Do you know what the most profitable skill is for running a small business?
It’s not keeping the shelves stocked. It’s not managing employees. It’s’ not even having a good product.
No. The most important skill is marketing your business. Why? Well, the only time you can bring money into your business is if you sell something. You can’t stock the shelves unless you have money to buy the stuff to put on the shelves.
And you can’t pay your employees unless you have money come in the business from selling stuff. And a good product might as well be a piece of junk in a box if nobody knows it exists.
That’s where marketing comes in to place. It’s how your communicate to the public that you have a good product. That you offer a good consumer experience.
That they should buy stuff from you, and not one of your competitors.
Marketing is also the most misunderstood skill on the planet. Which is perhaps why 65% of new businesses close their doors after 2 years, and over 85% of businesses don’t make it 8 years before going under.
Since most of your competition doesn’t understand how to do marketing properly, to bring in amazing results in little to no time, just knowing a few simple things will put you at a huge advantage.
In the land of the blind, the person with one eye is KING!
I’m going to give you the three most powerful – and profitable – marketing strategies for you to become the king in your area in as quickly as 90 days or less.
You have right now, in your hands, information that could change your life forever. Use it and profit from it.
Mistake #1: Going After New Customers
Yes, you read that right. New customers are the most expensive people in the world to find, attract into your place of business, and then convert into customers.
To help you understand this, let me demonstrate to you a powerful fact.
There are only 3 ways to increase your profits. The first way is to increase your number of customers. If Timmy has a lemonade stand and sells 100 cups a day to 100 people and makes $0.10 a cup for a total of $10 a day in profit… If Timmy figures out a way to get 200 people to buy a cup he’s just doubled his profits.
But that’s not the only way Timmy can double his profit. What if, instead, he figures out a way for his customers to purchase two cups of lemonade each? Then, with the same number of customers, he can double his profits.
Or, what if Timmy also offers something complimentary to the lemonade… such as a hot dog? Then, if a certain percentage ALSO buy a hot dog when he sells them lemonade, he can double his business.
Quick review of the three ways to grow your profits:
More customers
Same customers purchase more stuff
Same customers making more frequent purchases
Of the three, which is the most profitable? Well, let’s look at it like this. Let’s say you spend $2,500 a year on a yellow page ad, and it brings you in 100 prospective customers.
You have paid $25 for each person that has come into your store who might purchase from you. That is a static cost. You pay that $25 if they buy nothing from you, or everything in the store.
So what if you could increase the average transaction value of each customer by just $10? What did it cost you? Usually, nothing but a few minutes of creative thought. You already paid $25 to get them in the store… so you might as well maximize their value.
In Timmy’s case, he “cross-sold” them on a hot dog. It’s just a matter of creatively packing complimentary goods and using the right language to get the most amount of people to say yes to buying something in addition to what they originally came into the store to purchase.
McDonald’s simply asks: “Do you want fries with that?” Extra cost for McDonald’s to do that: 2 seconds of training for the employee, and 2 seconds for the employee to say it to each customer.
The result: an overall bump of about $0.08 in profit per customer. And when you have “over 1 billion served”, that’s a lot of profit!
So rule number 1: spend more of your advertising budget and time on figuring out how to get customers who have purchased from you in the past, or your new prospects, to PURCHASE MORE from you.
Often times the last thing you need is more customers. Whatever problems you currently have in your business usually multiple when you bring in more customers into the funnel. Instead, figure out how to get MORE from the same amount of customers.
Which leads to rule number 2: Figure out how to get past customers to make more frequent purchases from you!
Here’s everything required in order to make your marketing work.
They have to KNOW you exist
They have to want and be able to afford what you offer
They have to trust you
See, new customers first need to hear about you. But that’s not enough. They also have to be in the market for what you offer. It’s hard to sell ice cream to Eskimos. Finally, they have to trust you enough to exchange their hard earned dollars for the value you promise to deliver to them.
Past customers, on the other hand, already know you exist, already have demonstrated they need at least some of what you offer, and at least at one point in their life they trusted you enough to exchange their dollars for the value you promised them.
