A common complaint I hear from small business is that they don’t have any marketing dollars. I have yet to see that really be the case. Every business has a client acquisition cost. Those are marketing dollars.
A client of mine, a very large fitness and health facility, was informing me about unusual high turnover they were experiencing. After some questioning I learned that they were being reactive to these lost members. It was only until after someone did not renew their membership that they reached out to them. They hired two people to work phones for 3 full days per month to reach out to these non-renewing members and and tried to get them to renew. On average the callers spent 12 minutes per member, usually not receiving any returned phone calls.
I suggested that instead of running reports of who did not renew, they run a report of whose renewal is up in 90 days, AND have used the facility less than 2 times per month. Then offer those persons free personal training. The response was, “That is like giving them $80. “My reply was, “Yes, it is – that’s the point.”
The idea of giving value, regardless of the cost, is a very difficult concept for many to adapt to. Many think they are “cheapening” their products and services by giving it away or reducing the price. Phooey I say. How cheap will your business be if you try to sell it without any customers.
Your buyers want to know what is in it for them and want to know if you are as committed to them as they are to you. If the relationship is not reciprocal, it’s not a relationship.
Another case in point are apartment complexes. Many of these multi-unit dwellings run great promotions on getting people in the door. The most common is, “free rent for the first month.” When it comes time to renew your agreement they raise the rent by $100 per month, and that encourages them to move and take advantage of the promotion the neighboring complex has of free first month rent. Don’t you find that odd? Let’s break down what this is really costing them:
New tenant acquisition: $800 (first month of rent)
Cleaning cost: $125
Carpet replacement: $200
Paint walls: $50
Administration costs: $50
Total Cost: $1,425
New revenue from raising rent: $1,200
It is actually costing the company to $225 for every tenant that moves out because of raised rent.
What if the promo went something like this: “We don’t Raise the rent EVER!!! Guaranteed!!!” Retention would skyrocket and the company would pocket an extra $225 per tenant, decrease the vacancy rate, decrease maintenance costs and the list goes on and on.
Spending money on retaining clients is as important, if not more important, than spending money to gain new clients.
So the question is, where are you spending money to acquire customers, how are your marketing dollars working for you in retaining existing customers? Do you have dysfunctional operational systems that are impeding your ability to attract and retain new customers? The answer is probably.