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Lead Scoring, Prioritization, Routing & Nurturing How Businesses Increase Conversion Rates by as much as 300% About the Author Welcome. For more than 20-years, I have helped growth-oriented businesses develop more effective ways to attract and retain profitable clients. My focus is on leveraging your strengths and available resources in order to drive performance improvement in key areas such as: Lower cost per new customer Higher retention rates Higher referral rates Higher average order/annual billing I work with your sales and marketing team to develop practical action plans for demand generation, lead scoring/nurturing, customer retention and customer referrals. And I provide you with insight into your audience and competition with my research and competitive intelligence experience. So, if you re business could benefit from improved sales and marketing performance, give me a call so we can talk. And be sure to ask about the free, no obligation sales and marketing audit for qualified firms. (Your business must have an existing sales and marketing function supported with a budget that is at least 5% of annual revenue and annual revenues of more than $5 million.) CONTACT INFORMATION Phone: 410-977-7355 Email: pat@mcgrawmarketing.com PLEASE SHARE THIS PUBLICATION WITH ANYONE YOU FEEL MIGHT BENEFIT FROM ITS CONTENTS. This work is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License. 2
www.mcgrawmarketing.com 410.977.7355 Twitter: @patmcgraw Frederick Reichheld, The Loyalty Effect What are the questions you need answered in order to determine if an inquiry is a qualified lead? What answers make the qualified lead sales ready? How confident are you that everyone in sales and marketing is using the same criteria as you are using?...in a typical company today, customers are defecting at the rate of 10 to 30 percent per year; employee turnover rates of 15 to 25 percent are common; and average annual investor churn now exceeds 50 percent per year. In most businesses other than retailing, the author argues, the costs of acquiring a customer, setting up an account, and checking credit are so high that the economics just won t work unless the customer stays loyal....a five percent increase in customer retention rates can potentially increase by 25 to 100% the value of a business s customers A few thoughts from Pat McGraw Retention starts long before demand generation. Retention starts when you start planning your business what makes it uniquely valuable to your audience. Retention needs to be proactive rather than reaction yet too many wait until the customer is half-way out the door before turning on their retention magic. And retention is something that needs to be part of your corporate culture because everyone has a role to play in delivering a unique, valuable customer experience. 3
Lead Scoring, Prioritization, Routing & Nurturing How Businesses Increase Conversion Rates by as much as 300% Most companies fail to realize that they lose money on the first sale to a new customer and that it takes several purchases before the customer becomes profitable. But sit down and do the math (below) and see for yourself. The demand generation campaign cost $100,000 and generated 1,000 responses at a $100 cost per response. Only 10% or 100 of those responses became a lead, and then 50% of those leads (50) purchased, on average, $2500. Now this is where a common mistake is made and that is to confuse revenue with profit. Many businesses would see $125,000 in revenue as a successful campaign because only $100,000 was spent. But with 25% profit, this campaign generated only $31,250 in profit which means that the campaign failed to cover all of its $100,000 in costs. Now, to calculate how many purchases those 50 new buyers must make for (Continued on page 5) 4
www.mcgrawmarketing.com 410.977.7355 Twitter: @patmcgraw (Continued from page 4) the campaign to break-even, you must add additional sales and marketing costs to the equation and the end result is that those new customer need to make another 2.5 purchases to cover the remaining $78,750 in sales and marketing expenses. Tip 1: Be Proactive About Retention Few firms have a formal customer retention action plan. Most make the assumption that...once someone buys from us, their ours for life because our products and services are so much better than the competition. And we all know what happens when we assume, don t we?! Think of it this way. Retention is like moving from dating to marriage. It means more work and you still need to remember to tell them that you love them. And remind them of the many ways you express that love so they realize that they are enjoying value because they will forget. You want to consistently deliver a unique, valuable customer experience. You want to meet, if not exceed their needs and expectations. And those needs and expectations change so you need to pay attention in order to respond quickly, appropriately and effectively. Tip 2: What should that plan include? Right at the start, you need to identify what the customer values then create a plan for ensuring that your business consistently delivers on those wants, needs and expectations. You know what your capabilities are so use that as a checklist when (Continued on page 6) 5
