How can a small business owner make more money from the customers they already have?
You make more money from the customers you already have by pulling four levers: getting them to buy more often, getting them to send you referrals, raising what they spend each time, and charging the right price. For most service businesses these four cost less than finding new customers, because the trust is already built.
- The four levers, in the order most owners should pull them
- Why is it cheaper to make money from existing customers than to find new ones?
- How do I increase customer lifetime value?
- Which lever should I pull first?
- How much more can these four levers add?
- How do I get customers who stopped buying to come back?
- Do I need new software or a bigger marketing budget to do this?
The four levers, in the order most owners should pull them
Count what you already have. Pull every customer who paid you in the last two years. Next to each name, write how many times they bought and what they spent. Most owners have never looked at this list as one page, and it is the whole starting point.
Measure it every month. Track four numbers: customers, visits per customer, average ticket and price. If you can see them, you can move them.
Pricing: review your prices once a year. Most owners have not seriously reviewed their prices in years while their costs kept climbing. A small, explained increase to existing customers rarely loses the ones you want to keep.
Average Ticket: offer options on every job. Give three packages instead of one price, and offer the same add-ons every time. Customers often pick the middle option, and some pick the top.
Referrals: ask at the right moment. The best time to ask is right after the customer tells you they are happy. Make it easy with a card, a text they can forward or a simple thank-you for every referral. Then partner with non-competing businesses that serve the same customers.
Frequency: ask them back. Book the next visit before you leave the job, send a reminder when the service is due, and offer a maintenance plan. Many customers do not come back because nobody asked them to.
“One of the first things we implemented was three-tier package pricing. The first time we did it, we sold our top package.”
Why is it cheaper to make money from existing customers than to find new ones?
Because you have already paid to win them. Getting a new customer costs anywhere from five to 25 times more than keeping one you already have, and a customer who already trusts you says yes faster.
Research by Frederick Reichheld of Bain & Company found that raising customer retention by 5% raises profits by 25% to 95%. Every lever on this page works on people who already know you.
Source: Harvard Business Review, “The Value of Keeping the Right Customers,” October 2014.
How do I increase customer lifetime value?
Customer lifetime value is what one customer spends with you over the whole time they stay. You raise it by getting them back more often, raising what they spend each visit, keeping them longer, and having them bring others like them.
A simple way to see it: lifetime value is your average ticket, times visits per year, times the number of years they stay. Frequency moves the visits, Average Ticket and Pricing move the ticket, and good service plus regular contact moves the years. Referrals add new customers who already trust you because someone they know sent them.
Which lever should I pull first?
Start with Pricing, then work FRAP backwards: Average Ticket, Referrals, then Frequency. Pricing comes first because it needs no new lead, and every lever after it earns more once the price is right.
If your prices have not changed in two years, that is your first move. Then give every job options to raise the Average Ticket, ask happy customers for Referrals, and bring past customers back more often with Frequency. The free Hidden Profit Assessment shows which lever is leaking the most in your business in about eight minutes.
How much more can these four levers add?
More than most owners expect, because the levers multiply instead of add. A 10% gain on each of the four is not a 10% gain overall. It is roughly 46%.
That is simple math: 1.10 times itself four times is about 1.46. Small, realistic changes on each lever add up to a big change in the business, and none of them requires more ad spend.
How do I get customers who stopped buying to come back?
Contact them directly, with a reason to return and a date to act by. Many lapsed customers did not leave unhappy. They forgot, or nobody followed up.
Start with the list from step one. Anyone who bought before and has not bought in a year gets a personal message, a call or a card with a specific offer and a deadline. It is usually the fastest money in the business, because these people already said yes once.
Do I need new software or a bigger marketing budget to do this?
No. Every lever on this page runs on the customer list you already have, a phone and a calendar.
Software can help you keep track once the habits are in place, but it does not pull the levers for you. The owners who see the fastest results start with a printed list and a weekly hour to work it.
“We've done aspects of FRAP in our business, but frequency is going to be one of our main focuses moving forward in several different areas of the business.”