Tag Archives: customer

Small business strategy question: What causes you to lose a sale?

By Aaron Hoos on January 9, 2013 in Business

This blog post is part of a series on 100 small business strategy questions that an entrepreneur can ask themselves to help them grow their business profitably. Click the link above for the master list of 100 questions and find the growing series of blog posts discussing each question.

WHY IS A SALES LOST?

When a sale is made, you can break out the champagne and celebrate! Money has come into the business to pay for its operation (and hopefully to put a little into your pocket too). And wise businesses dissect those sales successes over and over to help understand the elements that came together to make it successful.

But not every prospect interaction ends in a sale. Many (perhaps most!) end up without a sale. The smartest businesses take time to dissect THOSE “failures” as well. (I use the term “failures” here very loosely because not every lost sale is a failure. I just used it to mean the times when a sale doesn’t occur).

Here are some ways you can dissect why sales weren’t made:

  1. Take a sampling of prospective buyers from a previous period of time. For example, examine all lost sales in the last month or examine the last 10 prospective buyers who didn’t buy. You need to either do this on an ongoing basis and handle just a few at a time (which is good if you are a sole proprietor or a freelancer or something) or you need to grab a batch and do them all at once in a big “fail-fest”. This sample should be of anyone who interacted with your business but definitively chose not to buy from you (as opposed to people who are in your sales funnel who haven’t bought yet). It’s not a perfect science to find these people because there are some slow pokes that you should take a closer look at… they’re the ones who keep claiming that they’ll buy but never do. I’m being someone general here because every business is different so you’ll have to find the definition of a lost sale that works best for you.
  2. With this list of people in hand, figure out where they were in the sales funnel when they chose not to buy. Usually, this will be people who were your leads who asked not to be contacted anymore and it will be prospects who were presented with your offering and said “no” and couldn’t have their objections overcome.
  3. Hopefully you recorded the reason they gave to not buy from you. (If you don’t record the reason, start doing so immediately!) Examine them carefully. and look for patterns over a period of time.
  4. Next, look at different factors like: How long were they in your sales funnel for? How did they interact? With whom did they interact? What information did they receive?
  5. Also, compare their progress through your sales funnel with the progress of your successful sales. Many times, you’ll find that there are a lot of clues here. The people eventually say no, for example, might bring up price earlier than anyone else or they might take longer to progress than the ones who became buyers, or they interacted in a certain way with certain staff members.
  6. Look for patterns. Try to find what is similar about people dropping out at these earlier stages and how is it different from people who progress through your sales funnel and end up buying from you. Look for common questions; common phrases, common pathways; skipped steps, etc.

You will eventually find some common factors. You might not discover all of them immediately. But with each time you do this, you’ll learn more and you’ll become more adept at spotting a “non-buyer” long before they even know they are non-buyers!

As you do this exercise over and over, you’ll discover that you can quickly and easily divide people into two groups: People who never should have been in your sales funnel in the first place and people who should have been there (because they are part of your target market) and just didn’t go through with the sale. When you divide people into those groups, it becomes even easier to find the problem areas.

Once you have identified the problem areas (which probably won’t happen the first couple of times you do this exercise), you can create a game plan to fix them.

Small business strategy question: How do you define a customer?

By Aaron Hoos on October 27, 2012 in Business

In a previous blog post I listed 100 small business strategy questions that entrepreneurs need to ask and answer to grow their businesses. Then I’ve been occasionally examining each question and providing tips and advice on how to answer that question and then apply the answer to your business.

The small business strategy question I’m looking at today is: How do you define a customer?

The first part of the answer to this question has to do with the synonym you use in place of the word “customer”. I use the word “customer” to refer to anyone who buys when you’re selling but not every business uses the word “customer”. They might use words like “client”, “buyer”, “subscriber”, “patient”, “member”… or something even more specific (like “seller” for real estate clients who sell their homes or “insured” for someone who has purchased insurance). But for my purposes in this blog post, I’m going to use the word “customer” to refer to the group of people you sell to, regardless of what you call them in your day-to-day business.

That’s not the only way we define a customer. We also define a customer based on what commitments they make. Someone who subscribes to our free newsletter might not be a customer. But they are a subscriber. To some businesses, a subscriber is a customer; to other businesses, a subscriber is not a customer.