Lead Scoring, Prioritization, Routing & Nurturing How Businesses Increase Conversion Rates by as much as 300% (Continued from page 5) discussing this with prospective and new customers. Then ask if there is anything else so that before you sign that deal you know what you need to do to retain them. Tip 2a: On-boarding Process They have never done business with you before and they have no idea how to work with you as a customer. So make it easy for them. Create a process for new customers that ensures they have a fantastic first experience and for some businesses that can be a day or several months. The goal here is to WOW the new customer so they never have time for second thoughts and buyer s remorse. Let me tell you a story that will help explain. Early in my career, I was in charge of sales and marketing for a sports apparel manufacturing company. And they purchased about a dozen sewing machines that cost more than $20,000 each. Prior to delivery, the sewing machine company sent out a person to look over the manufacturing site and worked with our team to ensure that the delivery would go smoothly. Retention starts long before the customer s first purchase. It s part of your business model, your culture. On delivery day, they arrived on time and were neatly dressed. They introduced themselves to the owners and managers and users. They quickly and efficiently executed the delivery and installation. That s when the training team arrived and they immediately began training the staff so they could quickly master the new machines. (They had also brought in a demo machine and offered scheduled training sessions for (Continued on page 7) 6
www.mcgrawmarketing.com 410.977.7355 Twitter: @patmcgraw (Continued from page 6) employees prior to the delivery and installation.) Then, every day for the next four weeks, a trained staff member from the sewing machine company would be on-site to answer questions and offer additional training. Since productivity was key the manufacturer offered service calls before and after normal business hours for our sportswear company. They came with a replacement machine (same model) in case they couldn t repair our machine in time for work. They also came monthly to perform regular maintenance so that the machines continued to work at peak efficiency over a long life. That s a retention plan. (Continued on page 8) 7
Lead Scoring, Prioritization, Routing & Nurturing How Businesses Increase Conversion Rates by as much as 300% (Continued from page 7) Tip 2b: Support You should have someone in charge of retention and you should giver serious consideration to that person not being the sales person that is assigned to the account. Why? Because that s not their core competency. You need someone that is skilled at working with clients in order to ensure they have a consistent, valuable experience. Someone that knows what to ask and look for in terms of satisfaction or dissatisfaction. Someone that can work with the client when their needs and wants have changed in order to modify your firm s retention strategy for their business. Tip 3: Clearly Define At Risk and Attrition This one sounds so simple but it can lead to some intense discussions. When is a customer at risk? And what is attrition? Is a customer at risk or no longer a customer when they close their accounts? Or when the customer is ordering smaller order or less frequently? The bottom line is that without a common measurement, it s tough to look at attrition across the enterprise in an organized way. Tip 4: Once defined, Identify Commonalities Once you have your definition for at-risk and attrition, look at those customers and try to identify common elements. Look at demographics, psychographic, geographic (or, in the case of businesses, firmographic) factors. Great retention is about being proactive not reacting to disappointed or angry clients. It s about consistently delivering great experiences that WOW the customer. (Continued on page 9) 8
www.mcgrawmarketing.com 410.977.7355 Twitter: @patmcgraw (Continued from page 8) Look at activities and interactions with your business are there any common events? Talk to your customers and ask why their behavior is changing. Interview former clients and find out why they left and what, if anything you could have done to have retained their business. Then look at all the data in order to some conclusions. What you should find is that some left for reasons that you could have prevented and others left for reasons you couldn t prevent. And you should identify certain behaviors that led to the specific action that is attrition. For example, most customers don t stop cold turkey. They might slow down and buy less often and in smaller amounts. (That s when they are probably testing out your replacement and they don t want to leave you for unproven alternatives.) Maybe they start to pay later and later. Or returns are up significantly. Or calls to service and support have increased. Tip 5: Communication Bring your sales and service people into the loop because chances are pretty high that the customer is saying things that are clear indicators of dissatisfaction and plans to take their business elsewhere. (Continued on page 10) 9
