I closed the last blog post with a promise to share some practical steps each of us can build a culture that creates amazing customer experiences and directly impacts profitability. Before I go there though, I want to share what may be the last invitation I can pass along for you to join me and Cindy this coming Friday (Nov 13) for the final LIVE2LEAD:Harrisonburg virtual experience we’ll be hosting in 2020. This year’s content is incredible but the bonuses are worth as much as the event itself… Hope you’re able to join us!
So how can we get more juice from each squeeze? First, understand I’m not suggesting that we ever try to actually SQUEEZE extra dollars out of the clients or customers we interact with! If we provide them with value through the product or service we offer, we deserve fair compensation for that. What I am suggesting is that we do everything in our power to make sure we capture as much profit as we possibly can from the revenue we generate!
In a post several days back, I referenced some of the material I was studying in order to put this all together stating that the profitability from business with a new customer typically ranges from 5 to 20% of the overall amount. That study also suggested that the margin from business with an established customer can often be between 60 & 70%.
That seems like a huge variance! Does that mean we’re offering crazy discounts to attract the new customer and jacking up our prices with established customers? Unless you’re the cable/internet provider we’re stuck with, that answer is almost always NO!
Let’s be honest, most companies have some sort of loss leader they promote in order to get a new customer in the door. That’s not what I’m really digging into here.
I have a good friend who provides a very specific certification course that’s priced around $2,000 per person for what’s typically two full days of very involved in-person training. About half of that amount covers his cost of materials, licensing, and the facility. He, and several others I know, say that marketing costs are usually between 20 and 30% per individual in this type of training. So what’s left? Simple math says that what’s left over, his profit, is around 20% of that $2,000 per person amount - and that’s assuming he fills the room since the fixed costs are the same whether there’s 2 or 20 people participating…
When I went through the first round of this training with him several years ago, he had time and money involved in getting my attention - in marketing to me so that I even considered investing in what he provided. He EARNED every penny of profit he was able to keep from that session. It was truly a great customer experience for me. Since then, I’ve attended a few more sessions with him and I’ve referred people to him for the training he provides. Because my experience with him was so positive, providing me with so much value, I didn’t hesitate with taking the next step personally or sending people his way… And that essentially eliminated any advertising costs he would have had in filling those seats!
In Know What You’re FOR, Jeff Henderson says that “when you exceed the expectations of your team, they exceed the expectations of the customer.” My friend who was providing that training didn’t have a team; it was him and his wife. But when they exceeded my expectations, as well as everyone else in that group, I was happy to be part of the team who promoted what he had to offer. When we exceed the expectations of the people on our teams, that absolutely impacts the kind of experience they create for each customer or client they interact with. And when our team members exceed the expectations of their customers and clients, we soon have a tribe of people who can’t wait to tell their friends.
There’s where that increased profit margin comes from with an established customer, and it also helps increase to margin with new customers by driving down the cost to attract them! The same thing holds true for our team members. Even at a higher wage, an experienced team member almost always creates far more profit for the company than the new employee. There’s far less cost in ongoing technical training and a drastic decrease in recruitment costs. When we’re able to create an amazing experience by exceeding expectations - for our customers and our team members - we can count on seeing it in our bottom line!
With all that in mind, there will be times where team members refuse to exceed expectations so we’ll address that in the next post...
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