Why Customer Retention Drives More Profit Than New Sales

If you retain well, what that means is you dip in your client relationships so you increase the lifetime value of your existing client base so you have more revenue coming from them. Two, you get better reviews that we talked about and what that means is you can then use that as justification for increasing your prices. So you no longer worry that, "Oh, why am I charging next? More than my next store competitor?" But you know, because me and that competitor are not on the same level. When you five-star work, they do, I don't know. Five-star work, but we get it. Yeah. Sure. And number three, you get more warmer leads coming through because you can get your existing client base to refer new customers to you. That usually are better qualified and tend to hang around longer. I'm Mike Harris and I help businesses to successfully grow their turnover and profit. In the last year alone, I have helped dozens of businesses at least double in size. And I work with small, medium and large businesses, including startups and multi-nationals. Essential to scanning your businesses, keeping your customers. Did you know that it costs five times more to get a new customer than a retaining existing one? Existing customers on average spend 67% more than new customers. And they are 50% more likely to buy new products. And yet many business owners and directors I meet are focused on getting new customers assuming existing are already in the bag. But in order to scale your business, you need both. And therefore to tackle this important subject and to give you free advice on effective customer attention, I am joined by a very special guest. Hello and welcome back to the Leaders and Strategy podcast. And today we're going to look at the really important subject key to scaling up any business, which is customer management. And to do that, I'm joined by a very special guest, the LinkedIn Queen Business Leader, Client Retention Expert and Coach, Yemi Olshan. Hello Yemi, welcome, and join us. Thank you for having me. What's I got? LinkedIn Queen. Well, we'll come back to that and we'll come back to why I think you're the LinkedIn Queen a bit later. Okay, so coming back to the Change Hive, which I think is really, really fascinating. And like, could you talk us a little bit more about the importance of client retention? And why do you think it makes such a big difference to businesses to get that kind of mindset in how they go about their sales and their sales, part line, et cetera? Sure. It's something that, so we initially started off just doing business transformation and help in businesses with growth full stop. But then when you think about it, there's only really three ways to grow your business right? You either grow by getting new customers, so acquisition, or you can grow by becoming more niche, so increasing your prices and serving a certain pool of clients at the same time, keeping your cost, you know, low, or number three, you can grow by selling more to your existing client base. And we're kind of doing all three, but then on realization, I was like, hey, hold on. Of all this three, if you had to pick one, the most optimal of all really is client retention, because if you do client retention well, you actually hit all three, because if you retain well, what that means is you dip in your client relationship, so you increase the lifetime value of your existing client base, so you have more revenue coming from them. Two, you get better reviews that we talked about, and what that then means is you can then use that as justification for increasing your prices. So you no longer worry that, oh, why am I charging next more than my next store competitor? But you know, because me and that competitor are not on the same level, when you five style work, they do, I don't know. Five style work. And number three, you get more warmer leads coming through, because you can get your existing client base to refer new customers to that usually are better qualified and tend to hang around longer. So was that realization that maybe say, hey, hold on, I don't think we're giving retention the focus that you deserve. I think all the noises around or the focus is around acquisition. And there's good reason for that, because it's sexier, right, it's like it's going to say, oh, I got 10,000 new clients today, right. And then also, most of the advertising profits are made off the back of running ads and all this kind of stuff. So there's big machines that support acquisition. But in this current business environment that we're in with all the AI automation, nobody even knows what's real and what's not real. There's so much noise coming up people. It's actually harder to acquire new cost. I don't think I was talking about how hard it is to do acquisitions this day, because ads and people are kind of getting blind to ads. Right. Like there's so many ad left right in the center. You get in all this cold DMs coming at you. It's like there's a lot. But if you instead of focusing on new, new, new, new, if you're an existing business already had like a good good client base, if you double down on your relationship with them and think about things like, hey, hold on. Are we doing the five hours as we tried to tell our clients to do? Are we building a service because we tend to work with service-based businesses, not product businesses. Our building a service that has a clear roadmap because for many people, the retention problem starts from when the client pays, right? I've paid because you have to think about it from a human perspective, buyers were more stas to kick in. All the chat to start is like, oh my god, like I just gave somebody thousands of pounds. Like really like I could have used AI for that. And then they make the mistake of telling their wife or their neighbor and it's like, you done me. You could have done so they're already having that chat. It's like, well, you can kill that noise quick by having a clear onboarding roadmap. It's like, how can you tighten the roadmap? How can you make it clear that the client knows exactly what's going to happen when? And also, ideally, give them the first value within