And, we define a customer based on when they become customers in your sales funnel will help you define your customer. For example, they might be a prospect until they commit to buying from you, even if they don’t pay until after they’ve received service. But that’s not the case for every business. Some businesses don’t have customers until that customer hands over cash.

It’s kind of a fuzzy line: When someone goes to McDonald’s, are they a customer when they drive into the parking lot or when they walk in the door or when they stand in line or when they order or when they pay their money or when they get their food?

WHY DOES IT MATTER?

You might be wondering why it matters how you define a customer, and why you should go through all this trouble for something that is apparently a very fuzzy definition.

There are a few reasons why it matters: Knowing who your customers are (and when they become customers)…

  • … helps you to market more effectively by shaping your marketing and sales efforts toward the value that the paying customer will receive (as opposed to some general value that people can get for free from you). This protects you from doing all that work to drive people to your blog or email newsletter only to have them think that you have given away everything of value and there is nothing worth paying for.
  • … helps you to work toward one specific goal in your sales funnel. (And, if you have other people on your team, you can align that goal so you’re all working together toward the same thing).
  • … helps you to measure your marketing and sales success so you can test the effectiveness of your marketing and sales efforts and improve for greater profitability.
  • … helps you provide better customer service by helping people who are actually customers (versus those who might be committed to your business but not a paying customer.
  • … helps you to innovate with simple things in your sales funnel like adjusting your paygate or delivery times

All businesses have customers but businesses define those customers differently. How do you define yours?

Why it’s sometimes good to lose a sale

By Aaron Hoos on July 4, 2012 in Business

Your conversion rate is the percentage of prospects that actually buy from you.

So if you have 100 prospects and 10 of them buy from you, your conversion rate is 10%.

Easy.

But here’s what you do need to know (yet many entrepreneurs don’t know)…

Part of your job as a business owner is to improve your conversion rate. Try to grow that rate by closing more often. Instead of closing 10/1000 customers, try to close 11/100. Then 12. Then 15. Then 20. Etc. This is a smart move because it’s more profitable (and less work!) than just increasing the number of prospects.

It’s important to always push that rate higher. But there is a limit.

There is a point at which your rate is too high. At that point, people are becoming customers in droves (which seems good) but it could hint at something seriously broken right now and something terrible is about to happen in your business.

1. SOMETHING IS BROKEN RIGHT NOW

If your conversion rate climbs and climbs and reaches a point that is too high, it can often suggest one of the following things:

  • That your marketing overpromises the value of the product or service.
  • That you have incorrectly priced your products or services and the value you offer is far greater than the price you’re asking. Note: The value you offer should be higher than the price you’re asking but if it’s too high then you might end up with too many customers — and possibly too many unprofitable customers.

2. SOMETHING TERRIBLE IS ABOUT TO HAPPEN

A too-high conversion rate means bad things are about to happen in your business:

  • Perhaps you will end up with a customer service issue if you overpromised something in your marketing and after your customers purchased your product or service they discover that it doesn’t do what it’s supposed to do.
  • Perhaps you will end up with a cash flow issue as you dump all of your revenue into growing your infrastructure to handle the influx of customers.
  • Perhaps you will end up with a big stockpile of inventory if your conversion rate is a spike that decreases as quickly as it increases.

(On a related note, this is one of the reasons why many new businesses fail: They get customers but don’t have the cash flow or infrastructure set up to handle those customers).

With conversion rates that are too high, you’ll end up with dissatisfied staff, dissatisfied vendors, dissatisfied customers, balance sheet problems, income statement problems, cash flow problems, procedural/infrastructure problems, and more.

WHAT YOUR CONVERSION RATE SHOULD BE LIKE

Your conversion rate should start low and grow steadily. It should grow with your business as you improve your skill set and infrastructure, and as you staff up. You can test your ability to handle more customers (in smaller spikes) as you try out new marketing methods or selling methods or technology.

In other words, your conversion rate should steadily improve through intentional scaling rather than as a wild and unpredictable growth

ONE OTHER REASON WHY YOU WANT TO LOSE A SALE

There is another reason I haven’t mentioned: As your business grows and your conversion rate climbs, you should be worried if you start closing nearly every sale.

Why?

Because you learn just as much — or more — from the customers you don’t serve as the customers you do serve. The ones you don’t serve will tell you why they didn’t buy (sometimes you have to ask) and you should listen. If enough of them are asking for something that you can deliver, you can offer products or services to serve them.

