By identifying other needs your customers have, you can actually buy and resell products to serve them. Take Tony Gyke. Tony needed more than promotion to jumpstart his small business, Skip’s Propeller Service. Tony had built a solid reputation as the leading repair service for in Western Pennsylvania, focusing on repairing the propellers on outboard motors. It was a good business during the summer, when people used their boats. Unfortunately, between fall and spring, sales were dead.
Tony considered a number of options. He could advertise in other markets and have people sent their propellers for repair by mail. But a review of the competition in other markets led him to conclude that would be a high risk undertaking. What else could he sell to his existing customers? What were his customer’s needs? He knew that they all had boats. Tony figured that if he had products they could use for their boats, they would just as soon buy from him as anyone. And he was right.
He started with ropes, bumpers, cushions and tarps. After one season, he had doubled his sales, just by selling more boating supplies. Then, he had a breakthrough. Someone asked him if he carried water-skiing supplies. What he found, by talking to his customers, that 80% of them were using their boats for water-skiing and wake-boarding. He bought a few wakeboards, some water-skiing supplies, some wet suits, and doubled his sales again. Then, another breakthrough. He found out that the wakeboarders had other passions. In the winter, they did snowboarding. And, when they weren’t on the water, many were skateboarders. So he bought some snowboards. Then skateboards. Sales doubled again. He had increased sales EIGHT TIMES in three years by just listening to customers.
Tony discovered something else: his customers had friends. They told others about the wakeboards, skateboards and snowboards, so he was getting customers he never had before. Summer, fall, winter and spring. He created a website so people didn’t even have to come in. They could buy from home. He gave “Ultimate Edge” Points to people who sent him new customers, and pretty soon, old customers were actually looking for new ones. Business doubled again.
Tony still sells propellers and repairs them, too. But his growth is in a new category, created by leveraging his customer base. By understanding the products they needed that are related to their existing needs, he both served them better and created an all season business. He created more revenue from his existing customers and leveraged them to get new customers. All without advertising, new product development or salespeople. Ultimate Edge uses the ultimate marketing weapon: customer leverage.
Dan Droz is Chairman and CEO of Droz & Associates: Marketing, Branding, Design, Public Relations, Advertising, Web Design, Interactive Marketing for Pittsburgh and surrounding regions.
October 7th, 2008, posted by admin
Marketing, Pittsburgh, Sales
You’re educating customers all the time. As you provide a product or service, you’re teaching your customer about proper usage, and additional needs. But what about the other things you do. Ongoing communication with clients helps give them a better sense of your capabilities and knowledge. A newsletter, outbound email, or occasional post card about an issue or problem that is relevant to your customers needs, can give them a sense, over time, of your knowledge and additional products and services. If you’re an insurance broker, a newsletter or article on planning for retirement or a child’s education can be helpful and illuminate both your understanding of the core problems your client faces while underscoring the need for financial planning services.
And, newsletters don’t have to be printed. One of the most leveraged uses of the Internet, for example, is the ability to educate without the high cost of printing. By sending emails, and offering special introductory pricing or additional information about new and existing products and services, you’re creating awareness and credibility in the mind of your customer.
A more formal way to create an educated customer is through seminars. Having regular “updates” or inviting clients to presentations that you might be making at a conference or meeting, lets them know about your expertise and offerings. Even if they don’t come, you can offer to send them the outline of the presentation and the materials you distributed.
Dan Droz is Chairman and CEO of Droz & Associates: Marketing, Branding, Design, Public Relations, Advertising, Web Design, Interactive Marketing for Pittsburgh and surrounding regions.
September 30th, 2008, posted by admin
Marketing, Pittsburgh, Sales
Up-Selling and Cross-Selling: Adding to the Sale to Increase Wallet Share and Profit
Upselling
IKEA has a dirty little secret. Their biggest selling item and one of the most profitable in their chain is a product no one ever comes to the store to buy. Yet, year in and year out they sell millions of them. It’s called a votive candle. You buy them by the dozen, even if you never need any. And the only place you can get them is at the cash register, after you’ve decided on what you “intended” to buy.
McDonald’s does it too. The friendly clerk who asks, “would you like some fries with that?” isn’t just being friendly. They’re doing the most important and profitable job in the place. They’re up selling, leveraging the moment of purchase to increase the total ticket of the sale. Up selling is the process of adding to a single sale, increasing the total amount of that sale. Usually, the “add-ons” are perceived to add very little to the cost, but offer high perceived value. Often, they are intrinsically related to the original purchase, such as the “extras” in car sale. However, they can be the “impulse” items at the cash register, that you decide to buy “as long as you’re there.”
