By: Donna Marie Thompson, Small Business Strategist
The starting point of all achievement is desire. Keep this constantly in mind. Weak desires bring weak results, just as a small fire makes a small amount of heat. – Napoleon Hill, author and business visionary
Do you have a strong desire and commitment to grow your business? All growing businesses monitor performance indicators in some fashion. These indicators range all the way from simple financial ratios and cash management forecasts to complex manufacturing and retail formulas such as cost per production run and sales per square foot. Yet these common financial measures provide no visibility whatsoever into one of the most important indicators of the health of your business, namely customer value. Customer value, not as defined by you, but as defined in the eyes of your best customers.
This is critically important in small business success because customer value is a leading indicator of a profitable, sustainable business. Customer value is an obsession in the top 5% of successful businesses. How about yours?
Four common quantitative measures of customer value are:
1. Repeat purchases. At the simplest level repeat purchases show that your customers are voting with their wallets. Your customers are satisfied to the point that they will buy your products and services either out of need or want. Either way it’s a strong indicator that you’re filling a market need, at least for now. Effective pricing and solid cost control can make this possible. Questions to ask are: what percentage of your customers make repeat purchases? How frequently do they buy from you? And is the average size of the customer order increasing? Sales to existing customers is the backbone of most successful businesses, large or small, with a direct impact on your bottom line.
2. Testimonials and references. The second level indicator of customer value goes beyond purchasing your products where your customer agrees to go on the record noting their satisfaction with your products and services to your prospects. In a testimonial, they agree to have their name and company associated with yours in your marketing materials and sales promotion activities. Although a great tribute, a testimonial is a more passive approach than a reference. Many of the customers who offer a testimonial will also be willing to give you a strong reference when new customers are considering a purchase. These interactions are invaluable to the growth of your business and can guide everything that you do. When you serve each customer with a future testimonial and reference in mind you automatically provide better customer service. It’s a self-reinforcing loop.
3. Referrals and sales advocacy. The third level indicator of customer value is a referral. In this case your customer goes out on a veritable limb and actually recommends your products and services to someone in their network. Their reputation is now on the line with yours. They are counting on you to deliver. This shows a tremendous vote of confidence in your ability to successfully deliver what you say you will. And in even more committed arrangements, this can go beyond a referral where your customer actually makes a sales call with you or advocates your offering. At this point your customer strongly believes that you provide real-world solutions for not only their company but you will for their colleague’s as well. This level of trust is earned over time by delivering exceptional service and attention to detail.
4. Partner and joint venture. The fourth level indicator of customer value is a partnership arrangement. Your client can be an affiliate in a single transaction, a one-time cooperative effort, or a joint venture opportunity legally drawn up for multiple transactions and multiple opportunities over time. There is a wide range of business structures that can accommodate this level of collaboration. In this case your customer has gone beyond being a cheerleader for your firm to actually sharing in the potential downstream revenues and profits. This is a very high degree of commitment by your customer to your business. Both parties can benefit and both are committed to your business success. Be selective in the early stages and start small with precision and clarity until there is a proven process that works consistently for both firms in a true win-win. There is a lot at stake, most importantly, your strong on-going relationship with this customer.
Depending on your marketplace it could be of great benefit to deliver exceptional customer service with the hope that your customers recognize this value and widely share their voices of appreciation. The voice of your customer is worth 10 times its weight in marketing and advertising dollars. Develop a strategy involving one or more of these four measures then make solid investments in delivering exceptional customer value in your business. Apply these measures of customer value to build a strong, predictable flow of revenues and profits to your bottom line. Your desire to grow your business will show results over time when you single-mindedly focus on delivering solid, recognized, and appreciated customer value.