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Your EnterQuest Bulletin - Issue 260
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| Thought for the week: "I never think of the future. It comes soon enough." Albert Einstein |
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In this week's issue:
Three types of customer relationship
Some people argue that in today's price-driven world, there is no customer loyalty. Let's face it, people go where they get the best deal. By that we don't mean the cheapest prices, but the best value for their money. Just because your customer bought from you once, don't be fooled into thinking they will buy from you a second time.
Competition has become fiercer with the rise in consumer choices. It's hard to find a market - large or small - that doesn't already have multiple competitors battling for their piece of the pie.
So how do you keep your customers coming back time and again?
To answer this important question you need to take a moment and think about what would keep a customer coming back for business. Three instances come to mind:
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The customer and the business have a positive relationship. In this instance, the customer has formed a positive relationship with either a person who works for the business or with the business itself. Perhaps they had a great experience and they now have an emotional bond with the business. Unfortunately, unless the emotional bond is nurtured, it fades away fast and, quite frankly, there are extremely few businesses that nurture their relationships with their customers.
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The customer has an incentive to continue the business relationship. People are human and because of that we are naturally greedy. The principle of greediness is what makes capitalism successful. Businesses that reward (bribe) their customers with coupons, points, credits and bonuses create an incentive-based relationship that crumbles once the incentive is taken away.
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The customer 'has' to continue the relationship because the cost to change is too high. There is an instance in which the business has tied its operations into the customer's life or business so closely, that to move to another product or service provider would cause damage emotionally, socially, operationally, or financially. An example of this type of relationship would be a person who is emotionally dependent on their therapist (emotional) or a customer who has bought computer software that isn't compatible with other hardware (operational). This is like an 'integrated relationship' because it extends into the life of a person or into the operations of a business.
Of the three types of integrated relationships (emotional, operational, financial), the operational relationship is the most powerful. Operational relationships exist when the actual work processes of two businesses overlap. Untangling business processes is a mess and always has a very high-switching cost.
Following on from this week's Stir, here's an extract from an article in EnterQuest's sister publication BETTER business magazine (issue 149, September 2007).
Keep an eye on your existing customers
Many small businesses are constantly on the lookout for new customers, and cheer every time one is captured. But by focusing on new customers, small businesses are ignoring their most valuable asset - and hurting their bottom line.
While new customers are attractive, they're expensive. Advertising and PR expenses can be costly and their effectiveness is hard to measure. Worst, about two-thirds of customers purchase once - and never buy again.
Existing customers make better sales targets. While there may only be a 5% chance of selling to a prospect, there could be a 50% chance of selling to an existing customer. Existing customers also cost less to serve. Studies show the costs of keeping an existing customer are as little as 20-25% of the costs associated with customer acquisitions.
Customers who defect - especially those who buy from you just once - are expensive. Not only have you wasted the money originally spent acquiring that customer, but you must spend again to acquire a 'replacement' customer.
Despite the profitability and other advantages of customer retention, about 85-95% of marketing efforts are devoted to the uncertainties and costs of acquiring customers rather than retaining existing ones. There's also the added problem of customer defection. Bells ring and champagne corks fly when a new contract is signed, but do you notice when a customer slips away to a competitor?
So what can you do to increase customer retention and profitability? Whatever you sell, your customers will react to their purchase, and their response depends on what you provided and how. If the product is shoddy or the service churlish or overbearing, the customer will probably never return. However, if the reaction is good, you'll get satisfied, happy or even delighted customers.
Good customer service isn't rocket science - it's basic common sense:
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Supplying customers with the products and services they want on the right terms for them.
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Adopting a customer-focused and listening attitude at every level so they feel it is not only easy but a pleasure to do business with you.
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Developing exceptional service systems so your customers feel warm when they deal with any part of your business.
- Proactively wooing them regularly at all levels.
Subscribers to BETTER business magazine can read even more articles to help them find and keep more customers, including:
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Break the marketing barrier! Marketing is the lifeline to business continuity and growth, yet many businesses fail to use it to its full potential. Fraser J. Hay explains why people don't get the results they expect. (Issue 155, April 2008)
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Boost your pulling power. When it comes to sales, finding people who are in the market to buy is critical. Nigel Temple explains how to attract the right clients for your business. (Issue 154, March 2008)
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'Sales' is helping a client to make up their mind. If you don't win new business, you won't survive - it's as simple as that. Don't think of it as selling, think of it as helping a customer make up their mind, says Richard Denny. (Issue 153, February 2008)
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To receive a free copy of BETTER business magazine simply send us your name and address to enterquest@cobwebinfo.com, putting 'EQ magazine offer' in the subject box.
Each week we provide you with summaries of some popular or emerging business ideas in the UK and elsewhere around the world.
