Getting customers is one of the most difficult aspects of running a business, so it’s important to retain the ones you have, sell more to them and continually look for new ones.

This guide explains how to get to know your customers and understand your market, so you can increase sales and develop your business. It also explains how to identify your most valuable customers, and how to maximise this value.

Know who your best customers are

Increasing sales to your existing customers is more cost-effective than winning new ones. So knowing who your best customers are can help you improve customer satisfaction and sell more to your existing customers.

Work out how profitable your customers are

Customers tend to be more profitable if they:

• buy high-margin products
• pay full price without negotiating discounts
• place a small number of large orders rather than many small orders
• don’t cancel or amend orders
• pay on time without being chased for payment
• don’t require extensive after-sales service.

Target both new and existing customers

Once you know who your most profitable current customers are, you could target them using customer loyalty programmes. And targeting customers with a similar profile to your best existing customers is an effective way of finding new prospects.

Use customer relationship management (CRM) systems

There’s a range of CRM software available to help you capture useful information about your customers and spot opportunities to generate more sales – as well as areas you need to improve upon.

How to collect, store and analyse customer data

The obvious way to start collecting data is to log all your sales and orders. If you sell online, you can capture sales data automatically. Other options are to:

• run customer surveys
• track responses to your marketing material
• hold competitions, offering prizes for information – you can also run competitions on social media.

Be careful how you ask for information. You run a risk of alienating customers if you’re too intrusive or demanding. Make sure it's easy for customers to provide the information you need, and incentivise them where you can.

“What information should I collect?”

It depends on your business. But useful customer data includes:

• name – so you can personalise any communication
• contact details, offering a variety of contact options
• transaction and spending history
• communication history
• payment history – whether or not they pay on time
• their profile – age, gender, business, interests, etc.

Remember to check your data protection procedures

Make sure you meet data protection laws for any personal information – for both existing and potential customers – that you collect, keep or use.

Identify ways to sell more

Nine out of ten businesses grow by selling to the same or similar customers. Long-term customers are more likely to:

• recommend your business
• spend more money with you
• forgive you for occasional errors.

Get to know your customers to tailor your products

Talk to your customers. Find out what else you can do for them and how you could do it better. Do research, run surveys, build relationships and show an interest in what they do. Every contact is an opportunity to improve your relationship with a customer.

How to sell more and sell higher-value

'Cross-selling' and 'up-selling' are two crucial techniques for making the most of your current customers.

Up-selling is encouraging customers to purchase higher-value products or services than they currently buy. It can be as simple as telling your customers about all the products in your range.

Cross-selling means promoting complementary products or services. For example, selling newspapers in a coffee shop, or anti-virus software with new PCs, is cross-selling.

Improve customer satisfaction

Customer satisfaction is the key to achieving great sales and staying profitable, and satisfied customers are more likely to recommend your business to other people – social media has made personal recommendations more important than ever.

Dealing with customer complaints

A fast, effective procedure for customer complaints is a vital part of good customer care. Things will sometimes go wrong; it's how you handle these situations that matters.

Your complaints procedure should include:

• listening sympathetically to establish the details of the complaint
• recording the details together with relevant material, such as a sales receipt
• offering repair, replacement or refund
• appropriate follow-up action, such as a letter of apology or a phone call.

How to increase customer satisfaction

Think about setting up proper systems to maximise customer satisfaction, such as customer service policies, feedback systems and complaints procedures.

Customer care extends to all aspect of the business, not just ‘front of house’. For example, your dispatch department fulfilment speed directly impacts customer satisfaction. Always consider your business processes from a customer point of view, not just business need.

Win back old customers

Previous customers are great prospects. They offer you the potential for increasing your sales and revenue, but they’re easier and more cost-effective to acquire than new customers.

Re-establish contact quickly

The faster you get in touch to show you value their custom, the more likely it is that previous customers will return. However, you shouldn't persist if you haven't received a response after a reasonable number of attempts to get in touch.

Discover their reason for leaving

Find out why your customer left; listen to what they have to say. Perhaps they had a bad experience with your organisation or a staff member.

Many customers stop buying because they would like more contact with their suppliers. So keep in touch, by email, phone, post, newsletters or social media.

Respond to customers' concerns to tempt them back

Once you know a customer's reasons for leaving, you can make an offer or proposition that responds to their concerns. For example, if the product is too expensive, offer a discount.

Remember to keep track of how much you're spending to win customers back against though. You need profitable customers, not customers at any cost.

Resources

Read our guide ‘Increase your profitability’.

The free ‘MyBusiness’ app is for all businesses in Scotland, whether you're established or thinking about starting up. You can download the MyBusiness App from the App Store.