How to Calculate the Lifetime Value of a Customer

Take a look at this infographic explaining  how to calculate the lifetime value of a customer.

Delivering exceptional customer experience directly impacts your bottom line.

http://www.pretiumsolutions.com/how-to-calculate-the-lifetime-value-of-a-customer/

blog.kissmetrics.com/how-to-calculate-lifetime-value/

Convert Community Goodwill Into Cash

You've worked hard to build your company's reputation in the local community. Convert that goodwill to real value as you prepare to sell your business.

Valuation can make or break the sale of your business. If your company is overvalued, it won't capture the attention of serious buyers and can languish in the marketplace for years. But undervaluation can be just as problematic. Although your business will sell more quickly, it may also mean sacrificing the financial objectives you hope to accomplish from the sale.

In the business-for-sale marketplace, overvaluation happens more frequently than undervaluation. For years, the seller has worked hard to build the company's reputation in the community, so when it's time to sell the business the intangible value of the company's reputation should be factored into the sale price, right?

The value of a company's relationships with customers, employees, suppliers and other stakeholders is called goodwill--and it does have real value for buyers. But to realize that value in the final sale price, business sellers need to execute strategies designed to convert goodwill to demonstrated business value.

How to Demonstrate the Value of Goodwill
As a small business owner, it's in your best interest to start making a case for the goodwill value of your company as early as possible. The more time and energy you invest in creating tangible measurements of your company's relationships, the easier it will be to demonstrate its goodwill value to prospective buyers.
With adequate planning, it's possible to increase your company's sale price by strategically documenting foundational elements of goodwill value.

1. Measure customer loyalty.
Customer loyalty is a reflection of your company's relationships in the local community. Although most business owners recognize the importance of loyalty improvements, relatively few owners establish loyalty goals and document the achievement of loyalty milestones for buyers.

2. Document customer service outcomes.

Businesses with strong customer service programs can benefit from positive word-of-mouth, advocacy on social media sites and other advantages. In addition to archiving positive customer comments and customer service interactions, create mechanisms to measure the effectiveness of your customer service efforts (e.g. average response time improvements, customer survey results, etc.).

3. Prioritize employee retention and development.
Employee relationships play an important role in determining the goodwill value of a small business. Buyers are willing to pay more for stable companies that can demonstrate above average employee retention rates and organized employee development programs.

4. Differentiate your products and brand.
Businesses that offer a unique product or service have a tendency to pique buyers' interest. By differentiating your business from other local providers, you can significantly improve its goodwill value--especially if you can demonstrate that customers perceive your business as the community's sole provider an in-demand product or service offering.

5. Benchmark everything.
Benchmarking is the key to demonstrating the cash value of goodwill. Sellers that make the biggest impact with buyers in the business-for-sale marketplace gauge loyalty, retention and other measurements against industry and regional benchmarks to quantify the company's intangible value.

Most small businesses have at least some goodwill value that can be converted into cash value during a business sale. However, the quantification of goodwill can be nuanced, so it's advisable to consult a business valuation professional before you assign actual dollar figures to the value of your company's relationships with customers, employees and other stakeholders.

http://www.inc.com/mike-handelsman/convert-community-goodwill-into-cash.html

How to Cultivate Truly Loyal Customers

"How do I create loyal customers?" a reader emailed recently. Good question: Customer loyalty is an issue every business owner cares about greatly.

So I turned to Larry Freed, CEO of Foresee, a global leader in customer experience analytics, for the answer. He graciously allowed me to share the tips below from his book Managing Forward: How to Move from Measuring the Past to Managing the Future, a great read if you're interested in better satisfying your customers.

"In business terms, I think of loyalty as a faithfulness or allegiance to a company or brand," Freed says. "In short, when I am loyal to a company, that company is my first choice."
But in broader terms, Freed says there are four basic forms of customer loyalty:

Purchased Loyalty
The best example of purchased loyalty is a customer rewards program. Other examples include memberships, coupons, and rebates.

Basically, purchased loyalty pays customers to be loyal, and there is nothing wrong with that practice. In many industries and market sectors the purchased loyalty strategy works extremely well.

The main problem with it is that purchased loyalty can be easily stolen because the customer is loyal to the program, not the company.

