For someone who has read any of my other blogs, the fact that I am a Simpsons fan is quite obvious. If it’s not clear to you who my favorite prime time TV family is, then it is quite possible that you have had one too many Duff beers; or Düff if you prefer something different (just promise me you’ll never drink a Red Tick beer).
Homer Simpson and Customer Service Strategies
One of my particularly favorite episodes has to do with Homer reuniting with his mother (the first time that happened). He basically reverted back to childhood, which is what would actually happen in that type of real life situation. In one of his opportunities to “show off” for his mother, Homer explains his job at the nuclear power plant. Mrs. Simpson—being a 1960s radical hippie—was horrified to learn that her son worked in the power plant and wanted to know why he wasn’t actively protesting its destruction.
Homer disagreed, citing proof that he is participating in its demise, but from within. His way of protesting is to work there extra “lazily” and put in half effort (ok, so Homer didn’t explain it in those words, but this is a public blog). The response struck a deeper chord in me. Was Homer right?
Business Advice from Uncle Scrooge, Duckberg’s Marketing and Sales Expert
Why just work hard, when taking it easy is more fun? Of course Homer was right, but for the wrong reasons! Allow me to bring in another cartoon favorite of mine, Uncle Scrooge. One of his favorite lines to tell Huey, Dewey and Louie about the nature of work was to “work smarter, not harder”. I don’t want to just be another Frank Grimes in this world; I want to accomplish great things in business and just working hard at marketing is not going to cut it. Take a look at this article from LinkedIn – you’ll see that great customer service is not only the right thing to do, but that it has a major, positive impact on your business.
So, what does this mean in business? “eCommerce spending for new customers is on average $24.50, compared to $52.50 for repeat customers” (McKinsey). The concept is very simple. It is a whole lot easier to market to someone that already trusts you than it is to build a whole new business relationship. How does this work? Let’s do the math.
Sales from Quality Customer Service | By the Numbers
I’m going to make it easy for this example. Repeat customers on average spend twice as much as new customers. Granted, you have to have customers for this to work, but I am going to assume that if you are in business, than you have at least a few of them. Let’s say your product costs $1000. That means every new customer that comes in will spend $1000. Once they become a repeat customer, their spending habits tend to increase and according to the stat above will spend $2000 each additional purchase. Ok, on to the next step.
“The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20%” (Marketing Metrics). For this example, let’s use 60% and 20%. Again, for the example, let’s say it takes one hour to sell the product. So, to reach out to 100 new potential customers would take 100 hours and your revenue from that would be a total of $20,000. Your per/hour average sales success rate would therefore be $200/hour.
If you were to try and upsell to 50 existing clients, you would succeed with 60% of them, or make 30 sales, but this is at the customer resell price (remember, they spend twice as much). Total revenue here would be $60,000, which puts your sales rate at $1200/hour. As a smart business person, which number would you rather make?
While this certainly makes for an impressive and obvious example and your specific numbers may not turn out to be that glaring, it is still clear that it is more profitable to you to put your attention on current clients first. Why? How do they spend more?
A Happy Customer is a Long-term Customer…and a Giving Customer
“Happy customers who get their issue resolved tell about 4-6 people about their experience. A dissatisfied customer will tell between 9-15 people about their experience. Around 13% of dissatisfied customers tell more than 20 people.” (White House Office of Consumer Affairs) Not only do current clients buy more themselves, but they bring in other people to buy, making it much easier to sell to a new client. On the flip side, though, people talk a lot more when they are upset as opposed to when they are happy. “For every customer complaint there are 26 other unhappy customers who have remained silent.” (Lee Resource)
Another, more inclusive article on this subject can be found here.
Would you rather keep plugging along starting up every new client from scratch, or do you want to take a lesson from Homer and Uncle Scrooge? Finding an easier way to make more money is out there. Just don’t go to Brad Goodman for advice.