Scenario: "Dude, you know how those Big Fortune 500s make more money every year? They just sell more than what they did the previous year. Yay!" It's a common myth among most of us trying to grow our businesses:
"Just sell more next year," we say.
Yet, that's likely how most of us entrepreneurs never sustain ourselves beyond five years: Before we know it, we can't sell any more of our badass services/products -- because, well, we would've run out of potential client targets. Big uh-oh? Doesn't have to be. To build a sustaining business that grows revenue every year, focus on the secret sweet spot we absolutely, totally, and almost-illegally love: Customer retention.
The "How-to-rock-the-world-even-more-in-5-years" Approach
Rock star entrepreneurs focus on something beyond "selling more":
- You use your heart, energy, and sweat trying to sell to a Bob.
- Bob becomes your customer by buying your widgets.
- Bob stays your customer by re-buying/buying-new widgets.
(The "How-to-be-obsolete-in-5-years" Approach ends the customer relationship at Step ^3.)
Why Customer Retention Rocks
Customer retention rocks because instead of restarting your sales efforts, you're building on top of what you already have.
- When you can retain a customer's pocketbook the following year, you'll -- guess what -- retain your revenues.
- Then, any additional sale will improve your revenues from the previous year.
Some Crazy Analogy to Understand the Concept
To be clearer since we think it's such a vital concept, here's a super weird analogy/scenario (so, please bear with us): Scenario: You're building a stairway. You need a bigger, higher, sexier one the following year, or...you'll die. That is:
- Year 1: You build a 100 in. flight of stairs.
- Year 2: You need a 120 in. flight of stairs.
The dilemma: How do you build that 120 in. flight of stairs?
- How to die (i.e. what most entrepreneurs unfortunately do): "Hey, we'll just use the concepts we learned in Year 1, write down what helped us and what didn't -- then go into year 1 motivated to build an even higher one in Year 2! Yay!"
- How to live like the badass you were meant to be: "Hey, we'll just retain as much of the 100 feet flight of stairs we've already built -- then try to build more on top of it. Yay!"
To climb your Mount Everest, don't keep on restarting. It's a prime way to shatter your business in five years. Instead, keep climbing. Badass businesses retain as many customer pocketbooks as possible, then build on top of it. (Yeah, you probably won't retain 100% of your customers. But if you're providing value, you'll keep a good majority around, who'll then likely refer you to even more customers.) And hey, it's 80% easier to keep a customer than chase a new one anyway.
"So how do I retain customer pocketbooks?"
We've written bunches of articles on the topic, but three tips to get you started:
You provide a service/product that they buy, repeatedly.Regarding your industry, ask yourself: How can I provide products/services that customers will buy repeatedly? Depending on your business, that could range from selling gourmet coffee, to providing updated software, to overlooked items such as monthly maintenance and ongoing support. But what do you provide? Use our next two tips to discover the answer.
You care. Genuinely.Sure, you could put up a false front. But chances are: (1) You can't sustain that fake sincerity for more than three weeks, and (2) customers will see right through you. Instead, if you truly care about your customer's success, you'll do something pretty valuable:
You provide value. Repeatedly.When you genuinely care about your customers, you start doing whatever it takes to improve their lives/businesses/bottom-lines/etc. (Guess why most customers come back to their favorite businesses?) By seeking ways to provide value first, you'll understand with clarity what your customers will need -- and in turn, what they will buy from you.
"How do I measure my customer retention score?"
You may think you're providing value, but how do you really know? And more importantly, how do you improve to skyrocket your retention? Just ask your customer: "Would you recommend us to a friend?" According to Reicheld's study: "This finding is based on two years of research in which a variety of survey questions were tested by linking the responses with actual customer behavior--purchasing patterns and referrals--and ultimately with company growth."
The Side Benefit to Customer Retention
Though we don't recommend just doing this: To build a sustaining business that grows revenues each year, you probably won't need to do anything but focus on customer retention. If you focus on retaining your customers, you'll provide kick-ass customer service that wows them like it ain't nobody's bid-ness. In turn, like a mutha flucka, that will attract customer referrals for you. As a rule of thumb: people who like you want to share you to their friends. Phew! We'll end with the usual moral. To build a kick-ass sustaining business:
Retain your customers like Vanilla Ice on rice.
Posted on September 19