Say you have a frequent flier account with a particular airline. If the only reason you are a loyal customer of that airline is its points system, then when another airline offers a more advantageous system you will immediately switch.

Every business wants a sustainable competitive advantage and a purchased loyalty program can provide one--even though it can be very tough to sustain.

Purchased loyalty can also produce unintended consequences. Some programs condition customers to expect deals, discounts, and loyalty rewards, causing many to be loyal to the deal or discount and not to your business.

Convenience Loyalty
The local market, the corner dry cleaner, the coffee shop on your way to work. You might be loyal to those businesses simply because they're convenient. You're likely to remain loyal unless competitors come along who are equally or even more convenient.

Convenience loyalty can apply online as well, although less commonly. If you own the right real estate on a home page or portal you may create loyalty through convenience.

Still, convenience advantages online are generally fleeting.

That's why location matters... until it doesn't.

Restricted Loyalty
Restricted loyalty exists when there is no other game in town. Your cable company may enjoy restricted loyalty, especially if you live in a rural setting and there is no competition. (Although it is easy to argue that other options do exist, like online services.)

Utilities tend to enjoy restricted loyalty. Most cities do not have multiple electricity providers.
A corporate travel program with a company like American Express may be a form of restricted loyalty, especially if you feel no other programs are competitive. Arguably some Walmart locations enjoy a form of restricted loyalty with a dollop of convenience loyalty mixed in. If Walmart is the only game in your town you naturally are "loyal." When customers have no options, loyalty is their only choice.

Constraints often create loyalty. Restricted loyalty is great for a business--if you can get it and maintain it--but restricted loyalty is increasingly a thing of the past. Competition exists in almost every consumer situation, both within an industry or category and in the larger marketplace.
Companies compete, especially in down economies, for a larger share of wallet--across industries and across markets.

True Loyalty
True loyalty is earned loyalty. True loyalty is undying allegiance to a brand or product based on an incredible level of satisfaction.

Customer satisfaction breeds true loyalty. When you are highly satisfied, when your needs are completely met and your expectations are consistently met and even exceeded, you simply cannot imagine using another product or service.

True loyalty is the holy grail of customer satisfaction and is something every business should aspire to create.

How?
Clearly the ultimate goal for almost every business is to create and foster true loyalty. When you measure the right things, listen to your customers, and make changes and improvements that will increase customer satisfaction, you can create truly loyal customers.

That's great: Loyal customers come back. You don't have to pay to acquire and keep them. Loyal customers are more profitable as well since new customers are much more expensive to acquire.

But in order to achieve true loyalty you must first measure loyalty the right way.
For example, measuring a potential behavior, such as likelihood to recommend, does not measure loyalty. Likelihood to recommend measures positive word of mouth. We worked with a fantasy sports provider and found that 27% of its users said they would not be likely to recommend... but only 3% said they were actually likely to share that kind of feedback with others.

The fact that, when asked, people said they were not likely to recommend the service did not automatically mean they would volunteer that information to someone else.

The key is to understand customer needs and expectations, measure your results, and make changes that positively impact the customer experience and meet the real needs of customers. Creating truly loyal customers by satisfying customers is a long-term, sustainable advantage.
So don't be lazy. Purchased loyalty has its place as long as you also practice fiscal responsibility. (After all, it's easy to satisfy your customers if you don't have to be fiscally responsible. Simply spend what you want!)

Convenience loyalty can be wonderful, especially if you choose the right locations or modes of delivery. And restricted loyalty is great if you can get it.

But those forms of loyalty are difficult to obtain and tend to yield fleeting advantages.

True loyalty, based on customer satisfaction, is the ultimate goal of any business and the only true long-term competitive advantage.

http://www.inc.com/jeff-haden/how-to-cultivate-truly-loyal-customers.html

How to Thank Your Employees in Only 8 Words

Genuine appreciation goes a long way. Here's a guide to get the most out of a brief note, no matter who you're thanking.

The other day I was given the challenge to recognize 30 people by writing each one of them a note, which got me thinking about the amazing implications of recognizing employee's contributions. It shows you are paying attention. It shows you care. It makes people feel valued. And as business guru Tom Peters notes, "People don't forget kindness."

