Generating sales leads is probably the most important ongoing task to ensure the survival of your business, but doing so on your own can cost you time, and deplete your personal bandwidth. If this is the case, you may want to consider handing over that task to an outside firm that specializes in generating sales leads for businesses such as yours. 

Of course, hiring an outside firm will cost you, but it can also grant you peace-of-mind that specialists are handling the most crucial aspect of your business. Before you hire one, however, you need to evaluate your business to determine if this is an appropriate move for your current business situation. .

Dollars and Sense

The biggest question to ask yourself when deciding whether to hire an outside lead gen firm is: will it be cost-effective? Lead generation services – especially B2B – often charge you per lead or can cost you thousands of dollars per month. As a result, your customer acquisition costs (CAC) will be driven up. The hope, however, is that the cost of hiring a lead generation firm will be offset by increased sales resulting from the extra sales prospects that the firm is bringing to you. 

Due to the cost, however, lead gen firms are probably most useful to high-margin small businesses that sell big-ticket items or services: medical offices; accounting and law firms; car dealerships, real estate companies, etc. If the increased CAC is so dramatic that it forces you to raise the price of your products, then hiring a lead generation service is probably not your best bet. You’d be far better off putting in the time and effort to generate sales leads on your own.

While you may have the budget to hire a led gen firm, it doesn’t mean that your budget is infinite. Some firms will charge you per month, while others may charge you per lead. It’s important that you determine which pricing plan would make the most sense for you.  

If you’ve done the math and concluded that hiring a lead generation firm will benefit you, it’s crucial that you do your research and find out as much about them as possible beforehand to determine if they are the right fit for your business. 

#1 Do Your Due Diligence!

Like you would with any other outside vendor, you need to research any lead generation firm you might be considering. First, find out if they’re ranked by any credible business source. For example, Fit Small Business, an online resource for small businesses, offers reviews and rankings of the most popular lead generation firms. 

Also, go to each candidate’s website and look for customer reviews and find out if they have experience in generating leads in your particular industry or geographic location. Try to get an idea of their pricing and how they get their leads. These are the firms that have experience in knowing where to look for sales leads and how best to glean information from them such as income range and interests.

#2 Do They Produce Quality Leads?

Poor quality sales leads won’t do anything for your conversion rate and worse yet, land your emails or phone calls on spam lists. What you want, besides contact information, are prospective customers who can afford – and are generally interested in – your products or services. In other words, you want leads that will produce the highest possible conversion rate. Will the lead generation firm produce a list of prospective customers that have previously purchased products or services in your industry? Will the lead generation firm build a list from scratch, or simply give you a ready-made list? If they are offering you a ready-made list, that’s probably not a good option – it may contain outdated information, and the firm probably hasn’t weeded out all of the sales prospects who said no. 

#3 Make Sure They are Compliant

There are laws in place in the US, such as the CAN-SPAM Act of 2003, that regulate solicitation emails, and you need to make sure your lead gen firm is in compliance with them. The act requires marketing emails to be sent from a legitimate email address, and the subject line must pertain to the body of the email, among other things. If you are trying to sell to customers overseas, especially in Europe, your led gen firm needs to be compliant with the European Union’s GDPR law that regulates marketing and solicitation emails.

Not complying with these laws can lead to stiff fines and other penalties against your business, so it’s crucial that you inquire about this.  

#4 Set Specific Expectations

Transparency is key, so you need to be as clear as possible about the volume of leads and what types of leads you expect from them. Ask them what their definition of a quality lead is and how much they charge for that, as the definition of a lead may differ from firm to firm. Some firms consider a lead to be anyone who makes contact with them about your business, while others consider a lead to be someone who is willing to set up a meeting with you. 

You need to also find out what emailing platform and email address the firm is reaching out to prospects with. Make sure the messages that prospective clients are responding with show up in your mailbox – not theirs. This way, you don’t risk missing out on legitimate leads because the firm forgot to forward them to you. Make this crystal clear with the lead gen firm before you sign a contract. 

Make Sure it Makes Sense for You

Lead gen firms can be very useful in increasing your sales and client base, but keep in mind they are not for every business. You need to conduct a careful analysis of your business to determine whether hiring such a firm will be cost-effective and make sense for what your business is trying to accomplish.

