How important is the Customer ?
Do you need customers?
Do you know how much they are worth?
How much does it cost to acquire customers?
For this example let’s just look at YELLOW PAGES. These other costs have to be taken into
consideration. Rent, Bill boards,
Radio, TV, Telephone, Exterior Signage, Utilities, Banners, Social Media, Text
Messaging, Direct Mail, Employee interaction, Word of mouth, Newspaper, Web
Site, just to name a few. In fact the
true value of your business and most of your investment lies in the number of
customers you have. The lively hood of
your business is determined by new customers and keeping the ones that you
have, called retention.
I never really understood the depth of this question until I
did an analysis of my advertising budget while I was CEO of SuperPawn. One area of discussion was the YELLOW
PAGES. We were spending $315k per year
for our stores and were introduced to a program where data was prepared by the
Telephone Company of the number of calls we were receiving at each one of
stores. We also had a 3 day study of
what type of calls we were receiving at the stores so we could attribute new
customers and current customers along with the types of questions.
For an average store we were spending $750.00 per store per
month. We were getting 5 calls a day
from new customers, so each call cost us $5.00 for each call. We were successful 25% of the time in getting
the customer into the store and 80% of the time conducted a transaction. So we were successful in getting 30 customers
a month for $750.00 or $25.00 per customer.
Wow.
We learned a lot just by the review and research. We found that our interaction on the phone
was weak. It took too many rings to
answer the phone and our employees were not trained on how to interact with
customers on the phone.
$ecret Phone Tip – customers calling for estimates
for items were often told they had to come in.
Most of those did not come in.
Those customers that were given a courteous estimate of value, 90% came
into the store.
But, $25.00 per customer blew me away, and that did not take
in consideration telephone and employee costs.
We also found that if the customer did not come back the
second time we lost money. Customer
retention is vital.
This is a great exercise in measuring Advertising dollars
spent and return on investment. Every dollar of advertising should be evaluated
by how many new customers will you get and keep.
The next evaluation is how much it costs you to acquire an
item. Yes, for every item that comes
over the counter there is a cost to acquire that item. So this is called overhead and driving
increase volume of transactions drives down the cost to acquire. The more efficient you can be, the lower the
cost to operate. This is one of the most
important drivers to profitability you can produce with efficient accurate
process.
Any slowdown can turn a profitable opportunity into a loser and
it is really hard to figure out. That is
why gross profit is not a great way to determine success.
Increasing volume of sales is also one of the best methods to
succeed. Lowering margin and increasing
turn is the most healthy and profitable way to improve your business.
So, sit down and analyze your advertising. Pay attention to all of the time you are
taking into conducting your business.
Organize yourself and your staff.
Get more done efficiently and you will find a better looking and
successful business.
Figuring out what a customer is worth is called Customer
Relationship Management. A lot has to go
into such an analysis, and each time a customer comes in to your store, each
and every transaction has to be updated and evaluated. BRAVO includes this very heavy data driven
analysis called Customer CRM.
In Bravo you will know how much your
customer is worth. Bravo keeps track of
every transaction of every customer every second. Essentially Customers are worth their
contribution over a lifetime. The longer
you keep a customer the more they are worth.
Bravo ranks your customers so you know who is the best, the top 10% and
so on. Check it out if free with Bravo
and is only driven by the powerful Data Analytic's of BRAVO.