The analytical readers among you are already thinking this article is entirely too touchy-feely, so let me add that there is also a self-serving aspect of thanking people. When you recognize the contributions of others, you reinforce the kind of behavior you want to see again. People who feel their efforts are noticed, and their work makes a difference, are more likely to go the extra mile in the future. Leadership is about empowering others to realize their own abilities. Communicate your belief in your people, and watch them rise to meet your expectations.

Some of you are now thinking, 'How am I supposed to find the time to write personal notes when I have [insert important obligations]?' Well, I can show you how to thank someone appropriately in eight words or fewer. You can do that. Also, you don't want to be that boss who has her assistant order flowers once a year on each employee's birthday. Save your money. Everybody knows someone else did it for you.

When you thank your employees, be prompt. Recognize the kind of effort you want to see again soon. And be spontaneous. Don't wait for a holiday or company-wide event to thank your employees. Of course, be specific, too.

Our research at Emergenetics indicates that most employees would enjoy a personal thank-you note, but they want it customized to them. For example, to say, 'You're doing a good job,' is fine for a "social" thinker, but a "structural" thinker doesn't trust you unless you add a specific task he has accomplished.

So how can you most effectively thank and recognize your employees, based on their individual personalities and traits?

Here are 10 tips, according to brain research:
1. People who are at the gregarious end of the "expressiveness" spectrum use their gift of gab as a work asset. You might write to them: 'I celebrate how you share your enthusiasm,' or 'Thanks for keeping the lines of communication open.'

2. People who are on the quieter end of the "expressiveness" spectrum appreciate one-on-one contact with you. You could say: 'Mary, I prize your well-considered solutions,' or 'I appreciate your respectful attitude toward everyone.'

3. Those employees who are forceful in terms of "assertiveness" especially appreciate the prompt response from you. You could let them know: 'Thank you for keeping the momentum going!' or 'I appreciate your decisive action.'

4. But those who are more easygoing when it comes to "assertiveness" want everyone to get along. You might say: 'Thank you for helping to keep the peace,' or, 'I appreciate your amiability more than you know.'

5. When it comes to "flexibility," staffers who are change-seekers don't get flustered easily. You might write:
'I recognize your easy resilience' or 'Thanks for how you handled [difficult client].'

6. On the other end of the "flexibility" spectrum is people who are focused and have strong opinions. You might jot down: 'I depend on your support,' or 'I honor you for your convictions.'

7. Analytical thinkers value intelligence and individual, rather than team, recognition. To them, you might note: 'I appreciate your penetrating questions,' or 'I respect the depth of your knowledge.'

8. Structural-minded folks want to hear details. You could let them know: 'Thank you for transferring all that data perfectly,' or 'You always meet your deadlines--impressive!'

9. Since social thinkers want to please you, you ought to write them: 'I am so grateful for your teambuilding skills,' or, 'I couldn't have done it without you.'

10. Those on your team who are conceptual by nature want to feel unique. You could let them know: 'Your solution to the XYZ problem was stunning,' or 'I treasure your creative long-term views.'

The power of sincere thanks cannot be overestimated. And when you become a master of employee recognition, you can start thanking your clients, too!

 http://www.inc.com/geil-browning/how-to-thank-your-employees.html

The quickest way to get things done and make change

Not the easiest, but the quickest:
Don't demand authority.
Eagerly take responsibility.
Relentlessly give credit.

http://sethgodin.typepad.com/seths_blog/2012/05/the-quickest-way-to-get-things-done-and-make-change-and.html

Nice People Will Sabotage You

How to keep quiet politeness from killing your sales, marketing and probably your business.

I’ll admit it. I'm not a particularly nice person. In fact some consider me brutal with my honesty. (Some just call me a New Yorker.) Either way they’re right. I don’t coddle. I don’t insult, but I call it like I see it and often I offend. I don’t do it to be mean. I do it out of integrity. I believe (often foolishly) that when people engage me in conversation that they are truly interested in my opinions and experiences. So I share it, willingly.

A colleague of mine claims one can offer blatant truth, and still be nice. She says: “It’s not what you say, but how you say it.” I don’t buy it. I have often witnessed, when someone has invested their heart, soul and ego into a project, and you tell them truthfully and nicely why it will never work, they still think you are cruel and non-supportive. Don’t take my word for it. Just watch Shark Tank, or American Idol. Except maybe Kevin O'Leary, most of the investors or judges aren’t actually rude or impolite. (Not since Simon left anyway.) They simply point out the errors in the unfounded beliefs of the contestants…dashing their dreams and crushing their spirits…thereby appearing to be cruel and non-supportive.

