How a Virtual Business Can Help You Increase Customer Loyalty
By Jacqueline Burgoa
Expert Author Jacqueline Burgoa
Never in history have customers been more fickle and demanding than in today's economy. Businesses that do not provide outstanding customer service will be long gone. In this new virtual business environment, customer service is your main competitive advantage. Therefore, business success lies more than ever, on retaining your customers. Take advantage of the virtual business strategy to catapult your business profits!
Technology, especially customer service technology, has evolved by leaps and bounds. Customers are no longer chained to their local store to get outstanding customer service. They are now empowered to take their business wherever they can get the best service. Now that they are freed of distance constrains, thanks to technology, they are free to buy anywhere in the planet...your competition is no longer the shop across the street; but the one in Asia, South America or anywhere on earth where there is outstanding customer service.
Keeping customers is not only smart business practice but a very valuable one as well. This is clearly measured by the Customer Lifetime Value (CLV). Most business owners only see the value of a customer based on the first sale, but do not take into consideration the future purchases of this customer. So let's see an example:
Mary gets her slacks cleaned at the cleaners for $8. Most business owners will see this as the only revenue. Fortunately, Mary comes back the following week and gets her dresses and some blouses cleaned for a total of $20. Now, you did not have to spend any money on marketing, advertising or sales to bring Mary back, she simply liked your service and the way you cleaned her clothes. So in reality, you made $28 from Mary. Therefore the true value of Mary is all the cleaning she has done PLUS all the future cleaning she will get done if you work hard enough to retain her loyalty...follow me so far?
In order to get the lifetime value of your average customers, simply multiply the average sales you made by the average number the customer came back to your business. Here is the simple formula:
Estimated Average Lifetime Value = Average Sale x Estimated Number of Times Customers Bought Again
So now that you know the CLV of your customers, the next question is...are your customers profitable? After all, you are in business to make a profit. In order to find out if your customers are profitable, simply multiply your average profit per sale by the estimated number of times your customers buy again. Here is the simple CLP formula.
Estimated Average Lifetime Profit = Average Profit per Sale x Estimated Number of Times Customers Bought Again
Knowing these numbers will help you decide how a virtual business can increase your customer's lifetime value and therefore your business profits.
In a virtual business model, you can implement the different customer service technologies readily available to reduce cost (and therefore increase short-term profit). A virtual business model also allows you to implement a multi-channel customer communications system to increase customer loyalty (and therefore increase long-term profit).
A virtual business customer service set up:
Is mostly free or of very little cost
It is web ready
You do not need to know programming to implement it
You can have it up and running in minutes
You can have employees or virtual agents anywhere in the world
Now, let's see how these points affect the CLP formula we discussed above. Customer Lifetime Profit or CLP is all about knowing the profit your customers bring. This means, if you lower your costs, your virtual business profits will be higher. Therefore by having a web based customer service infrastructure in your virtual business, your employees can work out of their homes. This lowers your costs because you no longer have to provide office space, utilities, desks, supplies, etc. If your business and industry allows it, you can even hire virtual reps for your virtual business...this means no payroll taxes or employee benefits. Since most of the applications are free or low cost, this means your out of pocket set-up investment costs are truly minute.
A virtual business multi-channel communication system is composed of:
Online Support Desk
Customer Relationship Management System
....and sometimes the old snail mail
How do these multi-channel strategies and applications help you with your customer loyalty? Again, going back to the Customer Lifetime Value or CLV discussed before, the more your customers buy from you, the higher your CLV. With an online multi-channel, 24/7 support system, they can reach you in whichever way suits them best, creating massive customer loyalty. Loyalty means your customers will keep coming back for more, which in return means higher CLV.
Keeping customers has never been this difficult. As you can see, setting up your customer service system as a virtual business will decrease your costs, therefore increasing your profits (CLP). It will also keep your customers buying from you over and over again therefore increasing your customer value (CLV). Remember, customer loyalty will make you a lot more money in the long run!
Jacqueline Burgoa was nominated by Forbes.com as "30 Women Entrepreneurs to Follow on Twitter". MBA. 16+ Years Virtual Business Owner. U.C. Berkeley Graduate. Worked in Singapore, Bolivia & U.S. Mom of 2 boys. She is the founder of http://www.JackieBiz.com where small business owners and home based businesses learn the latest virtual business strategies on how to work less and make more in their businesses.
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