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One step forward and two steps backward

A business cannot grow if it takes one step forward and takes two steps backwards. In this case I am referring to losing existing customers. Even if your growth of new customers is improving every month, if you are losing your old customer base at a faster rate, then you are headed for disaster.

I have to use a simple example: If your goal is to fill your bucket and every day you increase the amount of water that is poured in the bucket, you will never reach the top if the hole in the bottom is always letting more water out.

A business that measures its success by the number of new customers it gets each month is focusing all its efforts on marketing and very little attention is paid to the existing customer base.

Marketing is a two phase process: getting new costumers and keeping the old customers. Just as there are a lot of components to a successful marketing campaign, there is an equal amount, perhaps even more components, in customer retention.

New customers are recruited by offering (promising) certain benefits; if those benefits don’t match the customer’s expectation, then they will leave. Several things may be in play here: there may be a disconnect between what sales is selling in the way of benefits  and the internal customer relations staff that is providing those expected benefits. The second possible scenario, the sales team is selling to people who may not be able to fully utilize the products that are being offered, or they lack the training in how to maximize the benefits from those products. A third possible scenario is competition; the evaluation of what your competition is offering is another critical responsibility of the marketing team.

In either case, the solution is to step back and re-evaluate the entire marketing program, sales, retention and competition. This internal examination will cross over into all aspects of the business. That will include finance (budget, cash flow, etc.) internal product delivery systems, training, ongoing customer relations, and management in addition to the marketing process.

Unfortunately, this is an issue that affects many existing businesses. I found this problem in some “fast growth” firms where their cash flow comes mostly from new sales, and expenditures are based on an ever increasing income with no hope of stabilizing the cash flow. That is how the “bubble bursts.”

There can only be one most important thing. Many things may be important, but only one can be the most important.            Ross Garber

Nick J. Petra CFP     Strategic Duck can help you identify that one thing.



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