From the Center for Strategic Relations, a twice-monthly supplement to Applying Strategic Relations, mailed at your request

Low-Cost Buying Relationships

Last month explored internal customer relationships, including what really happens when internal relationships are week and unproductive. This lesson shares with you several ideas to develop buying relationships at a lower investment. Next week, you'll discover ways to see if you're wasting time on the wrong customers .

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Ps. Interested in picking my brain? I'll be in Atlanta GA (USA) November 11th through 13th, then later traveling across Kinston NC (USA) late November, Washington DC (USA) late December, and Toronto (Canada) in January. Write for details.

How To Develop Buying Relationships For Less

By Justin Hitt, Strategic Relations Consultant,

How much does it cost to attract one new customer to your business? If you're like most executives, you'll exclaim, "Way too much!" You're right, it can cost five times more for a customers first purchase than it may for their second or third.

Of course, if you don't know how much it costs on the first purchase verses any subsequent purchases , then stop everything you are doing to calculate this important number. Is it possible you're spending all of your profits on a customer's first purchase? Some companies do.

In addition to knowing your cost per sale (both first, second, and by campaign), relationship building executives are keenly aware of their cost per lead . Are you spending too much attracting customers?

By understanding your base costs to attract new customers, you can start developing buying relationships for less. Here are some strategies to push down base acquisition costs:

  1. Respond quickly to every request. What good does it do attracting prospects if your sales staff never follows up on their requests? The sad truth is most leads are never followed up on, so for each of these oversights you add to your base costs. That's why it's critical to set and hold staff to minimum lead response time, if possible returning all requests the same day they are received.
  2. Use systems and models for prospect interaction. Too often a call comes into an organization, the prospect is clear about their desires, but the person answering the phone has no clue what to do next. For every interaction outline three key "next actions" including both actions that can be taken now and those referred to other areas of your company.
  3. Survey desires and interests. Every customer is an individual with unique concerns and interests, but how are you to know this if no one ever asks? Start with simple open ended questions designed to extract key desires, expectations, and the results prospects want to receive. This lowers costs because it collects important demographics used to identify a best match for that prospects situation and improves segmentation.
  4. Have a system for lead nurturing. Of those leads who do not become customers a significant percentage will eventually be qualified to purchase what you offer. Are you doing anything with unconverted leads? Automate your process for turning leads into qualified buyers, do this with marketing and education processes at interaction points.
  5. Get customers to buy something. What if you had a low priced high-margined offering prospect could raise their hand to buy that let you know they were interested in higher priced more complex products? Seek small regular sales victories that get a prospect buying something. Even if you make very little, their action demonstrates enough interest to then invest time with a more expensive sales cycle for the target product.
  6. Help prospect direct the relationship. Instead of trying to "brand" or create an "experience" try giving prospects reasons to contact your organization. Prospects want to solve problems and will seek out the company who can offer them solutions. What kind of information do you make available that qualifies prospects interests?

Many companies are throwing their money away trying to persuade customers, when with the right system could attract buyers to their business. Even worse, smart executives will allow expensive sales and marketing campaigns without considering the cost against revenue generated. What's your cost per sale, how much does it cost you to acquire a customer?

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