Make More Money from the Customers You Already Have

If you ask a group of entrepreneurs how their enterprises could make more money, nearly all of them will give you the same answer:

“We need more customers.”

That is a smart answer. The broader your customer base, the greater your profit potential. Yet smart entrepreneurs can also increase profits by targeting their current customers more effectively.

Growing with current customers has two main advantages over finding new ones:

1.      You already know your current customers and what their needs and priorities are.

2.      You are already in contact with them, so you have opportunities to persuade them to purchase more.

The key to making more from your current customers is to implement one or more of these strategies:

Strategy One: Improve Loyalty

The most important way to increase loyalty and retention is to satisfy your customers. That means you need to find out what they like about your products or services and provide more of it. If you run a health club, for instance, start by asking, "Can you tell me what you liked about your class today?" and then provide more of it. You can also implement loyalty plans, such as price discounts or gifts to members who work out two or more times each week. The critical thing is to talk with your customers and give them more of what they like.

Strategy Two: Get Customers to Use More of Your Product or Service

There are three ways for you to persuade your customers to increase usage:

1.      Point out that their needs have increased.

2.      Show them new uses for your product or service.

3.      Simply remind them to use what you are selling.

Strategy Three: Upsell Your Customers to More Expensive Models or Versions

Airlines try to persuade coach passengers to fly in more lucrative classes such as business or first class. Car rental companies are currently adding convertibles, sports cars and SUVs to their inventory. In a health club, you might persuade customers that they need a trainer or need to upgrade to a more feature-rich membership package.

Strategy Four: Get Them to Pay Higher Prices

Sometimes when companies raise prices, they point to the increased costs of doing business - an argument that rarely makes customers feel good about paying more. A stronger argument for an increased price is increased value. For example, the owner of the health club might increase the hours the health club is open, or add new equipment when raising membership fees.

Strategy Five: Get Them to Accept Less Value

Offering less value for the same price lets you decrease your costs. But tread carefully. Some organizations do this without letting the customers know that this is going on. For example, producers of candy decrease the size of their packages without decreasing their price, or airlines may make it much more difficult to use frequent flyer miles. But eventually your customers will notice - and at that point, may leave you.

Value-engineering is a more stable approach to cutting costs. It means taking a close look at your products or services and eliminating or reducing benefits that the customers do not really care about. For example, if your health club customers rarely use certain pieces of equipment or if other equipment available provides the same type of workout, then it may be possible to remove that equipment.

To summarize . . .

The strategies I outline today can let you increase profits dramatically without having to develop new customers, hire additional salespeople or undertake other costly activities.

You’ll be making more money while spending less. That’s a combination that spells profit to any smart entrepreneur.