Sell to the Buyers
One of the key tenants of a marketing plan is that it must be part of a long-term strategy. A company that wants to generate new customers for the sake of reaching X revenue within a certain time frame, but has no long-term plan for what to do with those customers after reaching X revenue, will always struggle with cash flow.
A client of mine had this problem. We’ll call the company Joe’s Stuff. Joe’s Stuff offered a 100% seasonal product, and could only sell to customers during the spring and fall seasons – and for only a few weeks per season. During the off seasons they had to keep operations rolling in order to prepare new products for the next sales season. Needing to fix their cash flow problems, they asked me to come and consult with the management.
The most obvious way to increase your revenue is to sell more. But most companies, including Joe’s Stuff, are fixated on acquiring NEW customers, or trying to sell more of the same thing to their existing customers. And that doesn’t help with cash flow, especially for a seasonal company. By and large, very few businesses put any mental energy into selling new things to their current customers. Think about it, which group of people is more likely to buy from you: people who have never heard of your company, or people who have tested and proven your products?
Sell to the People Who Trust You
The easiest people to sell to are the people who already trust you! Is it not far easier to sell a $100 trinket to your friend than to sell a $50 trinket to a stranger? Of course it is. You have a relationship with them. They know you and trust that if you sell them a lemon, they can come and resolve the dispute with you directly. Your customers should have the same level of confidence in your business.
Here’s a quick game for you. Imagine that you own a company, and the government will only let you sell to 100 customers. Ever, total. With this extreme limitation on the number of new customers you can acquire, you only have two options:
- Sell to 100 people and then close your doors.
- Sell something to 100 people… and then sell something else to the same 100 people… and then sell them something else, and something else, and – you get it.
The Third Option
If you’re like most people who play this game, you created a third option for yourself – sell something else that doesn’t have a limit on the amount of new customers you can acquire. But that is not an option. Not in the game, and not in the real world. Anywhere you go, no matter what you sell, there will always be a maximum number of customers you can acquire. Once you reach that point – it’s called market saturation – it becomes too costly to market to new customers. At that point you are forced to either sell something new, or close your doors.
The solution to Joe’s Stuff’s problem was not to go out and find new customers. This client had a customer file of more than 80,000 existing customers. With a customer file that large, no company should ever have seasonal cash flow problems. Indeed, had they originally thought to add a non-seasonal item to their catalog and sell it to their customer file of 80,000, then they would have solved their own problem. But unfortunately most businesses don’t think that way.
Customer Lifetime Value
What I am talking about is creating customer lifetime value. A smart business manager with a long-term vision knows that the cost of acquiring a new customer is far greater than the cost of selling to an existing customer. You already know how to reach them, you already know what they want, and they already trust you. So why do so many companies rush to market saturation before they have even started to sell to their most profitable buyers?
The answer is simple, really. Expanding the product line is just “too challenging”, it requires a new learning curve for the sales team, or it’s just “Not what we do”. If expanding your catalog is “Not what you do”, then I can assure you… option number one is what you will do.