How to Boost Your Profits With Relationship Marketing
When you’re in the start up phase of any sort of business, turning prospects into customers is your most important goal. This will show you whether or not your business niche, your products or services, or your marketing approach is working. And it’ll give you a much-needed cash infusion as you start to grow your venture.
New customer acquisition—and sales—will always be an important part of your business. But to put your business on the road to profitability in the long term, you have to go beyond short-term thinking.
Through relationship marketing, which is a part of your wider customer relationship management efforts, you’ll be able to turn customers into raving fans that buy from you again and again and recommend you to others. The idea is you don’t want to have to continually seek out new customers and make just one sale. That may be okay at the beginning. But you’ll be drawing from a limited market. You don’t want that money you spent to land a new customer to go to waste.
Instead you want to retain the customers you have and increase their lifetime value. In other words, they spend more money over time with you, which makes your business more stable… and profitable.
Also, new customer acquisition, in which you conduct lead generation campaigns through ads or social media to build a list (usually of emails online), then market to that list until they buy. If you just use ads to try and make direct sales, that can get very expensive with little results. The reason being you have to take someone who is not familiar with you, your business, or your products or services… and build enough trust so they buy from you. That process takes time and a lot of effort. Not to mention that simply buying ads, whether for direct sales or lead generation, on social media or through the pay-per-click or banner ad networks, can be very costly.
Experts say that it is six to seven times more expensive to land a new customer than nurture your existing customers and have then buy from you again. So it’s clear that building a relationship with your current customers is key to growing a solid and profitable business.
That’s what relationship marketing is all about. You concentrate your efforts on people who’ve already spent money with you. They know you. They know the quality of your products. So it takes much less effort to have them buy from you again… as long as you keep them happy.
The trick is you have to form a “relationship” with those customers and keep them “warm”—in other words, engaged and loyal to you in the long term.
I’ll show you how to do that in just a moment. But first I want to make sure you know that building a relationship in this way is much less expensive than acquiring new customers.
If you have a subscription model in your business, where customers pay a set amount each month automatically, usually renewing after a year, you’ll be interested to know that a study from industry watcher David Skok found that renewals cost 11 percent of the cost of acquiring a new customer.
Once you have your relationship marketing strategy in place, your business will also be on the road to increased revenues.
In fact, just a 5 percent increase in your customer retention can increase your profitability by up to 75 percent—that according to data from Bain and Co. And because you have as solid base of customers, you have money you need to be able to expand.
Another positive side effect is that new customer acquisition, which you do have to still do even as you build your loyal customer base, becomes cheaper because your fans are recommending you so you don’t have to spending money on costly lead generation campaigns.
Relationship Marketing Strategies
With relationship marketing it doesn’t mean you continually send sales offers to your customers. In fact, that could sabotage your whole relationship building effort.
Instead you want to focus on providing them useful information and advice that they want—related to your niche, of course. Remember that you want them to be happy. And when you implement a content marketing strategy, you provide valuable, consistent, and helpful service, you do just that.
But you have to get to know your customers on a deep level. What are their wants and desires? How do they like to be reached with useful content? Figure that out so you can tailor your content, your marketing, your products, and your offers so that they are more likely to buy.
The goal is to build trust and for your customers to feel a personal connection to your business.
The Nuts and Bolts of Relationship Marketing
With the technology available today there’s no excuse for you not to be engaging in relationship marketing.
When you build an email list through lead generation efforts, you put all those names on a list. Then you market to that list. Your buyers can be placed on a separate list automatically, so you can contact that list with different messages than you would a list of prospects.
To build the relationship you can send useful content in a variety of ways:
This is essentially content marketing.
You can also use social media to build relationships. This channel is especially useful for engaging in conversations with customers because it’s so quick and direct. And you can easily inject a unique personality and voice. In fact, with so many people using social media to interact with companies and brands these days, being on Facebook, Twitter, even YouTube is an essential part of a relationship marketing strategy.
Profiting From Relationship Marketing
So how do you make money? Well, as part of the useful information you send prospects, you also send offers for new products. That’s called “upselling.” When you send out offers by email, you can expect on average to make $40 for every $1 you spend. That’s much higher than direct sales through banner ads or social media.
These backend products will be at a higher price point, and the customers will be happy to pay because they are more serious about the niche—and they know you and your products. The more the customers buy, the higher priced products you can send them. Depending on your niche and type of business, you might even host events, offer coaching programs, set up a membership site… you can charge thousands of dollars for these higher end, back end products.
Many companies have an “inner circle” level of products or special membership that is the pinnacle of this backend marketing—and the highest ticket items. In this level you might even have certain customers become “partners,” offering your products on their own sites in exchange for a commission.
Remember that the customer relationship management systems available today make it easy to highlight your best customers—so there’s no excuse not to engage with these folks directly.
Of course, no relationship is just one way. Relationship marketing is definitely a “two-way” street. By that I mean that you should give your customers a chance to give you feedback. Address their concerns and suggestions, whether it’s responding to emails or posts on Facebook, Twitter, or other social media. You must stay active in this channel and keep the conversation going.
Once you turn one-time customers into loyal followers, you can bet that they will help you reach even more people. They’ll become promoters who refer you to their friends, family, and people they reach online. With the reach of social media, this is an especially powerful avenue to increase your customer base and revenue. And like I said before, it drives your average cost of customer acquisition.
It’s also important that you reward your loyal customers by giving them things for free. Send out complimentary offers to create a feeling of goodwill. The psychological element of reciprocity is at play here too. When you give somebody something, they fee like they have to give you something in return. In this case, usually by buying something.
The Importance of Customer Service
One element of relationship marketing you can’t forget is customer service. When your customers have an issue… you must be responsive and accommodating.
- Always honor your money-back guarantee
- If something breaks, fix it or send a replacement
- Issue credits if a service is down
For your VIPs (top customers) especially you should bend over backwards to accommodate them. If they were to stop doing business with you… you could lose thousands of dollars… and your reputation as a company could be tarnished forever, which could have a huge impact on your bottom line.
Kick-Start Your Relationship Marketing Now
Even if you’re a relatively new business, you can still start your relationship marketing efforts. Pay attention to who your best customers are and make an extra effort to engage with them. Get active on Facebook and other social media. And always provide useful content to your prospect and customers… so they come to see you as a trusted resource and not just someone trying to sell them something.