An interesting idea to think about

In business-to-business marketing, it costs approximately 10 times as much to acquire a single new customer as to keep an existing customer.

Many businesses lose about 25% of their customers to their competitors annually.

If you could cut 5% of that customer loss, you could add as much as 100% to your bottom line.

Let s say you allocate 6 times as much to advertising as you do for customer retention.

Suggested Formula

Acquisition Approach: you allocate $120 for advertising and acquire 6 new customers at $20 each and you spend $20 and retain 5 customers at $4 each.

Retention Approach: you allocated $60 of your advertising budget to acquire 3 customers and $80 towards customer retention for 20 customers. You could add as much as 100% to you bottom line.

Conclusion: higher revenue for the same expense, which translates to a higher revenue for the same cost.

How the numbers work!

Cost to acquire 1 new customer = $20 and to retain 1 customer = $4

Typical Customer Acquisition Formula

You acquire 6 new customer @ $120

You retain 5 customers @ $ 20

Same costs @ $ 140

Results 11 Customers

Customer Retention Formula

You you aquire 3 new customer @ $60

You retain 20 customers @ $80

Same Costs $140

Different Results 23 active customers

The Green Grocer of Yesteryear

You may remember the days of the corner grocery store. In my neighborhood, the green grocer was Mr. Jones. He called us by our first names and he knew our favourite foods. My mother preferred brown eggs, so Mr. Jones would always be sure to have them in stock for her. I preferred Black Balls as a candy, so Mr. Jones would always offer me some.

In other words, Mr. Jones, like most other merchants of his time, carried his customer database in his head. He kept track of everyone's needs and made everyone feel welcome when they stepped into his store.

Times changed and now, at the beginning of the 21^st century, we find ourselves shopping at the big box stores. Nobody knows our names or what we like and need. My mother can't always get brown eggs, so she settles for white and then complains on baking day that her cakes don't rise the way they used to.

We all miss the good, old-fashioned service the Mr. Jones gave his customers.

My name is Mr. Bob and I'd like to welcome you to my own version of the old green grocer's store. Mr. Bob's philosophy is to supply you with the same kind of personalized service, in the form of marketing advice and networking secrets that the old green grocer provided.

For example did you know that: it costs ten times more to gain a new customer than it does to keep an existing one?

Relationship marketing has been around for centuries, now businesses are focusing on gathering customer demographics to better identify market characteristics, this is called Customer Relationship Management (CRM). CRM sounds like it is designed to build customer relationships but is in fact a mass marketing tool. Some businesses have found CRM very expensive so they focus on advertising to bring in new sales. Both groups may have missed the point that they already have existing customers who will buy more and refer others. Many businesses do not realize they are sitting on this untapped gold mine.

For example, did you know that each customer knows approximately 200 potential customers? Would it not make sense to develop a strategy to build referrals from existing customers?

Small businesses should spend less effort on acquiring new customers, and more effort on keeping existing customers. In order to succeed, modern 'green grocers' need to get to know their customers in order to build a strong relationship based on mutual trust.

Mr. Bob's Philosophy

My name is Mr. Bob and I’d like to welcome you to my own version of the old grocery store. Mr. Bob’s philosophy is to supply you with the same kind of personalized service, in the form of marketing advice and networking secrets that the old grocer provided.

For example did you know that: it costs ten times more to gain a new customer than it does to keep an existing one?

Relationship marketing has been around for centuries, now businesses are focusing on gathering customer demographics to better identify market characteristics, this is called Customer Relationship Management. CRM sounds like it is designed to build customer relationships but is in fact a mass marketing tool. Some businesses have found CRM very expensive so they focus on advertising to bring in new sales. Both groups may have missed the point that they already have existing customers who will buy more and refer others. Many businesses do not realize they are sitting on this untapped gold mine.

For example, did you know that each customer knows approximately 200 potential customers? Would it not make sense to develop a strategy to build referrals from existing customers?

Small businesses should spend less effort on acquiring new customers, and more effort on keeping existing customers. In order to succeed, modern “grocers” need to get to know their customers in order to build a strong relationship based on mutual trust.

People buy personality, not product, today!

This article appeared in Huronia Business Times

by Eric Skelton September 1996

"Forget mass marketing, business people are rediscovering that an attentive ear works better and costs less, says a leading exponent of relationship marketing."

"It costs five to six times as much to find a new customer as to keep an old one," Bob Cassels, President of The Cassels, told a business audience of approximately 70 exhibitors attending the Orillia Business and Consumer Show in August. The show was sponsored by the Orillia Area Community Development Corporation.

"The trick is to understand you've already got a gold mine in your existing clients," Cassels said. "Go and talk to them and find out what they need."

Cassels advocates customer surveys, which allow a firm to find out, from the customer's view, what makes the firm different and more valuable as a supplier. The results can be surprising.

In the case of one of Cassels' clients, a manufacturer, the survey showed that the firm's clients could just as easily buy the same goods elsewhere, but they chose to patronize Cassels' client because they felt the service was attentive and the advice honest.

"People do not buy products anymore," he says. "That's why the relationship with the client is so important. You're not in the business of selling stuff anymore. Instead, ask customers what they need. It's a novel concept, but the customer will tell you."

Cassels also encourages business people to ask, when the sale is complete, what they liked or didn't like about their service. "No client will be annoyed at being asked to express an opinion," he said.

If they want to be adaptable to their client's needs, business people also have to be different from their competitors. If a quirk of the entrepreneur's personality or some aspect of the business is especially unique and interesting, that's something to be promoted, not repressed.

"Why try to copy someone else? Why try to be the same? Why not take your personality and develop it, and put it into a brochure," Cassels queried.

Cassels concentrates on small businesses, many of which don't have the resources to on enough advertising to break through the clutter produced by bigger firms.

Instead, he encourages them to exploit word-of-mouth advertising by joining organizations as BNI (Business Network International), whose members cross-promote each other's businesses.

BNI has established chapters in Alliston, Barrie, Collingwood, Owen Sound, Orillia, Penetaguishine and Wasaga Beach. Each member carries a business card wallet containing the business cards of all the members of their chapter.

When a member hears of an opportunity, which could help another member, out comes the appropriate card.

"This kind of cooperative work produces more qualified referrals and re-sales than advertising that come from phone directories," Cassels says.

He states that only two percent of calls by phone pages inquiries actually lead to a sale because tire-kickers use the pages just to get the best prices.

"To be in business in the 2000's, unfocused advertising and promotions is expensive and a liability," Cassels says. "If yours is a little company trying to get by, it's an expense you cannot afford."