The Big Four ("4")...
If you are a business owner, your biggest concern is always increasing profits. The concepts are very simple, and once you understand what you need to do, it’s much easier to grab your profits. These four concepts are inter-related, and the increases are not arithmetic, but exponential. When you Increase your retention, reduce attrition, increase the frequency of purchase, and increase the dollar amount per purchase, your profits will not go up by 10% or 20%, but by 100% or 1000%. They work synergistically.
Let’s examine these.
1) Increase Retention
Retention is holding onto, or retaining, your customers.If the normal life cycle of a customer is three years, and you can increase that to five years, that’s not just a 40% increase in retention, it keeps a happy customer that is purchasing at your business.It gives you stability, and that increases your profitability.
How do you increase retention?Keep the customer happy!Get to know their name.Interact with them.Have customer appreciation days.Have “customer of the week” celebrations and events.If the customer has a complaint, they are not a whiner, they DESPERATELY want you to improve because they care.Listen.
Treat your customers with respect.If your employees joke about your customers, even behind closed doors, that is a cancer.You need to re-educate your employees that the customers pay the bills.If they make fun of the customer, they have planted the seeds of contempt, and no matter how much they try to hide it, they will always show that contempt to the customer.It’s not an option.If a business goes out of its way to drive customers away, it will almost always be successful.
2) Reduce Attrition.
Attrition is defined as customers leaving.If you can reduce the number of customers that leave, they will stay.You can’t always keep a customer from leaving…BUT, if you can, contact them, and ask them WHY they left.Rather than being offended, if you approach this in the right manner, they will be so pleased, that they might just become even MORE loyal.
Try this approach, call the customer and say, “Hi.This is Reed from Rapid Rainmakers Academy.I just wanted to apologize.You have been a loyal customer for years, and I always enjoy seeing you in the store.I noticed that I haven’t seen you recently.I don’t know if I did something to upset you, or one of my employees did something, but I have always seen you as more of a friend that a customer, and I just wanted to make sure that you were okay.If it was something I did, EVEN IF YOU DECIDE THAT YOU NEVER WANT TO SEE US AGAIN, I would always like to be the best that I can, and try to improve.What did we do wrong?”
If you are sincere, the customer will probably be so shocked that you would call and apologize that they will either tell you why they left, or give you the benefit of the doubt.Your job isn’t to be “right”, but to make your customers happy.Of course, some people will never be happy, but if you really TRY to improve, most customers will appreciate your effort.
3) Increase Frequency of Purchase
If you can increase the frequency of purchase, then you increase the number of times that the customer comes to your store and you increase the likelihood that the customer will feel comfortable spending their hard earned money with you. If you increase the frequency, on average, from once a month, to once a week, you have quadrupled the number of times that they are in your store AND you have increased the comfort level that they have with you.
The first time that they visit your store, they are just getting to know you, and they might not buy as many things. When they come back repeatedly, they come to buy.They don’t come to browse.They know what they want, and they want to buy more.
How can you enhance this?Make buying easy.Don’t have an air of mystery around the benefits that a product can give them.Instead, give people factoids, posters, and stories about how products can help them.When you make learning fun, they will want to buy more.When they have an intellectual justification to buy, instead of just an emotional one, they will not only buy more, they will feel good about having done so.
4) Increase the dollar amount per purchase
As your customers stay with you, don’t leave, and buy more often, they will feel more comfortable making the big ticket purchases.Your goal is to always help your customer get what they really need, instead of the cheapest thing that is on the shelf.
If you are selling quality items that truly increase the customers health, enjoyment of lifestyle, and help them long term, don’t be afraid to make suggestions.Don’t automatically assume that the customer is broke.They came in the store, didn’t they?They have money, or else they would not be in shopping. Be a subject matter expert on your inventory, and listen to what the customer is saying.If you can genuinely help them, you can confidently suggest the benefits of buying your merchandise.
When you increase the average dollar amount per purchase, your profit margin goes through the roof.Why? Because your store has fixed costs (such as rent, salaries, lights, water, taxes) that are the same whether your customer buys $1 per purchase, or $100 per purchase.When they purchase the larger dollar amounts, that incremental revenue is almost pure profit (minus the cost of the item).Your margins just GREATLY increased, and your profit will explode.
If you want to increase your profitability do these four things.
Increase the dollar amount spent per purchase.