How understanding Customer Purchase Frequency has helped service-based businesses fix their customer experience and be rewarded with significant revenue and profit growth.
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“I need more leads.”
“I need more customers.”
“I need to charge more.”
We hear many business owners say this when talking about growing their revenue and profit. It makes sense. It seems natural to simply think, I want to grow so I need more customers.
You might, but maybe not as much as you think.
Here’s something else we hear – “My revenue seems to be growing slowly based on the new customer growth we’ve experienced.”
Interesting. So you’re working hard to add new customers, yet revenue doesn’t seem to be growing as fast?
What if you have revenue and profit ‘leaks’ with existing customers? What if your business was ‘broken’ but you didn’t know it, and it was causing you to lose out on revenue, profit and cash.
How would you know this?
This is where our favorite revenue driver comes in – it is the customer purchase frequency (CPF) driver. This is driver #4 out of the #5 revenue drivers, in other words, the numbers that steer your business.
This number represents the average number of times customers purchase from you during the year. If you had 100 sales transactions across 10 customers, your CPF is 10 for that year (100/10=10).
Let’s make sure you understand what this number represents…
If you were a landscaping company and you bill all your customers on a monthly basis, your perfect CPF would be 12 because there’s 12 months you can bill in a year.
If you’re an HVAC maintenance company and all of your customers required (and actually followed) twice a year maintenance, your perfect CPF would be 2.
If you sell a product, your perfect CPF might be a bit harder to say so you’d have to use your historical numbers to tell. For conversation, let’s say all your customers buy during the holidays and two other times during the year – your perfect CPF would be 3.
Will your CPF always equal your ‘perfect’ number? Not likely. Not unless you’re a stagnant business when it comes to customer growth and your customers’ purchasing habits are the same across the board.
However, understanding what this number is, and what it should be, for your business is very powerful.
It’s the driver we’ve seen influence many significant changes when it comes to exposing issues and/or ‘fixing’ things in a business.
It’s uncovered large growth opportunities.
It’s typically a significant lever whether for revenue, profit or even cash flow.
Here’s some real examples and why it’s our favorite…
For a B2C customer who provides a service to consumers, it exposed a major customer retention problem in the first 30-60 days of service. Fixing the retention issue thus increasing the customer purchase frequency to the ‘right’ number will result in a 20% increase in annual revenue.
For one B2B service provider who signs up customers on a monthly recurring basis, it exposed a larger customer churn issue than the owner realized he had. Once the owner is able to fully solve his service delivery issue and ensure they’re finding the right fit customers (both found to be impacting customer churn), increasing his customer purchase frequency to the ‘right’ number will result in a 37% increase in annual revenue.
Another B2B service provider is shifting his business model to focus more on recurring customer work rather than one-time services, again, increasing his customer purchase frequency. The impact on his business could be a 61% increase in revenue by working with the same amount of customers! 🤯
So in all three cases above, they’re looking at significant revenue growth just by fixing something that is currently broken, or not optimized. We’re talking about mid-to-high 6-figure changes in revenue.
The alternative for each of them is, they could relieve a serious amount of sales pressure, spend less on marketing, and still achieve the same revenue, profit and cash flow goals for this year. That’s what we call an easier path to success.
This my friends is why we love this number and it’s why you need to understand it in your business.
If you are curious if you are leaking revenue and profit due like these three customers were, let’s hop on a short call to see if we might be able to help.
If we can, we’ll tell you. If we can’t, we’ll tell you. There’s no pressure either way.