April 2007
Grow Your Business By
Increasing The Number Of Times Customers Come
Back
How To Fire Someone
Tapping Into Testimonials
Don't Mistake Profits For
Cash
 
Grow Your Business By Increasing The Number Of
Times Customers Come Back
In the last issue we discussed the first of the
4 ways that you can grow a business –
increasing the number of customers of the type
you want to have. This month we discuss the
second way, increasing the number of times
customers come back to buy from you.
Chasing new customers versus
encouraging repeat business
It's a simple fact of business – most companies are
obsessed with getting new customers. They
advertise, plead, bribe, bend over backwards and
sometimes beg to get a new customer.
And after all that, once they get them, they ignore
them.
Think about this. It can cost up to 6 times more to
win a new customer than it does to have an
existing customer purchase again. Why? Because
you invested time and money to acquire that
customer for the first sale, but every
additional sale after that doesn’t involve any
extra acquisition cost. So for every sale you
make to an existing customer you actually keep
more as profit.
In other words, it ‘s a well recognized fact that
retaining and having customers come back for
more – and more – is the most profitable
way to sell.
So how can you encourage repeat business?
Know your best customers and
treat them well
One of the first ways to ensure repeat business is to
classify your customer base into tiers according
to how profitable they are. This can be as
simple as categorizing them as A, B, C and D
customers. This classification process means
that your ongoing communication and marketing
approach will be more appropriate for each
group. For example, your A customers are the
ones you most want to keep working with, so you
might invite just them to join a preferred
customer club, or A's and B's would get special
mailings and offers, etc. You could even go so
far as to ask your D customers to go elsewhere,
freeing up more time and energy for your
preferred customers.
Provide awesome service
Creating a team commitment to service can impress your
customers enough to keep them returning and
referring others. The commitment could make
certain promises of performance standards and
could explain your business ethics and mission.
These can make great unique core differentiators
as well.
Awesome service, like good telephone technique and
selling technique, can actually be systemized so
all the team knows what they are expected to do
for a customer and just how far their authority
extends in bending the rules. You can’t stop at
saying you want your customers to be given
awesome service – you need to train the team so
they can deliver it consistently and
effectively.
Nurture your customers
It’s important to nurture your relationships with your
customer in the same way you would any other
important relationship. Nurturing is the most
cost effective way to make customers feel valued
and motivated to keep purchasing from you. The
more you stay in touch with them the more likely
they are to remember you. Some effective
nurturing strategies are:
• Regular mailings to build on the relationship
such as newsletters, offers, calendars, service
reminders, thank you notes, special articles of
interest, holiday cards
• Establish a loyalty program that rewards
frequent purchasers
Use customer comments
Asking for feedback lets customers know that you are
truly interested in them and their opinion –
something other businesses just may not bother
with. And the feedback you get can be extremely
valuable for your strategic planning.
Follow-up calls just to make sure they are happy with
their purchase or to get in with some damage
control if they are not; satisfaction surveys;
customer advisory boards – all can be very
useful in encouraging repeat business.
When you do make the effort to gather feedback, and
the customer has made the effort to give it to
you, don’t waste it. Use the information to
continually improve the way you do business, and
let customers know that their suggestions are
being used.
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How To Fire Someone
Sooner or later it becomes the unpleasant task of a
manager to have to fire someone. The employee
can be hit hard too. They can be personally
shocked and hurt. It will likely disrupt their
life and throw out all their certainties – such
as where the mortgage repayment is coming from
next month. In fact the situation is one of
potential high drama and maybe even dire
consequences if improperly handled. When it
happens you need to handle it legally and
sensitively.
Handling dismissal sensitively
First, be very sensitive to timing. Firing someone the
day their child went into hospital for an
operation is one way to ensure resentment and to
arouse a sense of unfairness that could lead the
employee to start looking at ways to get back at
you.
Firing isn’t a public event or one you can delegate.
