One of the fastest ways to grow your business is to not only get your customers to come back, but to also get them to come back for more. Let’s use a quick example, building the ultimate lemonade stand.
If you’re like me, you operated a lemonade stand at least once. You got lemons, sugar, and with a little bit of mom’s help set up a lemonade stand on the corner and hoped some of your friends’ parents would buy a glass or two. It’s a pretty straightforward business. The money received ($1 per glass) minus the cost of lemons and sugar ($0.25) equals as a profit of $0.75.
For many years companies were satisfied selling a “single glass” of lemonade for $1. But times change. Today, many businesses, which are able to offer their products as a service, are selling many glasses of lemonade not for a dollar, but for $0.05 on a contractually recurring basis.
Now at first glance you may think that’s bad business because it now requires you to sell 15 glasses of lemonade at $0.05 per glass to make the same profit as selling one glass at $1. But this overlooks the value of retaining a customer longer and incentivizing them to buy more. Consider this example.
If we can get our customer to purchase 30 glasses of lemonade, we have more than doubled our profit. We could have received the same profit by winning a new customer. But we would also have the associated marketing and sales costs. So, retaining a new customer is worth more than winning a new customer. In addition, if we can get our customer to supersize their glass of lemonade then our profit could double again. This is the power of customer retention and cross-selling.
Under the new “re-occurring” financial model, a business is successful by keeping a customer as long as possible and by increasing the purchase over time by adding value and charging more. The name for this activity is Customer Success which is NOT a new name for customer service; rather it’s a completely new function that ensures customers are using the product and getting maximum value, so they continue to be customers. Customer Success is a subset of Customer Experience (CX), which encompasses all customer touchpoints including the way in which customers engage with your product, your team, and your brand. Focused time on CX is the key to maximizing the value of our ultimate lemonade stand.
Companies that understand the new model are making significant investments in CX. They’ve designed their customer journey, invested in teams, and in tools, all for the purpose of improving their CX. Have you taken steps to maximize your lemonade stand?