Lifetime Customer Value

What is a customer worth to you?
We often have this discussion with our new clients. Very rarely do we find that they have truly thought through the real value of a customer. They are usually so focused on the present that they forget the future opportunities that are available to them.

When we think of the value of our customers we often think only of the order that is in front of us. Some of our clients are selling commodities and are getting orders several times a month, or year, and they will think often in terms of the annual spend that the customer has with them. That goes some way to answering the question accurately, but how long does the average customer stay with you? When you know that, you are in a position to accurately work out the true customer value.

So, average customer value is the Average order value multiplied by the number of times they order per year, multiplied by the number of years they stay with you, and averaged out across all your customers.

Why is this important? Simply because it makes it possible for you to decide how much you are prepared to spend to get a customer. Winning customers is really difficult, and most of us have to go to great lengths to achieve that. Most of the business owners that we meet just don’t appreciate the lengths that are really necessary, and, as a consequence, find it extremely difficult to win new customers. They often fall at the last, or last but one hurdle, which, if they only knew it, would be even more frustrating for them.

When you are trying to get someone to buy from you for the first time you have a major barrier to overcome. We call it inertia (Resistance or disinclination to motion, action, or change). Inertia comes from many motivations, including fear of making a mistake, uncertainty about the value of your offering, loyalty to existing suppliers, and good old procrastination. In order to overcome inertia you need to do something dramatic. Maybe it is creating an offer they can’t refuse, maybe it is showing a level of persistence that is beyond the normal human. Whatever it is, you need to do it, and it is impossible to justify the effort that takes when all you are looking at is the first order that the customer will place with you.
So, here’s the thing; for many businesses it makes good business sense to lose money on the first order (or the first few) as the long term benefits of dealing with that customer will make those initial losses look like an extremely good investment

Are you too busy to succeed?

 

When I went to sales school back in the 80’s every training company had a variant of this cartoon.

I think it was supposed to inspire us to recognise that there are lots of people out there who need our service – we just need to get their attention.

Well, these days I am not so sure. It seems to me we need to do much more than just get people’s attention. Let me explain: probably 80% of the business owners we meet admit to having a major part of their business that they are not happy with. It may be they need to streamline their production processes, or they may need to generate more leads. Many people need to improve their conversion ratios. Whatever it is, they see the need for it, and they see the benefits it can bring them.

Here’s the thing – only 1% of the people we meet, in spite of the fact that they recognise they need to change, will actually do anything about it. And why not? Usually they believe they are too busy.

There’s the guy who is working 18 hour days and is desperate for a better work life balance. What does he do? He keeps on with the 18 hour days – after all, he is too busy to slow down.

There’s the woman who is generating 60 enquiries a week, but only converting one or two into business. She knows she needs to improve her conversion rate but she is too busy generating enquiries that she can’t close to stop and work out how to convert them better. Never mind it would take her less effort. Never mind she would make more money – she just has to keep on going. Too busy to stop. Too busy to try anything new.

So, why do people do it? Why do they continue to punish themselves? Well, our theory is that they are afraid of change. They don’t admit to that of course – no, they tell themselves they’ll just get the next couple of actions done, and then they’ll take a fresh look at the business. And the next couple of actions become three, four, five, and so on. Nothing changes.

Making lasting change to our business is challenging. We have to stop what we are doing and risk losing some money while we re-evaluate things. We have to face up to the fact that we have been doing some things wrongly for some time, and we have to be prepared to change, to risk new ideas, and to leave our comfort zone.

Perhaps it’s no surprise then that so many business owners are like the medieval king trying to win the war, and missing a secret weapon. However, for the 1% of us who are prepared to stop and think, and are brave enough to challenge what we have done in the past, and to try something new, this is great news; because it means that we are going to leave our competitors way behind, still doing what they always did, and still hoping for a better result.



Even plants prosper from planning and process!!!!!

I thought I’d show you a picture of our Azalea. This was taken last year (2010) just before Christmas. As you can see, the Azalea is a picture of health, and a great pleasure to have around the house.

Sadly, it was not always so. The plant has been with us for a couple of years, having been given to us by Ginny’s father, who had kept and developed it over a number of years. Since it came to our home, I have to admit it has been a pretty sorry specimen, producing no more than a few buds, which then turned brown and died. This, despite our care in keeping it safe from the frost, and watering it carefully every time it showed signs of life.

So, what changed this year? Well, we just didn’t know; we were simply grateful to have such a brilliant show of colour in the house. Only when we discussed our great fortune with Ginny’s father did we learn that one of the most critical times to water an Azalea is in the year before the flowering season. In other words, the plant had been watered really well the previous November and December (due entirely to weather conditions, and through no intent of ours), and consequently flowered so brilliantly this season.

That parallels so much the work we do with our clients. It is natural to think that success in selling is just about saying the right thing at the right time. In fact, while that is important, it is also vital to have in place the processes that give you the opportunity to say the right thing at the right time. Very few people understand that fact, and yet, the biggest thing that most of us can do to improve our sales performance is to put in place and follow through a process that generates us regular, qualified, high value opportunities.

Most of our clients tell us that they are great at sales once they are in front of people. Getting in front of them is the big problem. Our experience is that it is important not only to get in front of people, but to get in front of the right people regularly and consistently.

We only discovered the secret of cultivating Azaleas as a result of a chance event (the rainy season last Autumn). Without that, and our discussion with Ginny’s father, we would be completely in the dark, and would no doubt have a poor showing again next year. As a result of working with us our clients now know how to have consistently good sales years every year – and now you do too.

If you would like to know more about how to put in place successful processes for your business have a look at our web site www.precept.uk.com , or call us on 01509 415901 for an informal chat.

