3 Ways to Increase Customer Value
Serving customers is the sole job of your business. No service, no customers; no customers, no business.
But what happens AFTER you make a sale? How do you keep customers coming back for more?
And, why do you want to?
Transactions vs Relationships
When I was a rock star salesperson in Corporate America, there were two types of salespeople in the company.
The first type was the transaction-focused salesperson. They'd focus on getting customers on and off the phone quickly while focusing on quantity over quality. Their measurement was how many sales or transactions can I make in a single pay period.
The second type was the relationship-focused salesperson. This is where I excelled. Our focus was on building long-term relationships so customers would keep coming back over an extended period. Our measurement was how many sales can we make to a single person or account.
As a customer…
Which type of salesperson do you prefer to deal with?
As a business owner…
Which type of customer do you want?
Customer Acquisition Cost
Customers buy from people and businesses they know, like and trust. If you're going to invest the time, money and resources to build each of those things with someone, why not broaden that relationship into something long-term.
The cost to get someone to buy from you (i.e., customer acquisition costs) can be extremely high. But, when you can get someone to purchase from you or your business multiple times, that cost decreases.
If someone spends $100 with you, but it cost you $10 in marketing, then the customer value is about $90.
Pretty easy math, right?
If that same person spends $100 ten times, and you still only spent $10 in marketing, then the customer value rises dramatically to $990.
So, then the question becomes, How do you increase customer value?
3 Ways to Increase Customer Value
Both as an account manager for Dell and in my own business, I've made the bulk of my money and seen most of my success by selling new things to existing customers. By deepening the relationships with current customers, I've been able to increase revenue and profits, reduce acquisition costs, and build fantastic businesses.
Keep in mind, that you can't increase customer value unless you increase the value to the customer first! (TWEET THAT!)
If you sell a product to someone, then recommend a related product, you've just made a cross-sell. One of the most famous cross-sells is “would you like fries with that?” from McDonald's.
Here's another example from Amazon
Cross-selling is simply making the recommendation of another product based on the current product. This technique helps you, as the seller, meet all of the needs of the customer.
I talked about this in great detail in Chapter 30 of my book Exit Strategy, but cross-selling is about meeting the needs of your customers.
People rarely buy stand-alone items. What they actually buy is a solution; they may only buy a stand-alone item from you. We don't purchase TVs; we buy stands, cables, media players, movies, and maybe even installation.
Starbucks used the cross-selling strategy when they added tea to their menu, and again when they added food items and breakfast pastries. Movie theaters increase their customer value by offering popcorn, soft drinks, hot dogs and other items from the concession stand.
Cross-selling enables you to grab mind share as well as market share, and both are required to build your business.
Before my wife and I traveled to Chicago for Podcast Movement earlier this year, we booked our hotel in advance. When we arrived to check in, the concierge asked us if we'd like to upgrade our room from a standard to one with a view.
We chose to upgrade. And we bought the breakfast package.
Some people call the up-sell the “profit-maximizer,” and for a good reason. If a customer has already committed to making a purchase (like we were in Chicago), they're primed for the up-sell, and up-sells can dramatically increase customer value.
They may want to add the deluxe package to their car. They may want to upgrade their ticket to first class. Or, they may want to get the audiobook in addition to the Kindle version.
A famous up-sell (if you're from the South) would be “would you like to ‘What-a-size' that for 99 cents?” from Whataburger.
3: Create New Products
When I released my book, several sales came from my existing coaching, mastermind, and membership site members. A bunch more came from people who'd purchased my ebook on how to start a budget-friendly podcast, and some even came from people who'd bought my very first product I created before I even launched my business.
Creating new products is one of the best ways to increase customer value over an extended period.
Think about the last car you bought. Was it from the same manufacturer as your previous car?
What about your computer? Your cell phone?
As consumers, if we're going to spend the time to research a company, learn about their products and services, and eventually make a purchase, we're likely to keep purchasing from them over time.
This buying behavior is a kind of confirmation bias. If we buy from a company again, it means we made a good choice the first time. If we don't, it means we made a bad choice the first time.
Creating new products also allows you to grow and evolve along with the needs of your customer. As their needs change, your products and solutions can change too.
Questions to Help You Increase Customer Value
For a complete resource for identifying and understanding your ideal customer, CLICK HERE to download my custom client avatar worksheet.
- What other products will my customer buy to go along with my product?
- How will my customer use my product?
- How can I help my customer get the most value out of my product?
- What will my customer need in the future?
Have any of these techniques worked for you? Which was the most effective?