Customer reactivation - how to bring a client out of the stone age?

by DaniMc
18 replies
Been awhile since I posted - been very busy.

I have a client who has been in business 25 years. Her business has been in steady decline since 2009. This is such a common story for small business owners. Since 2009 the market has changed and many of them have not. They are vulnerable and losing to increased global competition.

At her peak in 2008, she did $1.4 million and life looked pretty great. She occupies a unique segment in the market and has a distinct advantage over her competitors because she has a small manufacturing operation on-site.

The problem is her business is in the stone age. She depends on her customers calling in to order - we all know that doesn't work the way it used to and her customer base has been poached away or forgotten they used her as a supplier. People come and go in her client companies and may or may not know her business used to give them service. Her main gig is managing employee rewards programs and creating custom awards. She does not do trophies. These are all B2B clients. This is high-end stuff.

She has several very large file cabinets that are packed FULL of customer records. I mean thousands and thousands of files. These are companies that used to buy from her regularly. Some know her business, some will not because it has been 5-10 years since they bought anything.

She has a separate cabinet for "repeating" orders - it is also huge but a lot of these are out of date also.

Relying on paper files and not keeping in contact with customers is going to kill her business very soon. She was paying me to help with her business processes but the change was just too much. Her employees are struggling with calling old clients (they have zero sales ability). They are inbound order-takers. They are good at that but outbounding scares them badly. She is scared, disappointed, and frustrated.

So - I have an idea.

What if I set up an operation that works her old customer files? I estimate that there is at least $1million in annual revenue sitting in those files. At the very, very least. In all honesty, $2m annual revenue is not a stretch. There are thousands and thousands of old customers. She used to be the heavyweight.

There would be several steps involved - scanning the old records - doing some sort of data entry - and then calling/emailing them promotions.

Finally, the questions:
1 - Does anyone here have knowledge of how this can work?
2 - She struggles big time to meet payroll now - so a big upfront investment will not work. Is there any way to work this on a commission basis?
3 - What would a good commission be? 20%? 25%? 50%?
4 - I will not do this work myself. Simply too busy. Does anyone know of a company that specializes in this type of operation who could take it on as my partner? Should I just put a team together myself? Is anyone here interested in calling on a commission basis?
5 - What is a good contract duration? This would be a minimum a one-year deal. She gets a lot out of it (digitized records and more sales). I believe the scanning and data entry might be the most important thing she gets from this. I could see this being a 24-36 month full-time arrangement for someone on the phone.

Thank you for any expertise and experience you can offer.
#age #bring #client #customer #reactivation #stone
  • Profile picture of the author Rus Sells
    The big hurdle is getting the data into a digital format and that's going to be a large cost as I'm sure every one is aware.

    I know that the legal industry uses document scanning and e discovery services for case work etc. There's got to be a solution out there but who knows the cost.

    You mentioned that she struggles to make payroll so that isn't a good sign so that's a little scary.

    Question: Is she getting data digitally now when she gets a new client? If not that would be the first thing to do so a relationship/re-marketing campaign can be created.

    For past customers I'd create a re-activation campaign and bite it off in little chunks. Maybe 100-250 at a time so you can test response and just keep chewing through it in segments. When you find something that gets a great response then you can send out in larger quantities.

    Remember it took her years to establish these accounts so for example if you do all the work and send out to 10K previous clients you could create more work then the company can immediately handle.

    As far as commissions or payment I'd just talk to her, no one here can really tell you what it's worth as a Joint Venture unless we have a better understanding of profit margins, average ticket size etc.

    But hopefully this helps define a possible path.

    P.S. PM me with your details if you want to discuss it further.
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  • Profile picture of the author bizgrower
    I can't help but wonder how much her market has shrunk because
    less companies do rewards and awards. Might be time to offer new
    services, such as (off the top of my head) customer rewards and awards.

    I think she should personally get back in touch with many of them,
    the one's she selects, and rebuild those relationships and establish
    the services they are looking for now.

    Dan
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    • Profile picture of the author DaniMc
      Originally Posted by Rus Sells View Post

      The big hurdle is getting the data into a digital format and that's going to be a large cost as I'm sure every one is aware.

      I know that the legal industry uses document scanning and e discovery services for case work etc. There's got to be a solution out there but who knows the cost.
      Two possible approaches are to hire a document company that specializes in this sort of work, or to staff an intern or two in her business to do data entry. The first is more costly, the second is more work to manage.

