Plan for Repeat Business

Plan for Repeat Business


If there is one mantra you should adopt now and plan for in your business, it should be that repeat business equals profit. The reality of business is that it costs anywhere from six to eight times as much to generate a new customer as it does to sell to an existing customer. And profits only start to accrue from new customers after a second, third or even fourth purchase. So how can you plan for repeat business in your start-up?

First, you must determine upfront the cost of ‘buying‘ a new customer for your business. What do I mean by ‘buying’ a customer? Exactly that. Instead of guessing how much to spend on sales and marketing, determine how much you are willing to spend to ‘buy’ a customer. This will give you a more concrete way to create your budgets for marketing, customer appreciation strategies and referral programmes.

Determining the acquisition cost of a customer

Say your R10 000 ad generates 100 phone calls. For each call or lead, you’re paying R100 to drive people to your business. If 20 of those leads turn into buyers, you’re paying R500 to capture each sale.

Let’s also say you can plan for each customer to spend R5 000 with you, with R1 000 of that profit. How often would you continue to invest R500 into marketing? If you wanted to profit continually, you’d invest those Rands over and over again. Knowing how much it costs to buy a customer also allows you to plan for and master the numbers around the lifetime value of your customer.

Years ago, I owned a dog food business. My average customer would spend R8 000 a year on their dogs, and the average dog lived about 10 years. I presumed a customer would stay with me half that time, meaning the lifetime value of my dog food customer would be R40 000.

Imagine if I created a repeat business programme that both produced and rewarded referrals. If a single customer could be incentivised to buy on a monthly basis and was also prompted to refer two new customers to me, that would make a single customer worth R120 000.

What if those new referrals sent more referrals? How much value is that initial contact worth now? More importantly, what would I be willing to do to keep that single customer? This long-term view of customer value is essential.

Only when you realise a customer’s lifetime value do you see the importance of developing great relationships with your customers. The goal of all that effort is, of course, to build a loyal base of raving fans – the ultimate key to building repeat and referral business.

Have a plan

So what should your repeat business plan look like? Here are five key action points:

1. Be dilligent with your database
This is extremely important. In fact, the biggest long-term asset for most companies is their customer database. So plan for it, protect it, add to it and communicate with it at every opportunity.

2. Make your communication personal and personable
Whether it’s a letter, a brochure, a frequent buyer’s card or an email, make your communication to your database reflect the culture and personality of your business. Make everything represent the core principles of your company vision and mission.

3. Make it easy for your customers to buy and keep buying
Lower the barriers to purchasing from you. A great way to test this is to pretend you are a customer trying to buy from your own company at least once a month. What, as a customer, would you change? Another way to lower buying barriers is to simply ask your best customers how you can make doing business with you easier.

4. Decide what you can promise your customers
Make sure it is something you can deliver consistently each and every time. The basic rule is to ‘under-promise and over-deliver’.

5. Test and measure everything
From your ads and your numbers to your loyalty programmes, make sure the numbers work at every level. Because whenever your marketing ROI fails to deliver, you can tweak or change your programmes.

Effective advertising

Having all of these components driving your repeat business will allow you to develop a great competitive advantage for your company. It’s the foundation for referrals and word-of-mouth advertising, and that form of advertising continues to be the least expensive (and most effective) marketing you or anyone can ‘buy’.

Brad Sugars
Brad Sugars is a startup expert and the writer of 14 business books including “The Business Coach”, “Instant Cashflow”, “Successful Franchising” and “Billionaire in Training”. He is the founder of ActionCOACH, a business coaching franchise.