Welcome back to another Whiteboard Wednesday.
Today we’re going to be talking about new customers and what actually matters.
What really matters here is the cost and what you’re going to be getting on the back end. Especially if you’re a business owner or a sales person. So in this case, and this might be a little elementary for some of you, but we’re going to go through it anyway. What the toughest part is about getting a new customer is you need to get their attention. You need to keep their attention to build trust and you need to be able to give them some kind of benefit.
So how can you model your offer? How can you present to them that you are the solution to their problems?
So, ultimately, what that comes down to is: it costs you a lot of money. So if you’re selling like a $300 service or product, the cost of where you can actually acquire customers start to really digging into your profits. Especially if you’re a business owner or you’re a salesperson on commission or something, you can’t really negotiate with price too much because you’re spending time to acquire them, to prospect them, and then to bring them into your sales process. So if you’re selling a $300 product or service you might only have $30-$40 to really acquire that customer. Depending on your profit margins, of course. Ultimately, what we’re going to be doing is nurturing and growing these first-time customers. One person coming in. We want to be able to nurture them and then grow with them over time.
Pretty much, what you’ll need to know is: was your product or service perfect for them, was effective for them, what else do you have that you can offer to that person? So do you have some upsells? Do you have some cross-sells? Can you down sell them into a different item so that we can keep building their trust and keep working with these people? What do you have? And then what are the actual benefits that you can provide these people? So if you’re providing a service that generally helps make people money like a marketing company, what you need to do is be able to translate additional benefits. What tangents can you grow from? What benefits do they get from working with you again? What benefits can you continue to elaborate on, right? So you need to build out the horizontal aspect of your business. So what kind of services can you offer? And the vertical depth of that service. So if you’re providing a service, how deep can you go to provide a massive service that fulfills and goes above and beyond for that customer. Once you know these things, you can start effectively growing your one customer into multiple services. According to the 20-80 rule your past customers will bring you 80 percent of your business. So 80 percent of your business will come from the customers you already acquired.
This implies that there’s actually like a lifetime value for the customer. If you can acquire one person and they continue to grow with you, that means they’re not just worth that $375. If they work with you 4 times in the next year or 12 times in the next year depending on your product or service, there’s a certain amount of money you can drive from each person. So $375 sale over here, $375 actually turns into something like $1200. So now you can say, “Well how much is it actually costing me to get the attention, build the trust, and build a solid solution model for them?” You can take it from this number, the lifetime value number, and say, “Maybe I can spend more than just $30 or $40. Maybe I can actually spend $400 to acquire someone.” Which is a lot of fuel for the most difficult part of acquiring a customer. So instead of spending just $40 in acquiring a customer you can say, “I’m gonna spend $400 and on average I can grow my $375 customer into a $1200 customer”, and so what that means is you actually can put more money up front, acquire more customers, and continue to nurture and grow these clients to build that sweet sweet lifetime value. If you have a good product or service you should expect from this model to be awesome for you. It’s a great way to seed a bunch of people and let them grow up. You want to be farming your clients. You don’t eat going out and hunting for each one it takes it’s too time-consuming to go hunt for every client so by building up his lifetime value number. You can end up spending more on the tough part, which is acquiring customers. Customer service is secondary because it should be so ingrained in your company culture and your company values that customer service is a given. So the only thing that matters is acquiring customers to use the lifetime value to your advantage.
Thanks for sticking around for another Whiteboard Wednesday! You guys are awesome. See you next time.