#2: No Alarm System for Customers About to Be Lost
Few customers depart abruptly. Those are obvious, typically over an unresolved complaint or dispute. Most gradually lose interest and wander off. They show signs, but business owners don’t bother to read or respond to them. In Chapter 16, we discuss the Alarm System needed to catch customers before they become lost to you.
#3: No Rescue System for Lost Customers
Incredibly, most business owners just accept their losses—as normal, as inevitable, or as beyond their control, blaming cheaper competitors or even blaming the customers for lack of appreciation and loyalty. Some customer loss is unavoidable. They move away, they die, their brother-in-law gets in the business. But most lost customers have the potential to be rescued. Chapter 16 describes a Rescue System.
#4: No Customer Multiplier System
Referrals are expected and taken for granted. A lot of this is due to the disease of our time: entitlement. It is rotting our society. Referrals are also viewed by most business owners as unmanageable, as random acts by customers. The idea of organizing a system around referrals seems like trying to get backyard fireflies to fly in formation. But, by the time you have finished this book, you will have all the makings of your own Customer Multiplier System.
Confession of an Ad Man: A Few Words about Sticky Glue and Solid Foundations
As I said, you are smarter than the average bear. Proof, that you are reading this book about a subject that most business operators are not interested in. You might argue that, as an “ad man,” I’m not very smart, writing such a book, but I have ulterior motives, which you may well deduce and find as worthy of being a key objective for you as well. Anyway, you are here, at least open-minded about doing some different things to keep customers active over a long tenure and to grow by “customer get a customer.”
I am an “Advertising Man,” a modern day Mad Man, like Draper and the others at Sterling-Cooper you watched on TV. I started in the ’70s, not the ’50s, but the ad business hadn’t changed much in those 20 years. It was, and still is, about getting clients to spend as much as possible in vague pursuit of new customers in the least measurable ways they could be seduced into using. Please read that again: about getting clients to spend as much as possible in vague pursuit of new customers in the least measurable ways they could be seduced into using. This is because ad agencies are customarily compensated by a disclosed percentage of your expenditures, plus, usually, undisclosed “under the table” money from the media outlets they place your advertising with. Make no mistake about the media itself either, whether “old” or “new.” Google and Facebook are not about delivering customers to you at the lowest cost or with the best efficiency. They are about having you spend as much as possible using them. I started with a traditional, normal, and customary approach to the ad agency business, but quickly became allergic to the stench of the b.s. sold to the clients, and I switched to direct marketing. You can—and should—read about the conversion, and the way you can make over any business’s marketing as an investment instead of an expense, in the book No B.S. Guide to Direct Marketing for Non-Direct Marketing Businesses, Second Edition.
I have made much of my living and, ultimately, my fortune over 40 years by developing effective direct-response advertising and direct marketing campaigns for clients and by teaching my methods to both professional advertising copywriters and agency teams and to independent business owners of every stripe so they can be better DIYs. Yet I often advise against my most immediate self-interest. Often, a client comes to me to get new or better ads—be that print, direct mail, online, radio, or TV. And often, after a little investigation, I discourage them from such investment because they do not have their internal act together and they are squandering so much opportunity with their existing customers (and leads) that producing more by more advertising is like forcing more gasoline into an overfull tank. It just spills out all over the pavement.
My co-author and chief organizer of this book, Shaun Buck, is more obvious about his role. He presents himself as a retention and referrals guy, far more than a new customer generator. His main company, The Newsletter Pro, specializes in custom customer newsletters that serve as sticky glue to keep customers interested in a business and as stimulus to get customers telling others about the business. The same kind of newsletter program also provides the solid foundation for marketing more to existent customers, to increase their value during their life with you just as it extends that tenure by months or years. I have strong appreciation for this because I have never been without at least one of my own newsletters performing these functions for me throughout my entire business career. Interestingly, a number of my peers and competitors have copycatted many things I do but have not copied this, the most valuable thing of all. Consequently, I built companies with equity, executed sales, and amassed wealth through my businesses while they just kept earning most of their income through unchanging manual labor and uncertain, erratic income events, and after 30 or 40 years, still need tomorrow’s new customer to pay yesterday’s bills.
My work and Shaun’s work intersect—to keep, escalate value of, and multiply customers so that your entire business grows ever more valuable and sustainable, and income uncertainty is replaced with very predictable income.
Having very predictable income should be a vital goal.
Income uncertainty plagues most business owners and often perpetuates an underlying tension and unhappiness at home with spouse and family. It’s why even quite successful business owners and sales professionals often half-joke about the people close to them still hoping they’ll “settle down and get a good job.” Income uncertainty or unpredictable revenue also injects underlying anxiety into the staff of the business, and gets in the way of their top performance. When you steady the income, you gain authority with those around you. People have confidence in you. They are more cooperative. There’s less complaining. You and they can focus on forward achievement rather than worrying. One of the best cures for income uncertainty is improvements in and systemization of customer retention and multiplication through referrals.
Very predictable income makes businesses more pleasurable to own, easier to manage, and much more valuable when the day comes for exit by sale. When properly presented to potential buyers of a company, predictable income has a higher multiple value than does unpredictable income. Recurring revenue has an even higher multiple. One of the key things an owner actually sells when he sells his company is projected future earnings at a discount. The more certain those future earnings appear to be, the less he has to discount and the more money he exits the scene with.
When you go out the back door of this book, three things should have occurred: one, you having a far richer and better understanding of the financial importance of retention and referrals; two, you having all the elements needed to assemble systems for achieving maximum retention and referrals in your particular business; three, you being highly motivated and determined to get those systems up and running. Arguably, presuming some of the first and third are already present, the second of these is most important. And the key word is systems.
I teach that all wealth is the product of systems. Henry Ford’s wealth and the Ford family dynasty wealth he set in motion is not the product of any invention of combustible engine or automobile. It is thanks to the system of the assembly line for manufacturing (vs. the traditional one-man-makes-one-product approach) and the system of franchised auto dealers (investing their money in the inventory and distribution). You can peel back the curtain of just about any successful company