Page 322 - Duct Tape Marketing

306 Part V: Winning and Keeping Customers

If your calculations show that getting a new customer costs you $300, you’ll
know not to risk losing that person’s business over a $50 dispute. Whether it
means accepting a questionable return, or writing off a contested charge, or
indulging a customer with extra service or an unexpected gift, the investment
will likely cost less than the expense and effort required to replace that cus-
tomer with a new recruit.

Customer economics

Whether a customer buys from you once or a hundred times, your initial
marketing investment is the same. What changes is your ROI or return on
investment — demonstrated in the following formula — which goes up dra-
matically when the consumer becomes a long-term customer, allowing you
to offset the cost of customer acquisition with revenue from multiple sales:

ROI for a One-Time Customer = Profit from 1st and Only Sale

ROI for a Long-Term Customer = Profit from 1st Sale + Profit from 2nd
Sale + Profit from 3rd Sale + Profit from 4th Sale + Profit from 5th Sale +
Profits from all future sales over coming weeks and years

Expanding your share of
your customer’s billfold

When you increase your market share (see Chapter 4), you win a greater por-
tion of all the sales of products like yours that are purchased in your market
area. This requires an offensive marketing approach that seeks to win busi-
ness from competitors.

When you increase your share of customer, you capture a greater number of
purchases from existing customers, employing a defensive marketing approach
that fortifies and builds upon your valuable existing relationships.

The most efficient way to put money on your bottom line is to increase busi-
ness with existing customers.

Here’s how:

ߜ Think of the initial sale as the first step toward winning the customer’s
business for life — or at least for as long as that person remains in the
market for the kind of products you offer.

ߜ Develop relationships. Let customers tell you what they want. Let them
do most of the talking. Hear what they’re saying and work hard not to
jump in with reasons why their ideas won’t work. Realize that if you
can’t address your customers’ needs, someone else will. Their words are
the path to their billfolds — and to your success.