Did you know that 20% of customers generate 80% of the revenue for most businesses? It’s the Pareto principle at work again.
Factor in also that a repeat customer is more profitable than a new customer, and you have a compelling case to focus on retention for growth.
And yet, customer acquisition gets all the glory. The hottest topics in marketing are around driving traffic and that initial conversion from prospect to new customer.
But there are so many conversions - and so much profit - left on the table when we assume the work is done after the initial purchase.
Some of the most exciting - and profitable - conversion optimization happens after the initial purchase.
This is a desktop recording of the talk I gave today at the Mississauga Board of Trade (MBOT) on this very topic.
In just under 20 minutes, you’ll discover a system for driving up the lifetime value of a customer - on autopilot. Hit play! (And then check out my event special offer.)
I’ve posted a special offer for anyone who was at the MBOT presentation - or who watched this recording. You can choose from a range of services to get your own 80/20 System for Growth on Autopilot.
Rather read than watch a video? Here’s an audio transcript instead.
This is the first time I’ve published a transcript, and it makes me nervous. This is not polished writing - it’s how I talk, and it’s for the convenience of you skimmers and fast readers, in a rush to get to the point! I feel you.
In case you were wondering, this transcript is via Rev.com and I have to say, I love it for accuracy. It’s tempting to create all of my content this way. If you have any questions on how it’s done, reach out.
Now, on with the transcript.
Hey, everyone. I am going to present today on a topic called the 80/20 Path to Growth on Autopilot. What you're looking at right now is my Canva screen, now I’ll switch to presentation. All right.
Thinking about your business right now, how practical is it for your customers to buy from you frequently? Are you in the kind of business where your customer might buy from you everyday? Sort of Starbucks model?
Or are you in the kind of business where your customer might buy from you weekly or monthly?
Or are you in one of those businesses where customers practically speaking are really only going to buy from you about once a year?
We can't all be in a business where we're lucky enough to have something that any given customer needs to buy or wants to buy every single day, but we can increase the lifetime value of every customer using what I'm calling the 80/20 path to growth on autopilot.
Today, I'm going to give you an overview of the 80/20 path to growth, which is broken down into three components.
First, emails that increase customer lifetime value. This entire system is driven by email. It's the vehicle. It's the medium, but there are two other important components.
One is asking a single question that's going to increase your customer retention, your profitability and drive new customers when you do it right.
Second, how to never miss online word of mouth referrals again, right.
If you own a business or if you're in charge of business development, you're probably aware of this constraint that there are only three paths to growth.
We can get more new paying customers.
We can increase how much we charge for any given product or service so there's a higher average transaction value.
Or we can get our customers to buy from us more often.
And so much of marketing would have us believe that number one is the most important, that marketing is in fact getting new customers.
But the truth is that 80% of our revenue will come from just 20% of our customers. Those are the customers that will buy more often and when they do, they'll spend more.
Big businesses know this so research shows that the world's largest corporations spend more to retain a customer than they do to acquire new customers. You've probably seen statistics on the value of an existing customer, the profitability versus a new customer, right. The facts are out there but big businesses have entire departments to devote to retention.
What about small or medium businesses? Well, small and medium businesses, even if they have few resources and little time, can turn new customers into repeat customers and even into advocates who will grow your business on autopilot and I'm going to show you how.
Again, there are three steps to this system and something that's important to note is that it's almost entirely automated. If you're a student of email marketing, you know that the power of automation is incredible today so you can set and forget this system, really largely only tweaking it when you need to. There's one important exception and I'll point that out as we go.
Let's start with triggered emails. What do we mean by triggered emails?
Triggered emails are emails that are automatically sent to a subscriber based on a certain behavior. If you shop online and you've ever added something to a cart with a retailer who has your email address, you've likely noticed an email follow up a few hours later if you didn't checkout saying hey, like you have great taste or hey, you forgot something. So that's a triggered email.
But we should all be sending triggered emails to our new customers. As soon as they become new customers, we should be tagging them in our email marketing system and sending them a series of onboarding emails.
Why triggered emails?
Why can't we just send those broadcast emails out to all of our list or chunk of our list? The kind of broadcast emails that say, “Hey, this is what's going on right now. We have a special, or, it's June, we just hired.”