The news should be delivered personally in a
short private meeting. It is wise to have one
other respected or impartial person present as a
witness to the proceedings. In an age of
litigation that’s the best measure you can take
to protect yourself.
If you want to extend some empathy by offering praise
of any good action then be judicious. It may
sound callous, but overdoing praise in this
situation can have negative repercussions
ranging from creating an unfounded hope that the
decision can be reversed, to use in court as
evidence of the unfairness of your action.
The timing and nature of the departure announcement to
the rest of the team and the employee’s day of
departure must both be settled at this meeting.
For both actions the best strategy is "as soon
as possible". The shorter the time, the less
opportunity for rumor to spread, or for the
situation to upset regular work. This is not
heartlessness – it doesn’t do the departing
employee any good to be hanging around in these
circumstances.
Handling dismissal legally
Stick to the facts. Those facts need to be the legally
justifiable reasons why you are terminating the
employment contract. “I don’t like …” or
“You don’t have the right attitude about X, Y
or Z” won’t cut it in court. The best favor
you can do yourself is to read up on basic labor
law, particularly as it relates to such things
as discrimination and unfair dismissal.
And you need to be able to back your legally
justifiable reason with written documentation on
the actual incidents that demonstrate the
employee has breached regulations or failed to
live up to performance standards. That means you
need to have, and maintain, a good personnel
record management system to track the history of
the incidents the employee has been involved in
and the warnings or whatever you have given
them. Implementing a formal performance reviews
routine, whereby you can record the discussions
you have had about performance shortfalls, is a
good start. In the context of dismissal, these
records provide the justificatory evidence that
has brought you to this action. Documented
history of poor or illegal behavior is what a
court will look for if the matter ever goes that
far.
Terms of severance such as pay and benefits should be
detailed and accurate. An employee who feels
they are being cheated as well as fired is as
good as in court.
If you feel unsure of any aspect of the firing process
then call your lawyer and take advice. Their
most expensive advice will likely be less than a
court case will cost.
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Tapping Into Testimonials
Positive, believable comments from real life customers
with real names who live in real places about
their experience with your business and your
products are proof positive to potential buyers
that you can be trusted. And with that
foundation in place to overcome their natural
skepticism, selling to them becomes so much
easier.
Here are 5 tips to help you get persuasive
testimonials and use them to convert prospects
into buyers.
1. Go after testimonials
Unsolicited casual comments from customers in
conversation or over the phone, or comments in
correspondence with them are good, but you
should have no hesitation in coming right out
and asking for a testimonial when you know you
have a happy customer.
You can actively stimulate customers to give you
testimonials. For example, send a postcard or
email message to recent customers asking them
what they liked best about your product or
service or offer a free sample to a select group
of your customers in exchange for their thoughts
on the product.
Customer focus groups are another great opportunity to
get customers talking about your products and
services and what they appreciate most about
them.
One easy way to collect testimonials is to include a
link on your website with a form that allows
your customers to give you their vote of
confidence.
2. Get them for all your
products and their different benefits
All of your prospects and customers are not exactly
the same. They don’t buy the same products and
may even buy from you for different reasons.
Different aspects of your products and services
are likely to appeal to different prospects just
as they do to different customers.
Try to get testimonials that mention a variety of
different benefits your customers derive from
using your product and get them for products
across your entire range.
3. Use only testimonials with
the right characteristics
-
The message should mention benefits rather
than features – that’s what people really
buy. "This product doubled our profits in
a month!" rather than "This product
is easily installed".
-
It must substantiate your marketing claims –
if you say your product can do something,
your testimonials should back up your claim,
complete with actual facts and figures.
-
It must sound credible – accompany each
testimonial with the first name, last name
and hometown of each testimonial-giver. You
should get their permission first of course.
4. Don't fudge it
Don't edit or rewrite your testimonials to exclude a
negative comment or to elaborate on what is
there. If you can't use the testimonial pretty
much as the person offered it then either ask
them, if you can, to rephrase it themselves or
don’t use it.
