Are your customers falling off the ladder?

Are Your Customers Falling off the Ladder?

Are your customers falling off the ladder?

Are Your Customers Falling Off the Ladder? Every business owner must ask this critical question regularly.  Your customer loyalty ladder profile can say a lot about the health of your business.  One of the primary reasons small businesses and startups fail is a lack of marketing activities directed at customer loyalty.  This failure rate is exaggerated during a struggling economy as customers hunker down with the businesses that they already have established a solid relationship with.  This customer ladder is the path your customers take from the first moment they hear about your business to the final level of interaction in which they choose to engage your business.

Beyond just looking at how customers fit into your ladder we need to look at how your budget is allocated across it.  Where in the ladder will we obtain the greatest return on investment (ROI)? Various experts have identified several different versions of this ladder, some with 5 rungs and some with a few more depending on the level of granularity desired to describe the customer.  Take a close look at your customers and identify what percentage of your sales comes from each of the following classifications.  Then look at where you spend your marketing dollars.

The Suspect – a person or business that has heard or been exposed to your business or advertising.

The Prospect – a person or business that has responded by showing interest in your message.  We can add granularity by identifying a rung for those who merely showing interest from those who are beginning to negotiate how they want to buy.  These would be your buyers or shoppers.

The Customer – a person or business that has purchased your goods or services once.

The Client or Member – a person or business that has made multiple purchases.  These are your loyal customers.

The Advocate – a person or business that refers prospects to your business.  Let us note that a referral will skip the expense of moving from the suspect rung to prospect.  The cost of moving a referral from prospect to customer is significantly lower than new prospects coming through your suspect phase.

The Raving Fan – a person or business that can’t help themselves from selling your goods or  services for you.  An advocate will make referrals but a raving fan is part of your team. A healthy business will spend 30 percent of their marketing dollars on activities that move customers up to the top portion of the ladder.  They will spend 70 percent of their marketing dollars on advertising seeking new customers.  Many struggling businesses I have come into contact with are allocating their marketing dollars in a 5/95 split, consuming most of their budget frantically seeking new customers.  They need this because they are losing customers after a single purchase.  Their customers are falling off the ladder.  They have made a critical mistake of not building a relationship with the customer to increase their loyalty. To bring a suspect up your ladder to the customer level through traditional advertising can cost four times the expense of attracting a repeat customer.  In addition it can take 30 to 50 times the advertising dollars to bring a suspect up to the customer level versus having an advocate refer the prospect. This illustration depicts just how important it is to never lose sight of marketing to your existing customer base.  Loyal customers can be your anchor through the ebbs and flows of a business cycle, and the passion of advocates and raving fans can be more effective than an in-house sales team at bringing highly qualified prospects to your business, all due to the power of a referral.

Finding Your Target Market

Four Steps to Identify Your Ideal Client

Finding Your Target Market

You may just be happy to have a prospect come through your door; but if that prospect isn’t your ideal client, that walk-in is probably just wasting your time. An ideal client will give you more business, larger profits, and fewer headaches; they are interested in your business, products, or services, and value what you bring to the table.

These four steps will help you begin to identify and target your ideal clients.

1. Analyze your current customer database.

In the article, “Higher Revenues: It’s the Principle of the Matter” (SOHO, April, 2009), I wrote about increasing your company’s revenue 16-fold through the Pareto Principle, or the 80/20 Rule, stating that 80% of your revenue comes from 20% of your clients. Look at your customer database to see if this is true for your business. Your customer database should include the following information: name, address, phone number, e-mail, what was purchased, purchase date, and your client demographics. Your client demographics should track additional unique information: annual sales, client personality traits or attitudes, and anything else that helps you identify your ideal 20%. So you’ve figured that out. Now what?

2. Why does that 20% stand out?

This question is integral in determining methods to attract more and better business. The ideal 20% provide higher profits and repeat business, so examine your newly filtered database to find commonalities within this group. Do they live in a particular neighborhood? Maybe they work in an urban area or in a certain career field. Are there connections through schools, churches, athletics, or networking groups? Do they attend trade shows, seminars, or read certain publications? Continue to study your best clients and learn what makes them unique and want to purchase from you. Utilizing a customer data platform to gather this information can be a highly effective endeavor for businesses to pursue. This information greatly increases the effectiveness of your marketing efforts.

3. What makes your business special?

Now that you’ve identified commonalities within your ideal client 20%, it’s time to look inward to find out what makes you stand out to that group. Your business can’t be everything to everyone, so discover what your ideal clients like best about your business?

Which product or service do they buy repeatedly? Maybe it isn’t your products at all, but your “go the extra mile” or “whatever it takes” attitude. Perhaps it’s the niche your product or service fills. Ask your ideal clients what they like about your business; they’ll give you honest feedback. Then look at your business brand and marketing message to make sure it is consistent with what you want to say and with what your clients say about you. Use this information to reach out to develop new prospects.

4. Target those prospects.

Develop a database of prospects that share identified commonalities with an “ideal client” and work to get in front of these types of prospects to increase your success. Attend events, seminars, and trade shows that your ideal clients attend, because chances are your ideal prospects are there, too. Become a featured speaker at one of these events. Your expertise will help gain their trust and provide the opportunity to earn their business. When given a choice, most informed buyers would choose value over price and prefer to purchase from someone who has a specific expertise in their business or need.

Market to this group of prospects and ask your ideal clients for referrals. Since they share common habits or traits with your ideal prospects, your top 20% are likely to know a few prospects they can funnel your way. If you follow these four steps for identifying and targeting your ideal clients and prospects, you will greatly enhance your chances for success.