If many are looking for a cheaper price, consider establishing a budget-friendlier service you can offer them (or a layaway plan or something like that). If many are super-users and your product or service is for the average user, consider a higher-pried, higher-functionality version of whatever you’re selling.

Just recently, one of my subscribers at an email newsletter unsubscribed. He was kind enough to email me why. Turns out, he’s not in my target market. We’ve had a great conversation since and he’s become a good contact I will rely on in the future. He’s just one guy. But if more of my subscribers (or UNsubscribers!) tell me the same thing then I’ll need to adjust my newsletter to match their request. I plan on using a survey shortly to see if there are others who are like that first subscriber. If so, it’s an easy fix!

THE QUESTIONS I HAVEN’T ANSWERED YET

So I haven’t yet answered some questions and you’re probably wondering about the answers: “What’s the right conversion rate for my business?”, “What rate is too high?”, and “How fast is too fast for a conversion rate to climb?”

You’re going to hate my answer but the answer is: “I don’t know.” Conversion rate ratios and speed are going to be different for every business. It depends on a million factors including your business model, and what infrastructure you have in place, and your relationship with customers and vendors and staff, and your own personal ability to deliver (or manage staff) while scaling up.

But here are some tips to help you find the right conversion rate for your business:

  • See if you can get access to average conversion rates in your industry. Those numbers won’t be perfect but they are a start.
  • Know your current conversion rate (many businesses don’t know what their conversion rate is) and use it as a baseline.
  • Figure out what factors will increase your conversion rate. (It usually has to do with the marketing and sales efforts in your sales funnel but sometimes other factors like the time of year will impact it too). Then do your best to master those factors — either by systematizing them or predicting them in your sales funnel.
  • Ask yourself how you would handle the growth in customers if you intentionally increased your conversion rate to 5%, 10%, 25%, 50%, and even 100%. How would your business handle it? What changes would you need to make throughout your sales funnel? Build checklists and flowcharts to help you be intentional.
  • Build contingency plans to handle unexpected spikes in your business. Start with figuring out WHY the spike is occurring and then plan how you would scale up quickly to handle the sudden burst. (There are lots of things you can do: Staff up quickly, have technology researched and ready-to-implement, discount prices for delayed delivery, set up a waiting list, etc.

Weekly Sales Funnel Challenge: Wrap-up

By Aaron Hoos on May 20, 2011 in Business

This week, I challenged you to give some thought to follow-up sales to your Customers and Evangelists. They are often overlooked in sales funnels as a source of revenue, but they are far easier to sell to and that makes them more profitable.

So did you find something to sell to them?

I always try to do the challenge with my readers and this week is no different: I did think of some additional sales to make to Customers and Evangelists and I started working on it! It will take a few months to produce (since I’m heavily committed with client work right now) but be sure to watch for it!

Weekly Sales Funnel Challenge: Selling to your Customers and Evangelists

By Aaron Hoos on May 16, 2011 in Business

The Weekly Sales Funnel Challenge is a week-long challenge for business owners to focus on a specific aspect of their sales funnel for one week. It’s a fun way to keep you focused on one of the most important parts of your business. A new Weekly Sales Funnel Challenge is published every Monday and a wrap-up post is published every Friday.
Weekly Sales Funnel Challenge

Customers and Evangelists are terribly overlooked in a sales funnel. After all, they’ve already bought something so most people don’t even think of them as being IN the sales funnel any more.

But I disagree. Customers have bought from you once. Evangelists are Customers who talk about you to their friends. But they are still in your sales funnel and they are the easiest to sell to (because you’ve already sold to them once).
So, how are you going to sell to them again?

In this week’s challenge, I want you to think of a product or service that your Customers and Evangelists might like. It doesn’t have to be something YOU sell… it might be something for which you have an affiliate account and you just recommend the product or service.

No, I’m not asking you to start selling something more to your Customers and Evangelists this week. However, I think you should take a moment and think about what you can sell to them.

Good luck!

6 reasons why you WANT to have competitors in your marketplace

By Aaron Hoos on May 4, 2011 in Business

When I was in high school, my friend’s family owned the very first computer store in town. I was always sort of impressed that they had a lock on that market. I imagined a business without competition to be the highest level of business achievement – a sort of entrepreneurial nirvana.

