It is vital to focus on a few very clear objectives. You can’t do everything at once. As you chase new prospects it is easy to forget the amount of money to be made from your current customers.
Customer Evaluation
Often you will be exhorted to spend time on the top 20 per cent of customers who will probably generate 80 per cent of your revenue. This is a very simplistic approach, which needs further exploration. In fact, if this were the case in your hotel I would quietly panic! Customers are fickle and you never know when they will decide that your hotel does not meet their needs.
If you find that you have a number of very large suppliers, you need to put a lot of effort into developing other clients to redress the balance. You need to look at the vast majority of your
customers and divide them into those that can be developed and those that are unlikely to grow.
Customer Share
We all know that it is less costly to sell to existing customers than to new customers. You need to make sure that you have initiatives in place that will capture a greater share of business from customers that you already have:
- Find out how much they spend on accommodation so that you can work out your share of their expenditure. How can you persuade them to use you more?
- Find out who else they buy from and ascertain exactly why they use somewhere else. Can you provide any service or amenity that would satisfy more of their needs?
- Find out what else they need apart from rooms. Do they need meeting space, or do they entertain customers for lunch, or maybe they have an annual corporate event or a Christmas party?
- Persuade them to upgrade to better rooms or take more expensive menus for their functions.
- Don’t spend too much time on a customer when you have established that you get most of the available business from that customer; but don’t ignore them either!
Lifetime Value
Assessing the lifetime value of your clients is key to ensuring that you don’t think short-term when you consider business
development. To develop your marketing budget properly you need to know:
- the lifetime revenue from each new customer;
- how much it costs to acquire a new customer.
Of course you need to be selective and consider first your most valuable customers. This may well be regular restaurant guests and corporate clients booking rooms and/or meeting rooms. However it might still be a valuable exercise if you have a high repeat ratio for your weekend guests.
How To Calculate Lifetime Revenue
As an example, let’s look at a corporate booker using your hotel regularly for weekday accommodation and meetings. Assume that they use five rooms per week at
£ 60 (net), then the annual revenue is
£ 15,600. Add to this revenue, say, two meetings a year and various lunches and dinners and the total revenue may be
£ 19,000. Assume that each company stays for around five years at this level then we are looking at
£ 95,000.
You can try the same exercise for each customer and each restaurant guest, making sure that you take into account the natural attrition rate.
How To Calculate Customer Acquisition Costs
This is not a particularly scientific exercise but will give you a good place to start. Firstly, look at last year’s total marketing costs and divide them by the number of new customers you did business with. You will need to separate these marketing costs between restaurant, weekend guests and corporate clients, so
that the sums are as accurate as possible. If you spent
£ 50,000 on brochures, sales staff salaries, expenses and entertaining and generated ten new corporate customers, then the costs of acquiring each new customer would be
£ 5,000.