The alternative to us truth-sayers is people with discretion. They grew up under the rule: If you can’t say something nice, don’t say it at all.” They either lie and say something “supportive” when you bring them your hideous, doomed-to-fail idea, or worse they exhibit what I call Quiet-Politeness and simply say nothing. Most likely they’re not vested enough in your success to engage in conflict with you over your passion.

These nice people are not doing you any favors. In fact they are sabotaging you in three ways.

1. Nice People Waste Your Time.
This happens in sales all the time. You meet people at networking events. They’re polite. They never actually tell you they won’t do business with your company. So you optimistically think they’re worth keeping in your tickler file. You follow up every couple of months. You email them a birthday card. You tell yourself that someday they will come around. They won’t. They politely return your email or take your call, again omitting the fact that they’ll never buy and are generally annoyed with your persistence. In fact they would better serve you both, by stating that they already buy from their brother-in-law or that they hate your CEO, and just cut you loose. In sales, nice people suck up the majority of your time and resources. Just look at your conversion numbers.


2. Nice People Encourage Low Standards.
Most people ask for opinions in hopes they are on the right path with a project. A marketer who has passionately invested months in a new campaign runs it by a nice colleague for her feedback. The nice colleague thinks it’s a six on a scale of 10. The nice colleague supportively says: “ Looks good. Keep it up.” Why create unnecessary conflict in the cubicle next door? She thinks. The marketer feeling reassured, continues on his path of mediocrity. The campaign has lackluster results.


3. Nice People Enable Failure.
When an achiever is passionately driving down a fatal path, nice people tend to clear out of the way. Some are simply avoiding conflict. Others don’t want to appear non-supportive as the achiever reaches the point of no return. The nice people demonstrate their own brand of silent cruelty by not sharing their knowledge that can avert the disaster.

I’m not suggesting we round up all the nice people and ship them to parts unknown. Neither should we abandon all rules of polite society. But if you are an achiever in the business world, nice people will create unnecessary obstacles without some precautionary steps.


1. Defend against the “Golden Rule”
State clearly you do not want to be treated by nice people the way they want to be treated. Tell them instead to openly share their honest opinions and experiences or don’t engage. Tell them you intend to do the same.


2. Reward Bluntness
It doesn’t matter if you are an entrepreneur, manager or employee. When you seek feedback, show that you appreciate truth and constructive criticism no matter how harsh and painful. Show you can apply input so people are encouraged to provide more of it.


3. Give Nice People a Safe Path to Disengage
Most nice people can’t help themselves. Help them form nice people cliques and let them sabotage each other en masse. Perhaps you can identify them with an embroidered N on their lapels so they can find each other easily. This way you can avoid them and come hang out with those of us who will be brutally honest and give you the necessary feedback for success and achievement. We’ll be supportive by helping you overcome your real obstacles and we’ll encourage you to do the same for us. Come on over anytime. (You can find many of us at the Bull and Bear.)

It may not be a nice time, but it will certainly be refreshing.

I look forward to reading all your comments both good and bad. Of course I don't expect the nice people will say anything.


http://www.inc.com/kevin-daum/dont-take-business-advice-from-nice-people.html

The 8 Things Your Employees Need Most

Forget about raises and better benefits. Those are important -- but this is what your staff really wants.

Pay is important. But pay only goes so far.

Getting a raise is like buying a bigger house; soon, more becomes the new normal.

Higher wages won’t cause employees to automatically perform at a higher level. Commitment, work ethic, and motivation are not based on pay.

To truly care about your business, your employees need these eight things—and they need them from you:


1. Freedom. Best practices can create excellence, but every task doesn't deserve a best practice or a micro-managed approach. (Yes, even you, fast food industry.)

Autonomy and latitude breed engagement and satisfaction. Latitude also breeds innovation. Even manufacturing and heavily process-oriented positions have room for different approaches.

Whenever possible, give your employees the freedom to work they way they work best.

