The Value of a Happy Customer
Have you ever worked with a company that seemed way more interested in chasing new customers than taking care of the ones it already had?
I have. And at the risk of giving you the most obvious advice in the world…
This article is about why you should focus on making happy customers first.
The Customer Factory Model
There's a real business case for prioritizing current-customer satisfaction over new-customer acquisition. To understand this, let's look at Ash Maurya's Customer Factory Model.
Consider this:
Every business is like a factory that turns people—prospects and/or unaware visitors—into customers.
To grow a business, you need to increase your factory’s throughput—either by moving more people through it or by increasing the value you extract from each customer.
Marketing’s purpose is to source the inputs for your customer factory.
There are three ways you can get people into your factory:
Acquisition. This is the typical marketing motion where you compel new people to buy from you. It could be via ads, sales outreach, social media or any other method that requires the use of your time and/or money.
Retention. These are your satisfied customers who stick around with your service or come back for more, increasing their overall value to your business.
Referral. This is when your customers (or partners) do the acquisition work for you, referring new people to your business who go on to become customers.
Making happy customers increases 2 & 3: retention and referrals.
And of course, you pay for #1. Whether via dollars or hours spent, every new customer that isn’t referred to you comes with an acquisition cost.
Happy customers don’t just stick around—they bring more customers with them. By focusing on making your current customers happy, you’re effectively investing in the most cost-efficient growth strategy there is.
Now, as good as referrals are for efficiency, they lack predictability. And if you’ve been relying on word-of-mouth to grow your business, you’ll reach a stage when you really need to invest in a measurable, repeatable acquisition strategy (e.g., digital marketing).
But not at the expense of your loyal, happy customers.
Find the “Sneezers” to Encourage Referrals
In his book Purple Cow, Seth Godin introduces a wonderfully effective, mildly gross metaphor about “sneezers.”
Sneezers are people who can’t help but tell their friends, family, or online followers about products, services and experiences they’re excited about. They spread their thoughts and ideas like someone spreads germs by sneezing.
Finding sneezers is key to creating organic, word-of-mouth traction for your business because their recommendations carry more weight and trust than branded content like ads. When considering ideal accounts or customer segments to target, take note of who would be most likely to evangelize your service when satisfied — sneezers can drive a lot of power to your happy customer engine, reducing your reliance on paid customer acquisition over the life of your business.
Build a Referral Network with Partner Marketing
Of course, customers aren’t the only people who can send new prospects your way. Networking with other businesses that offer complementary services to yours can be a great way to generate referrals.
When you provide a service that makes your partner’s job easier or makes them look good to their clients, they’ll be much more likely to recommend you. Every entrepreneur will go through stages when they need to clear tasks off their calendars that aren’t related to what they do best. And many will come across customers that aren’t a great fit for their services.
Prove that they can trust you to handle these tasks and clients, and you will open up another referral channel for your business.
You can incentivize partners further by offering them a commission on referrals, but this won’t be enough on its own. Partner marketing is still marketing, and you need to be perceived as the best solution to a real problem to close any deal. A 10-20% commission on its own will not be enough for a serious business to risk its reputation — and potentially give up a hard-earned client — by recommending someone who can’t deliver.
The best way to grow an early-stage service business? Do great work that makes people happy, for those who are likely to tell others about it.
