A lot of business owners ask: “How can I get more customers?”
What they’re really asking is “how can I make more money?”…
…and getting more customers isn’t always the right, or best answer.
I’m going to focus on three things any business can do to dramatically boost their profits without altering the business’s structural integrity.
Increase Customer Lifetime Value (LTV)
The first strategy we have for you revolves around Customer Lifetime Value (LTV). Businesses often ask how they can acquire more customers to increase profits. However, the more effective question should be: How do we increase our profits per customer? The answer lies in understanding the LTV.
LTV is the total revenue you can expect from a customer throughout their association with your business. If you acquire a customer for $500 and they make an initial purchase of $1000, your profit is $500. But every subsequent purchase they make — since you’ve already covered the acquisition cost — mostly counts as profit.
So, how can you increase the LTV? Consider what your customers purchase before and after they buy your product or service. By expanding into these adjacent areas and providing these surrounding services or products, you can substantially boost your customer’s lifetime value and, by extension, your profits.
Implement an Automated and Gamified Referral Program
The second strategy is to make the most of your organic or referral-based clients. These clients are valuable because they come from trusted sources, and you don’t have to spend a dime acquiring them.
Despite 83% of customers being willing to refer after a positive experience, only 29% actually do. You can attribute this discrepancy to busy schedules and the complexity of the referral process. To mitigate this, I recommend implementing an automated and gamified referral program.
Automating your referral program ensures that every time a service is delivered or a product is sold, the process of asking for a referral is initiated. Adding a gamified element to this can make referrals fun, leading to higher participation. Reward structures or point systems can incentivize customers to engage more in the referral process.
Collaborate with Businesses That Share Your Customer Base
The third strategy focuses on a different type of partnership — not with customers, but with other businesses. Instead of competing for customers, why not collaborate with businesses that serve the same customer base but in a different way?
For instance, if you run a local pizza restaurant, partner up with a local hotel that doesn’t offer room service. By placing a small card in each hotel room with your restaurant’s information, hungry guests can easily order a pizza. It’s a win-win situation that increases your customer base without any major marketing costs.
This strategy can be implemented in almost any business context. Landscaping businesses could partner with cleaning companies, nail salons could team up with masseuses, and the list goes on.
Dramatically boosting your profits doesn’t necessarily mean overhauling your entire business. It can be as simple as understanding your customer’s lifetime value, automating your referral process, and partnering with non-competitor businesses with a similar customer base. Implement these strategies and watch your bottom line grow!