If you have any kind of customer list, I suggest creating a simple ‘Customer/Client Flow Budget” in a similar format to your Cash Flow Budget as a tool to record your month by month success in attracting and retaining customers.
It can also let you monitor trends and be able to take action to improve things, just as you would if you could see a declining cash flow number.
Here’s how to build it.
The first two sections allow you to monitor your marketing and selling efforts:
Set out the first series of rows as follows:
Gained – new customers/clients acquired this month
Defecting – customers/clients that have not bought recently who need some marketing effort
Lost – those who have not bought in specific time period and have not responded to marketing
Regained – those who have responded to marketing and have bought recently
Then add a Net Customers/Clients Gained row to total the monthly columns.
Below that create analysis rows for the sales channels that customers/clients arrived at:
The second two sections of the spreadsheet help you drill down into your existing customers/clients behaviour so they don’t go missing in action. As you know, it takes anywhere from 6 times the cost to gain a new customer as to retain one and these numbers are going to help you with that:
Set out rows for the number of people who bought within certain time periods.
This is called Recency. The actual time periods will depend on your own business but for example:
< 1 month
< 3 months
< 6 months
< 1 year
Recency has been shown to be the best number to confirm if someone is actually a customer or not and predict if they are likely to buy. (Not everyone on your database is really a customer) This is the data to help you predict sales numbers, which is so crucial to your planning.
If you can access this data from your customer/client records, it is also a fantastic way to monitor groups of customers/clients and contact them before you lose them for good.
The next part helps you monitor people as they move through their Customer/Client Lifecycle.
Set out the following rows:
Good- multiple purchases and last purchase recently
New – single purchase made recently
Missing Good – multiple purchases, last one some time ago
Poor – single purchase made some time ago
Recency and Frequency (number of purchases made) are combined to give you these numbers. For example, New clients would be 1 purchase within the last month, Good customers might be 3 purchases and last bought within 3 months. You need to work out the criteria for your business that make sense.
There are two ways to use this data:
Firstly, as someone moves from being a New customer/client, they move on into either the Good or Poor customer groups. Watch as the numbers change to see the effects of your marketing and sales efforts over time. If you have a successful campaign, you’ll see a bulge that moves through the numbers.
Secondly, regaining customers/clients is much harder than retaining them. Research done by a famous hotelier showed that 67% of customers leave because they think a business doesn’t care.
Look for the group of people who are at the verge of moving from Good to Missing Good customers. it is the best way to predict when your good customers/clients are likely to defect and so need extra marketing effort to encourage them to stay.
For more on this subject, I would recommend reading the comprehensive information on Jim Novo’s blog.
I hope you find this little idea helpful. Please contact me if you have any questions about it.