2. Targets. Goals are fun. Everyone—yes, even you—is at least a little competitive, if only with themselves. Targets create a sense of purpose and add a little meaning to even the most repetitive tasks.

Without a goal to shoot for, work is just work. And work sucks.

3. Mission. We all like to feel a part of something bigger. Striving to be worthy of words like "best" or "largest" or "fastest" or "highest quality" provides a sense of purpose.

Let employees know what you want to achieve, for your business, for customers, and even your community. And if you can, let them create a few missions of their own.

Caring starts with knowing what to care about—and why.

4. Expectations. While every job should include some degree of latitude, every job needs basic expectations regarding the way specific situations should be handled. Criticize an employee for expediting shipping today, even though last week that was the standard procedure if on-time delivery was in jeopardy, and you lose that employee.

Few things are more stressful than not knowing what your boss expects from one minute to the next.

When standards change make sure you communicate those changes first. When you can't, explain why this particular situation is different, and why you made the decision you made.


5. Input. Everyone wants to offer suggestions and ideas. Deny employees the opportunity to make suggestions, or shoot their ideas down without consideration, and you create robots.

Robots don't care.

Make it easy for employees to offer suggestions. When an idea doesn't have merit, take the time to explain why. You can't implement every idea, but you can always make employees feel valued for their ideas.


6. Connection. Employees don’t want to work for a paycheck; they want to work with and for people.

A kind word, a short discussion about family, a brief check-in to see if they need anything... those individual moments are much more important than meetings or formal evaluations.


7. Consistency. Most people can deal with a boss who is demanding and quick to criticize... as long as he or she treats every employee the same. (Think of it as the Tom Coughlin effect.)

While you should treat each employee differently, you must treat each employee fairly. (There's a big difference.)

The key to maintaining consistency is to communicate. The more employees understand why a decision was made the less likely they are to assume favoritism or unfair treatment.


8. Future. Every job should have the potential to lead to something more, either within or outside your company.

For example, I worked at a manufacturing plant while I was in college. I had no real future with the company. Everyone understood I would only be there until I graduated.

One day my boss said, "Let me show you how we set up our production board."

I raised an eyebrow; why show me? He said, "Even though it won’t be here, some day, somewhere, you'll be in charge of production. You might as well start learning now."

Take the time to develop employees for jobs they someday hope to fill—even if those positions are outside your company. (How will you know what they hope to do? Try asking.)

Employees will care about your business when you care about them first.

8 Ways to Build Customer Loyalty

Top salespeople use these simple rules to keep their customers buying from them--even in the face of steep competition.

Customer loyalty is the key to profitability. The reason is simple. It costs more–geometrically more–to acquire a new customer than to keep a current one.

Without customer loyalty, customers leave. Then you can end up sacrificing as much as a third of your sales year just to get your numbers back to where they were the previous year. Ouch.

With that in mind, did you ever wonder how top salespeople keep their customers so loyal? It's not because they have great products or they're good at schmoozing. The secret to customer loyalty lies in putting the interests of the customer ahead of your own. It's really that simple.

Here are eight rules for making this happen:
1. Have a sales philosophy that emphasizes relationship building.
2. Define a unique niche and become the customer's expert on it.
3. Help the customer build the customer's own business.
4. Translate what you offer into the customer's business results.
5. Value the relationship more than making your quota.
6. Think end-of-time friendships, not end-of-month totals.
7. Achieve a perfect job of delivering what you've promised.
8. Provide absolutely impeccable service after the sale.

The above is based on a conversation I had with amazing sales mega-guru Jeff Gitomer. I love his stuff and I featured some of his ideas in my recently published book.

http://www.inc.com/geoffrey-james/8-ways-to-build-customer-loyalty.html

The One Decision Every Great Entrepreneur Makes

Good founders benefit from vision and courage. But great founders know their success hinges on this one crucial decision.

Business is a lot like sports. While business is rarely a zero-sum game, since success does not have to come at the expense of others, still, some companies win while others lose—and the reasons why aren't always obvious.

Take basketball. As Bill Simmons (the most insightful and entertaining sportswriter on the planet) writes in his outstanding The Book of Basketball:

[The Lakers and Celtics] were loaded with talented players, yes, but that’s not the only reason they won. They won because they liked each other, knew their roles, ignored statistics and valued winning over everything else. They won because their best players sacrificed to make everyone else happy. They won as long as everyone remained on the same page. By that same token, they lost if any of those three factors weren’t in place.

