During a recent mentoring session, I was asked how can a business scale in today’s climate? For a business to scale, consider the following fact…studies show it costs five times more to sell to a new customer than to sell to a returning customer. So, instead of focusing all your attention on gaining more leads, why not put more energy into current customer relationships and retention to increase their lifetime value. This can be done by viewing the marketing funnel as an “hourglass” and paying attention to the lower stages of retention and endorsement (circled in red).
Think about the “hourglass” in the following way:
- Awareness: You may have a great company product, but if you’re not reaching the target market and getting in front of prospects, it doesn’t matter. Your brand is as good as non-existent if you don’t have an audience. Remember, it’s not the consumer’s responsibility to find your company…it’s your job to find the consumers. The Awareness Stage is located at the very top of every marketing funnel. This is where marketers will put their brand in front of their target market in various ways to try and capture their attention. At this stage, why not leverage lower Endorsement Stage customers using social media advertising to spread the business word? This is just another application of third-party endorsement. Give potential new prospects a reason to share their contact information with the business based on that endorsement.
- Conversions: While the average entrepreneur is focused on getting the sale, the successful entrepreneur is focused on getting the lead. Think of a conversion to be when you capture a lead’s contact information and not when you make the sale. This allows you to build a relationship with your potential customer. Once you have the information and consent to directly communicate with a prospect, you control the conversation and thus have an optimized potential to build the loyalty and rapport that yields a sale.
- Relationships: A Harvard Business Review study found that shared values drive 64% of brand relationships, and customers are even willing to pay more for brands to which they are connected. Your brand must resonate with the target audience’s values and convey those values in a way that forms connections between your company and customers. Some of the best ways to do this are the ones that mimic personal communication between two people, like email, text, or online communities. Just like with your friends and family, nurturing a relationship with your customers (or potential customers!) takes work. Build an effective brand message that sticks, takes more than one email a year. Actively engaging with your customers keeps your brand top of mind (awareness), showcases shared values and builds trust.
- Retention: Too many entrepreneurs are focused on that first sale and not doing much to ensure a second sale. If you’re going to be sustainable, you need customers coming back for more. This means developing a business offering that leads to a second sale and a third, and so on. Examples may include a subscription model where customers get a new or different product each month, or even a more comprehensive service tier from service businesses. If all of your sales naturally lead to a second purchase, the business will enjoy a very healthy profit. With that profit, you can invest back into the business and scale.
- Endorsement: When you look at the bottom of the hourglass, you will notice a building pool of repeat customers who love your product and tell their neighbors about it. This is really a new salesperson on your team, but you didn’t have to pay them in the normal sense. This person is paying your company because they like your product! This is what it means to create brand endorsors of your business. This is where business owners should spend most of their efforts. When you do it successfully, regular customers become part of an organic marketing channel that feeds into your awareness stage. Brand advocacy is built through a strong combination of exceptional products, top-notch customer service and a strong relationship with the customer.
To scale a business, the entire marketing funnel should be viewed as an “hourglass”. Focus on the lower portion of Retention and Endorsement to keep customer acquisition costs low and customer lifetime value high. This is how to increase business profits and scale the business during changing economic times.
Be sure to view the micro-thought free video entitled “Marketing For Business Owners, Session 1“.
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