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Chris Bjorklund: Whether you’re running a global fastfood empire or a small Pilates studio, the key to increasing sales is to focus on how best to serve your long-time customers, the ones already in line to order a burger or already set up for a workout session. With their pocketbooks, they’ve shown they believe in your company time and time again. Hello and welcome to this AllBusiness webcast. I’m Chris Bjorklund, your host. Just exactly what do you know about your best customers and how do you connect with them? Today, we’ll explore this topic with a series of experts who will help you identify, cultivate, and retain your best customers and offer some real-life examples straight from the sale floor.

Chris: EHS Pilates is a small but growing San Francisco Pilates studio. What are they doing to generate more revenue and increase profits?

When I’m looking at profitability for the business, we use our software and we have four main categories that I would look at in terms of profitability for the business and the first being our group classes, the second being privates, and we also do education here, and then our retail business where we sell a lot of Pilates-related props that we’ll send home with clients. When adding new classes or taking classes away or looking at instructor, retaining the clientele, all of our reports allow us to adjust accordingly. So when a class isn’t doing well, we need to phase that out and think of something new. We don’t want to have the client just come in only for the trainer, we also want some loyalty to the business as well and retail is run as every other business would be run in terms of profitability and what products sell, what don’t, when we need to bring new things in, when we need to stop carrying things. We phase in and out and then bringing all of these together. We look at them collectively. We go through budget meetings. We look at the reports that we get from the software and then make changes accordingly.

Chris: The folks at EHS Pilates seem like they’re on the right track. For more on what businesses of all sizes can do to target their best customers, we turn to Charles Sterck, managing director of Sterck, Kulik O’Neill Accounting Group, which specializes in helping companies identify their best customers so they’ll come back for more. One of his key tools is what he calls the revenue maximizing formula.

Charles Sterck: Total revenue is comprised of the total number of customers you have multiplied by the average amount of money they spend when they visit you multiplied by the number of times that they do visit you. Total revenue. So now when I ask a business owner how should we increase total revenue, we no longer have only one solution which is to get to new customers. We can increase the average sale, that is the amount of money that your customer spends while visiting you or find a strategy that enables or causes your customer to come back and visits you one, two, three, four more times in a month, year, whatever your measurement period is, and by virtue of that formula, you increase total revenue.

Chris: Another technique for generating repeat business with your best customers is to stay on their radar screen. Let’s take a closer look now at how that’s done.

Running a heating and air-conditioning business may seem like a one-time hit-or-miss proposition. But that’s not the case for Kevin Cummerford of Service Champions in Pleasanton, California. AllBusiness reporter Paul Kilduff asked the owner what his selling strategy is. Just how does he manage to get homeowners who’ve already done business with, to call him back for the small jobs and the big jobs too?

Paul Kilduff: Kevin Cummerford started Service Champions in 2003 from scratch. Today, the company has 84 employees, 2 offices, 64 trucks and expects 2008 revenue to be 17.5 million. How did he accomplish this growth so quickly? We went to their Pleasanton, California headquarters to find out.

Kevin Cummerford: We really took the philosophy in watching Wells Fargo, two companies Wells Fargo and McDonald’s. They really have perfected what’s called this LCD marketing. It’s lowest common denominator marketing. It’s the 99-cent value meal. It’s the free checking account. All they’re looking to do is get the client in the door, give them great service when they arrive in the door like if you get on a free checking account, they give you great service, they bend over backwards and then all of a sudden you get on their credit card. You then are talking to them about a mortgage and before you know it, in a two to three to four-year period, you’ve got a lot of your accounts transferred over to Wells Fargo and it all started with a free checking account. Very similar process in our business. We can go and market, which we do at times, market for a $10,000 replacement system, buy a furnace, buy an air conditioner. However, what we find is more effective is if we just go in with a $78 tune-up. Give the client great service. Get them; sign them up after we’ve done this great demonstration for them. Get them on an on-going maintenance program and then when it comes time for them to replace their system, when it comes time for that $10,000 replacement sale, they only go with us. One of the things we preach to our team members all the time is we’ve got to not only be the sizzle, we’ve also got to have the steak. What I mean by that, if you’ve ever been to a great restaurant and the guy that the waiter brings the steak behind you and you hear it sizzling behind you and then that begins to get your appetite going, and he lays that steak in front of you and you take a bite of that steak and it doesn’t taste good, it doesn’t matter how good that sizzle sounded. We really train a lot on the sizzle. We’re really good at the sales and the marketing and the communication and the direct mail. We also have to be really good at the steak side so we’ve gone out and hired great people to not only be able to fix things and build things and install things. We also have really good people that can sell things and market things and service things. You’ve got to have both when you’re in a small business. Most small businesses fail because they’re really good at the steak. They’re a really good technician. They’re really good at fixing stuff. They fail on this end. They’re terrible at the marketing. They’re terrible at the service center. They’re terrible at the sizzling. That would be the number one difference between Service Champions and all of our other competitors.

