On Business, On Marketing / 10 Jan 2014
How To Grow Your Business

How To Grow Your business:
The (only) Three Ways

When you’re are up to your neck in spread-sheets, forecasts, budgets, customer data-bases, P&L’s and balance sheets you can be forgiven for thinking that business is a complicated game. It often is. However, there is something that is deliciously simple – there are only three ways to grow your business. Knowing them is like having someone turn a light on in a darkened room and will have a profound impact on how you approach your marketing.


Forgive me if this seems blindingly obvious but a business that does not have a regular policy for new customer acquisition is unlikely to survive for long. It’s the part of running a business that we most often shy away from – it’s quite human. In simple terms we are asking people to be our ‘friend’ and we all fear rejection more than anything else. The answer is to stack the odds in you favour, that’s what marketing is all about. There are many things you can do to greatly improve your chances but the single most important thing to understand, when it comes to new customer acquisition, is the power of life-time values.
Research shows that, on average, a new customer will stay for around 5 years. If this is the case then almost anything you can do to acquire the customer – in terms of cost – is worth it.
Tip: Reverse the risk (see risk reversal under ‘How direct mail works’) to potential new customers. Get them to try the product or service at your risk – return rates are never more than 3% (usually much less) but the effect on conversion rates is dramatic.


Average spend per customer £100
Average frequency of spend = 3 x per year £300
Life time value of customer x 5 years £1500
So – if we gave this customer a free introductory offer worth £100, they would have been worth £1400 to the business over five years.
Have you ever wondered why wine companies like Laithwaites are so keen on giving a case of wine – practically every time you open a bank statement or shake out the contents of a magazine? Using the calculator above a £60 case of wine (which probably costs them £40) could easily win them a customer who buys 5 cases worth £60 a year and who remains loyal for at least five years. That’s the £1500 illustrated above. This is especially powerful if you use a lock in strategy – see ‘Tip’ under ‘Increased Frequency of Spend’.


Take a moment to work out the impact on your business of adding £5 to every customer’s spend over the last year.
The difference between ‘successful’ and ‘really successful’ can often be the difference of increasing the spend-per-customer by as little as 5%. Once a customer has made a purchase the likelihood of them making another one rises exponentially. Find accessories, related products, insurance and add ons – anything that increases the spend, by however little, can have a major impact on your profitability.
Perhaps the cleverest of all ‘increasing-spend’ strategies was the one which built Marks and Spencer. For years – and way before their time – they operated a ‘no-quibbles’ returns policy. This was not just a kindly piece of customer care – the reason was much more hard-nosed than this. Each time a customer came back to the shop with returned items they would spend more money. Occasionally they may have had to throw away a returned item but by far the greatest part was put back on the shelves and resold. A brilliant and practically free method of not only increasing the amount their customers spent but (see below) also significantly increasing the rate of spend.
Tip: Always offer an opportunity to buy and additional product or service at the point of sale. This is when the customer is most in love with your company and therefore most likely to spend more money.


As above this is a simple matter of arithmetic and once again, a small shift can make a big difference when spread across your entire customer base. Simply by persuading a customer who shops with you once a year to shop twice doubles their contribution. This is why so many successful businesses work so hard for our loyalty. Tesco’s 10.3 million Clubcard holders are the lifeblood of their business. The whole purpose of these loyalty cards is precisely that – loyalty. Their aim is to create a sense of community rewarded by discounts, special offers and incentives. It’s a powerful multiplier. Imagine Tesco’s 10.3 million spending just £5 extra a year because of piece of plastic in their purse or wallet. That’s an extra £51.5m per year and £257.5m over 5 years. This is quite apart from the money they would have spent anyway.
Tip: Consider a lock-in strategy by offering incentives for loyalty. Perhaps ‘a second year at half price’ for payment now or ‘every 6th one free’. Coffee shops’ stamp card is exactly what this is all about.


If there is anything you are doing in your marketing strategy which does not ultimately lead to one of the above (more customers, higher spend, more often) then stop doing it! It startles me the number of times I hear from businesses that some piece of marketing or other was about ‘brand awareness’. B*****ks! If you’re BMW and have a worldwide advertising budget of $500m then maybe a little ‘brand awareness’ is a good thing, but for the rest of us it’s either just an excuse for a poor advertising campaign or plain and simply a waste of money.
For help in creating a marketing strategy which will acquire more customers and increase loyalty and spend, call us on 020 8659 1457