Lead Scoring, Prioritization, Routing & Nurturing How Businesses Increase Conversion Rates by as much as 300% (Continued from page 9) Remember, there s nothing worse than hearing from a co-worker that...i knew they were unhappy after the customer has taken their business to the competition. You want to know that information as soon as possible so you can respond if that business is worth saving. Tip 6: Pick your battles Sometimes, losing a customer is inevitable. Some will die. Some business clients will close their doors. Some will relocate to places you don t serve. Sometimes, losing a customer is a blessing. You probably have some customers that fail to generate a profit. They pay late. They return merchandise all the time. They call service and require help all the time. You have limited resources and your goal is to invest those resources in areas that generate the greatest profits for your business so have a process for determining if the at-risk customer is worth retaining. Tip 7: Intervention Process Once you have identified an at-risk customer, you need to act swiftly and appropriately which means you need to have a process and a plan. And that plan needs to have clear rules for evaluating, accepting or rejecting the customers terms. Oh and make sure that whomever represents your business at this meeting has the authority to make decisions because in some cases you are going to need to negotiate. Don t go running in there tossing around free stuff. Don t walk in and drop your prices. Walk in. Sit down. Ask them what, if anything, is wrong. Then shut up and listen. Ask questions that confirm what you thought your heard so that you are on (Continued on page 11) 10
www.mcgrawmarketing.com 410.977.7355 Twitter: @patmcgraw the right page and so that the customer knows you heard them. Then ask how you can make them happy. Amazing as it might seem, a lot of customers will be happy to see you care. Some will ask for something that is simple and very reasonable. And a few will ask for the world at which time you make a counter offer. You want to bring this to a happy conclusion right then and there so don t ask to go speak...to my manager. Be in charge. Tip 8: Random Acts of Kindness Regardless of the customer s behavior step in every once and a while with a random act of kindness. Thank them for their business. Offer them something of value and that s not a discount. Be creative and leverage your resources so that it s something of low cost but high perceived value think early boarding for frequent fliers or early check-in and late check-out at hotels. Or maybe it s call ahead seating for preferred clients. The key here is to offer something relevant, personal and of high perceived value so it WOWs the customer. Conclusion Retention is all about setting clear expectations at the start of your relationship with the prospective buyer and then making certain that you have the processes in place to consistently meet or exceed those expectations over the course of your relationship. Keep in mind that expectations and needs and wants will change over time so you need to keep the communication open in order to proactively manage those changes. And have clear, measurable objectives in order to measure your own performance over time because you won t know if you are successful unless you understand the key metrics. 11
Lead Scoring, Prioritization, Routing & Nurturing How Businesses Increase Conversion Rates by as much as 300% Customer Retention Self Diagnostic Part 1: Targeting and acquiring new customers Yes No Does the organization have a clear picture of what the key customer segments are and how it can help meet customer needs? Does your organization bundle products and offers to meet the individual goals of these segments? Have you identified subsegments within the larger groups and defined value propositions for them? Do you have formalized on-boarding programs for new customers that include regular communication during the first year? Are you able to price products based on individual customer relationships? Part 2: Servicing and developing customer relationships Yes No Does your organization develop common processes collaboratively across the business to simplify the customer and employee experience? Does your problem resolution process support escalations and measurements? Do you have proactive retention programs to identify and approach customers likely to attrite? Does your CEO champion a customer-centric sales and service culture across the enterprise? Do you have a formalized sales training and coaching program for improved employee performance? Are your sales and service representatives trained to recognize retention threats? Do you have any loyalty programs established for products (e.g., credit card rewards)? Part 3: Measuring results Yes No Do you have a clear definition of attrition that is clearly communicated and understood by all across the organization? Are you tracking and reporting on attrition on a regular basis? Does your CEO review retention results on a regular basis? Do you track attrition by product and customer? Can you identify controllable versus uncontrollable attrition? Are your product managers compensated for retention as well as acquisition? Do you have the ability to measure the profitability of individual customers? 12
www.mcgrawmarketing.com 410.977.7355 Twitter: @patmcgraw Please share this document with anyone you feel might benefit from its contents. If you have any questions or comments, please contact Pat McGraw at pat@mcgrawmarketing.com or 410.977.7355. 13