Then, to my surprise, I learned that they were helping someone else start a computer store in the same town. In other words, they were helping to create their own competition! I didn’t understand it at all. When I asked my friend’s dad about it, he said that competition is good for business. Although he didn’t go into detail, it was a lesson I never forgot (I even remember the exact moment when he told me – it was in the kitchen of their house – it was a watershed moment for me).

It took me years to learn why competition is a good thing, but I now realize that it is essential to a strong, prosperous business. Here are my top 6 reasons why I embrace competition:

REASON #1: COMPETITORS DEFINE YOUR BUSINESS

Competitors help you to figure out what you do. If you are starting a business and you examine how your competitors define themselves, you can identify a point of difference that they are not addressing.

It’s like being lost and using a couple of fixed objects to help you figure out where you are. Your competitors are those fixed objects and you can easily find your way in the marketplace when you compare yourself to your competition.

Creating a business that has too much identical competition (everyone sells exactly the same thing at exactly the same price – real estate agents are a good example) will eventually result in a price war with your competitors. But if you look at your competitors as a starting point and then you define yourself carefully, strategically, and in a different way from the rest of the pack, you’ll help to attract the right people to your business (people who might not be attracted to your competitor). You won’t have to compete on price because your competitors are different from you.

For more information about differentiation and competition, read my blog posts: Equal is not good enough and Mine is bigger than yours — competitiveness and marketing content.

REASON #2: COMPETITORS KEEP YOU HUNGRY

A couple of years ago, I met someone who owned a business that was in-demand and the only kind like it in the entire state. The guy charged insanely high prices and 100% interest on unpaid debts. He could make his own schedule and he didn’t need to provide good customer service. Sounds awesome, at first – you can do what you want and you basically have a licence to print money. But eventually, some other entrepreneur will spot the opportunity in that market and see that he or she could make a financial killing while charging less AND providing exemplary service… and suddenly the first guy’s business is in trouble.

When I was a freelance writer, I would sometimes get frustrated at the low-priced freelancer writers who would charge next-to-nothing, undercutting my prices. On more than one occasion, it caused me to look at my prices and sometimes consider lowering them. (Fortunately, I never did). I realize now that those low-priced competitors kept me hungry and I worked harder to out-work and out-earn those competitors. I’m glad for them now.

REASON #3: COMPETITORS COMPEL INNOVATION

In economics, inflation is kind of like a swarm of termites. You don’t see them but they eat away at the stuff you own. Inflation causes upward pressure on prices so that $1.00 tomorrow is worth less than $1.00 today. In other words, if you’re standing still in your finances, you’re actually going backwards.

It’s the same in business. If you want to create a product or service, build a sales funnel, automate it, and then go sip margaritas on a beach, think again. Your business is “standing still” (not innovating) and your competition will outpace you with newer, faster, shinier products and services. While you’re asking the lifeguard to put sunscreen on the places where you can’t reach, your competitors will be inventing a better mousetrap. Before you know it, your business will sputter and die because no one wants your clumsy old offering.

Your competitors are innovating, so you need to as well. Their very existence forces you to get creative, invest in your business, and reach for more. That’s great for your customers and for your business’ longevity. Read more about innovation at my blog post: My best advice on innovation. And this blog post provides an interesting take on innovation: Want a competitive advantage? Offer the same products as everyone else!

REASON #4: COMPETITORS BECOME CASE STUDIES

In your own business, every interaction in your sales funnel is a piece of data that you can analyze to make your business better. You watch for patterns, for sudden changes, and for opportunities. You put all of these pieces together, you compare it with your metrics, and you can make huge, positive changes in your business.

But if you raise your head out of your sales funnel for a moment and glance across the street at your competition, you’ll learn quite a bit, too. Yes, you won’t have all of the facts or metrics, but you can put together an awful lot just by looking in their windows, browsing their website, mystery shopping them, and listening to both happy and disaffected customers.

Watch for competitors’ marketing campaigns that have a huge impact. Analyze the types of people going through your competitors’ doors. Find patterns among the disaffected customers who decide to switch providers and buy from you instead. By simply watching your competitor, you can learn so much from them to benefit your own business. They become a living, breathing MBA case study to make you a smarter entrepreneur.

Want a place to start? Why not do some really simple competitive research to figure out how to price your products or services. Learn more about it at this blog post: How to easily discover the best price for your product or service.