the first 14 days max, right? No, it's just that's it. We're working them by to clean up their roadmap, the onboarding roadmap and the time to value. Like with that tighter. Secondly, how can you build proper routines around your service? Because again, when you have so many clients, you actually forget. So then and what that means is people pay you for staff and they're not really getting the value from your service because they forget to use it. So they can't you and they're not building routines around it. And you only remember when it comes to renewal times, like, oh my god, yeah, I need to go ask for the next check. And then when they haven't used my service. But if you're more proactive about building routines around your service, then it makes the renewal conversation easier. You know, like, you know, like, I'm not sure how to ask for the renewal. Third, proactive thinking around things like revenue expansion opportunities, like so it's so. We're doing this together. Like now I'm working with you. As we said earlier, to your quote, which I really love, when you saw one problem, it creates other problems. So what other problems have now been created that you can possibly help them solving, right? So when it's cross cells, upsells for the reviews that I talked about, social proof being important. And the fifth one being around, proactively checking the client health, right? Because I think it's often rescue. We are not using our CRM in a way that we're tracking to see, hey, this is client behavior a bit off. Like, are they like not as they used to read my newsletters, but they're not reading it anymore. They used to like like my YouTube, but haven't seen them for a while. Like, and you kind of notice any kind of like signs like this guy is kind of off of beat. Can you catch that early and proactively correct it before they turn? So the five hours. Yeah. And it's fascinating. And I mentioned earlier, I'm going to digress for a second. I mentioned earlier, and called you the LinkedIn Quaid, which you laughed at. But I'm just going to point out there's a good reason for this. So I follow you on LinkedIn and you're right. You get bombardered loads of stuff on there. But I really enjoy and like your posts. And I mean this genuinely, I learn so much from what you say. And quite often, it kind of strikes me called with what I believe anyway, which is one of the things I'm going to talk about in a moment. But it just puts it differently in a different context. And it acts as a reminder. I think, yeah, I know this, but I'm not doing it. Why am I not doing it? So I think it's great. And if you're not following, you should do. And they'll get a lot out of it, I think, by watching or reading rather. You're post. But yeah, so some of the things you said there, I mean, one thing about just going for you for me anyway, just going for you, customers all the time. You're a transactional business because you're basically a single order. A single order transaction that you're going for the next one. And most businesses, I think, are more profitable. And are certainly more enjoyable if you move it from being transactional to actually having a relationship with the clients and it becomes more collaborative. So I don't see how you can do that if all you're doing is. I mean, you use the different face to me. So you call them acquisitions on you clients. So that constant looking for new clients, you're transactional. And I think you'll always be pitching and I'll lower level for that. So that's the first thing. Second thing is you can reduce your overhead. Because if you've got a huge cost and getting lots and new customers, if you're focusing around four or five customers, you can, you don't need to spend that. You can spend it actually within the business and the, so I think it saves your overhead. But the other thing that I think is really critical, which is, you talk about client protection, I call it repeat business. Same thing. Every business should be looking at repeat business. They should be making sure that, you know, if they're doing it right and the clients happy, they will come back. So, you know, so therefore, if you're focusing on lots of people, it's so much harder to really give them a good service to get that repeat business. Absolutely. And actually, in some businesses only need two or three clients. And that repeat business is constantly coming in. But they know those customers inside out back to front and they get a real service out of them. So I think, I think what you're talking about is the difference between companies that are transactional and are really just looking at cost and businesses that are partnering in collaborative, which are really focused on providing value. And I think there's this huge difference. And I think the world, the world that you're in and what you look at is talking about that latter. So that client retention for me is all, you know, sits in that. And there's a saying, I think that makes businesses more profitable and certainly makes it more fun for I think with what you're doing. Absolutely. I agree. And one more thing that I think you touched on it right is all of this builds up to, if you ever decide to sell your business, what people are buying is the repeatability and the profitability and the way you can build repeatability and profitability to have that recurring. So it's what's your net retention rate right? And the month on the basis becomes the number that drives how valuable or what the valuation rate. So you're right. Because I, I, I, and one of my KPRs that I'll track around the business is 80% repeat business. Listen, that's very good. So I don't want 100% repeat business because I'll never be getting any new clients in. So I think that's a good mix of 20% comes in new 80% is, is, is the times. Yeah. So I think, you know, I think that's important. 