When most people talk about “customer loyalty,” they often are actually talking about the more specific loyalty styling “conative loyalty” without knowing it. While there are several means to characterize “customer loyalty,” the loyalty most business owners desire is that which brings customers back to their business. Conative loyalty is an essential concept for business owners looking to improve customer retention, as understanding the concept is the basis of fine-tuning your operations to galvanize retention.

What is Conative Loyalty

Conative loyalty is the customer behavior of continuing to patronize your business. There is enough psychobabble to fill a book or two about conative loyalty, but the root of the concept is rather simple: consumers who willingly choose to go back to your business after a first visit are exhibiting conative loyalty. Unlike cognitive loyalty and affective loyalty, however, conative loyalty is shown in action rather than thoughts and opinions. Scoring conative loyalty with your customers is visible by the number of “regulars” and frequent customers or clients that patronize your business. So, the real game is not simply to achieve conative loyalty but also how to maintain it with your current customers.

Tips on How to Achieve (and Maintain) Conative Loyalty

Know Your Industry

The breadth of small business industries and styles means that there will never be a universal answer as to how to keep customers coming back; consumers don’t go to a coffee shop and a pool repair business for the same reasons. Maintaining conative loyalty and allowing new customers to form it will take some serious brainstorming between you and your trusted staff along with (believe it or not) feedback from your customers. Consider which of your products are most popular; in what ways can you change or improve that product to justify a reason for customers to make a return trip? Industries like auto maintenance or dentist offices that regularly schedule future appointments while customers are still in-house have it easy but that doesn’t mean the rest of the small businesses out there are out of luck.

Give your customers a tangible reason to come back to your business. For example, a coffee shop could encourage recycling by asking customers to bring their cups back from the last time they ordered for a discount on their next order. At its roots: use proof of purchase to incentivize future purchases. For industries where this would be more awkward (like the service industry) consider looking at your most popular products and seeing where it is possible to segment, separate, or improve existing services to necessitate a follow-up; just make sure this change doesn’t breed customer frustration.

Encourage Recommendations

Customer recommendations and reviews have an often-unspoken benefit beyond good press: customers who take the time to meaningfully explain their good experience are more likely to remember it themselves. Encouraging customers to write reviews online is a great means to allow those customers to feel out and articulate exactly what it is they like about your business. Then, they are more likely to remember those sentiments in the future! Online reviews, also, are not the only means to let customers speak their mind! Consider dedicating a space in your business to display hand-written, personal recommendations from your customers. Having their writing be physically on display in your business is another great means to build an emotional connection.

Customers who are enthusiastic enough about your business to write a review or recommendation outright are already exhibiting conative loyalty in spades but for the customers who haven’t reached that threshold yet, it’s up to you to convince them that your business is worth getting excited about!

Don’t Forget! Affective Loyalty Plays into Conative Loyalty

Affective loyalty, or the emotional loyalty held for a business, is likely the basis of building strong conative loyalty among your customers. Think about the concept of a “regular” in its own right: staff remember regulars’ orders, their names, and their preferences. That can only be formed through consistent, meaningful interactions with your best customers.

Go out of your way to train your staff about the importance of affective loyalty. You don’t have to sign them up for a marketing theory course; instead, get back to basics on the importance of even the simplest friendly inquiries when working with customers. The goal of your staff should almost always be to break the monotony and the base transactional undertones of doing business. If staff have a meaningful, memorable interaction with customers, you better believe they are on the first steps to building conative loyalty with your brand and business.

Reevaluate Business Pipeline Sections with Most Customer Interaction

Conative loyalty isn’t run by an off-and-on switch; every interaction your customers have with your business and brand will contribute to their perception of it, and by extension, their conative loyalty to your business. Think, then, about the elements of your business with the most customer or client interaction. Those elements must be maintained with unique precision to consistently impress (or, at the very least, simply satisfy) customers.