Broadcast emails are not as relevant because they're not meeting your customer exactly where your customer is in their journey. Often they feel broadcast emails feel off putting because they can come at the wrong time and your level of awareness as a customer may not be right for those broadcast emails whereas triggered emails are like getting an email from a new acquaintance.
In triggered emails, very importantly, we move customers along the journey. This is a diagram, a screenshot from Digital Marketers Email Marketing Mastery Certification course, which is excellent. We will not go into the journey in detail but it's important to note here.
I have circled the bottom eight boxes in this diagram and most of us think of the customer journey as the journey to becoming our customer but in fact, the customer journey largely happens after that initial purchase. There is so much value to be derived from the relationship after that initial purchase, but most of us aren't deriving that value from our relationships with customers.
Now we have to guide them along these steps from learning to consume the product or service through to becoming an active promoter and all of that can happen through triggered email.
Many of my customers, acquaintances say, well, you know I don't have an upsell or cross sell. You know they buy my services or my product and then they don't need it again for a long time or maybe ever. However, even if that's the case, even if that's your business model, the emails that you send after a customer makes their initial purchase with you can get them to some very important next steps with your business, right.
The next yes that you elicit from your customer may be another purchase if that's your business model or it might be giving you very important insight that makes you more profitable or it may be giving you word of mouth promotion, which again can grow your business on autopilot and I'll show you how.
First, the key here, giving more value. In email marketing, that's one of the fundamental tenets that you need to be delivering value, right and many of us, as business owners, as sales people, we already know what the value is of the product or service that we sell and we take for granted that our customer will know it as well, but when they're new to us, often they have to be taught to get the maximum value from your product or service, right.
They might need to be taught compliance. They might need to be taught tips and tricks. They might need to be educated to be a better customer.
They might need to be educated to recognize the benefits that they're gradually experiencing, that they're just not aware of.
So, you need to be teaching them to understand the value and you will do that through a series of initial indoctrination emails, those onboarding emails.
We're following a three to one rule here.
I think I learned this from Joanna Wiebe at Copy Hackers, but as a general rule, you should be giving value with your emails, sending pure content, non promotional about three times for every single time you send a promotional email and I would include in that anytime you ask your customers for something back, be that a sale, feedback or a referral or a review online, right. Three to one ratio.
The next question is, did they really get value?
The only way you know is if you ask and again, you can use email to automate this process, the asking. You're going to be sending a triggered survey email as part of this onboarding sequence, as part of the series of triggered emails that you send to your customers when they first make a purchase with you.
When you do this, you'll also be driving retention, profitability and customer acquisition, which I will show you.
You're going to start asking customers what some people have called the “ultimate question”. Have you heard of the Net Promoter Score? It's relatively new, around since 2003. It was developed by Bain and Company. It's a very simple, deceptively simple but powerful question. On a scale of one to 10, how likely are you to refer us to someone else?
You're going to be sending this survey question via a link through a triggered email. This may be the fourth email that you send to your new customer but the timing has to be of course adapted to your business.
How much time does it take from that initial purchase, given that you're coaching them through those indoctrination emails? How much time does it take for them to really know what value they drive from your product or service? That's a very individual question.
What are we going to do with this information? Well, we're going to segment your list of new customers further.
Based on their answer, they're going to be divided into detractors, passives and promoters. I'm going to tell you what to do with each of these.
Your detractors are those who scored you only a zero to six out of ten. Those are people who are at risk of doing damage to your business, right.
The passives, those who scored you seven to eight are fairly neutral, satisfied but they are at risk of detraction as well if another company comes along and delights them.
But then your promoters, those who scored you nine to 10 are delighted and they are ready to promote you, but they need to know how and we'll talk about how you help them promote you.
After you send the survey (and you're going to be using smart survey software), your respondents are going to see a custom screen based on their score. Call it a thank you page, but it's a follow up question.
For those who scored you zero to six, you're going to be asking what you can do to fix the situation and getting their contact information if you can't. If you'll remember, I said there is one part of this process that you should not automate. This is that part. You should definitely do a personal follow up if possible, over the phone with your detractors, right. Find out what it takes to make them happy and it is incredible.
In your own lives, you've probably experienced this. When you're unhappy and a company effectively solves your problem, you can go from being a detractor to being a promoted quite quickly. In fact, you can become one of the biggest promoters of that company because you're so impressed because it is so rare for companies to say I'm going to fix this problem. Right, so follow up with your detractors.
