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10/27/2009

Gain And Retain More Customers Using Customer Flow Analysis

After studying the cost of advertising and promotion, most businesses find that it takes about three visits for a customer to start becoming profitable. Therefore, successful businesses are those which spend considerable time and effort getting to know their customers, and understanding the economics of both acquiring and retaining them.

Unless a business is increasing its number of customers, it is either going out of business or treading water. Therefore, it is vital for a business to set up a tracking system to monitor both the increase of new customers and the retention of existing ones. Usually, a business that does not monitor its customers closely makes bad advertising decisions.

Here is a customer-flow analysis questionnaire which will assist you in evaluating your focus on the acquisition and retention of customers�which will help you make good advertising decisions. 

1) Do you know the average acquisition cost per customer?

Take the total advertising and promotion budget and divide it into the total number of customers per day, week, month, quarter, and year.

2) Do you know the average acquisition cost per new customer?

Take total advertising and promotion budget and divide it into the number of new customers per day, week, month, quarter, and year.

3) Do you know how many new customers come into your business each day, week, month, quarter, year?

Ask customers if they�ve shopped or purchased here before and make a tally on a New Customer Sheet.

4) Do you know what areas your customers come from?

Post a map of the general area, and ask customers to stick in a push-pin where they live. At the end of a week or two you will see a cluster where the majority of your customers are coming from, and major gaps where they are not coming from. Then you can redirect your marketing and promotion to those gap points.

5) Are you encouraging your customers to refer your business to friends and associates?

Make sure each customer receives a certificate or discount for bringing a friend, associate or family member. Everything from mother/daughter or redheads, to boss/secretary or teacher/student�specials encourage your customers to tell someone about you.

6) Do you know how many customers you need to achieve break-even each day, week, or month?

Divide your daily operating costs by the average dollars each customer spends. This gives you the number of people you need to buy from you each day to achieve break-even. Example: daily operating costs equal $1,000. Average expenditure per person $10. Total number of people needed to buy daily to achieve break-even is 100.

7) Do you know how many more customers above break-even are needed to achieve various profit level goals?

Using the same basic formula determine how many additional customers will be needed to start generating the profits you desire.

Remember that your fixed costs are already paid for once break-even is reached. Given your variable costs, how many more customers will be needed to achieve your desired profit?

8) Do you have a Customer Quality Control System that gives you customer feedback on how you can stay competitive?

Are you randomly calling your customers to see if they were satisfied with your service, product and price? And then asking how you can be of more service to them?

9) Are you up-selling each customer to maximize the return on sales?

Are you strategically designing your promotions and advertising to assure the customer gets a good price, while you are presenting and offering additional higher-profit items to them once they are in your store or place of business?

10) Are you monitoring the competition�s service, products, and price to insure you are not overlooking any competitive edges that would attract more customers?

There is nothing dishonorable in studying the competition. Every major sporting team does it. And every major business does it. So you shouldn�t feel uncomfortable going into and examining anything and everything the competition is doing.



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