      Question: Is she getting data digitally now when she gets a new client? If not that would be the first thing to do so a relationship/re-marketing campaign can be created.
      She kind of has a hybrid order system. So the customer files are paper. The orders have been entered electronically for the past 5 years or so. But, there is still a lot of paper flying around and I am not sure how getting the relevant order data will work.

      For past customers I'd create a re-activation campaign and bite it off in little chunks. Maybe 100-250 at a time so you can test response and just keep chewing through it in segments. When you find something that gets a great response then you can send out in larger quantities.

      Remember it took her years to establish these accounts so for example if you do all the work and send out to 10K previous clients you could create more work then the company can immediately handle.
      This is a very, very good point. Her builders/designers could easily become overwhelmed. Up until a year ago, she had 15 people working in manufacturing. Now she has 4 but they are long-term and know what they are doing.

      As far as commissions or payment I'd just talk to her, no one here can really tell you what it's worth as a Joint Venture unless we have a better understanding of profit margins, average ticket size etc.
      In the past she has mentioned hiring a sales team and paying 50% commission. Her largest competitor pays 50%. But they sell more promotional type stuff. She does some promotional business, but recognition is her real business.


      Originally Posted by bizgrower View Post

      I can't help but wonder how much her market has shrunk because
      less companies do rewards and awards. Might be time to offer new
      services, such as (off the top of my head) customer rewards and awards.
      That may be an issue and is a good point. She does very nice awards for annual banquets and such also. Her "employee of the month/quarter" management service is by far her most regular source of income. Companies still need these services. I believe her biggest problem is the inefficiency in her sales processes.

      I think she should personally get back in touch with many of them,
      the one's she selects, and rebuild those relationships and establish
      the services they are looking for now.
      Agreed. I tried to get her "sales team" to start reaching out, but they just couldn't stomach it. Huge pushback. They are three very nice women, who have been there a long time, and who have zero sales skills. They are order takers. Doing this with her existing staff is really not an option.

      I can see a good revenue upside if the right players are in place to turn the business around. I think in 2013 she did about $650k. Much, much less than her potential for what she has built and the relationships she has.

      She wants to retire in 5 years, selling the business would give her the nest egg she desires. In its current state, no one would buy it for even half what it is worth.
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      • Profile picture of the author Kay King
        Agreed. I tried to get her "sales team" to start reaching out, but they just couldn't stomach it. Huge pushback. They are three very nice women, who have been there a long time, and who have zero sales skills. They are order takers. Doing this with her existing staff is really not an option.
        The big hurdle is getting the data into a digital format and that's going to be a large cost as I'm sure every one is aware.
        The current staff won't be able to turn into sales people - and data-to-digital is like "getting ready to get ready". It would be great but perhaps too costly and time consuming

        Why not hire a couple people to begin with - on commission - and provide them with "leads" from the files. The women working long term there could pull those those leads from the old files and the outside sales team would have a good foot in the door with that. Give the sales reps a weekly list of contacts made up from both filing cabinets and provide extra incentive for bringing in new business.

        In this economy -good chance many of the businesses she sold to are under different management or have different people doing the buying. Outside sales reps could start bringing old customers back and would not have the chance of overwhelming her with orders.

        Edit: Get her system online by starting with the results/orders the new sale reps bring in and go from there.

        ...I'm not sure if we are talking "promotional awards" here - that's what I'm getting but I may be wrong. If so, there are regional trade shows and she could send outside sales reps to those, too. I knew a man who was in that business and whenever sales slowed - he picked up the pace on face-to-face with businesses and going to the trade shows. It worked for him every time.
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        • Profile picture of the author DaniMc
          Originally Posted by Kay King View Post

          The current staff won't be able to turn into sales people - and data-to-digital is like "getting ready to get ready". It would be great but perhaps too costly and time consuming

          Why not hire a couple people to begin with - on commission - and provide them with "leads" from the files. The women working long term there could pull those those leads from the old files and the outside sales team would have a good foot in the door with that. Give the sales reps a weekly list of contacts made up from both filing cabinets and provide extra incentive for bringing in new business.

          In this economy -good chance many of the businesses she sold to are under different management or have different people doing the buying. Outside sales reps could start bringing old customers back and would not have the chance of overwhelming her with orders.

          Edit: Get her system online by starting with the results/orders the new sale reps bring in and go from there.
          You make a very good point, Kay.

          Instead of a large upfront time/money investment - this arrangement could be "bootstrapped" with the existing records

          The main issue I see is that there is no incentive for me or anyone else to build this for her unless we can get through lots of records quickly. She has wanted to hire sales reps for several years, but she just doesn't have the experience. She knows nothing about sales and marketing so I don't think she could pull it off and there is really no financial incentive for me to get involved at that level.

