Immediacy – How long can businesses wait for success?

Historically on this blog, I’ve talked about how businesses can make the most of their existing customers and data.  In a perfect world, the success that can be achieved by mining what is currently owned would be able to steer most businesses through these tricky times.

Unfortunately, more often than not, this isn’t enough on which to squeak by.  Other activity can be critical.  And as the pressure builds on businesses to keep alive in a difficult market, the length of time allowed for a particular strategy to succeed shortens.  This is a problem – sometimes a “long tail” payoff far outstrips the initial quick wins.  But as businesses begin to strive for immediate results (sometimes to the exclusion of a longer term strategy) are these quick wins doing more harm than good?

A good strategy, now more than ever, needs to be built with different time frames in mind.  If structured properly, a strategic plan should incorporate;

• Short Term Goals (Repeat purchases : retention)
• Medium Term Goals (Up-sell or Cross-sell : development)
• Long Term Goals (New Customers / Win-back : activation and re-activation) 

As you might expect, the ease with which these goals can be met relates to the timeframe in which they can be achieved.  Retention is relatively easy (relatively being the key term!) to implement, re-activation being arguably the most difficult.  Yet look at bottom line value of these goals.  A repeat purchase, although easy to induce, arguably does little to extend the lifetime value (LTV) of the customer*.  Development is more difficult because it takes the customer out of their existing sphere of behaviour, but if successful should allow for an exponential growth in their LTV.  And the difficult activations provide a previously non-existing revenue stream.

So, although the quick wins give the business a much needed short term shot in the arm, true growth cannot be achieved without long term planning.  Ignore the future at your peril!

*N.B : again, relatively speaking.  A customer purchasing twice that you would expect to purchase only once has the potential to double or triple their LTV.  However an argument could be made that this is actually a “re-activation”.  Historically, a win here refers to a customer with a long-term loyalty to the brand buying a product “out of cycle”.

Can 80/20 ever become 60/40?

A general rule of business is that 80% of your revenue comes from 20% of your customers. It's a naturally occuring rule, and even has a name (the Pareto Principle).

However, such a hard and fast rule may cause you to ask "Well, why should we waste time recruiting more business? We can afford to lose our smaller clients and coast on our bigger ones!". I'm sure you see the flaws in this logic. However, there are a couple of important points that not only address this misguided approach, but could actually give your business a shot in the arm.

100% of your clients have something in common. You. And although they may differ in a number of ways, you (as a service provider) are who they choose to fulfil their needs.

Also, because they have chosen you, they are comfortable to build a relationship with you, and you have their trust. However, the 20% that spend the most with you don't trust you more than the other 80% of your clients. They may simply have understood quickly that you can fulfill more of their needs.

The way to level up the Pareto Principle is to ensure that the further 80% are having all their needs met by your company, and also are aware that you can help them as service providers.

There are a number of ways to do this, and a consultant can help to implement a number of methods to address customer optimisation. However, by being intelligent with your up-sell and cross-sell offerings, whilst at the same time having effective retention strategies in place and (most importantly) learning from the data you own, you can begin to tip the balance in your favour.

CRM’s need not be complicated

The last 18 months has seen a radical shift in the priorities held by a business. Unfortunately, too many have been forced to devote the majority of their time and resources to simply staying afloat. And, really, this is totally understandable. The recession has been painful, relatively swift, and really quite violent.

For the last few months, investment in CRM has been championed by a number of sources – seen as the one dependable way to survive a recession and maybe even exit in a stronger position than a business entered. However, there’s a significant gap between large businesses who know they should tighten up their CRM practices, and those smaller businesses who don’t know where to start. And sadly, those smaller businesses are most at risk.

So what’s holding investment back? Two key factors. 

Firstly, fear; a perception that the implementation of a CRM system is incredibly expensive. Our suggestion would be that any steps taken to master your customer data are valuable. Even a little investment (maybe some data management, and some top line customer insight) can change the outlook of the business – knowledge leads to confidence.

Secondly, know-how ; a perception that implementation of a CRM system is incredibly complicated. Again, it needn’t be, and it can be done in-house. As you would expect, we’d recommend that (at least from the outset) external advice is sought on best-practice CRM creation. If this is professionally planned, then a consultant can create a system that can be handed over to the client, and to a certain extent maintained in-house. Admittedly, this isn’t best practice. However, if it allows a client to be more intelligent with their acquisition and retention planning, then it’s a positive step forwards, and a great platform to build on.