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Does Your Business Really Need More Customers or Clients?

Nov 2, 2007
As a business what is the lifeblood of the company? Well, if you deliver a product or service of any description then it's most likely to be your customers or clients. It may also be true that your frontline staff play a massive part in keeping the company in front of as many people as possible at any given time.

Why do so many businesses place so much emphasis and focus on getting new customers? Potentially they are sitting on an untapped goldmine of opportunity right under their noses and with little or no inherent costs to speak of.

An existing customer base is the most overlooked source of some of the most profitable transactions that you could wish for.

Ask yourself this question.

Is it easier to sell to someone you have already built a relationship with or sell to someone you have never dealt with before?

Let's look at some key questions and then do the math. You will be surprised at how some reasonably small percentages can add a large numbers to your businesses bottom line.

1. How can you increase the number of customers who buy from your company?
2. How can you increase the average order value?
3. How can you increase the average order frequency?

To answer these questions make take some creative thinking or even a brainstorming session or two. But as you will see, it can be very worthwhile exercise.

Let's say, to keep things easy, you have 100 customers in your database.

Their average order value is 100.00

The order frequency is twice per month.

All things being equal and assuming none of those customers were lost, this means the value of those customers on a monthly basis would be:

100 x 100 x 2 = 20,000.00

Now let's look at what would happen if you increased each of these areas by just 10%.

110 x 110 x 2.2 = 26,620.00

26,620.00 - 20,000.00 = 6,620.00 in extra turnover. An increase of 33% in one month!

By focusing on all three areas you're also creating exponential growth and only adding 10 new customers to the database.

The other key question you should ask yourself is:

What is the potential lifetime value of a customer? Again this is something often overlooked especially by the small business owner.

Let's say for example you have a landscape gardening business and your base charge is 35.00 for standard grass cutting service.

Normally you would cut the grass for your average customer 27 times every year.

That would equate to 27 x 35.00 = 945.00 turnover per year.

Now let's say your service is well received and you keep the customer happy even for 4 years.

That customers lifetime value to you would be 3780.00. That's not including any up selling for other services that you offer.

The important thing illustrated here is to look at the potential overall value of your customer, not just the single payment for your product or service.

One last thing. Always remember to calculate your profit margin. There will be little point charging 35.00 if your costs were 34.00. As one of the great business growth coaches, Peter Thomson, always says "Turnover is vanity, Profit is Sanity".
About the Author
Paul Sutherland dedicated to coaching clients and customers in making a real difference to their business profits and overall business growth strategies. For more information and insights visit www.dti.eu.com Also Pick up a thought provoking FREE report "7 Big Mistakes".
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