Improving Client Profitability
Once your new or growing business attracts clients, how will you keep them? Client retention is a vital component of business success. For example, if you calculate that it costs you $100 in advertising and other promotions to earn a single client and just $20 to retain that client, it's a smart business decision to invest in retaining your existing clients.
That's why business experts suggest that you “lose a sale if you must, but never lose a client.” If a client needs something that you don't have, make it your goal to satisfy and retain the client by making a referral, even to one of your competitors. You may lose $50 in profits on the sale, but you will probably retain the client, who will come to you first for future advice. Again: Lose the sale, but don't lose the client.
If you don't know where to start in determining how you will keep clients, look first to your competitors. Then determine what method will work best for your business depending on whether you want to avoid or beat your competitors. Also anticipate future competitors as well as redirections from current competitors. Stay ahead of them to stay in business.
Retaining By Price
Individual buyers and market groups often buy commodity products based on price. ABC Stores has Crust Toothpaste at $2.95 a tube, but XYZ Mart offers it at $2.55. If your consulting business offers a commodity (common or mass-produced) service, be prepared to sell it based on competitive pricing. Any one of your competitors can cut his price and take some of your business away.
Most small businesses don't attempt to retain clients based on the lowest price. They often cannot compete with large competitors who can automate services and can sell them for less than your business can produce them.
Retaining by Service
Service is helping others. Whether your business sells a product or a service, service is involved. Representatives of your business — yourself or employees — directly or indirectly assist clients in solving problems. Service is an action that benefits others. By considering your client's needs and fulfilling as many of them as possible, you are providing a service. Your unique insight into your client's needs and your ability to help clients are what make your service unique and less subject to competition.
Retaining by Selection
Many consulting businesses capture and retain clients by offering a selection of services that is wider than those available from your competitors. Consider the many needs of your core clients. What related needs do they have? Which of these needs can you fulfill with your knowledge and experience? What further services can you develop that will benefit your clients? Can you somehow make your business a one-stop resource for your core clients?
You can improve client income — and profitability — by improving your services. It can be as simple as having fresh, quality coffee in the waiting room; meeting clients near their home or office; or offering a free initial consultation. Whatever you can do to earn your client's business can help your business' profitability.
Many small consulting businesses are niches, or specialized businesses within specialties. Small businesses often start up in this category. The primary reason is diversity. If a well-funded competitor enters the market and takes some of your clients, you still have segments of your business that can be expanded to compensate. In addition, many of your clients will appreciate the wide selection and buy from you even though your prices may be higher than price competitors. Identifying and analyzing your individual clients can help you determine the best ways to find and retain your best clients with a wider selection.
