Marketing

Customers

It sounds obvious, but it’s amazing the number of people who start businesses without considering who is going to buy their products/services and why.

Consider three key aspects:

• Who are your customers?
• What are your customers worth to you?
• Customer service.

Who are your customers?
First, decide who are your customers. Can you write a profile of your typical customer? Can you distinguish your customers from those of your competitors? How can you identify your customers from among the many people in the town, city or country in which you are located? This is critical because, unless you can identify your customers, how will you know how to reach them?

What are the defining characteristics of your customers:

• Are they old or young?
• Are they rich or poor?
• Do they have children? Babies or teenagers?
• Where do they live?
• What kinds of cars do they drive?
• Do they take foreign holidays? How often? And where?
• Do they use the Internet?
• Have they credit cards? Which ones? How much do they use them? And for what?
• Do they buy locally or will they buy by post or over the telephone?
• Do they respond to television advertising?

There are hundreds of questions that you can ask about your customers that will help you to define who they are. And, before you object, the customers you define in this way won’t all be the same – but you will be able to see patterns between different groups that will help you understand why your sales effort to this group is successful while your sales effort towards another apparently similar group does not work at all.

Without this customer profile firmly in your mind, most of your marketing effort will be no more than random shots into the dark.

What are your customers worth to you?
This is an interesting concept, highly developed in the USA and only slowly beginning to catch on in Europe. It rests on two principles:

• It’s easier to retain a satisfied customer than to find a new one
• Satisfied customers not only buy again (and again and again …) but they encourage others to become customers.

To test the first principle, think of your own shopping habits. When you are buying something you buy regularly, from a shop you use regularly – the daily newspaper from your local corner-shop – how much thought goes into the purchase decision? Almost none. You simply add the newspaper to whatever else you are buying. But, if you are buying some thing expensive from a supplier you do not know, you spend time checking them and the product out, before you finally make the commitment.

Most people are the same: regular purchases from familiar sources are quickly made, while new purchase relationships take longer to establish. Customers build up a trust with their regular suppliers. And once the trust is established, repeat sales follow easily. Thus, it is easier to develop new sales based on that trust than to develop new customers from scratch.

So when you win a new customer, do not think of them in terms of that single first purchase only. Think of all the repeat sales you will make to them. For example, a customer who buys £20 of petrol in your garage every Saturday morning will buy over £1,000 of petrol in a year. If he lives in the area for 10 years, and continues to buy petrol from you, he will buy £10,000 of petrol over that 10-year period. If someone offered to buy £10,000 petrol from you, wouldn’t you be extra nice to them? This man is offering to do just that – but not all at once.

Everyone wants big-spending customers, not small-purchase customers. But, looked at over the longer-term, your small-purchase customers are high-spenders too.

To calculate what your customers are worth to you, multiply their average purchase by the frequency of purchase (in the example above of £20 of petrol a week, £20 x 52 = £1,040), and then again by the length of time that you expect to hold them (again, over a 10-year period, £1,040 a year becomes £10,400). This puts a clear money value on retaining your customers.

The second principle again can be tested against your own experience. When you are pleased with a purchase, particularly a significant purchase, you tell other people about your experience and recommend them to use your supplier. Research shows that satisfied customers tell four other people. So you can take your customer value calculated above and multiply this by four, since you expect that one satisfied customer will generate four new customers. And you could multiply further since, if these new customers are satisfied, they will each tell four more, who will become new customers and so on.

But, if you disappoint a customer, they tell nine others, probably exaggerating the seriousness of the problem and they almost never come back themselves. So you have lost 10 customers.

So it’s very clear that satisfied customers are valuable creatures and should be looked after. What are your customers worth to you?

Customer service
So now you know what your customers are worth to you, what do you do to show it?

Customer service is probably the primary means of creating repeat customers. In most cases, the customer can buy a similar product or one that does the same job elsewhere, probably for around the same price. That’s the competitive world in which we live. So customer service is the feature that can distinguish your business from your competitors.

Again consider your own shopping experiences. How often do you return to a store where the staff are surly, unhelpful or downright rude? Not any more often than you can help. But how often will you visit a store where staff are friendly, eager to help and appear to value your business however small it may be? A lot more often – sometimes you will even go out of your way to visit that store over others that are closer or perhaps even cheaper.

Look at the buying experience from your customers’ point of view. What can you do as the seller to make that experience as pleasant, as easy and as uncomplicated as possible? Decide and then do it. And keep on doing it.

Good customer service is not a once-off. Nor is it something that is decided once and set in stone forever. Good customer service keeps evolving, changing as customers’ needs change. But it’s the key to keeping those valuable customers.

Now go on to consider the other key elements of marketing:

• Customers
• Competition
• Product
• Price
• Place
• Promotion.