The automobile dealer that shows its cars full of extras, the restaurant that offers desserts and pies to go, the bank teller that offers you a CD’s. Everyone is doing it, as well they should. They’re all leveraging us, the customer, to get a bigger share of our wallet. They realize that once we flip out our credit cards, we’re in buying mode, much more likely to buy anything, especially related the sale. Its time to up sell.
Cross-Selling
Another form of leveraging the customer is through cross selling. Cross selling differs from the upsell in that the product or service in the cross selling situation is not perceived to be marginal. It is another, separate product, and is often sold at another separate time. If you’re a law firm doing litigation, you have a great opportunity to market employment law to the same client. If you’re selling heavy equipment, the equipment needs to be serviced. Even accountants have gotten in to the game. For decades, CPA’s focused on financial statements, audits and tax returns. Then came software that did that. Now, those same clients are buying financial planning, asset management, insurance and business consulting of all sorts.
You’ve Got To Ask
The simple act of asking “would you like fries with that order” or “would like to Supersize that drink” actually activates demand, prompting people to open their wallets by an additional 22%. The reason is the process we all go through before we decide to buy something. There’s a fear of making a commitment. Any commitment, whether its our time or money. We want to keep our options open. But, having made a commitment to buy something, we want to save ourselves time and money in the future if we can get something that is easily accessed at the same time or in the same place. In the case of cross selling, almost all buyers would rather deal with the same source for as many products and services as possible, if they were only able to get them.
Asking has a few important advantages. First, it creates awareness. Our customer may simply not know we have an item or offer such a service. The ‘ask’ may actually be put as a question about awareness. For example, “do you know about our 24/7 service program?” may be more comfortable than “would you like a service program with that copier?”
Second, asking creates demand. The buyer may not realize it, but the purchase of one item actually creates the need for other things that they may not be immediately aware of. They need to be “reminded” about the other possibilities. Selling a warranty program or installation makes no sense before you’ve purchased a washing machine. But, having made the commitment to buy one item, creates the need for related products and services.
Third, asking provides efficiency for the buyer. If the buyer is going to need or want the item in the future, they will perceive efficiency of getting it now.
Here’s an example of how it might work with the book you’re now reading. You’ve purchased this book and have gotten to page ?. If you’d like to get an audio tape of this book so you don’t have to read the rest, you can go to the last page of the book and order a synopsis of this book and other things I’ve written, for only $10. Also you can also get access to a number of other products we offer. Just call 800-837-2705 anytime or visit our website. And, as someone who has already purchased this book, you are automatically entitled to a discount.
Fourth, asking shows you care. When asked, “have you thought about what kind of coffee table would look good with that color sofa?” …the question is not so much about selling as advising or reminding. As the seller, you actually know a lot about what customer needs are likely to be. The simple act of asking for more business while you’re in the middle of a transaction plants the seed of a new sale, fertilizes it, allows it to grow in a matter of seconds. No prospecting. No advertising. No printing. It’s leverage at its best.
The items you’re suggesting have to make sense. Asking, “would you like some pizza with your burger, m’am…” will only get you a stare. Burgers and pizzas are substitute main courses. Cokes and fries are accompaniments. You’ve got to be asking about the accompaniments.
Assess New Needs
Nothing works better to cross sell or upsell a customer than knowing them better. The internet has made one-to-one marketing a high art, making it possible to adapt content and promotions to individual users based upon your knowledge of their needs. But, knowledge of your customer can be acquired through a variety of methods, including surveys, self assessments or advisory groups.
• Surveys. Surveys allow you to ask specific questions, in either in writing or in person. For example, warranty forms that come with products, and ask for a variety of information to activate your warranty are a form of customer survey, to allow companies to better understand their customers. If you have a product, it is a great way to get information from your customers. If you provide a service, sending a written “customer satisfaction survey” can provide the way for customers to give you feedback on your service, and qualify themselves for future services. Providing a “request for information” list of your products and services, gives them an opportunity to express their interest.
The results of a sales effect of surveys can be quite extraordinary. A recent study conducted jointly at Rice University and New York University confirmed the amazing impact of surveys on customers buying behavior. Although the study was testing the impact of survey research on sales of financial products, the results are instructive. Customers were three times as likely to buy something else and half as likely to defect.
In fact, the sales effect of surveys is so powerful, you have to watch how you ask. You could be “sugging.” Federal law requires marketers to disclose if their purpose is to sell goods or services when they’re conducting research because even the Feds realize the unfair advantage you have when your conducting research.
