Kick The “Leaky Bucket” Syndrome

“Customer conversions,” a term casually tossed around on marketing blogs and journals, is often considered the end-all-be-all of business growth plans. No doubt you’ve invested in plenty of customer conversion tactics — email or ad campaigns, radio spots, billboards, and newspaper or magazine ads. While these are all great ways to reach new customers, if you’re spending time and dollars on courting new leads only, you’re missing the rest of the picture.

It’s understandable to assume increasing your number of customers is the primary way to increase your revenue, but it’s not as simple as that. Customer conversions shouldn’t be your main focus because high conversion rates may coexist with high churn rates. Meaning, as quickly as someone new walks in your front door, another patron is walking out the back — known as the “Leaky Bucket Syndrome.”

You may be fantastic at encouraging first-timers to purchase new handguns, but what happens to them after a period of time? Do they slowly leak out the bottom of the bucket, meaning you spend the majority of your resources on marketing campaigns to convert more new leads to make up the deficit? Even if you could establish some kind of “homeostasis” with your leaky bucket problem, you’re still neglecting your most valuable resource — the ace in your back pocket, if you will. Let me explain.

There’s fascinating evidence from a study conducted by Bain & Company and Harvard Business Review on customer retention, which is widely considered to be one of the most influential on the topic. The study found each customer lost is a greater deficit than each new customer gained. That’s because customer-spending habits reveal they tend to purchase very little in their first year with you.

However, in the second, third, and fourth years — if you convert an occasional customer to a loyal customer — their spending can double or quadruple! If you can retain just 5 percent more customers in your database (i.e., turning them into loyal shoppers), your profits can increase between 25 to 95 percent over the course of several years. Let that sink in!

Focus On Improving Retention Rates

Often, business owners focus on their current period costs and revenue and forget to factor in expected cash flow from future loyal gun enthusiasts. It’s easy to misplace your energy on conversion and neglect retention. You can correct this with a change in mindset and a change in systems.

To learn how your defection rates are doing, you’ll need a method to track customer purchases. A great way to accomplish this is to implement a rewards membership program, which captures personal information and spending habits. Whenever customers stop purchasing or purchases decline significantly, you can reach out to them in a couple of ways. You could send them an email with new promotions or a short customer survey to learn why they’ve been absent. A personal phone call could also make a huge impact. Through these methods, you might be surprised to learn your customer service is lacking, your employees aren’t helpful enough, prices are considered to be too high or your store hours aren’t convenient enough.

It’s absolutely essential you find ways to kick the Leaky Bucket Syndrome for the sake of your gun store’s profitability and reputation. Customer loyalty is where the answer lies. In the following months, we’ll explore further how to tangibly encourage this brand of loyalty as well as foster top-notch customer service.

Patching up your bucket certainly doesn’t happen overnight, however, it’s a long-term investment that can yield impressive results.