- Strange and unusual foods. Customers hankering after a change to their ordinary diets will find weird and wonderful products under one roof (or on one website) at Edible.com. The business sells unusual food and drink such as chocolate-covered ants and scorpion-infused vodka. It also sells body care products.
Regularly improving your vocabulary is not just about learning a new word and its meaning. It will improve your general knowledge and make you feel and act smarter in all sorts of personal and business situations.
Do you know the difference between the very similar looking words 'factitious' and 'fictitious'? Which word means:
a) false or artificial
b) invented and not true
Answer at the end of the Bulletin.
The following topical business issues have been recently reported in the media. Did your radar pick them up?
1) The British Retail Consortium (BRC) has published its latest Cost of Collection survey. Its figures show that the popularity of using which method of payment to pay for goods has increased?
a) cash
b) credit card
c) debit card
d) prepaid spending card
2) eBay sellers are once again planning to boycott the popular online auction site because of changes to how eBay wants them to conduct their business. Which change does eBay want to impose on sellers?
a) they can only trade for a maximum of three months
b) they have to begin the bidding at a set price
c) they won't be able to post negative comments about buyers
d) they have to have their own website
3) Ethnic caterers protested in London on Sunday 20 April against new legislation which they say will have an impact on their businesses. Which new rules were they protesting against?
a) changes to the tax rate
b) new immigration laws
c) corporate manslaughter laws
d) environmental health laws
Answers at the end of the Bulletin.
Podcasts and information from the Beermat website
The Beermat website is useful for small business owners to bookmark. There are links to free information, articles, e-books, sales and marketing tools and podcasts.
Free intellectual property advice
Own-it is a free intellectual property advice website aimed at creative businesses. Membership is free and grants access to free online advice. The site also has useful guidance pages on intellectual property protection issues for different types of businesses.
Pensions information for small businesses
The Pensions Advisory Service (TPAS) provides free, practical information and guidance on pensions, including state pensions and pensions for the self-employed. It has an information guide for small businesses on the subject of saving for retirement. The website can help you get to grips with pensions basics.
Business calculators and quizzes
This website from recruiter Aaron Wallis has a range of useful calculators and quizzes for small business owners and start up businesses. They are grouped into different categories including 'business and law', 'business skills' and 'finance and taxation'. Calculators available include borrowing risks, breakeven and VAT calculators.
EnterQuest has teamed up with ContractStore.com to give four businesses the chance to win specimen legal contracts of their choosing worth an average of £50.
ContractStore.com have a number of ready-made, professionally drafted business contracts to help protect you in your dealings, give your business a professional, established image when you use standard terms for buying and selling goods and services, and help you meet legal requirements. These can be useful when establishing and managing alliances with suppliers, customers, agents, distributors and joint ventures, as well as when employing staff.
ContractStore.com are offering one lucky reader the chance to win four contracts of their choosing and three runners-up can choose one. To be in with a chance of winning, simply answer the following question:
Q. According to the British Retail Consortium, which type of payment has increased in popularity over the past 12 months?
E-mail your answer, together with your name, address and daytime telephone number, using "ContractStore Competition" as the e-mail subject line, to enterquest@cobwebinfo.com.
All entries must be received by 30 April. EnterQuest and ContractStore will use the information you provide for their own marketing purposes only and your details will never be shared with any third parties (except to arrange delivery of the prize). Competition rules are available on request.
This book aims to help people to think more productively and how to apply productive thinking in business, work and at home. The book follows six steps to help you separate your creative thinking from your critical thinking and includes many of the author's own brainstorming tools and techniques to help you generate and process your ideas. Check out:
Just one word answer
a) factitious means false or artificial.
The bank manager's smile was factitious.
b) fictitious means invented and not true.
The accountant used fictitious pricing and profit and loss figures in order to explain the principles of profit and loss to the entrepreneur. |
How's your business radar? The answers
1) The answer is a). Cash is currently favoured by consumers and the BRC reckons this may help them control their spending in light of the credit crunch.
2) The answer is c). Sellers on eBay won't be able to post negative comments about buyers, even if they have had a bad experience with one. However, buyers will still be able to leave comments, leaving sellers defenceless if a buyer criticises a seller's conduct.
3) The answer is b). Demonstrators from the catering sector protested over new immigration rules. They say the new rules could impact on their ability to bring foreign skilled chefs and cooks to work in ethnic eateries such as curry houses and Chinese restaurants. |
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Good luck
The EnterQuest Team
This information is meant as a starting point only. Whilst all reasonable efforts have been made, the publisher makes no warranties that the information is accurate and up-to-date and will not be responsible for any errors or omissions in the information nor any consequences of any errors or omissions. Professional advice should be sought where appropriate. |
