The Most Important Way a Business Can Increase Profitability

Are you having trouble increasing your business’s profits? If you have hit a plateau or a slump in sales, it may be time to assess areas of your business that you are losing money. The first thing you need to look at is your customer relationships.

The relationship you have with your customers is critical to the performance of your business. Therefore, businesses must focus on customer retention as a large part of their marketing and business plan. 

Customer retention is defined as:

“a variety of activities aimed at keeping customers for the long term and turning them into loyal buyers. The end goal is transforming first-time customers into repeat customers and maximizing their lifetime value” (HelpScout)

These repeat customers are going to transform your business as not only will they continue buying your products if they have a positive buying experience they will share that with family, friends and colleagues. Studies show that increasing customer retention by 5% can increase a company’s profitability by 75% (Bain & Co). Therefore, to make your business more profitable, you must increase customer retention.

If you are ready to get repeat business, then follow the 6 steps below.

1. Build a Database

Your database should comprise of names and contact information of the customers who have bought your product or service. It can also include past purchases. This will allow you to have their information on hand so you can market to them in the future. By having their information you can send them exclusive offers, coupons or upcoming events. Additionally, if you keep track of their past purchases, you can inform them of restocks or similar items they may like.

To create a database you can start with an excel sheet, and this may be enough when you are just starting out, but you will find that when your business grows, you need a more organized system. There are many free customer relationship software (CRM) programs for small businesses. Find one that fits your business needs and size.

Also, make sure to use social media sites such as Facebook and LinkedIn. Encourage customers to leave reviews on Facebook, LinkedIn and Google My Business. You also want to encourage them to like and follow your page. This will allow you to share your posts with them and promote to them directly. If you encourage your customers to connect with you on LinkedIn, you can post business updates that they will see in their feed.

2. Create Offers

Offers can include special offers, codes, buy this and get this deals and etc. These are all things that will keep customers coming back for more.

There are two ways to do this for your customers.

1. For new customers: Create an offer exclusive to new customers. This will attract more customers and entice them into wanting more past that initial purchase.
2. For existing customers: Consider a customer rewards program. This will give them access to exclusive deals and offers the more they buy.
   

Another really great opportunity would be to create a referral program or word-of-mouth marketing. This will encourage existing customers to refer your business to colleagues. For every new customer that the existing customer brings in, they can earn exclusive offers.

3. Deliver Excellent Customer Service

For many business owners, this may be a no-brainer. However, many business owners drop the ball in this area whether it is with error resolution or making the product difficult to buy. To put it short: go above and beyond for your customers. These are the things that will resonate with customers well after their initial purchase and will propel them to make future purchases.

At the bare minimum, deliver upon their expectations. This article on mastering delivery elaborates on how you can perfect your delivery to ensure your customers are happy with their service and willing to come back for more. 

4. Ongoing Product Development

Don’t be a one-trick pony with your business. If you only provide one thing how does that differentiate you from competitors?

If you are selling the same product or service and not diversifying your offers customers will get bored and turn to your competitors.  Also, if you offer a one-time product or service, how will you keep customers returning if they think they’ve gotten all that they can from you? Continue to add products and services to keep customers engaged and keep the competition on their toes.

5. Create a “Buy Forever” Program

These include memberships or subscriptions that will keep customers continuously buying your product, especially when they can receive exclusive offers or products.

A Membership Model encourages customers to join a group of exclusive customers that receive specialized benefits for those who join. It can be free or require a monthly fee. A subscription requires customers to pay a recurring fee that will give them access to exclusive products or deals. The subscription can be tied to the membership, having them work hand-in-hand to keep customers buying more.

Offer different price points that will make customers always want to ugrade so they will continue doing business with you. Have an end goal that they want to achieve like a free product or exclusive access.

6. Focus on the 80/20 Rule

Going off of the previous point, if you have a way that allows customers to upgrade they will want to buy more. 20% of your current customers will want to buy more and so having a way that they can buy the next program or the next product keeps them returning. Once you have those programs and products in place you can then build a foundation where that 20% of customers that are continuously buying your product, make up 80% of your profits.

This is the power that Repeat Business has and why it is so important that owners are working towards it in their plan. Especially when you consider that it can cost up to 5 times more to acquire a new customer than to keep current ones. Mind-blowing - I know.

If you’re still having trouble wrapping your head around the importance of client retention, or if you need guidance on how to work it into your business model, give us a call today. We offer FREE 30-minute coaching calls to business owners ($500 value).