Touch-Point Strategy
by Bray J. Brockbank

Customer relationships can be one of a business' most valuable assets. So why are customer relationships often one of the most undervalued, under-managed, and underutilized assets a company has?

Businesses, in the ongoing effort to gain new customers, tend to overlook the value existing customer relationships hold. All business profits are derived from managing successful relationships with customers.

It's a simple fact: Every business gains and loses customers. However, successful businesses understand that customer satisfaction is vital to acquiring more customers and to curbing the loss of already established customers.

Every customer relationship is an "asset" and adds "economic value" to the business and bottom line. What businesses need to do is focus on ROCE (return on customer equity).

The Battle: Retention & Attrition

Customer Retention

Retention programs should focus primarily on keeping customers satisfied. Retention may be accomplished by quantifying how much each customer is worth to the business. This is accomplished by putting a dollar value to each customer.

Businesses who dedicate most of their time, energy, and resources to acquiring new customers risk doing so at the expense of their existing customers. The result: customer neglect. Perceived or real, neglect corrodes ROCE (return on customer equity) and confidence found in customer relationships. As a result, recurring sales diminish.

Customer Attrition

Customers leave for several reasons. Customers may go out of business, move, build relationships with other companies, switch to a competitor, and or even find your product and or service inadequate for their needs. But, more often than not, a customer will be lost or leave because of a lack of satisfaction.

A lost and or dissatisfied customer is often too expensive and difficult to recover. Once the damage is done, the relationship may be irreconcilable. This disenchantment is generally a direct result of little or no customer touch-point strategy.

The loss of customers can be significantly reduced when a business supports a unilateral approach in keeping existing customers satisfied. Satisfied customers are a business' most valuable asset and a supported, effective touch-point strategy will greatly increase customer retention, satisfaction and revenue.

Touch-Point Strategy (TPS)

The real difficulty facing most businesses today is refocusing current efforts, energy, and resources back to the established, existing customer. Not in acquiring new ones. Established, satisfied customers are the lifeblood of any business.

Developing a customer touch-point strategy is an extremely effective way of keeping existing customers and new customers coming back for more. Any touch-point strategy should focus on managing and maintaining high customer satisfaction levels while protecting the customer relationship.

Touch-point strategies should be measured by their ability to directly impact and improve upon each of the following two factors: 1) increasing the average transaction amount, and 2) increasing the frequency of return or repeat transactions.

When executed correctly, touch-point strategy processes produce new revenue from existing customers who are ready, willing and able to buy more products or services. The main purpose of touch-point strategy is to convert underutilized assets (customer relationships) into high performance assets (new, profitable transactions).

Each relationship represents a Customer Life Cycle (CLC). To better appreciate the value of an existing customer it's necessary to analyze the costs related to acquiring new customers.

Acquisition Cost

How much does it cost a business to acquire a new customer? Better yet, how does a business determine the true value of a customer once acquired?

To determine the true value of a new customer, a business must determine what an average customer is worth before it budgets or commits any resources to acquire them.

By looking closely at what a business spends on average to acquire new customer transactions, it may require use of some basic mathematical work:

First, determine how many transactions a satisfied customer completes in a year. Then divide the annual number of transactions into the business' gross annual sales. This result will give the average value of each customer transaction.

Once an average transaction amount is determined, deduct the average cost of goods and all other related costs of sale. Add the average costs together and subtract them from the average transaction value. The remaining number is the maximum amount of money a business can expend to acquire each new customer transaction while remaining profitable.

By determining the maximum allowable transaction acquisition cost, a business can then determine precisely how much more money remains to acquire each new customer relationship based on the average customer's life cycle.

Determining the customer's value and related costs allow the business to better determine the customer relationship pay-off and equity.

Future Customer Equity

When a customer is satisfied they will reward the business. Each customer should be viewed as a qualified source for referring new customers and revenue streams. Reward the customer for their contribution to your bottom line.

Remember that existing customers represent a goldmine of new leads, referrals, and return business transactions. Keep the customer satisfied. Qualified leads, referrals, and new sales will undoubtedly follow.


About the Author
Bray J. Brockbank is a business, technology and marketing consultant for Learnframe, a KnowledgE-Commerce and eLearning infrastructure technologies company. Bray has over twelve years experience in enterprise marketing, consulting, management, strategy, technology integrations, organizational development, and sales. He has written several authoritative articles and papers on eLearning, business, technology, trends, strategy, and leadership development. He can be reached by email at bbrockbank@learnframe.com.

Also by Bray J. Brockbank | Many more articles on Sales & Marketing and Customer Service in The CEO Refresher Archives

   


Copyright 2002 by Bray J. Brockbank. All rights reserved.

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