According to Jay Abraham, there are only three ways to grow your business:
-Increase the number of clients
-Increase the average size of the sale per client
-Increase the number of times clients return and buy again.
Today, we are going to take a look at how to increase the number of clients. One marketing strategy used by many companies to reach new clients is “risk reversal”.
Did you ever subscribe to a magazine or a service because they gave you a 30, 60, or 90-day money-back guarantee?
Risk reversal is a strategy where you take out all the risk of a transaction for a client.
Statistics have shown, that when you offer a time-limited risk-free opportunity, people are more likely to do business with you because you have addressed their fear and increased their confidence in you. In any case, very few people take you up on the offer.
In our Spa operation, we announce upfront that we are committed to the highness standard of treatment, but if the client is not completely satisfied, we promise to redo the service at no cost.
When Kocoon Spa started (due to many factors that I will explain in a future post), we were on the verge of bankruptcy after 8 months. This meant that we had very little cash flow left to continue, perhaps a month or two at most.
With my friend Ji Meng, an expert in finance, we looked at the numbers to find out what the problem was. We found 2 tangible facts:
Fact 1: More than 90% of clients returned within 3 months after their first visit. This meant that satisfaction was not an issue.
Fact 2: The percentage of new clients was too low and irregular.
We concluded, that we needed to increase the frequency of this conversion more rapidly for the business to survive.
We tried the “risk-reversal technique”. I talked to all the gourmet /expats’ supermarkets and asked them to offer 300RMB (45$) spa vouchers to all customers, and 500RMB (75$) vouchers to their best customers. We may have donated at least a thousand vouchers!
At this stage, I was ready to try anything, even to lose money on the first visit of the customer, so we tested this for a month (and renegotiated new payment terms with the landlord).
This turned out to be a success! Many people had heard of Kocoon Spa and had waited for an opportunity to try it out. The voucher with a limited time offer was the trigger that made them call.
Today, I believe that this strategy reversed the story of Kocoon Spa and even saved it. As Jay Abraham points out:
This strategy has been used over and over by successful companies, because showing a satisfaction guarantee, demonstrates one’s commitment to providing results and sends the message that you are beyond short-term gains.
There is a belief, that “free” takes out the value of what we are offering in the client’s perception.
But actually, what you give for free can be something different from your normal service.
For example, a free “initial assessment” for coaches, a free “audit” for consultants, a group introduction and demo for a small fee. The point is that the risk is not entirely on the client’s side. Be creative and play with it!
Do you have tips to help increase client traffic? Please share in the comments and let us know what worked and what didn't!
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