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One of the things you, you, I, I use the phrase a lot about the sales pipeline and you use the pipeline on the funnel earlier. But you use a phrase that I've never come across before, which I love, which is talking about the leaky sales pipeline. So and you've got to go and block the leaks. So just talk us a little bit through what you mean by the leaky or the leaking pipeline. Yeah, sure. So the basic premises that many businesses, especially those that have been around for like 10 plus years, don't actually need more new leads. They need to fix the leaks in their business because here's why many times we spend all this time doing all this new ad campaigns and stuff and get all these leads come through. And usually we send them like one or two lead nurturing campaigns and we forget about them. And we then move onto the next campaign. You got hundreds, you got thousands of people potentially that you probably hit once or twice and you forgot about now. And now you're going to start a whole new ad machine running and you forgot those guys. Or you've got customers that you've already served, you know, pretty well say once or twice. Again, because you didn't nurture them as well. They've now moved on to other things. You haven't gone back to try and reacquire them or bring them back into your world. So at two points, potentially even before any ads, you already have a gold mine that you're sat on. You've got the lead nurturing that you could do a better job of and you also got the past customer reengagement that you could do a better job of just to get you new business through them. We haven't even yet come yet to build in a deeper relationship with your existing customer base and seeing what else you can sell them. Like what can you upsell or cross sell? So you're already sitting on a gold mine in three ways that if we could fix that, usually you probably will realise that you don't have to do, still run ads because you're a point. You want to make sure you're still kind of out there and you know, people are seen and recognising the brand and know that you're around. But if you fix the leaks properly, you find that 80% of your profit will come from within your existing pipeline. So I hope you don't mind, but I actually used that phrase recently with the customer. And it was exactly what you were talking about really. So the context was I was talking to them about growing their business and they were saying, well, to grow the business then we need to get more tenders in, we need to get more inquiries in because if we want to be 20% more, we need to get 20% more work so we need to get more people out there talking to clients, shaking that tree to get more inquiries in. And I said, what's your wineration on the tenders that you're doing at the moment? About 1 in 6. Well why don't you get that to 1 in 4 then? Why go and get more clients? Why not put more focus around or more tenders rather? Why not put focus around the tenders you are getting and get those better and improved them? Because you go and get not more client, not more tenders coming in. You're still going to be losing 5 out of 6 of them. So why not focus on them coming in and secure 2 out of 6? So 1 in 3? That way you don't need to go and put more resource in getting them. So even go back to the ones you've lost historically because the thing is, even though you chose one person, you found out after a year or two maybe something has gone off and sort of took like, hey, just check it in to see how the budget is going. Check out the feedback, find out. Yeah. And every 6 months or so just touch in and see, you know. But I used your phrase. I said, you don't need more water coming into the pot if it's leaking out. Fix the leaks which is getting improved your tenders. Then you can go out and start trying to get more inquiries in the game. So yeah, I think it's a great phrase. As I say, I've stolen it with pride. Still away. So you spoke early about your background sort of fintech and that technological background. How do you think that transfers into other types of industries and other types of businesses? I'm pretty well actually because I feel like, so I started off so computer science on the grad masters then started off doing like tech transformation at big investment banks. So like doing like JP Morgan Barclays and then do the fancy MBA at LBS because my parents are entrepreneurs that were kind of come from this long line of entrepreneurship. Always wanted to do it. But just could not for the life of me work out how my fancy investment banking skills was relevant to any small business. Like who cares that I know what bonds do and how. CDS is work. Credit default swaps. CDS. I'm not giving you so far. But then it dawned on me that this is what I think we're the pandemic and all the, you know, still don't kind of help a lot because on reflection, this is why I've put away game retention helps because I think especially when you run a run a small business, you really need that headspace to think and to really like process. And the anyway, but I digress. So on reflection, I realized that hey, hold on. What I've been doing for this big businesses is actually called transformation or digital transfer whatever. But really what we do what I've doing is mapping out processes from front to back. So what's the as is process? Seeing what the excess factors like so where are we not very efficient? Where can we optimize things and make things sharper so that we can grow. Or so that we can enter a new market so that we can, you know, what if so ultimately all that was to help us grow. So my baseline skill set was growth and go to market consultant. But that took a whole load of like thinking through. But I think now it's such a blessing because I approach growth not from a perspective of a marketer or something, but it's more from someone that has systems thinking as a background of like so let's go back to the component parts. Like let's literally look at the machine. How is the machine working? Front to back. Let's map it all out and make sure we're booking up building on the right foundation and really cutting out all those inefficiencies. And this is why I think retention again. Sorry. I feel like I'm just a man. That's why you're here. I think this is why it's important because it starts to show you the leaks really, really fast because like the thing is if you find that your clients are not coming back is why they're not coming back like what is the missing