• Self Assessment. Providing customers a way for them to assess their own need can be a power motivator, because they are effectively “selling themselves.” The key to selling more products or services to a customer comes down to two things: The customer knowing they have the need, and their knowing you’re a good resource for them to use to address the need. Self assessments do both extremely well. With a few key questions, customers can begin to understand their own vulnerability in servicing their product, or in other areas. These can be in the form of true/false questionnaires or more complicated “scaling.” In simple assessments, you need only to give a “score” and interpretation to be helpful. In more sophisticated assessments, you might even issue a report. An example of a self assessment can be found at the end of this chapter.
One of the possible ways of positioning a self-assessment is as an “entitlement,” ie, the client is entitled a free assessment of their needs at no additional charge. Entitlement marketing is the basis of many successful businesses, where the use of already “earned” benefits might be forfeited if not redeemed.
Bundling
The next time you’re in an auto showroom, just try to find a striped-down model. If there are any, they surely aren’t on the showroom floor. The only cars you’ll see are the ones with extras that are bundled with the base product. In restaurants, the “all inclusive” dinner with salad, vegetable and dessert is bundling. A warranty or service agreement with your washing machine: bundling. The McDonald’s Kids Meal: bundling.
Bundling is simply the process of combining products and services to increase the perceived value and wallet share of a sale. Just like the up sell-by-asking, the bundling-by-bundling requires an understanding of what the natural “extras” should be. They can’t be capricious. Bundling fries with a burger makes sense. Bundling pizza and fries does not.
Done well, bundling serves a number of purposes. First, it increases the ticket of the sale, so you’re getting more wallet share from the start.
Second, customers often perceive added value in a bundled product or service, because the added services are perceived to have a lower price when bundled than when added after the sale, if for no other reason than convenience. If I were going to get a stereo in my car, I’d rather get it done without hassle and as part of the “package” than as an aftermarket product.
Third, you are positioning your firm as a multi-level provider. The simple act of bundling signals the breadth of your offering, even if you aren’t the manufacturer of the product or actual provider of the service. In fact, on of the best forms of bundling is providing products or services you don’t even make or do. You’re creating strategic partnerships to give more value and receive more wallet share from your customer.
Dan Droz is Chairman and CEO of Droz & Associates: Marketing, Branding, Design, Public Relations, Advertising, Web Design, Interactive Marketing for Pittsburgh and surrounding regions.
September 24th, 2008, posted by admin
Marketing, Pittsburgh, Sales
Because the cost of maintaining a customer is far less than the cost of acquiring a new one, maintaining and growing revenue from existing customers creates marketing leverage by lowering the cost of business acquisition. So, to the extent possible, create leverage with your sugar daddies in the following three ways:
1. Retain the good ones
2. Increase their wallet share through up selling
3. Use them as referral sources to get new customers
1. Retain The Good Ones
Customers are money machines. You make an investment to get one and the payback is the revenue they generate. When you lose one, you lose three ways. First, you lose the revenue, which immediately cuts into your profit. Secondly, you’ve got to replace the business with new business that’s more expensive to get. You’ve got to go out and buy yourself a new customer. Third, a new customer is more expensive to maintain. They require education, time and service to get acclimated to you.
Attrition rate, the percentage of last year’s business you have to replace in order to maintain your volume, is death to your marketing budget. It’s the hole you have to fill before you start to grow. If you’re in a business that requires a new customer for every transaction, you have an extremely high attrition rate and a good chance for a high business acquisition cost. So, the first thing to do to leverage your customer is to work hard to keep them. Especially the good ones.
Sometimes, attrition can be a good thing. That’s when your customers aren’t profitable. If you’re paying to keep a customer, that’s not leverage. That’s suicide. But once you’ve decided they’re worth keeping, here are some ways to keep them customers happy:
• Data on the Daddio. The best way to serve your Sugar Daddies needs is to get to know them. What they’re buying, their frequency of purchase, personal information, and feedback on how you’re doing. This can be done on a website, through surveys, questions by sales people, focus groups, or smart cards. My grocer knows more about what I eat than my wife. (That’s because I eat most of the good stuff before I get home). Actually, in order to get the best price on my Altoids, I’ve got to swipe my card. They know about me and give me the coupons to prove it.
Every year, we invite 8 or 9 of our clients to an “advisory” session, to hear their suggestions about how we can improve. We get a facilitator, so they all feel comfortable speaking their mind. And they do. Just the act of expressing makes them more comfortable. And we can adapt to what they say.
• Speed of Response. The single biggest reason for customer dissatisfaction isn’t high prices. It’s not even bad quality. It’s slow response time. The easiest and best way to say you care is to respond promptly. That means returning phone calls immediately, or at least same day. It means getting quotations to a client a day early. And doing what you say. Fast.