          I'm looking at this more like a mining operation - I know there is gold in the ground, I just need to the right business process to make it worth the time to go and get it.
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  • Profile picture of the author +newportone
    In my experience post cards are one of the best ways for intermittent contact.
    Post cards tend to be held onto by the recipient for months, sometimes years. It is better than a hard copy letter, magazine ad, etc. Post cards are reasonable to mail in large numbers. A series of mailings over time is best.
    If it were my project I would want a nice post card produced with a special offer.
    Have a new special offer website ready to go.
    As the records were being scanned I would create excel sheets.
    Upload the spread sheets to a autoresponder and go for opt ins
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  • Profile picture of the author Rus Sells
    Agreed. I tried to get her "sales team" to start reaching out, but they just couldn't stomach it. Huge pushback.
    It's not a sales team as you know they are just order takers and probably overpaid at that.

    Guess what, this Women's business and lively hood is on the line. Fire every single one of them and replace them all with experienced outbound sales/customer services professionals.

    Harsh? Yes, Necessary? YES!

    Mr. Business Cat would have zero problem executing this decision.
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    • Profile picture of the author DaniMc
      Originally Posted by Rus Sells View Post

      Mr. Business Cat would have zero problem executing this decision.
      I would have no issue doing it either. Two of her ladies are productive and are pulling in around $20k per week each from their existing relationships.

      When I did her initial evaluation, I found two options:
      1 - Shut down her manufacturing operation, streamline the business, outsource the manufacturing side. This is not desirable as manufacturing is really her core business and her main advantage. She has made a huge investment in machines and intellectual property. Becoming a pure sales/marketing company is not realistic because that is where they struggle the most.
      2 - Use her resources to create more sales. This is what needs to happen. The company can be saved, but a lot must change. Honestly, this business is going down unless things change.

      I have no desire to be her consultant/coach because I don't want to be part of a sinking ship.

      At the same time - if I could make a load of cash by letting her outsource sales to a team I build, it might save the business and be very profitable. The business will probably still fold in the next few years, but why not make some money for everyone in the process?

      I like the woman immensely - but as you know this isn't charity and there needs to be a good business model in place before I will even approach her about this.
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      • Profile picture of the author ronr
        Be very careful. It's hard to walk away when they are really nice people and you see a lot of potential, however they may be too far gone or to stuck in their ways do anything you need them to do or to handle new business you bring in.

        I would only consider working with them, and I mean it when I say consider IF they are totally open to implementing whatever you decide to do and you are sure they can fullfill new orders.

        I have a friend who had a great business in the past but it's slowed down and he's never done anything with his past customers. I've thought about helping him becaue I know it would be profitable for both of us but I don't because he's just not willing to do what is necessary to change and implement what I set up for him.

        Ron
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    • Profile picture of the author kenmichaels
      Originally Posted by Rus Sells View Post

      It's not a sales team as you know they are just order takers and probably overpaid at that.

      Guess what, this Women's business and lively hood is on the line. Fire every single one of them and replace them all with experienced outbound sales/customer services professionals.

      Harsh? Yes, Necessary? YES!

      Mr. Business Cat would have zero problem executing this decision.
      You cannot get rid of ALL of the order takers. Who would take the orders?

      The sales people? No chance in hell that would work out well.

      Have the sales people sell and let order takers do they are good at.
      Maybe cutting back to one or two ... however ... firing one
      person would not help financially in any way.

      It can however have a huge impact on moral.

      One of the things I have seen work to bring companies on the brink
      is reigniting the passion and fire in the owners.

      Hard to do if she has her eyes set on a 5 year and out plan.

      Pushing her to the point of re-ignition might be like pushing a boulder uphill.
      If I have ever seen the time to stomp on the greed button ... this is it.

      Kay's suggestion is gold.
      I would like to add .. if it was me I would give the reps a computer
      and have them input the information as they call. ... two birds
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      • Profile picture of the author Rus Sells
        Ken I think the owner needs the moral adjustment and having employees who won't "get on board" then they really need to leave.

        If she can't make payroll or is barely making it each pay period then she is over employed at this point which is another reason I'd just get rid of every one and hire two new people.

        If she had 5 or more employees she's just created some positive cash flow and that's not a bad thing. =)

        These people would be out bounding to past customers, Ron mentioned most recent customers and that's exactly where I have the new people focus. Now we have two new people with fresh attitudes and no moral bias as well.