Part 2 An Example of how we do what we do

If you can remember where we got to last week, we had started to look at what it was that made the girls at Ruddick Recruitment different, and in fact it was those unique qualities that had made them so valuable to their customers.

So we had to go and find some more.

 

Step 4

Good Customers Bad Customers

Now was the time to look at what make a good customer to them and what makes a bad one

Of course we all go and look for more customers but we need to make sure we are looking for good ones not bad ones.

Now they had quite a lot of customers that used to be good but they had lost contact with or just hadn’t any job requirements for some time. They had stopped talking to these people. So we re-introduced their newsletter, a friendly communication with information about legislation changes local interest and some fun, this used to be sent to the people that were registered with them but had stopped. We got them to send it to clients as well.

 

We decided that all their existing clients could do with remembering just why they use them and needed something a little different to remind them. So we started with a hand made Halloween card, Christmas card and a very nice Valentine card that actually got people to pick up the phone and thank them. Oh and we carried out a very illuminating survey on what employers think of recruitment agencies.

 

Step 5

We looked for areas of new business where they had been successful before and could again and put together a direct mail letter for schools and colleges. We also identified that they used to place quite a few clerical staff, and that had been very profitable for them.

 

Step 6

Having decided what they wanted and what needed to be done a ONE PAGE BUSINESS PLAN was written to clearly identify the goals and objectives and to establish the strategies and plans for achieving the END RESULT. And with this the tools to measure the process to keep on track.

 

Now all this didn’t happen without some pain and some change. Deadlines were missed weekly nagging sessions were necessary to make sure homework was done. Encouragement was needed when prospective clients were proving elusive and hard to pin down. But slowly the belief that “we’re great” came back.

To celebrate their 10 year anniversary at the end of March, they totally revamped the office. Sexy cream walls with a striking red feature wall, sleek new furniture and a whole new energy. Last day of March they held a party to celebrate and clients old and new came to see the change.

 

Oh and by the way did I mention that in a year that has been hit by the worst recession in living memory, they increased profit by 50%?

That’s enough to make anyone feel good about themselves again.

 

If you have a vacancy don't forget to call

Shirley or Sue on 0116 269 5151 or visit

    www.ruddickrecruitment.co.uk

An Example of how we do, what we do

I wanted to share with you an example of how we do what we do.

 

Starting Point

Recruitment agency specialising in temporary industrial staff in local area.

Established 9 years ago had been very successful. But after a few difficult years, Shirley had lost her oomph and didn’t know where to start to get things back on track. She was feeling as jaded as the office looked; a sad reminder of the mid nineties, all pastels and floral borders. Money was tight and holiday pay, tax and vat payments were a time of sleepless nights for Sue, Shirley’s business partner and keeper of the purse strings. 

They knew they had to do something, but didn’t know what.

 

Step 1

What did they want the business to do for them?

“BEGIN WITH THE END IN MIND”

The girls had never thought about their work in that way. After much discussion they realised that they would like to sell the business in 5 years and clear their mortgages with some cash left over.

 

Step 2

What numbers do you need to achieve this goal?

How does that compare to where you are now?

So having identified the size of the task, we could work out how to get there.

 

Step 3

Why do people buy from you? What is it that they buy?

“To fill a job vacancy” came the reply. Well there are many ways to fill a vacancy and many other agencies out there that don’t survive very long so what was it about these girls that made them different?

They took away the hassle of looking for people and sifting through the dross, they respond incredibly quickly to requests and are very flexible in dealing with both clients and candidates. They really want to fill the jobs with the right person so take great care in selection. And do you know what; they are really nice to deal with. They are fun, a little crazy sometimes, but always incredibly good at what they do. Who wouldn’t want to deal with them?

 

It was around this time that sprits started to lift a bit, and the girls started to realise that they were actually pretty good at what they did.                                                                                                        

 

Join me next week to see how we identified who were their "good" and "bad" customers and created a business plan.

 

Oh, and by the way, if you need great temporary or permanent staff contact

Ruddick Recruitment 0116 269 5151 and ask for Shirley or Sue.

First Blog

So here we go, this is our first blog.

I guess the best place to start is at the beginning and why we do what we do.

 

Both Phil and I spent many years selling lots of “stuff”, creating very successful relationships with customers. Understanding what our customers really wanted to achieve, then making that happen. Our greatest pleasure came from developing the people who worked for us, by creating training and mentoring programmes and seeing them grow into talented successful salespeople.

 

When we started Precept in 2005 we wanted to find an area where we could use our experience and success to help others.

 

Business advisor and consultants generally don’t get a great press and are so often seen as hugely expensive, unregulated, and not delivering value. Most consultants focus on the large companies with big budgets and can get away with delivering low relative value.

 

We clearly identified at an early stage that the people who really needed help, and who were consistently ignored (or out priced) by the consultants and business advisors were the small “owner managed” businesses. These businesses set up with such enthusiasm and energy. Businesses set up out of a passion for what they did. This can be a great way to start; we have found the “owner” is the best salesman a company could ever have, because, although their sales techniques might not be great, their passion carries them through. But as things progress, and the business develops that original enthusiasm and passion isn’t enough to create the growth the ambitious owner wants.

 

This is where we come in, as Sales Specialists to add skills, techniques, processes and knowledge. We then coach our client so all the new skills take root and take the business to where he wants it to go.

 

Now, a lot of people think we look for failing businesses, which are desperate and we can ride in like a white knight and save them. Well we have done that, but if a business is really failing it is generally more than just not having enough sales that causes the problems, and the problems are so deep rooted that the changes we would implement are too hard for the business owner to take on board.

 

We look for successful ambitious business owners who really want to take that leap forward and know that they will have to change things for that to happen. That is where the fun starts and we love seeing how the changes we make together help them to realise their dreams.