A lawyer I know has a policy. He tells his clients that when they call, either he or his assistant will return any call within 3 hours. The effect: the focus groups we’ve had with his clients say he’s the best lawyer they’ve ever dealt with. The truth is, he admits, he’s actually not that great a lawyer. He just returns calls fast.
• Pro-active Communicating. Sugar Daddy’s often don’t complain. They just fade away. They feel neglected. Apart from formal surveys, keeping them abreast of what’s going on through an occasional call, email, or letter gives them tangible evidence that your there, thinking about or acting on their business. Where applicable, a monthly or quarterly report gives you something to refer to when the question “what have you done for me today,” arises.
A restaurant I go to had my wife and I fill out an “information” card. Every year, on our birthday and anniversary, we get a post card that says we’re entitled to a free drink, a dinner, or dessert. We know it’s a promotion. We even know the computer is handling it. But the communication counts. They’re working us because we’re customers. They want us back more frequently. And it works.
• Incentive. I sat next to a mother with three children on their way to Disney World. She had changed planes in Atlanta and had waited over two hours for the next leg of her journey. The curious thing was that there was another airline with a direct flight to where she was headed. Why was she willing to put up with an extra four hours and the inconvenience of plane hopping? Points.
• Added Service. One of our clients sells lime. Not the fruit. The mineral. Barges full of lime. Mountains of lime. The only problem is that there are plenty of other lime suppliers. It’s a commodity. A ton of lime is a ton of lime. Until one day, the CEO had an idea. He realized that every time a barge full of lime went down the Monongahela River, the captain of the tugboat had to fill out a bevy of compliance forms at every lock along the way. So they created a template on their website. Fill it out once and with every barge full of lime, you get the compliance forms for every stop along the way to your destination. An added service that comes with the lime. It doesn’t cost our client a thing. It’s automatic. But for the customer, it’s time saved, mistakes and liability avoided.
Dan Droz is Chairman and CEO of Droz & Associates: Marketing, Branding, Design, Public Relations, Advertising, Web Design, Interactive Marketing for Pittsburgh and surrounding regions.
September 17th, 2008, posted by admin
Marketing, Pittsburgh, Sales
The Leverage of The Customer
Customers are the most valuable assets your company has. They’re the source of revenue, the Sugar Daddies that pay the rent. The nature of many businesses requires a constant flow of new customers. Others have the added leverage of being able to create ongoing relationships with customers that deliver more business without more marketing investment. Auto dealers, for example, need a constant flow of new car buyers, but get ongoing revenue from service agreements. However, some companies spend so much time looking for new dance partners, that they forget who brought them to the dance. Yes, you might need new customers to grow. But, make sure you keep focus on the sugar daddy you’re dancing with: your current customer.
Customer value comes in two forms. First, the immediate revenue from every transaction you make. Second, the projected revenue based on your ability to retain the customer, that adds to your total asset value. Think of your business as an apartment building. Your customer is the tenant. You get revenue every month, plus the long-term value of the building based on its revenue generation potential over an extended period. Keeping your customer coming back for more is the name of the game.
Getting A Sugar Daddy
To understand the leverage value of your sugar daddy, consider what you have to do to develop one. Generally, it’s a 3-stage process, each of which has a set of strategies, tactics and costs. You’ve got to: 1.) Find them, 2.) Sell them and 3.) Keep them.
1. Finding (Prospecting) is the process of identifying and reaching a prospective customer. Get out your checkbook, because this is the most expensive way to get a new piece of business. Think of a start-up company with no customers. Marketing costs in the first year of operation may actually exceed revenue, because the investment in business development needs to be made before business is generated.
The reason that prospecting is so expensive is that the methods for reaching out to and communicating with prospective new customers generally are pay-as-you go. Advertising and direct marketing are the most common forms of prospecting and even though you can reduce prospecting costs by targeting and inexpensive contact measures, prospecting costs can often exceed 20% of the first year’s revenue.
2. Selling (or Promotion) is the process of creating trial and repeat use of a product or service. Once you’ve identified and communicated with a prospect, there needs to be either time spent or an offer made that creates a “first” sale. At times, this process needs to be continued to activate repeat business. Sales and promotion can often exceed 10% of total revenue, including sales commissions and promotional costs.
3. Keeping (Customer Service) is the process of creating customer loyalty that leads to additional sales without promotion or selling, essentially creating a “relationship” with the customer that leads to a pattern or habit of buying your product or service. Customer service can often be between 2-5% of total revenue.
Dan Droz is Chairman and CEO of Droz & Associates: Marketing, Branding, Design, Public Relations, Advertising, Web Design, Interactive Marketing for Pittsburgh and surrounding regions.
September 12th, 2008, posted by admin
Marketing, Pittsburgh, Sales