, but also costs and demand fluctuates. You should be highlighting to your customer that your price change also comes with increase in value for them too. After all, most customers are more interested in value than the cheapest price.
Negotiate with suppliers to bring the price down
By doing this, your customer does not have to undergo any change, but you can still increase the value they are giving you.
4. Low Profit, Inactive Clients – Reach
This is where you should not be placing a big emphasis, but you should have some sort of strategy in place. That’s because these customers were never extremely valuable to you, and they are not even engaged at the moment – but there is the off chance they may become more valuable in the future.
You want to reach out with minimal effort. You want to use as much leverage as possible and consume as little time as possible with these strategies. I cannot over-emphasise that this should not come close to becoming a main concern – these strategies are just add-ons to the bigger strategies of retention and reactivation.
Automated follow up
You want to have some emails that automatically go out to probe interest. They should be written such that you do not have to edit them very regularly. They should not contain a hard sell, but should be designed to elicit a response.
These could be your regular blog posts or newsletters: if these customers are ready to ascend, they will do so from their own need rather than you making a concerted effort to activate them. Meanwhile, you are regularly showing them you are of value, until they do have that need.
Once you can clearly place your customers into these categories, I guarantee you that you will be far better positioned for stability and smart growth.
The final piece is using a Customer Relationship Management (CRM) tool. Even if it just an Excel spreadsheet (or a more advanced system like Zoho or Ontraport), it is valuable to be able to have all your customers names, emails and phone numbers in one place.
This will allow you to do regular analysis and segment your contacts for effective outreach so you can really start to harness the power of your existing customers
About the author
This guide has been written for ByteStart by Shweta Jhajharia, Principal Coach and founder of The London Coaching Group. Despite a competitive economy, her clients across sectors consistently achieve measurable double digit growth (over 41%) and are the most awarded client base in UK. Other articles by Shweta include;
- 4 Steps to building your business by hiring ‘ugly ducklings’
- The 3 issues you’ll need to overcome if you want your start-up to reach £1m turnover
- How winning an award can get your business noticed, PLUS 5 ways to reap your prize’s full potential
- How to turn your customers into your best sales force
More help on promoting your business
You can find lots more help and ideas on cost-effectively promoting your business in these other ByteStart guides;
- Making your business a success online – A Digital marketing guide for small business owners
- How to create business cards that make a big impression
- How to plan and implement a successful email marketing campaign
- A Practical guide to Content Marketing for small business owners and start-ups
- 7 Brilliant branding tips for start-ups
And these will help you to succeed with your online and social media efforts;
- 10 Top tips for small businesses starting out with social media
- Tweets that get you followed and your business noticed – How to build a loyal following, 140 characters at a time
- 5 ways to maximise your business with social media
- How to use Facebook to grow your small business
- Marketing your small business through YouTube – The 4 essential steps to success