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Are You Running Your Business Backwards?

Published Thursday Jul 9, 2015

Business management consultant and author Peter Drucker said, “The purpose of business is to create and keep a customer.”  Yup, makes sense.

But let me ask you two questions. How much do you spend creating customers compared to keeping them? Who makes more money in your organization—salespeople or support people? 

If you are like most businesses or department heads, product managers or group managers, you are so focused on your front-end sales that you are letting your profits walk out the door. That is an uncomfortable thought but one that plays out in business every day. We build processes and structures and train staff around selling. “Of course we do Lou, you ninny, that’s how we grow—more sales!”

Yes, selling more is one way to grow. But there are actually three ways (I am borrowing this from the marketing guru Jay Abraham.): Acquire more customers; create more transactions (sell customers more stuff and diversify your products and services); and increase average
transaction size.

All are true. And I will add a fourth that will ensure you are profitable for years: Keep as many customers as you can. While that seems obvious, I’ll repeat my earlier question—how much time and money do you spend creating customers compared to keeping them?

New is Not Always Better

From my experience, business has reached an embarrassing low point where customers are treated with a mild contempt and where nearly all business activities are organized around new sales. I had subscribed to a magazine for several years when they made an offer to new subscribers—the football phone. It was chintzy and cheap, but I wanted one, so I called and asked for one. No deal. It was for new subscribers.

Know what? I cancelled my magazine subscription. How much did it cost to replace me? It would have cost far less to give me the $4 phone. In fact, according to the Cam Foundation’s paper, “Cost of Customer Acquisition vs. Customer Retention,” new customer acquisition costs businesses five to 10 times more than keeping customers. That is truly backwards. 

Taking customers for granted costs businesses a fortune in lost profits. And few do anything about it because:

• The business focus is on new sales.

• They are not aware of when and where it happens.

• Nobody has ever looked at the numbers to truly comprehend the impact.

Treat Customers Like Clients

One solution is to treat customers like clients. What’s the difference? Customers are transactional; clients are relational. I am a customer at my grocery store and gas station, and a client with my attorney and accountant. What is the fundamental difference? Advice and trust.

Clients receive advice and that builds trust. If you are already advising your clients, ask if they are at risk of defecting. The answer may be no, but you need to do more to minimize that risk. I have a Fortune 100 company that has been a client for 15 years. I have been to their office many times, but on three separate occasions I received a personal invitation from the retiring head of security so he could introduce me to the new head of security. “This is Lou Altman, his company is our satellite phone provider, don’t ever consider anyone else.” How can any competitor overcome that endorsement?

Increasing Retention

There are many ways to increase client retention. Below are three key ones.

Pre-Sale: Provide prospects with more information about the industry than any competitor. While doing this (through eblasts, newsletters and webinars), you can work in what makes your business unique. Empower your prospects to make better decisions by giving them objective information. This is the first step in building trust.

Fulfillment: Deliver your product or service with “more.” Standard SatCom industry practice is to ship a satellite phone in a box. We unpack the phone, charge the battery, install the SIM card and battery, label the phone with the number, test the phone and pack it all into a padded nylon case that holds the phone, all accessories, a flashlight, a flash drive video of how to use the phone and a 24/7 support number.

Post-Sale: Demonstrate you are truly looking after their interests, not just yours. When is the last time you called your clients to say hello and check in without a sales pitch?

Once you build client retention into your entire business—from prospecting to post-sale—you’ll stop running your business backwards and see profits soar. n


Lou Altman serves as CEO of GlobaFone, his satellite communications company in Portsmouth.  He is also a public speaker and executive coach.  He can be reached at

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