Too Many Companies Concentrate on New Customers Rather Than Hold The Ones The Already Have

Feb 29 2012

I’m going to explain it in terms that I deal with every day.  In my lawn and garden industry the resale value of a landscape company is only the value of the equipment and hard assets that they’ve built up over the years.  On the contrary, a lawn application and maintenance company has great resale value.  The landscape company has big tractors and trucks and can do millions in revenue yet the lawn business does $500,000 and has 3 times the resale value.  Unfortunately, many landscapers don’t realize this until they get out, and even then ,they don’t understand why nobody wants to buy their business.  The reason is simple.  Repeat and long term customers give a business a stable income which is highly desirable.  The one time customer takes much more effort and has to be replenished every year.

These two types of business translate into many different industries.  You can make a living at both but the business that has contracts, subscriptions, and repeat customers is easier to valuate and therefore is easier to sell.  All businesses should have a goal of having a portion their company that has repeat customers.  It provides cash flow and stability. Once you’ve sold a customer a product you now have an “in”.  It seems that many online businesses view the “in” as no more than the ability to now bombard you with weekly sales emails.  To me, most business are so busy trying to get new customers that they forget to pay attention to the customers they already have.

What made me think of all of this is a vendor that I buy from.  I usually buy $10,000 worth of product from them.  Last year I didn’t buy from them at all.  The reason wasn’t really anything in particular.  I actually found a few other good vendors that had some pretty good prices and I purchased their products instead.  I could have called the company and seen if they could match or asked for a price sheet, but I didn’t.  A few weeks ago I saw their ad in a trade magazine that surely cost a few grand.  I thought to myself.  If I had a customer that spent $10K with me and didn’t put in an order last year I would certainly have contacted that customer and seen if there was anything I could help them with. My ten grand would have paid for a lot of ads.

I have to admit I am just as guilty.  I am so busy working on billboards, newsletters, and attracting customers, I forget to focus on staying in touch with the people that are regulars. I too need to do a better job. I do try and call on all my customers that spent over a certain amount but like many owners dread hearing why they haven’t purchased from me this year.  I realize it’s positive to hear the negative, and I’ve learned not to take it personal, but it always stings a little to be criticized. It gets easier as I get older.  I think my turning moment was a few years ago when I called a customer that spent $10-15K with me each year and that year had barely spent a few thousand.  He was blunt.  He said every time he put in an order it was never pulled when he got there. He was right.  The problem was he always put the order in 3 to 4 hours before he was to arrive. Of course I wasn’t going to say that directly but rather that if he could call in the order in the day before I would personally guarantee the order would be pulled.  I’d even give him whatever plant we forgot for free.  It worked, he put in an order that day and we’ve been good ever since.  One phone call and the account is back.  It’s not quite to what it was but neither is the economy. And that’s another point.  Everyone is spending a little less because of the economy so worrying about a customer being a little down is pointless.  The customer that is drastically down needs some attention.

With thousands of customers, calling them all is impossible so basically I work the top 100 spenders that aren’t spending as much.  I NEED those repeat customers.  I need more of them but I want to keep the ones I have.  I want them to buy more every year and at the same time, I want to add more just like them.

Working your previous customer list doesn’t have to be spammy.  It can be a simple phone call or email to say hello and ask them if there is anything you can help them with.  It could a coupon that only previous customers get and is better than what anyone else gets.  A simple way to say thanks and please come again.  Presently I get emails alright.  It is usually sales and specials and nothing but a mass mailing.  I know why though, because it’s cheap.  I think there is a better way, I’ve heard its called the Zappos way but its a way I’ve used for years.  I call it the “throw in a little personal” on top of the sales.

I first realized it with Christmas cards.  I get a few hundred business Christmas cards a year.  I throw all of them away except the cards that have something unique to me.  Perhaps a little note or scribble that shows the card was more than a mass mailing.  If they don’t care, I don’t care.  I use the same method that I used at my wedding thank yous.  A one or two sentence thank you that mentioned something specific about that person.  On the wedding cards it may have said “thanks for the toaster, I just went out and bought a toaster cook book so I can start making breakfast” (real card).  I do the same method for the Holiday cards and say “After laying out 15 semis of mulch this year you’re do for some rest this winter.  Thanks for all your orders and look forward to seeing you in the spring”.  A little something that individualizes them.  This fun and personalization is how Zappos is approaching their customers as well.

I’m not positive about this but it seems to me they have a customer database that allows the customer service reps to write little tidbits about conversations that lets others draw off of.  Things they can use later in emails and conversation.  When they bring it up you feel special.  As if there aren’t 5000 people working there but rather like its a small company that knows you.  All because they kept a few personal details.  You would think that a company that size couldn’t pull it off but they do.  They are fun to deal with.  It’s an enjoyable experience and you want to go back.  They want you back and it comes across.  I don’t get that feeling from most of the places I shop.

Coupons, coupons, coupons.  You see them everywhere.  It’s a bribe to get you into a place. It seems to be the only way they know how to get you back.   It works well but most businesses can’t turn those into repeat customers because the only chance they get them back is to match that coupon price.  Look at Bed Bath and Beyond.  If you go and buy something there without their 20% coupon your wife will kill you.  It’s an eternal coupon.  That is their way of getting you to come back and for them it seems to work.  They are known for that but that’s not the key to their success.  It’s their return policy.  They will take back anything and I mean anything.  It’s one of the most liberal of any store I’ve seen.  If they sell it they will take it back.  Most of the time they give you CASH, yes cash.  At worst, store credit.  It’s their way of saying.  “Hey, that didn’t work out but while you’re here, buy something.  They will do anything to get you to keep shopping.

So advertise, keep trying to add more customers.  All businesses want to continue to grow, to scale.  But it’s just as important to make sure your existing or past customers have enjoyed their experience and you should do everything you can to make sure they come back.  Again, the point is to ADD customers not replace them.

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Outsmarting the Dumb, Outworking the Smart

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  1. Nadia

    That’s why all of my wedding clients get handwritten thank-you cards after the wedding. One year I actually sent everyone Sephora gift cards. Deliver a great product, thank them for their business, keep ’em happy.

  2. Eric

    Today’s coupons come in the form of groupon
    or living social deals that train customers
    to expect a deep, deep discount on everything
    they buy. They certainly don’t become loyal
    customers, as they are always looking for the
    next great discount. Most of our new business comes from existing customers via
    referral….an area many business owners neglect.

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