No matter if you are just starting out or a seasoned business owner, finding new customers is often an expensive proposition. AND, your marketing budget is likely just a few cents of every sales dollar – you’re not blessed with Coca-Cola’s marketing money. In fact, there’s solid math behind an especially important metric: your Customer Acquisition Cost:
(Customer Acquisition Cost) CAC = Totals Sales and Marketing Expense / New Customers
Therefore, if your budget is $9,000 (assuming a small business with $450K in revenue and in an industry where you spend 2% on marketing) and you saw 150 new customers last year, your Customer Acquisition Cost is $60 ($9,000 / 150 = 60). Each new customer cost you $60.
If you are an HVAC contractor, that $60 may have brought you customers with an average spend of $5K – that’s well worth it! But what if you’re a gelato shop with an average ticket of $10? Many small business owners would say that the new customer would have to visit six times, but it’s really more than double that, as you don’t see $10 of Gross Profit from each sale – you have ingredient costs. So, they’d better come back – a lot!
How do you keep them coming back? Customer service has to be at the forefront of your training and culture. Think of a certain chicken fast food choice well known for its customer service. Its staff are out in the drive-up line, interacting with customers, taking orders, building connections, friendly smiles are everywhere. Compare that level of service to a hamburger choice that doesn’t make customer service an “over-arching” priority (see what I did there?). Which one makes you feel welcome? Which one has raving fans?
Customer service need not be expensive, either. At my favorite liquor store, staff are always asking if they may be of service. If I’m looking at red wine, they’ll ask what I’m serving it with and guide me to an excellent choice. Their staff is so helpful and positive that I have no idea who the owner is – every staff member treats me as well as an owner would. And I keep coming back.
A good CRM or Customer Relationship Management solution can represent a moderate investment, but it can be extraordinarily valuable in building connections with your customers. A CRM can be used to onboard new customers, reactivate former customers and keep all of them coming back. HubSpot, Zoho and Monday.com are great options.
Your social channels and e-mail can be powerful for building relationships and for listening to customers’ questions and concerns. Americans are distracted by thousands of messages every day (think about your e-mail, phone, commercials, signs, calls, etc.). Even if your customer is thrilled with your product or service, when they leave, they’re barraged by countless demands on their attention. Use these tools to keep in contact in a helpful, meaningful way and you’ll continue to remind them of your value. And studies have shown that it’s typically 6 times more expensive to find a new customer than to keep a current one. What other expenses could you cut to 1/6th? Your rent? Utilities? Not hardly!
Loyalty programs help to build positive relationships and can be points-based or tiered and can offer sneak peeks, discounts or other customer benefits. Square has a great article on this topic.
Mistakes happen, and customers are sometimes unhappy despite your best efforts. Respond to customers’ concerns in a timely manner, with positivity and empathy (both of which cost you nothing!). That includes online reviews and social channels; monitor them to thank customers who say something nice and to respond promptly to customers who may have a complaint. Your response should be swift, professional and should show the world how well you handle the occasional hiccup.
A very professional way to gauge customer satisfaction is to track your Net Promoter Score (NPS). Basically, it involves asking your customers through a quick survey or other means how likely they would be to recommend you, from 0 to 10 (with 10 being your biggest fans). Promoters are 9s and 10’s – they’re raving about you! Passive customers are 7’s and 8’s – what can you do to build stronger relationships with them? Detractors are those that score 0 – 6, and they’re unhappy and quite likely telling others why. If you don’t track customer satisfaction or NPS, you’ll never know.
We started this article with math, and we’ll end with it, as well. This time, with the concept of Lifetime Value of a Customer (LTV) so you can see how important customer retention really is. Our gelato shop customer might come by 5 times a summer and they bring the family. That’s 5 X $30 for $150. Let’s say they do that for at least 5 years, now we’re up to $750. Suddenly, they’re not a $10 customer, they’re a $750 customer. Either way, they’re worth keeping happy, but $750 is a sweet number. As sweet as your gelato!
