Small businesses have an advantage when it comes to making customers for life. In most small businesses, the person who facilitates the sale continues to have customer contact after the fact. As a result, the style and service mode that attracted the customer in the first place continues unaltered, and the customer’s buying decision is reaffirmed during every future contact.
On the contrary, large businesses are usually organized in departments: The marketing group is in charge of getting customers. Then, once the customers are on board, their contacts switch to people in the purchasing, distribution, delivery, and other departments. The marketing mindset changes to an operational mindset, and too often the customer gets lost in the shuffle.
As small businesses begin to get larger, some begin to adopt structures that resemble those of their big-business role models and suddenly their customer focus begins to change. Don’t let this happen to you. Manage your business so that every person in your organization realizes the value of every customer not only to your sales today, but also to your sales tomorrow and well into the future, when the customer’s positive comments will lead others to your business.
Valuing your customers
Imagine that each of your customers arrived wearing a price tag reading Replacement Cost: $1,000. Imagine that even your inquiries and responses to ads came equipped with signs saying I cost $75. Don’t you think that everyone in your company would handle each contact with greater care if they realized what it cost to bring that person into your business and what it will cost if you have to recruit a replacement?
Estimating the cost of a new customer
To roughly estimate the cost of bringing a new customer into your business, apply the following formula:
Begin with the cost of last year’s marketing program. Even a wild guess at what your company spent in advertising, sales, public relations, promotions, signage, brochures, and other communication vehicles will provide a good starting point.
Subtract marketing costs that were directed toward repeat or loyal customer marketing communications for example, customer newsletters, customer promotions, and customer entertainment.
Divide by the number of new customers you attracted last year. The result is a rough approximation of what it costs to develop a new customer for your business.
Share your findings with others in your company so that they are aware of the valuable commodity with which they are dealing each time they have customer contact.
Once you know the cost of getting a customer, you’ll have an indicator of how much expense you can justify to keep that customer on board.