Simmons calls this principle "The Secret" and says (quoting NBA-great Isiah Thomas), “The secret of basketball is that it’s not about basketball.”

The same principle applies to business. Talent is obviously important, but the ability to work together, check egos at the door, and make individual sacrifices when necessary is the only way a team succeeds.

Think about the business teams you’ve seen fail. Rarely was their failure due to a lack of talent or even the absence of a great idea. More often they failed because of personality conflicts, ego clashes, or competing agendas.

So is the secret of business that it’s not about business?

Not quite. Later in the book Simmons describes The Secret to Hall-of-Famer Bill Walton.

It’s not a secret as much as a choice... Look at the forces pushing you to make the other choice, the wrong choice. It’s all about you. It’s all about material acquisitions, physical gratifications, stats and highlights... And you wouldn’t even know otherwise unless you played with the right player or the right coach…. With a truly great coach, it’s not about a diagram, it’s not about a play, it’s not about a practice, it’s the course of time over history. It’s the impact a coach has on the lives around him.

That's why every great leader makes the same decision. Walton believes success at the highest level in basketball comes down to one question: "Can you make the choice that your happiness can come from someone else’s success?"

If you can make that decision you take the most important step towards becoming a great leader.

No entrepreneur has qualities like courage, vision, charisma, adaptability, and decisiveness in equal measure.

But every great entrepreneur does make the same decision—and so can you.

http://www.inc.com/jeff-haden/the-one-decision-every-great-entrepreneur-makes.html

What Drives Customer Loyalty Now?

It's time to put away the golf clubs and pull out Google Reader: Sales are no longer just about personal relationships.

If you think customer loyalty is driven by personal relationships or because of your hard work, then not only are you wrong--but you're putting your revenue at risk. The reasons for customer loyalty have changed dramatically in the past decade, according to research published in the book, "The Challenger Sale" by Matthew Dixon and Brent Adamson. Relationships and hard work now come in second and third on the list of what customers value most--and what will drive them to change providers.

Instead, customers today are looking for sales people to be experts--not in the products or services that they offer, but rather in the customer's own business. Sales people who can demonstrate that expertise in the sales process are winning big deals away from formerly entrenched competitors.

Here's how customers consider your value, from lowest to highest:

• If you know your product, you are a human catalog
• If you know your services, you are a technician
• If you can match your products and services to the customer's needs, you are a sales person
• If you know a customer's problems and business, you are a consultant
• If you know a customer's industry, market challenges and competitors, you are an expert

Customers are moving their business from sales people to experts. If you want to be the big winner in your market, you have to increase your expertise and demonstrate that expertise in meaningful ways to your customer.

Here's a course of action.
1. Learn your customer's industry, business challenges and competitors.
You don't have to become an encyclopedia of information to be of increasing value. Instead start with just a few steps:

• Read and subscribe to your customer's industry's top two or three blogs.
• Put keyword notifiers in your Internet search tool for the top three or four key terms for your customer's industry issues.
• Read the trade association newsletters and website materials of your customer's industry.

2. Ask your customers about changes in their industry.
Focus on these four categories: technology, regulation, mergers/acquisitions and innovations. These categories are forward-looking and often are the market drivers with which customers need the greatest help.

3. Suggest how you might help your customers.
Explain how your products and solutions address their upcoming challenges. When you are demonstrating expertise, the language you use is important. Focus on their issues more than your offerings. Use the language of:

• Time: How you can help them to be faster and more responsive to the market and to compliance deadlines.
• Money: Saving and making money is always a motivation for a buyer considering the value of expertise. In addition, there is the measurement of money in relationship to the market. How will working with you change their position in the marketplace in the area of value, price, cost or share?
• Risk: The impending negative impact of something that you point out can be a powerful motivator for action. Loss of market share, penalties for non-compliance and the risk of being technologically overrun by competitors are all threats that can help customers see you as a valuable expert.

Achieving a level of expertise value has a big impact on customer loyalty. Increasing your relevant expertise can help you trump your competitors' hard work and personal relationships.

http://www.inc.com/tom-searcy/what-drives-customers-loyalty.html