5. If you've got it, flaunt it
Where do you use testimonials? Where don’t you!
-
On all marketing – your website, ads,
newsletter, brochures, on your product
packaging, etc.
-
In your store, especially in product
displays
-
In your office / waiting area
-
On the back of your business cards
Testimonials are a great persuader. Start applying
them now in your business and you will quickly
start converting more prospects into buyers.
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Don't Mistake Profits For Cash
In business there are some fundamentals that are
common to each and every organization regardless
of size or type of structure. One of the most
important of these is the management of
profitability and cash flow. It is vital to
understand the difference between them and the
fact that profitability and good cash flow do
not necessarily go together.
In fact, profitable businesses can go out of business
because of cash flow problems.
How does that work?
Profit is the difference between sales and costs
within a specified period, say a month or a
year. But while a sale may have been secured and
goods delivered, the related payment for the
sale may be deferred, for instance as a result
of giving credit to the customer. While you wait
for receipt of your money however, you must
continue making payments to suppliers for
inventory, to employees for wages, for
repayments on equipment and so on.
Sales, costs and, therefore profits, do not
necessarily coincide with their associated cash
inflows and outflows. The net result is that
cash receipts often lag cash payments and, while
profits are being reported, the business may
still be experiencing cash shortfalls.
That can have two very serious consequences – at best
a slowing in the rate of growth of your
business; at worst, complete business failure.
Rapid growth by profitable businesses may well
lead to shortages of cash, because extra money
is needed to finance expansion (for example, to
buy extra stock or purchase fixed assets). In
extreme circumstances this can lead to failure.
Knowing you’ll have enough cash to pay a bill
next month isn’t enough if your creditors are
pushing for payment today and you can’t come up
with it.
Good financial organization and having a strategy to
manage cash flow will reduce the likelihood of
disruption to your business. The strategy
revolves around implementing effective business
practices for improving cash flow and using a
cash flow forecast mechanism to predict and
manage slow periods.
Good practices
for ensuring cash flow continuity
-
Manage the credit you give – develop polices and
procedures to ensure credit is only offered
to reliable and profitable customers; reduce
the average debtor’s days outstanding by
e.g. specifying payment terms on your
invoices or charging interest on late
accounts.
-
Keep your books up to date – if your books are not
kept up to date and accurate your cash flow
forecast and other reports will not be
accurate and the benefits of forecasting
will be lost.
-
Put contingency plans in place to borrow money at
short notice for unexpected crises in cash
flow. Better to be prepared than to have to
arrange finance on unfavorable terms at
short notice.
-
Manage your bill payment schedule – don’t pay early
(unless good discounts apply) since that
removes cash you could be using to earn
interest or investing elsewhere; don’t pay
late since that puts suppliers, who might
otherwise have been prepared to carry you
over an emergency on the basis of your good
reputation, offside.
-
Fund your business properly – outlay of capital
expenditure should be matched by long-term
funding such as a term bank loan or a hire
purchase agreement over a number of years.
That way, the cash outlays are timed to
coincide with the expected cash inflows to
be derived from the investment in the fixed
asset.
-
Keep inventory to the minimum necessary – if you can
decrease the amount of stock you are holding
without decreasing your sales, then you have
less money tied up in stock and have
released cash into the business.
Forecasting
— knowing and
planning for the peaks and valleys of cash flow
Your cash flow needs constant monitoring and planning
using a cash flow forecast report to make sure
you always have enough ready cash to meet your
costs on time.
Profit and cash flow are two factors that do not
necessarily go hand-in-hand. More businesses
fail for lack of cash flow than for want of
profit. For this reason it is essential to
manage the procedures that determine cash flow
and to forecast the cash flow situation to be
aware of where there may be problems looming.
Having the right procedures in place can
help you manage your cash flow effectively. Both
your accountant and your business advisor can
help by looking at your processes, recommending
changes that will protect cash flow and
providing you with a regular cash flow forecast.
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