REASON #5: COMPETITORS RAISE MARKET AWARENESS

Imagine a town in which there are only two companies providing window cleaning services. They both market their services aggressively and have their own point of difference. Simply by advertising the benefit of cleaner windows, they highlight the problem of dirty windows in the market’s mind and the market will search for a window cleaning company – even if it’s not the one whose advertising initially prompted their awareness.

It’s the principle of 1+1=3. Competitors’ marketing will attract new Leads (and sometimes YOUR Leads) to the competitor, but it will also alert the general marketplace to the general problem or need. People from the marketplace will look for a solution or fulfillment and may end up in your sales funnel as a result (all because they became aware of the problem or need from your competitor’s ad). Note: I’m not suggesting that you don’t leave all of the marketing to your competition. However, I think that competitors who advertise in the same market will have a greater cumulative effect than if they each advertised in their own market).

REASON #6: COMPETITORS CAN BECOME COOPERATORS

I love motorsports, especially NASCAR. One of the things that makes the sport great is when two competitors will work together to push ahead of everyone else. Overall, they are still ruthless competitors, but for a brief moment they can put aside their differences to eliminate the rest of the competition.

The same thing can happen in business, too. You can work together with a few carefully chosen competitors to win more customers and outpace other competitors. Now, please note: There are laws about collusion and I’m not suggesting you circumvent those laws – you’re not doing this to raise prices across the board or to destroy a few competitors. There are ways to legally cooperate with your competitors for mutual benefit. For example, you can share the costs of joint advertising to reach different markets through the same channels. Or, you can send each other potential customers who may be a better fit for the other than for you. When I was a freelance writer, I competed against other freelance writers, of course. But when a Prospect wanted to buy from me and I discovered that they were not a good fit (perhaps I didn’t have the bandwidth to help them, or maybe they were in an industry I knew nothing about), I had a few carefully chosen competitors who I felt comfortable recommending them to. And the relationship worked both ways – those competitors knew who I was interested in working with and they would send people to me.

WHAT THIS MEANS FOR YOU

First, welcome competition. If there are no competitors in your marketplace, be wary. Dare to invite competitors to your marketplace! Get to know your competition as individuals, but also get to know their businesses. Use competitive analysis to learn as much as you can about them. Find out how you can help them (and take the first step to do so) and you may see some reciprocation. And always keep an eye on your competition to motivate you to stay hungry and stay innovative!

Hey, this blog post gives another reason to love competitors: 4 ways to insert yourself into your competitor’s sales funnel and steal their customers.

Just what is a lead? How to know if you can make money from this sales funnel contact

By Aaron Hoos on May 3, 2011 in Business

As contacts move through your sales funnel, you nurture a relationship with them. The engagement that comes from that relationship elicits more and more information to help you know whether or not this contact is likely to buy from you.

As the relationship builds, the contact moves out of the Audience stage, where they were simply listening to general ideas about the problem or need they have, and they advance to the Lead stage, where they start taking action to pursue a solution.

But what exactly is a Lead? Is it a name? Is it an email address? Is it a telephone number? Is it an affirmation that they are interested in what you have to sell?

I believe that a Lead is a sales funnel contact who has realized just how acute their problem or need is and is starting to search out a solution. They’re willing to exchange a little bit of information about themselves in order to see if you could be one of the potential solution-providers to meet their needs. But what information you collect from them depends on your business.

I recently read an article that was published back in December 2009 (but the good stuff is always timeless!). In the article, Eric Rudolf proposes the difference between “a name”, “a lead”, and “an opportunity”. His article nicely bridges the gap that the marketing department and sales department often try to communicate over.

Summarizing what Rudolf says…

  • A name is just a name with no context.
  • A Lead is a name and contact information of someone within a target market who has expressed interest in learning more.
  • An opportunity is a name and contact information of someone within a target market who has expressed interest in learning more, and has a budget, and is an decision-maker.

Those are pretty good definitions. And if I were to look at those and then compare them to how we understand sales funnels, I would suggest that a name is a contact from your Audience stage, a Lead is a contact from your Leads stage, and an opportunity is a contact from your Prospect stage. And this matches with what Rudolf is saying — an opportunity is the warmest and most likely to buy.

So what should you do? It doesn’t matter whether you work alone or have a big marketing department and sales department. You (and/or your team) need to get names in the Audience stage and then nurture the relationship into a Lead. Then, nurture the relationship into a Prospect. Once you’re there, the contact is ready to be sold.

Read Eric Rudolf’s article Is it a Lead or not? A marketer’s guide to communicating with sales.

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