All else being equal, who do you think is going to be more inclined to say yes to your next offer? A stranger, or someone who knows you and is likely to be comfortable dealing with you again?
I think the answer is obvious. Before we go into how to get past customers to increase the frequency from which they purchase from you, let’s first deal with increasing the average purchasing size of each customer.
Mistake #2: Not effectively using cross-sells, up sells or “package” selling
We already discussed “cross sells” with the “do you want fries with that?” example. So what’s this mean for your business? The first thing you need to do is implement your own cross-sells.
Here’s a simple way to do that. Look at your 5 to 7 most popular sellers in your business. Each one of them should have a cross-sell. In flooring, if they buy carpeting, you should also make a special offer for them to buy “spot remover” with their carpeting.
You can even give them a special “purchase discount” because you don’t need as high of margins since you have already PAID (in marketing and advertising) to attract them to come in the door and purchase from you.
So isolate your five biggest sellers, and find other items that you can offer with them that compliment the main purchase, just like fries compliment a cheese burger.
Then, just create a quick script to use and to train your employees to use. It could be something as simple as “Would you be interested in receiving a special 60% purchaser discount on spot remover to compliment your flooring purchase today?”
Anything is better than nothing. Based on tests, even a weak attempt at a cross-sell works 6%-20% of the time, and the point being is that it has almost no hard cost at all to implement, so why not do it?
The second thing is the up sell. This is where you try to offer them a more premium version of what they are ready to purchase. Let’s return to the flooring example. There are different pads you can put under your carpet. There is the basic pad, often made of several different materials that are bonded together, thus making it cheaper to sell to the client. Then there is “prime” pad, which is solid, more durable, makes the the flooring last longer, but is more expensive.
In this case, when putting together an offer for the customer, you’d want to say something like “Would you like to invest a little bit more to make this carpet last 6 years longer – and feel more comfortable under your foot?”
Then, you simply explain why buying the upgraded version of the padding is a better option for them.
Now think about it – if your mark up is the same for both paddings, then you’ll make more money. Example: let’s say you make 50% profit on each pad you sell. If a customer needs 100 square yards of rebond pad, and that sells for $4.50 per square yard, then you just sold $450 of materials, of which $225 is profit to you.
But what if you could’ve bumped them up to the premium pad that sells for $7.50 per square yard. Now that’s $750 in material sold, of which $375 is profit to you.
That’s an increase of $150 for just a few minutes of sales work. Again, all you have to do is come up with a simple script, and a simple way to demonstrate why the little bit of extra cost involved for the customer is worth the investment, in terms of what they’re going to get for that little extra bit of cost.
So how can you make this work for you? Go back to those 5-7 popular products and simply ask yourself — “Is there an upgraded and/or premium version of this that I can offer to my customer?”
There always is. And often times, you can make a premium version without hardly any more hard cost, if you focus on intangibles. Let me give you an example.
Let’s say you own a high-end restaurant. One premium version you can offer to your clients is the “immediate seating” club. For a small fee each year, these customers can guarantee that they get seated as soon as they enter the restaurant.
In this case, you’re selling time and convenience, not a product. That has a lot of value in this day in age.
Or you could even create a special area for preferred customers that has a much more luxurious feel to it, to make them enjoy the atmosphere more. Again, you’re selling luxury, not a product… another intangible.
The final thing you should consider using is “packaged selling”. Most people prefer to have someone else make the decision for them, so they don’t have any responsibility in the matter.
Let’s return to the flooring example. Why not create an “active lifestyle package”. These are for people with lots of children, maybe pets as well, or who have high traffic homes.
For them, you can preselect the carpet, padding, vinyl and tile options, and then sell it as a package, instead of each component on it’s own. This allows you to already INCLUDE the premium versions, or the stuff that has the highest profit margins.
And they are more likely to say yes, if you do it right, since it’s easier FOR them to say yes.
Then, the next logical step is to upsell them to an even more deluxe package. Ha! In this case it could be the “active but luxurious life style package”.
