MN Fruit & Vegetable IPM News - Vol. 1, No. 6

What is the most important asset of your company? What was your first thought in answering this question? Was it land, machinery, buildings, or employees? All are pretty good answers. But from a certain point of view all of the above are essentially liabilities until your customers bring their money. In this series I will explore this view and what it might mean to your business.

Know your Cu$tomers. Do you know how many customers you need to create a profitable business? Can you separate your customers into profitable and non-profitable categories? To answer the above questions three similar nurseries provided their customer data bases for analysis (Stegelin 2000). Each nursery had approximately 1,400 customers. They separated their customers into retained (1,000), lost (~200), and new (~200) categories. The retained customers generated 88% of the total revenue and 89% of the profits. If you factor in a marketing expense, both the lost and new customers were net losers. Increasing the retained customer category by a few percent can show dramatic increases in profits. An increase of 5% in repeat business can produce a 60% increase in profit (Reichheld, 1996). Having satisfied customers is a great feeling. Satisfying customers to the level that affects their behavior, beyond their feelings, is great business. Having customers demonstrate their loyalty by coming back with their money is profitable. If the repeat customer is an important factor in your business, what actions you might take to increase your repeat business.

People Skills are the Key. This is not to devalue your technical skills. Today people expect quality. Quality is your ticket to the marketplace. One of your best competitive tools is to care about your customers and make them feel important. The better you understand your customers the better you can deliver a value that impacts their behavior not just their attitude. Do you know which values are most important to each of your customers? Customers value convenience, price, appearance, taste, smells, and many other descriptive words. Customers come back when you get the value “proposition” right. If things are too crazy to ask customers what they value at the point of sale then we need to find another way to discover these values. Every time you talk to your customers you have an opportunity to learn as much about them as possible. Never pass up the opportunity. Give your loyal customers a service that they can talk about and you have made good use of your marketing dollars. It may be that the best path to acquiring a new customer is through the great experiences of your current customers.

References and Recommended Reading

Stegelin, F.E. 2000. Profit Impact of Customer Retention, SNA Research Conference, Vol. 45: 509-512.

Frederick F. Reichheld. 1996. The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value. Harvard Business School Press, Bain & Company Inc.

Lawfer, M.R. 2004. Why Customers Come Back – How to Create Lasting Customer Loyalty, Career Press.

Editor’s Note: Karl Foord, Ph.D, MBA, has considerable experience with horticultural crop production and marketing. Beginning with this issue, we will be publishing a series of Karl’s articles on marketing and business management that we believe will be useful to many of our readers, particularly fresh market growers. Please send your feedback and questions to Karl at: foord001@umn.edu

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ACKNOWLEDGEMENTS

Co-Editors: Bill Hutchison, Department of Entomology, University of Minnesota, hutch002@umn.edu
Jeanne Ciborowski, Minnesota Department of Agriculture, Ag. Resources Division,jeanne.ciborowski@state.mn.us
Suzanne Wold-Burkness, Department of Entomology, University of Minnesota, woldx018@umn.edu

The Newsletter is published weekly from May through August, cooperatively, by the Minnesota Department of Agriculture (MDA) and the University of Minnesota (U of MN). Reports are posted on the U of MN and MDA web sites on Fridays. If you have suggestions and/or comments, please send your contributions by 4 p.m., Tuesday to Jeanne Ciborowski, 651-297-3217, jeanne.ciborowski@state.mn.us , MDA, 90 W. Plato Blvd., St. Paul, MN 55107-2094. You can access the Newsletter at the U of MN web site in htm. format at: www.vegedge.umn.edu/MNFruit&VegNews/mnindex.htm and at the MDA web site in pdf. format at: www.mda.state.mn.us/biocon/fruitreports/default.htm

Partial funding for this publication is provided through partnership agreements with the Minnesota Fruit and Vegetable Growers Association and the United States Department of Agriculture – Risk Management Agency (RMA) and the RMA Community Outreach and Assistance Partnership Program. These institutions are equal opportunity providers.

DISCLAIMER

References to products in this publication is not intended to be an endorsement to the exclusion of others which may have similar uses. Any person using products listed in this publication assumes full responsibility for their use in accordance with current manufacturer directions.

Last Revised June 11, 2004.
The University, including the Minnesota Extension Service, is an equal opportunity educator and employer. ©1999-2004 Minnesota Extension Service, University of Minnesota. All rights reserved. Contact copyright@extension.umn.edu for information on reproduction or use of this material.