by John Almberg, Identry  LLC

An online merchant--let's call him Bill--called me the other day with a familiar problem:

"I need more customers"!

"Are you sure?" I asked. "How much does it cost you to get a new customer?"

Not surprisingly, Bill had no idea how much it cost him to convince a total stranger to make that all-important first purchase. So we spent a few minutes estimating how much he spent each year on various forms of advertising--print ads in magazines, attending trade shows, Google AdWord advertising, and so on. We also estimated how many new customers this advertising produced.

When we divided the total cost of advertising by the number of new customers, we figured it costs Bill, on average, about $300 to 'buy' a new customer.

"And how much does each new customer buy from you?" I asked.

"Not enough," he grumbled. "It varies, but the average customer probably buys about $100 worth of product. If I'm lucky."

"So, you spend $300 for a customer who buys $100 from you?"

"You got it."

"But you're not including your loyal customers, are you?"

"Oh no!" he said. "The average customer makes one or two small purchases and then I never hear from him again. But some come back over and over again, and spend a ton of money."

"And why do they do that?"

"I don't know," he said. "It just happens."

Like lots of online (and offline!) merchants, Bill focused all his marketing efforts on getting new customers. What he wanted was a constant stream of new customers flowing into his online store.

But after spending $300 to 'buy' a new customer, Bill didn't do anything special to keep him or her. Why should he? Most new customers placed one or two small orders and then disappeared forever. That was the way it worked. It just happened.

So, while Bill moved heaven and earth for a new customer, he took his existing customers for granted.

Is it surprising, then, that most of Bill's customers quietly became former customers?

"You don't need more customers," I told Bill. "You need more loyal customers. More of those people who come back over and over again, and spend a good portion of their collecting budget with you."

"Sure," he laughed. "But how?"

That's the topic we'll cover in this series of SELLING ON THE WEB. It just so happens that the Internet is particularly good at converting customers into loyal customers. It's not easy, or free, but its a lot more profitable than 'buying' a continuous stream of new customers.

So, how can you convert more of your customers into loyal customers? According to Don Peppers and Martha Rogers, writing in their book The One to One Future, the key steps are:

1. Focus your attention on the customers you already have, whether they've ordered once or a dozen times. Figure out what they want, and which needs you can satisfy. Then use the knowledge you have of them, and the trust you've built, to make additional sales.

2. Increase the 'durability' of your customer relationships. Invest money in keeping your customers, because it's much cheaper than getting new ones.

3. Stock more of what your customers want, and ask them more often if they would like to buy. By focusing on the needs of your existing customers, you can dramatically increase the frequency and quality of your offerings, thus increasing your sales.

4. Create an interactive relationship that leads to meeting more of your customer's needs. You can never know what a new customer will want, but you can discover what your existing customers want. It's a cycle. By constantly encouraging your customers to give you more information, you can offer more products that satisfy their wants.

Skeptical? Well just consider this: McDonalds put these principles to work and--by adding 7 little words to their sales pitch--improved profitability by 30%. Can you guess what they were? (Check the next issue for the answer!)

Next issue, we'll discuss more one-to-one marketing ideas and look at some simple and practical ways you can put one-to-one marketing to work in your business!