Conative loyalty is most likely to break down over repeated unsatisfactory experiences, so imagine the places where – in a worst-case scenario – your clients could be disappointed with their customer experience. If your business offers any kind of delivery services or meets customers at worksites, how long does it take for your employees to get there? If you don’t have a meaningful metric for this, that’s a good sign you should investigate transit times. How often do you train front-of-house staff about the importance of good customer service? This means more than sitting your staff down in the break room and saying, “be nice!”. If you want your staff to be memorable and pleasant to your customers, you need to make sure they are happy at work in the first place. This may require some introspection about your workplace culture at large.

Building a Conative Community

Conative loyalty is the eventual goal of just about all small businesses and for good reason; conative loyalty represents a customer’s genuine preference for your business over another and their willingness to act on that feeling. While cognitive loyalty in businesses is valuable, knowing that something is premium doesn’t mean that someone likes that thing or has any intention to patronize that business. And affective loyalty, as well, has its shortcomings: even people who like a brand don’t necessarily also have to go back and patronize those businesses. Conative loyalty is based on repeat action and is plainly visible in the faces of your regulars and most dedicated customers. In order to build that loyalty, then, consider the steps your business can take to both retain the regulars you already have and the steps you can take to excite and convince new customers to make your business part of their daily (where possible!) ritual.

The one thing most likely to bring clients into your door (except a sign saying “Free Stuff) is some amount of customer loyalty. Customer loyalty is the lifeblood of a healthy business but there isn’t one finite way to achieve or cultivate it. The art of customer loyalty is as fluid (and sometimes fickle) as customers themselves; consider the wide variety of industries and equally wide variety of consumers in the world. There isn’t one way to pull in everybody but there are tried and tested methods sure to put your small business in the right mindset to cultivate customer loyalty. In celebration of customer loyalty month, join Kapitus on a weekly exploration of the most helpful concepts and theories used to bring about customer loyalty. To begin this series: let’s get heavy and understand “cognitive loyalty.”

What is Cognitive Loyalty

Cognitive Loyalty is a term created by Dr. Richard Oliver and explored in his marketing essay “Whence Consumer Loyalty?” published in The Journal of Marketing in 1999. In his own words, Dr. Oliver explains loyalty itself as “a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior.” Dr. Oliver goes on to explain four main types of consumer loyalty (cognitive loyalty, affective loyalty, conative loyalty, and action loyalty). In this article, we will be be talking exclusively about cognitive loyalty , touching upon the other categories in subsequent articles.

Cognitive loyalty is loyalty built by consumers’ own cognition; this means that consumers reason themselves that a certain product or brand is superior or premium. This type of loyalty extends to just about any kind of product you can think of. Here’s an example: Consumers tend to think that American Express credit cards and financing products are more elegant, premium, and all-around superior compared to other companies’ cards; another example is computers manufactured by Apple versus one of several other PC manufacturers. In both cases, companies in a space of exceedingly similar products (consumer credit cards and personal computers) through a magic slurry of masterful branding, digestible marketing, and several other tricks have grown a dedicated group of consumers who are exceedingly loyal to their products.

Consumers who exhibit cognitive loyalty have, in essence, convinced themselves that the product they align with is superior. Of course, a bit of helpful nudging from the source company’s marketing and customer service team can go a long way.

Tips to Achieving Cognitive Loyalty

Don’t Say it!

Cognitive loyalty is incredibly delicate and must be cultivated like orchids: with light, subtle nudges. If a consumer thinks you want them to think your product is superior, it’s more than likely they will take it the wrong way. Heavy-handed marketing doesn’t fly in the 21st century, so instead of buying a billboard that says, “We’re the Best,” consider, instead, ways to make your customers come to that conclusion on their own.

The IKEA Effect

There is a lot to learn from furniture giant IKEA, chiefly among those lessons is the marketing phenomenon that shares its name. The IKEA effect explains less so consumers’ loyalty to IKEA stores and more so their belief in the products themselves. Despite the reality that IKEA products are manufactured in similar environments and with similar materials to many of their competitors, consumers are consistently more connected with their IKEA furniture and products compared to others. Why? Because those consumers built the furniture themselves. Specifically, Harvard Business School found that 63% of consumers were willing to pay more money for furniture they had assembled themselves compared to similar (but pre-assembled) items.

