Why Customer Relationships Matter

When people asked Garfield Weston why, as the proprietor of a multinational food conglomerate, he still remained a baker, he used to tell them that there are few opportunities where a businessman can take a profit from a customer for the same product 365 times a year. The stark financial fact is that it often costs 10 times as much to make an initial sale as it does to engineer the follow up. Few businesses can survive on initial sales. Many go broke before this truth dawns on them. This is why the furniture business is so hard and why Terrance Conran, the main protagonist behind flat-pack furniture, was so successful when he concentrated on lower cost replacement items. Many startups fail despite having enough money to prime the sales pump. They just don't have enough to last until repeat orders come in.

The automotive business gauges this nicely. While Rolls Royce takes a lifelong profit at one swipe and their automobiles roll on forever, their rivals have another strategy. They ensure that their cars have a long enough life to offer unforgettable pleasure for the money, but not so long that their customers won't come back several times for a newer model.

The most vulnerable time in a fledgling firm isn't just before it first goes into profit. The most vulnerable time is just after the second release. If you haven't built up a good relationship with your customers by then, you have little chance of winning the more profitable second sales. An Eskimo who has to make a hole in the ice takes longer to get supper than the Eskimo who uses someone else's hole. It is the repeat sales that are the real lifeblood of any trading firm.

This process as a whole of being nice to customers is now known as Customer Relationship Management (CRM). It isn't merely a pleasanter way to run a business. It is a smarter way.

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