        Now the moral problem is solved without having to convince employees to change. Making order takers become out bound sales reps is usually not what people who like these positions sign on for. They just prolong the recovery keeping them around and will start seeking employment elsewhere and then the following week they don't show up Monday morning.

        Ron is correct too, Old = Cold. I'd concentrate on inactive customer accounts for perhaps 24 months and have the new team reach out to them.

        In the mean time work with the owner to get customers into workable CRM or something.


        Originally Posted by kenmichaels View Post

        You cannot get rid of ALL of the order takers. Who would take the orders?

        The sales people? No chance in hell that would work out well.

        Have the sales people sell and let order takers do they are good at.
        Maybe cutting back to one or two ... however ... firing one
        person would not help financially in any way.

        It can however have a huge impact on moral.

        One of the things I have seen work to bring companies on the brink
        is reigniting the passion and fire in the owners.

        Hard to do if she has her eyes set on a 5 year and out plan.

        Pushing her to the point of re-ignition might be like pushing a boulder uphill.
        If I have ever seen the time to stomp on the greed button ... this is it.

        Kay's suggestion is gold.
        I would like to add .. if it was me I would give the reps a computer
        and have them input the information as they call. ... two birds
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        • Profile picture of the author Kay King
          The main issue I see is that there is no incentive for me or anyone else to build this for her unless we can get through lots of records quickly. She has wanted to hire sales reps for several years, but she just doesn't have the experience. She knows nothing about sales and marketing so I don't think she could pull it off and there is really no financial incentive for me to get involved at that level.
          I'd say it's unlikely someone who built and maintained a profitable business for 20-25 years knows "nothing" about sales and marketing. She hasn't learned to apply her knowledge to current business conditions and practices. Many small businesses cut costs and pulled back when the economy tanked - and her 'employee rewards' might not be in much demand in a high unemployment market. Cutting back works for a short term crisis - but not in a bad economy that drags on year after year.

          Her employees are not the problem - they are doing the work they were hired to do and seem to be long term so probably know the business/product well. This is her failing for not adding outside sales to the mix and in not aggressively addressing the problems as the business declined.

          Her best bet might be to sell out to a competitor who wants to expand his own business or to look for a merger. If she waits to sell "later" - there may be nothing to sell.

          I agree that I don't see profit potential for the OP. To rebuild this business will take more than tweaks - she may need a working (and investing) partner and that might be more than she's willing to do.
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  • Profile picture of the author serryjw
    Dan BEFORE you do any of the above ( which are all great recommendations) YOU must evaluate what is the business.products worth NOW and has it been replaced with other technologies. like mobile rewards.
    Business is so off that making payroll is tough. I know your heart is in the right place BUT the company maybe too far gone to save it. It will gone until it doesn't.
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  • Profile picture of the author vndnbrgj
    I have read all the posts, and some of this may be redundant, but here is what I would do if she was my client....

    Get a scanner, even if it is just a wand to start digitizing the records and attach the scans to a CRM. Someone could be hired at minimum wage to do this.
    Get a commission only sales force started. She has the leads, let a sales guy/gal run them.
    Start contacting her competition. She could offer to manufacture their products. If that is where her core business is, and she sucks at sales, let her manufacture.
    I would create a whitepaper outlining how companies can improve employee retention/morale. The last part of that would be talking about the awards your client sells. I would use this as a lead gen tool. If the past customers are under new management and don't want to talk, offer the whitepaper.
    In addition, I would make it a requirement to give me a your name and email to get the pricing on my awards. You can view them, but I need your info for pricing. Now, her sales reps can follow up with these folks as well.
    I would also look at what other kind of JV deals are out there that she can partner with.

    1 - Does anyone here have knowledge of how this can work? (I think I answered that)
    2 - She struggles big time to meet payroll now - so a big upfront investment will not work. Is there any way to work this on a commission basis? (Yes, see above)
    3 - What would a good commission be? 20%? 25%? 50%? (I would do 50% if she could, then give your reps 35-40% on a tiered basis.)
    4 - I will not do this work myself. Simply too busy. Does anyone know of a company that specializes in this type of operation who could take it on as my partner? (No) Should I just put a team together myself? (You very well could and that is what I would do in your situation) Is anyone here interested in calling on a commission basis? (Possibly, I would have to learn more)
    5 - What is a good contract duration? This would be a minimum a one-year deal. She gets a lot out of it (digitized records and more sales). I believe the scanning and data entry might be the most important thing she gets from this. I could see this being a 24-36 month full-time arrangement for someone on the phone. (That depends... If they are terrible about making current record digital, it may be perpetual. I would start with a 12 month agreement and say you will re-evaluate the terms at the end of the 12 months.)
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  • Profile picture of the author Ron Lafuddy
    Dan,

    I think you're "flogging a dog" here, but you can test that.

