Monday, October 12, 2015

Nurturing Profitable Software Customers

Philip Kotler devoted a chapter of his excellent book "Kotler on Marketing" to acquiring, retaining, and growing customers.

Kotler defines marketing as the science and art of finding, keeping, and growing profitable customers.

Generating leads, Kotler explains, involves identifying the target audience, gathering leads, and qualifying them.

A suspect (versus a prospect) is somebody who might be interested in buying your software, but who might not have the money or need.

Kotler urges us to calculate and track Customer Acquisition Cost (CAC) and Customer Lifetime Profits (CLP).

Affinity marketing means targeting a group of prospects, and trying to sell them your software. While Kotler doesn't particularly address the software development industry, I'm confident that he would say that affinity marketing might be as simple as adding a medical dictionary to your existing software application, and targeting doctors and other health practitioners. But few things in life are ever that simple.

You can turn customer complaints around, Kotler explains. Studies have shown that 34 percent of customers who have major complaints will buy again if their complaint is resolved, and 52 percent will come back if their resolved complaints were minor. Responding to these complaints quickly notches up these percentages dramatically.

Kotler believes that cultivating long-term customers has a lot of advantages. You can cross-sell and upsell to them. In the software development industry, this might mean becoming an affiliate of another microISVions, and offering its applications to your customers. And upselling involves encouraging your customers to upgrade from the standard version of your program to the professional or enterprise version.

It takes less effort to complete transactions with existing customers, Kotler believes, because they're familiar with your products, communications, emails, and procedures. They're more likely to recommend your programs to their friends and business colleagues. And they're less price-sensitive because they've developed a relationship with your company.

Kotler tells us that most companies lose money on some percentage of their worst customers. If you're getting some customers who require too much tech support, for example, find out why they're buying from you, and do something to change that.

Kotler says that if you want to keep these customers, then educate them, so you're not spending as much time supporting their efforts. Or raise your prices so it's worthwhile dealing with them. If you don't want to keep these customers, then send them to your competitors.

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