October 16, 2008, 12:47 AM — Business owners, even ones who understand and develop technology, need every possible advantage in competing with larger companies in their space.
One of the main advantages of a smaller company is that they can develop stronger relationships with their customers and clients.
Since earning a new customer is 6 to 7 times more expensive than retaining an existing one (according to Frederick Richheld, author of The Loyalty Effect), it makes sense to focus on increasing the total amount they spend with your business.
It's important to be able to not only determine how valuable those customers are but to also choose the right customers to focus on --- after all, not all customers will bring the same amount of revenue, and some will be more ready to refer you into their networks than others.
The article Increasing the Lifetime Value of Your Customers by Integrated Marketing describes how to develop higher value relationships with your customers using "CARLA's" tactics and how to build an effective referral system, without a large budget.