    Ask her for 100 of her newest "past customer" accounts.

    You want to give yourself a fighting chance. The older they are, in terms of the last time they purchased, the colder they are.

    Sit down with the stack and call them. See what happens.

    You'll get as first hand account of where things stand and what is/isn't possible.



    If she's having trouble making payroll, they have to do some cutting...Now.

    It won't be bloodless. Is she "up" for that?

    Where are they with past due accounts?

    How much cash do they have on hand?

    Is she current with payroll taxes?

    From your description of things, they're taking on water fast.

    Stop and think about where they'll probably be 6 months from now. (I'm not giving them a year.)

    The business has been mismanaged for too long.

    You don't have the time necessary to pull off a "Hail Mary".

    Not a lot of options, unfortunately. It's late in the game.

    Best bet may be to cut and streamline where possible, in order to keep them alive
    and off what's left to a competitor, while there is still time.

    Has she talked about that?
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  • Profile picture of the author bizgrower
    1) The company I order supplies from has a very good order taker.
    She knows their products and gets me their pricing, and gets me
    good deals... Recently, they changed and I have to talk to the sales
    rep who has been assigned to my area because my order taker has
    her own accounts. He's not so good and does not always get back
    to me with prices/product samples. (This company does not have a
    website or catalog yet.)

    So, evaluate the staff and keep the productive ones. Hire productive ones.
    Just paying attention to employees and the workplace can improve the morale.
    (See General Electric Hawethorn manufacturing plant studies.)

    2) No sense spending money digitizing bad data. She and the productive
    long timers need to cull the old data and go after the most likely suspects.

    3) She needs more revenues asap without spending anymore than needed.
    She does need to look at cutting costs where she can without harming operations
    and being able to handle additional business well.

    4) I was also thinking she should white label/wholesale her manufacturing capabilities.

    5) She should not count on a traditional business sale as her retirement plan.
    Even if in shape, it may never sell as financing is not easy as pie. Nor is it easy to
    find a good buyer. She might also look at finding someone to manage the business
    and still get income in her retirement. Some more solid, less speculative
    retirement plan.

    Or, she could look at selling her assets to a competitor or related business.

    6) She needs to reposition the company as the go to company in the current market.
    New irresistible, profitable offers on the retail side and the wholesale or white label
    manufacturing side.
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  • Profile picture of the author misterme
    Her largest competitor pays 50%. But they sell more promotional type stuff. She does some promotional business, but recognition is her real business.
    Her "employee of the month/quarter" management service is by far her most regular source of income. Companies still need these services.

    I tried to get her "sales team" to start reaching out, but they just couldn't stomach it. Huge pushback. They are three very nice women, who have been there a long time, and who have zero sales skills.

    Two of her ladies are productive and are pulling in around $20k per week each from their existing relationships.

    Shut down her manufacturing operation, streamline the business, outsource the manufacturing side. This is not desirable as manufacturing is really her core business and her main advantage. She has made a huge investment in machines and intellectual property.
    Based on what you've observed it sounds to me you could do a Marcus Lemonis type business revamp here - not a business revive.

    "People, process and product" right?

    People: Keep the two pulling in $40K for now, get rid of the rest and bring in sales people to take care of the following:

    Product: Her profitable, still viable business is the "employee of the month/quarter" management service. Liquidate the rest... EXCEPT for the manufacturing business.

    That's a different business. She already has the equipment and facilities to manufacture so DON'T outsource the manufacturing. What you want to do is become the SOURCE for the industry's manufacturing needs. Get that manufacturing business running at full capacity.

    ...and of course streamline her process.
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    • Profile picture of the author Rus Sells
      That's kind of along the lines I was thinking, taking Marcus' approach.

      People, Product, Processes.

      Originally Posted by misterme View Post

      Based on what you've observed it sounds to me you could do a Marcus Lemonis type business revamp here - not a business revive.

      "People, process and product" right?

      People: Keep the two pulling in $40K for now, get rid of the rest and bring in sales people to take care of the following:

      Product: Her profitable, still viable business is the "employee of the month/quarter" management service. Liquidate the rest... EXCEPT for the manufacturing business.

      That's a different business. She already has the equipment and facilities to manufacture so DON'T outsource the manufacturing. What you want to do is become the SOURCE for the industry's manufacturing needs. Get that manufacturing business running at full capacity.

      ...and of course streamline her process.
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