Paul: To keep track of all their employees, trucks, and most importantly customers, Service Champions uses a customer relationship management system designed specifically for the heating and air-conditioning industry called SuccessWare. For more on this kind of programs and other tech-savvy ideas, we turn to Chris Zawacki as he talks to smallbiztechnology.com editor Ramon Ray. A founding partner of Greenhouse IT, Chris specializes in developing IT programs for small companies.

Ramon Ray: Technology could be confusing for many businesses. When you have a law problem, you hire a lawyer. When you have an accounting problem, you hire an accountant. But for some reason, technology is still confusing, kind of a black box to many people. We have with us today, Chris Zawacki of Greenhouse IT to help us understand how technology can be used in a small business.

Chris Zawacki: You need a way to communicate with your clients. You need a way to put your employees in a position to succeed as they interact with your clients and so contact relationship management database, a CRM package.

Ramon: And CRM, what’s CRM stand for?

Chris: Customer Relationship Management. So when you’re looking at dealing with your customers, you want to be able to seamlessly interact with them. You want to build processes in your business that allow your employees to fulfill whatever your customer is looking for and exceed expectations. Technology is a great way to do that. As you start, you can use the basic Microsoft Office Suite to accomplish this but I think as you grow, depending on what your business type is, there are general kind of mainstream CRM packages out there, the Axe, the Goldmine, depending again on what industry you’re in. You may want to look at an industry-specific package. These are things that allow your sales people to track their endeavors and efforts. It allows your customer service and fulfillment departments to interact with the clients and these processes that technology allows you to track ensure that you don’t miss out on opportunities, that you don’t miss delivering a product or a service to a client on time. Again, deliver so you exceed expectations and technology can help you do that.

Chris Bjorklund: Now that you know how to identify and cultivate your best customers, how do you retain them? Make them part of the family. Jim Stein is the CEO of American Ratings Corporation, a company that rates local companies on customer satisfaction for whom I have consulted. He says it’s all about super gluing customer loyalty, something that can be accomplished by every smart business owner.

Jim Stein: To super glue customer loyalty to your company, I recommend three action steps. Step number one, create a list with your team of three types of experiences your customers have that creates dissatisfied customers. This could be different things in service that happens. Different screw-ups that employees have with customer accounts, product malfunctions, et cetera. Then create a list of three things that your team does that surprise your customers in a good way and have…creates let’s say super satisfied customers. Step number two is to analyze this list and to price out the cost of what good surprises cost your company in terms of the benefit of new customers and customer retention and what bad surprises cost in terms of losing customers. Now you need to calculate, okay what is the value of a customer over the life of the company? And it’s somewhat of a complex formula but I’ll try and synthesize it here. First thing you do is you figure out what is the margin that you’re making on the average customer? Take your last month of sales and figure out how many customers you actually served and take your revenue and divide the revenue by the number of customers so that you get your average sale price. Then do a rough calculation in terms of percentage of what your incremental margin is. Now what you need to do is to figure out your attrition rate of customers over the course of a year and also calculate how many years you’re going to keep an average customer and you can do that, this is a little secret, by taking your attrition rate percentage that leave, taking 100 and divide the attrition rate into it. So for instance, if you lose 5% of your customers, okay 100 divided by 5 is 20. You have an average of 20 of your customers. Okay, so now you calculate the actual value of a customer over the life of the customer. It becomes a very big number which is all the more reason to make sure and to spend, to super glue the loyalty of these customers with you. Now because you’ve involved your entire team, it’s a great opportunity to get buy in from your team because they’re the ones that are going to do the small things to keep customers satisfied. The third step is to monitor and lead from the top and you personally must lead by example otherwise it will not work. And that means you create a little chart on the wall, you do training. You track it weekly and you see what good surprises your employees are doing and what of the bad surprises you’ve now wrung out of your system and make sure your employees are not doing. And if you do those three steps, you’re going to super glue the loyalty of your customers.

Chris Bjorklund: So that wraps up our program for today. Thanks to all of our experts. I’m Chris Bjorklund, thanks for joining us.