I hope none of you have a business as badly conceived as my first business – selling roof restorations. It is nothing more than a gigantic churn-a-thon.
Every week I would have to go out and knock on enough doors to talk to about 150 people in order to get enough people to do enough quotes in order to sell 2 of these each week – so that I made my money, kept my roofers busy and paid all the bills. About half of my working time was pounding the pavement knocking on doors and usually nobody was home.
The best part of the business was it meant every week I was pretty much starting again from scratch.
This was 100% churn if ever I saw it. There was no repeat purchasing built into the business at all. How poorly built was this business? Yeah, pretty bad.
In retrospect this business was a churn-a-thon. There was no getting ahead, there was no creating future income from the same amount of labour. It was a classic case of making minimum wage with brawn rather than maximum wage with brain.
It took a while before I worked out that I could cross sell the same people other home improvement products. S.L.O.W. should have been my middle name.
Once I understood just how important customer loyalty is, I realised just how much more important it was to be in a business that capitalised on customer loyalty.
Avoiding the churn-a-thon.
Every business is going to churn customers. Some of your customers are going to stop buying from you any given year. It is almost unavoidable. However, you can do your best to minimise that churn. A 25% reduction in churn means that is 25% less new customers that you need to replace the lost ones.
That increased loyalty means an increased customer lifetime value because those customers are going to be staying with you even longer. Which means you should invest more to get keep them and invest more in order to get them in the first place – making it easier to grow your business.
If you are stuck in a business where you can’t get ahead because you are always having to start again, it’s time to do something to end the great churn-a-thon.