Let’s go back to our restaurant example. Let’s design the “Romance Package”. In this case, you get a limo to come pick you up outside your door, you get a special table near the fire place that is more secluded, you get a vase filled with beautiful flowers that you get to take home and keep (including the vase), and you get a special “lover’s dessert” for you and your lucky one to share.
You’re no longer in the restaurant business… you’re in the romance business… and you can charge a lot more for that!
At the very least, you need to create one “package” that you can offer to a certain portion of your clients who come in and visit you. Make it much higher priced and more luxurious than normal so that if even only a handful of customers say yes to it each year, you’ll have made a pretty good extra bit of profits without doing hardly anymore work.
(Did you know that, on average, 20% of your customers bring in 80% of your profits? I specialize in created “high end package” offers that specifically cater to those 20% of customers who bring in your 80% profits. If you’re interested in finding out more about this, contact me.)
Mistake #3: Not Understanding the Lifetime Value of a Customer
If you knew the potential life time value of even an average customer, you’d spend far more time making sure existing customers continued to use your services, and far less time trying to get new customers.
Let me give you an example. Let’s say Lucy is 45 and spends $100 a week at her preferred grocery store. Lucy doesn’t plan on moving any time soon, and has at least 15 more years of good shopping left in her.
So let’s see, 15 years is 780 weeks. And at an average of $100 a week, that’s $78,000. If you owned that grocery store, don’t you think it’d be prudent to come up with a strategy to make sure Lucy keeps coming back to you?
Now get this. A famous study done 20 years ago, that was recently just re-tested and re-confirmed, found out what causes people to quit going to a store or a service provider. Here were the results.
9% Leave because of competition
OK, so someone else might come along offering them a better deal, or better service. Or perhaps they have a location that’s closer than yours. It sucks, but it’s part of the game. But the instructive thing is you only lose 9% of your customers because of this.
9% Leave because they move
It’s hard to get someone to come back to your store if they move halfway across the country. It’s just the nature of the beast. Some will go because we are nomadic creatures.
14% leave because of a complaint or dissatisfaction with service or product
Okay, this can be worked on a bit, but one thing I’ve learned in business is you can’t please everybody, nor do you want to. And anyway, it’s not that big of deal, because there is something FAR, FAR greater that causes your customers to go somewhere else.
It is greater than all these other factors combined. Here it is:
68% leave because of perceived apathy of the service provider
In other words, they feel you only look at that as a customer to get money from, and that you don’t care about them. Notice the word perceived. You might very well care about them. But if you don’t show them you care about them in a way that’s unique and that isn’t something that everyone else does, then there is no reason for them to remain loyal to you.
So if you don’t have a specific “customer retention” strategy in place, you’re losing 2/3rds of your previous customers! And once you know the potential life time value of a customer, that should make you sick to your stomach!
So what’s the remedy? First, you need to increase the amount of communication you have with your past customers. At the very least, follow the “4 a day rule”. Every business day, someone in your business should contact at least 4 past customers with a personal follow up, either by email, phone, letter or in person.
You should also consider a newsletter… and no, not those fancy, beautiful and “corporate looking” newsletters I’m sure your familiar with. You need to take a more personal approach.
People don’t fall in love with corporations… they fall in love with personalities. The first part of that word is “person”. You have to open up to them. Let them know who you are, a little bit about what’s going on in your life.. and also you have to show some character and a bit of humor, and style.
Think of why you’re close friends with the friends you’re close with. You should try to establish that same bond with your customers.
(There are several strategies I use to do this… the best is with a monthly newsletter, which is my specialty. If you’re interested in getting some ideas for how to create these special “customer retention” newsletters, you can contact me.)
Finally, someone who cares about you looks out for your best interest… with no ulterior motivate in mind. Again, that’s where a newsletter comes in handy. Each month, you can create an article giving them tips on how to better their life, improve the value they can get from your services, and just things that can make them feel better about themselves… And they’re getting all this stuff just because they’re a customer of yours.
That’s how you make someone feel special.
At any rate, you need to create some kind of customer retention campaign, and that’s often just staying in contact with past customers, once every few months to let them know you’re still thinking about them.
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