This was an award winning presentation from TEC (The Executive Committee) a global organization of CEOs. Duane presented this seminar to CEOs throughout the country, who gave it rave reviews for simple techniques to grow their businesses. You will learn the principles of customer retention and formula for calculating the lifetime value of a customer.

1. Simple Techniques to Grow Your Business By Duane “DJ” Sprague

2. These concepts are universally applied to a Business to Consumer or a Business to Business organization.

4. Growing your business through Customer Retention provides the most reliable long-term growth strategy to improve your bottom-line and is the most cost effective. Why?

5. Who is More Profitable? OLD CUSTOMERS NEW CUSTOMERS

6. Who Closes at a Higher Rate? 28-30% vs. 15% OLD NEW

7. Who Generates Higher Gross Profits? OLD NEW

8. Who Generates More Referrals? OLD NEW

9. Who Can You Re-Sell at a More Cost Effective Rate? OLD NEW

10. Who is Easier to Reach and Advertise to? OLD NEW 10

11. Who is More Valuable and Profitable? G OLD NEW

12. Retaining just 5% more of your customers can boost profits by 25 to 120%

13. Sale Sale Sale Sale Customer Retention Cycle

14. 1x Sale 1x sales lead to “flat line” growth, which leads to Chapter 7, 11 or 13 Bankruptcy

15. Computing the Lifetime Value of a Customer: Calculate the total aggregate profit of the average customer over the lifetime of their patronage — including all residual sales of all products and services — less the average customer acquisition cost for advertising, marketing and fulfillment expenses. 15

16. Example: Your average customer makes an initial purchase of $1,000 which brings you a $500 gross profit. They make 3 more $1,000 purchases the first year for another $1,500 in gross profit. The first year you have a gross profit of $2,000.

17. The average customer buys for 3 years and makes 4 purchases per year with a $500 gross profit per purchase. $2,000 x 3 years = $6,000 gross profit per customer – $350 acquisition cost for advertising, marketing & fulfillment = a lifetime value of $5,650.

18. You should also factor into the calculation how many referrals the average customer generates. If the average customer generates one referral, their lifetime value has more than doubled, because the referral does not have the $350 acquisition cost, for a potential lifetime value of $11,650.

19. Now, what if you did not retain this customer after the first sale, your gross profit after acquisition costs would have been only $150. If your average customer has a lifetime value of $5,650, can you afford to spend more on acquisition to build market share, and can you afford to spend $30 on retention to extend their lifetime value? Is your marketing budget based on a percentage of sales, or on your sales goals?

20. Calculate Your Customer Lifetime Value: Average number of purchases per customer per year: _________________ Average profit per purchase: x________________ =________________ Average life span of a customer in years: x________________ Minus acquisition costs: – _________________ Lifetime Value: =_________________ 20

21. With existing customers you have already made the big acquisition investment, so additional sales are more profitable.

23. How many existing customers do you lose each year to competitors?

24. The average U.S. company loses 10 to 30% of their customers each year.

29. How much does it cost you to replace up to 40% of your customers each year?

30. In the retail automotive industry, it costs $430 to replace or acquire a new customer. 30

31. Calculate Your Customer Acquisition Cost: Total annual advertising and marketing budget:$________________ Divided by the total number of new customers you sell per year:_________________ Total Customer acquisition cost: =________________

32. Is it even possible for you to replace up to 40% of your customers each year?

36. Of the 3, which is the number one reason?

37. Two-thirds of customers surveyed said they left because they felt unappreciated.

40. “ The job of a company and a salesperson is not to make sales, but to make loyal customers .”

44. How many if any of these or other retention ideas are you doing now?

45. What else could you be doing?

46. “ Today’s follow-up is a down payment on your future.”

48. The Pareto Principle: “The significant items in a group normally constitute a relatively small portion of the total items in the group.” Also known as the “vital few and the trivial many,” or the 80/20 rule. 55

49. Who are your least profitable customers? How much time and resources do they consume? Are they more effort than they’re worth?

50. Who are your core customers, those that comprise the middle 60%? What characteristics do they have in common?

51. Who are your top 20% or VIP clients? What characteristics do they have in common? What makes them different from your bottom 20% and your core 60%?

52. Become passionate about retaining your VIP clients. Understand them. Predict their needs. Solve their problems. Make their life easier. Save them time.

53. Provide them with direct access to top management. Provide gratuitous services. Never let them down. 60

55. Companies are offering their customers everything—except what they really want.

56. In a survey of 6,000 retail consumers across the U.S. and Europe, it was found that the majority of people don’t want what we thought they wanted.

57. We assumed they wanted either the lowest price , or the best quality . The truth is, they want “ acceptable quality ” and “ fair and honest pricing .”

59. You can’t sell products or services, you need to sell solutions .

60. In order to sell solutions, you may need to break the 10% Rule. The 10% Rule : “Everybody within a a specific industry does the same things, and offers the same products advertised and marketed in the same ways plus or minus 10%.”