For your passives, for scores seven to eight, you need to be asking what else could we do or offer to make you even more satisfied. This is a critical question. I will talk more about how this is also a very profitable question or potentially very profitable question for you.
For scores nine to 10, you're going to be asking them to write out exclusively, what major experience is so positive and I'll tell you why we ask.
Going back to those passives though. That open text response is a goldmine for you. This is where you can find upsells, find cross sells and find what we call profit maximizers, which are those offerings that are pure profit, right or that deliver a lot more profit than your other offerings.
Often we don't know. We’re inside our businesses, we think we're delivering everything we can. But our customers know what else they want and if we listen, we can find great opportunities.
One example is, I use Zoom video software, video conferencing software and I have the subscription for individuals and quite satisfied, but I wanted one of the features that's only available when you buy 10 seats transcription. I'm already paying for transcription elsewhere and it would be so fantastic if it were just seamlessly integrated, but I don't want 10 seats. I'll pay more, but not 10 times more, right so I reached out and I asked, can you charge me, give me a custom fee to get transcription to my subscription for an individual.
We worked that out and they are now making profit that they otherwise wouldn't have. They already have the AI transcription technology and so without asking, you don't know that these opportunities exist.
Okay, so what are you going to do with the feedback from your promoters, those people who scored you nine to ten, who've already explained to you what made them so happy? You're going to automate your five star customer reviews. Not just reviews, but most likely five star reviews. Why five star reviews?
Well, as you know, if you have shopped for anything, if you've looked for a restaurant or a hair dresser or what have you, you have no doubt looked at the reviews. You've scrutinized the reviews and people today want to see highly positive reviews and recent reviews. That's how they decide to do business and getting a lot of reviews also helps with SEO because search engines see those reviews as signals that you're an active business, that you're of interest and they send more traffic your way.
All right, but the unfortunate truth is that often people who leave reviews are disgruntled. They may not even be your customer. But if they’ve had a negative experience and no outlet for that negativity or a way to resolve it, that drives people to leave negative reviews.
As for as those people who are satisfied, who are thrilled, they will tell people and some people will leave online reviews. I do, but many people are delighted and forget to leave an online review so we are going to level the playing field here for you.
What we're going to do is have your email marketing system automatically send a triggered email, asking anyone who scored you a nine to ten to just take that feedback that they already gave you and drop it into a review. You'll give them the links. You can even feed them back their exact words, what they said made them so happy and let them post it online.
After you ask, don't forget the three to one rule. You have so far asked your list of new customers to respond to a survey and you've asked your promoters to also leave you a review so now you have to follow up with more value, more content, right because the relationship needs to be seen as giving more than taking.
That's the essence of the 80/20 system.
First, you're getting to the next yes with triggered emails. We're using those automated triggered behavior based emails to move your customers along a journey, right, a goal based journey.
Two, you're asking the ultimate question, every time of every new customer at the right time.
Three, you're automating more five star reviews.
That brings us back to those three paths to growth, which we talked about as constraints but with the 80/20 system, you'll automatically get more new paying customers when your promoters leave five star reviews online, again automated.
Two, you can potentially make more profit from each transaction when you listen to what people say they would pay more for, right and you add that as an offering.
Three, you're getting more frequent purchases from each customer that you've already paid to acquire. So, those people who could have been detractors, right, those people who were dissatisfied. You've dealt with that and hopefully you're able to retain them.
The people who are passives and you follow it up with them, whatever your business model may be, you can follow up with your passives in a very specific, targeted way because now you've segmented them. You can send them coupons. You can send them personal thank you’s, whatever it takes to get them to the next level of delight.
And you've shown the people who are just waiting to become your biggest fans and promoters, that you care about them too by asking what they think and by delivering value with your triggered emails, with your onboarding indoctrination emails.
That 20% of your customer base may always drive 80% of your revenue, but that 80% should be so much more profitable.
Now I've included a special link here. Oops, this link should be at the end of the URL, all right. This link is for anyone who attended the talk today at MBOT and those of you who heard me live can go to this link and check out the specials that I have for getting this system done for you or done in part for you. Anyone else is welcome to check out those offers as well and contact me to get the 80/20 system in place in your business. Thank you.