ACCOUNTS JOBS CITY

Having described the model, let me hasten to add that I know it is oversimplified. Not all customers will move through each level. Some will become promoters without ever providing feedback. Some will provide feedback and then go away and never return. Despite its simplicity, I believe the model can be helpful in understanding the concept that customers can become much more valuable to a business than just the value of the purchases that they make. Consider the following:

This chart attempts to show in relative terms how much a business benefits financially from a customer at each level of possible engagement. At the far left, Just Looking, expenses associated with a customer typically exceed income from that customer. For example, you spend money on advertising and attract the attention of a customer willing to take a look. At that point you have paid out (for advertising) more money than you have brought in ($0 purchased by the customer).

1. For those customers that take the step and buy your offering, chances are you will cross over into positive returns. If the customer returns to buy again and again your profit from that customer will increase. Note that the slope of the line becomes steeper in the buying again phase. That is due to the fact that it is less expensive to sell to returning customers than it is acquire new customers. In fact for most businesses it costs five to ten times more to acquire a new customer than it does to sell more to current customers. The obvious difference is the acquisition cost associated with attracting new customers. The less obvious reason is that a regular customer already knows how your product or service works and doesn’t require as much “hand holding” throughout the process.
2. As the curve continues into the higher levels of engagement, Giving Feedback and Telling others, its slope becomes even steeper indicating that significantly higher returns are possible. Two reasons for this: 1) The additional costs required to move customers into these levels is relatively small and 2) The potential returns have a built in multiplier effect—that is, one customer’s actions can influence many other customers. For example, feedback from one customer that helps you improve your offering not only benefits that one customer and brings them back again but benefits all your customers and increases the likelihood that they will return more often. Even more obvious, a customer who begins telling others about your business brings not only her purchases but the purchases of several new customers to your business.

In conclusion, engaged customers will help you improve your offering, they’ll actively promote your product, they will improve your bottom line, and, to a large extent, they will determine how fast your business will grow. As you consider the growth of your business, look not only at how many “Just Looking” customers you can bring in and move to “Just Buying,” but also consider how you can get your “Just Buying” customers fully engaged in your business. Do you feel like you have the “pedal to the metal,” spending all you can on advertising but still can’t get the growth of your business into the fast lane? The fact is, if your customers aren’t engaged, it may not matter how much you spend on advertising. Just like a car in neutral isn’t going anywhere (no matter how much gas you give it) until the transmission is engaged, your business isn’t going anywhere until your customers are engaged.

What does engage mean? Here are three definitions you might find in a dictionary:

1. To attract someone’s attention.

2. To establish a meaningful contact.

3. To move into position so as to come into operation.