This doesn’t mean that you have to run a furniture company to take advantage of the IKEA effect. The basis of the effect is the cognitive bias that a product or brand that the consumer helped build will likely become more favorable in their minds. A great means to get consumers involved with your business is to collect customer feedback and involve customers in your product creation process. The most essential piece, however, of collecting customer feedback is making certain customers know that feedback was both read and considered by your business.

The Better of Two Options (For Whatever Reason)

Think back to the two opening examples from this article: consumers often think Apple is superior to its competitors and the same is true for American Express compared to its competitors. This mindset doesn’t simply indicate that  consumers prefer Apple or AmEx, but instead that they prefer them over something else. Cognitive loyalty requires that consumers pick your product and brand over something else which they will inherently see as less premium.

The first step to becoming the better of two options is finding (and getting to know) your competitors and their products/services. In many industries, this is straightforward but may well require some abstract thinking for some others. Once you find a point of comparison, consider the ways your business is more attractive; this doesn’t strictly concern prices and rates! Modern consumers are interested in more than price when becoming loyal to a brand. Consider marketing your business as the more ethical of two options: investigate means to decrease your carbon footprint or highlights the ways in which your business is already doing its part e.g., recycling, higher wages, donations to charity. Of course, businesses risk sending the wrong message when marketing their ethical traits themselves. Reach out to your local newspaper or television news station to see if they are interested in writing about your company’s strivings to become more ethical; the goal is to have consumers understand that you are being ethical and environmentally conscious for the sake of it rather than for increased brand loyalty.

Cognitive Loyalty Through Introspection

Developing cognitive loyalty for your business and brand will never be a one-size-fits-all solution. Consumers shop at businesses for near-infinite reasons. Take off your business owner hat for a moment and think about your own cognitive loyalties. What companies, brands, or products do you believe are inherently superior to their competition? What brought you to that conclusion? What can you do to emulate that sensation? Sit down with your trusted staff and ask these introspective questions and you’ll likely be one step closer to finding how cognitive loyalty best aligns with your business.

Acquiring new customers is certainly one of the most important aspects of running a small business, but SMB owners also can’t forget that keeping existing customers coming back is just as crucial to the long-term survival of their businesses. This is the reason why customer lifetime value (CLV) – the total amount of money you can reasonably expect from repeat customers over the lifetime of their relationship with your business – is often closely monitored by successful small business owners. 

Maintaining a strong CLV number is important for a variety of reasons. First, it can increase your profit margins, since it generally costs less from a marketing and advertising standpoint to attract an existing customer than a new one, since, ideally, existing customers have already had a positive experience with your business. Second, strong CLV puts your business in a much better position to thrive in the future since it is a strong indicator of future sales. Third, a weak CLV number can tell you the areas of your marketing and customer experience strategies that need changing and improvements. 

What You Can Learn from CLV

CLV allows you to:

• Recognize your best customers. CLV will tell you which customers most frequently spend money with you and which ones spend the most per transaction. Knowing the profile of your biggest spenders allows you to conduct marketing campaigns in a hyper-targeted way, focusing on those channels that you know will reach those who have the potential to spend the most.  But beyond that, it can help you retain existing customers.  Whether you’re in the accounting or retail businesses, these are the customers that you probably want to offer special discounts to; provide individual customer service to; and to whom you would showcase the products or services you may want to promote more heavily. 
• Improve Forecasting. By forecasting what products and services repeat customers may want over a future time frame, you should be able to effectively manage inventory and allocate marketing and sales resources. 
• Segment customers. Calculating CLV allows you to categorize your customers into groups based on which ones are likely to make a repeat purchase. This will allow you to effectively tailor your marketing strategy and increase lead conversion rates.
• Figure out ways to keep customers coming back. Most importantly, CLV will allow you to customize your marketing to encourage customers to make repeat purchases from your business. Remember, repeat business is essential to your future growth.

Calculating CLV

The simplest way to measure CLV is to multiply the average purchase price (aka average value) by the

Calculating customer lifetime value could very well be one of the most important exercises for your small business.

average number of times a customer makes a purchase (aka average customer lifespan). This formula should apply if you are using CLV to predict your future sales flow, even if your sales are seasonal and inconsistent.

