Do you need more customers? Or more value from existing customers?
We all know it costs more to get a new customer than to keep an existing one – but the real question is how to make more out of that existing customer.
Sell more product
You can either sell more of the same thing the customer bought before or you can offer them something else as well.
Options to look at include:
- reminders for repeat purchases. In some industries this is commonplace – in others there is great opportunity. You probably get a reminder to renew your car insurance, you might get one about servicing your car. What about servicing your dishwasher? Or booking an termite inspection?
- which offerings appeal to the same customers? Can you create promotions targeted at those only buying one of those?
- how can you increase recurring revenue? Service and support contracts are the most obvious option, but there are others too.
Whatever tactics you opt for, a database helps. A database is not just a tool for communicating with your contacts, it’s a store of information to help you analyse them and your business with them. It helps you find patterns and segment customers so you can give them the most relevant offers.
Offer new products or services
Existing customers are a great source of ideas to extend your offering. Casual conversations can launch ideas, or you can ask trusted contacts about a specific idea you have, or you can run a customer survey to identify pain points.
Review your pricing
Pricing is complex and interesting. Setting your prices too high can result in no work. Setting prices too low is even worse. Yet how do you set your prices?
Factors to consider in pricing include:
- the pricing model – for instance, do you charge on a time basis or a project basis? Do your payment terms affect cashflow and hence profitability?
- your current profitability, including the balance between overhead costs and costs directly attributable to specific customers or product offerings.
- how a specific offering fits in your customer acquisition, retention and growth strategy. Loss leaders can get new customers in the door, but unless you can sell them something else which is profitable for you, what’s the point?
- market rates, competitor pricing and market positioning. Are you a premium supplier with excellent quality and service standards or a reliable basic provider? Or a discount specialist?
- the cost of product – for service businesses, this is time spent fulfilling the contract. But how much is your time worth and how much of it do you actually have available in any given week?
- the value of your service to the customer or potential customer. Small points of difference from competitors may make a big difference here. So can your reputation and positioning. Think about the difference between a Toyota and a Lexus.
We love pricing strategy, especially for service businesses.
So often, you can’t get economies of scale. More customers take more time. The only way to make more money while keeping a life is to raise prices.
But it’s fraught with risk. To work effectively on pricing review and changes, we need a high degree of trust, information sharing and marketplace understanding. With a small number of clients, we find an obvious pricing issue very early on in our relationship. With most clients, it’s something we come to after some time working together. But a small change in pricing can make a big difference in profit – so we’re always happy to talk!