puzzle? It could be that your position is not quite right or that needs some shifting or you're working on the wrong segment segment. So without really, I find that if you fix retention, I can fix that really well. All other parts of the business that's to like fall into peace for falls into place like a lot quicker. So anyway, so answer your question. Tech really does help because it gets you back into like systems thinking like no less component parts, build it all up and then see how it works. Now we spoke before we started and I talked about the identity and I think that's a great example of the identity of your business. And you started thinking it was this but actually the real identity is the skill such you have to help people sort of kick start the businesses and then grow them and scale them up. And that's a different, I think is quite a different identity to the business to maybe what you thought it was when you started. It's the why you were struggling. One of the, you mentioned the funnels and the cloud journeys and you have a phrase that you use, I think it was on LinkedIn, LinkedIn question, but it might have been on your website where you talk about the funnels. I thought that was about brain first, but the customer journeys are about by first. And again, I thought that was really nicely put. So I don't if you want to expand a little bit by the thinking that sits behind that. Yeah, sure. I like funnels. I think click funnels and that whole final community has done a good job of waking us up to the idea that buying is a process. It's not just you have a conversation and they say yes or no and it's like, okay, goodbye. Yeah. Knowing that hey, there's a process to it. You'd kind of need to hit them a few times, you know, hopefully we'd value each time. But I think sometimes when we think about funnel, it's very brand first is very much I want to push through my funnel. Like how can I get all these guys to be attracted to my funnel and push them down it? It's like, so it feels we then get into the mindset of manipulation, coercion, like not always because it's sinister though. It's just because it's just the conditioning of how. I think at least I get into and I think funnel. But if you think of the customer of the relationship as more of a journey, I think it's more collaborative, it's more Haylesson. I would like to attract this types of people. What do I need to offer in exchange for them to be a track like a gardener? How to kind of plant or flowers, so I need to plant or attract certain kinds of birds or insects or bees, right? Like, you know, same thing with your business. So I want to attract this type of a buyer, what kind of elite magnets or things that I have to put out there so I can attract this people. When they do come into my world, of course, again, to buy and be in a journey and a process, how can I build this relationship and people that know like trust? And you still want to be fast, right? And the fastest possible time, but in a way that feels good both ways. Because again, if you think funnel, funnel, funnel, usually buyers remorse as highest in that kind of journey, because you're forcing them through the funnel. But if it's more of a journey, like, hey, listen, I want to attract you into my world, brand awareness. I want to then nurture you because I want to make sure you get to know me, like me, trust me, and know that I'm the best person for this job. So you're choosing to work with me. I haven't forced you to work with me. I don't want to kind of crazy cashbacks and customer drama. So let's build that relationship quickly, right? And then once we've done that, then how do we then go about the actual sales process? How do I sell? Is there a defined process to it? Are we doing spin or was it a challenge or whatever the. What's that process? And then, port, how do I make sure that I didn't deliver on what I said I was going to deliver to you to a point about building the roadmap? So I've communicated very clearly to you what to expect and when. I'm also giving you value in the fastest possible time so you don't get into like remorse mode. And people don't start telling you the chat doesn't happen in, right? And how am I making sure that I'm practically retaining you in my world and keeping you engaged in what is happening? And finally, how am I tracking through your health to make sure you're in it? So I think we think about it in terms of journey. It feels more. I want to give you value. And as long as you're finding value in this process, we keep working together. If at any point you don't find value, no problem. You can jump off the bus. And maybe when the bus comes back round again, you can get on again. Right? Because people kind of come in and out come in and out. Or funno is kind of like, "We'll push you down." So like, "Where are you when I say not?" That's how I see it. And that's why I think I feel like longevity, especially with all the automation, like the brands that will do well with all the AI staff, other ones that are human first and very relationship focused, not just. And to take that exactly the same thinking but from the other angle, if all you're doing is pushing the brand, all you're ever going to do is get the funnel building up. But as soon as you start looking at the customer, the buyer, that's when you start, I think, get the repeat business because you're actually interested in. You're interested in the person and what's important to them and why they buy things and why they come back. Exactly. And so therefore, I think it is. You're looking at the funnel and you're looking at it at the journey. But if you flip it the other way and say, "Look at it from a brand or you look at the customer," it's the say. You can't do the same conclusion, I think. It's exactly the same thing. You become transactional if you're not looking at the people that they're dealing with. Exactly. You probably covered this already when we were talking about the leaking funnel. But I'll ask the question slightly differently. What do you think of the three biggest challenges that businesses face with regards to client retention? I think first one is not being clear on the offer. That's