If you don’t have much in the way of sales history data, however, this formula may be tricky because you’re going to have to estimate both average purchase price and average customer lifespan. Guessing average purchase price and average customer lifespan will likely result in a high margin of error. 

How do Everyday SMB Owners Calculate CLV?

While the equations may seem complicated, and small businesses sometimes seek the help of outside marketing firms to calculate CLV, many have created a system that allows them to determine this number in-house. . Kapitus spoke to everyday business owners to discover not just how they calculate CLV, but the ways they try to improve it. 

Zach Goldstein, founder of Public Rec, says keeping your website appealing is key to maintaining strong CLV.

Zach Goldstein, founder of athletic apparel line Public Rec, said the best way to improve CLV for an eCommerce business is to examine and improve the pages on your website in which potential customers are leaving. 

“We use the average order value our customers buy annually multiplied by their average lifetime value to determine the average CLV for our business,” said Goldstein. “There are multiple ways to improve CLV depending on where users drop off in your sales funnel.

“The best way to increase CLV is to optimize your customer retention. First and foremost, this means analyzing your sales funnel to see at what step or event in the browsing process your users tend to abandon the site. From there, you implement strategic changes to your website design or in reaching out to the customer via email to gain feedback on what works.”

Chris Gadek, vice president of growth at billboard company AdQuick, said creating strong customer retention starts with personalized customer service.

“CLV shows how loyal customers are to your product and your brand,” said Gadek. “Creating a sentimental value between customer, product, and business increases revenue and retention. As a metric, you can describe lifelong customers as those who continuously interact with your platforms or continually purchase products from your website at a consistent pace.”

Prioritize Customer Loyalty Programs

Jason Sherman, founder of TapRM, says loyalty programs and retargeting ads are key to customer retention.

Jason Sherman, founder of TapRM, an eCommerce platform for craft beers, said the key to improving CLV is to focus on customer retention marketing. 

“Your RPR [Repeat Purchase Rate] shows how often customers make repeat purchases,” said Sherman. “To calculate it, first find the number of customers who placed an order, let’s say, in December. For that same month, find the number of repeat customers. Then divide the repeat customers by the total customers…You can improve your RPR through customer retention strategies such as an optimized customer life cycle, loyalty programs, retargeting ads, and cart abandonment emails. This creates a better post-purchase experience that drives customer loyalty and increases repeat sales.”

Brandon Adcock, founder of Nugenix, says discounts, special offers, and quality outreach marketing go a long way to obtaining repeat business from customers.

Brandon Adcock, CEO of Nugenix, which manufactures and sells men’s dietary supplements, also said that offering discounts and retention programs are key to the survival of his company.

“We measure our customer lifetime value by looking at their average purchases, both amount and frequency, and projecting that at a similar rate into the future,” said Adcock. “But importantly, customers aren’t static, and neither are businesses. Prices and products change, and the world of e-commerce is growing more competitive by the day. We build CLV by fostering long-lasting relationships with our customers through discounts, special offers, and quality outreach marketing that creates a positive image for our brand.”

Focus on Customer Onboarding

Steven Walker, CEO of Spylix, emphasized that a company’s CLV will automatically be strong if customers have a good initial experience. 

“We use the simplest formula for calculating customer lifetime value: the average order total multiplied by the average number of purchases in a year, multiplied by the average retention time in years,” said Walker. “Based on current data, this estimates the average lifetime

 value of a client. With data from specific categories, you may utilize this data to better focus retention and promotional activities.

“Introducing new clients to your business, explaining what you do, why it matters, and why they should stay” are paramount, said Walker. “Long-term client relationships need trust. Buyers will return if they feel your organization gives the greatest deals on their desired items. It works because building real relationships with consumers keeps them coming back.”

Build Your Future

Whether you own a law or accounting firm, or a construction or plumbing company, repeat business is crucial to the survival of your company as it ensures that customers will keep coming back in the future. While there are several ways to calculate CLV, at least part of your marketing and sales focus should be on encouraging customers to return.