really, really earlier on. It's not clear on the offer. So it's a lot of different things that we offer. It's trying to be everything to everybody like, "Who you? What you want? We can do anything you want." Second is not being clear on who the segment is as well because I think sometimes too often actually I see this is you have a client that's trying to talk to four different client groups at the same time. So someone seems to me, I want to talk to lawyers to start up founders to different slightly different. I'm like, speaking four languages at the same time. It's a lot of work. You know what you say? Like I'll let you do what? After about you get ahead and they're confused and you're sure what you're saying in New Ward's too many. Yeah, I'll buy that for start conversation. So it's being clear on, I think maximum two ICPs or ideal customer profiles that you want to target is important. And I have a third one because you asked me for three. I think sometimes it's making sure your ideal customer is actually profitable. Yeah, yeah. Right. So I think I've posted something around there. So it's moving from ideal customer profile to more ideal profitable clients. Yeah. Well, it's funny. I mean, I used to talk a lot about the report. I mean, before I set up the company, but I used to talk a lot about repeat business. And then it's only dawned on me. I had to be talking about profitable repeat business. It's easy to go and get repeat business. It's not necessarily easy to go and get profitable repeat business. And I think there's a, there's, it might be a subtle difference, but a huge difference in mindset around what you do to, to get profitable repeat business. So you're right. It's, it's your profitable ideal customer profile. Not just ideal. Yeah. You may like them because they're fun, but you don't pay you then maybe they'll be more exactly right. Yeah. Interesting. Now for ongoing support, join our new Patreon community. Subscribe for exclusive content from the leaders in strategy podcast down loadable resources like our annual business plan checklist and access to a full business course. As a member, you'll get discounted rates on one to one workshops, which has to have your business questions answered and featured in special monthly August episodes. Let's strategize and let's execute. We're going out Patreon now and become a leader in strategy yourself. I think that's us for today. We've covered a lot of things. So thank you for joining us. Thank you. I always like to set some homework for our viewers and listeners. So as you're here with us today, I thought perhaps you might like to set the homework for us. I think we did that ready, right? So we talked about the value. So really going back to the values again and being clear on why you're in business, what you want out of it. And then off the back of that, maybe think about the goals for your bit because I think every business is at least two goals, right? So one for cash flow, one for compounding growth, right? So do you have a clear goal or strategy for how you're going to get cash flow like you meet a short term, three months kind of thing and then long term, how you're going to make sure it compounds with each other. And then the third one being around things like really sitting down to map out the customer journey. We talked about the six steps. Yeah. And then the six steps, what does it currently look like for you? Right? And I think that last one is a brilliant one because I don't do that. I mean, I'm, you know, I'm saying, you're listening to you today and I'm thinking, I don't do this much of doing this. And it's great because actually that customer journey bit is really important. And yeah, so great, great bit of homework for everybody to take that and the goals, etc. And yeah, because it helped, it'll help you, help you to go back and just reassess what you're doing in the business and just that's a step back and thinking about it. Are you really? And it shows you where to focus right? Because if you can see, for example, you don't have as many leads as many people to nurture, it shows you that in the next few months. Good run out. Things are going to quite exactly. Good run out, run out cash. You know, so it's like that needs to focus. And you're not long and guessing because guess, of course, if you've done for a long time, your gut intuition is pretty spot on usually. But if you have it laid out on a dashboard, it means that you're more data driven, not data driven, data informed, with how you're making decisions. And better still, you can now delegate a lot of stuff because you can say, you can now stuff, have a manager to say, hey, here's how I make decisions. There's other things I'm looking at to make it because if you know it's got, there's data that has come in somehow. Yeah, absolutely. Okay. That's informed the gut intuition. If you've got that instinct, it's because you've got knowledge from the past that you're applying. Other people haven't got that knowledge yet. Can't go on the gut. They need the actual information in front of them. Exactly. And it makes it easier to then scale and build that. And then finally, if you really need help with retention, I think a good starting point is that scorecard on the website. So you can go to thechangeive.co/sportslash. Yeah, we'll stick all over the scorecard. I'll stick that in the comments. Amazing. Yeah. Yeah. (laughing) - Yeah, it's really cool. - It's like, take it, like, yeah, I'm like, - Not enough out there, not not far, so. - Okay. And just a quick reminder where you can find us, you can watch us on the leaders in strategy YouTube channel, listen to us and Spotify, Apple Podcast, Amazon Music, Podbean and PodJacer. And of course, we upload every episode onto my LinkedIn page and also onto the Strategies Consulting website. All right, well, thank you for joining us. Hopefully that's been useful. The importance of retaining customers. Thank you again for joining us today, Yemi. It's been really good fun. And hopefully you'll come back and join us again soon. - Thank you. - And I'll talk about cash collection or something like that, that's equally as important. So that's it. See you soon. - Thank you.