Businesses of all sizes could do well to think more carefully about customer retention. Acquiring new customers is not only critical to ensure your business grows; it also satisfies your need to move on to the next thing and provides a fresh start and a blank slate. Unfortunately, acquiring new customers comes at a cost, which some sources suggest is around 7 times as much as reselling to your existing customer base.
Although acquiring new customers is a necessary and very important part of any business, it shouldn’t be your only focus. Once you have done the hard work of getting a customer on board you need to make sure you keep them! After all, how can you expect to grow your business at all if you can’t keep your existing clients happy?
Without repeat business from an existing client base you are constantly trying to plug the gap. A great month in terms of new business needs to be repeated month in month out if you have no steady income from your existing customer base. In short, running a business solely on one off sales does not make good business sense.
This infographic from Flowtown cites that you can increase your profits by up to 95 per cent just by improving your customer retention rates by five per cent. This seems like a pretty bold claim, but even an increase in profit of 20 per cent would seem like a huge win to most businesses!
So why are existing customers worth so much more than new ones?
With new business you are likely to have a longer lead time. The prospect has to be convinced that you are the right company to work with. Their doubts have to be addresses, whether they are about your product, service, price, quality, location, personnel or anything else. For every prospect that eventually buys you have to factor in not only the cost and time you’ve spent selling to them, but also to all the other prospects who haven’t bought anything.
Once a customer is on board you are likely to have overcome most, if not all of their concerns. The benefit to you, and the reason they’ll become easier to sell to in the future is that you will have built an element of trust with them. They are likely to be less sensitive to price, less likely to shop around and likely to buy from you more readily than go elsewhere. This again means shorter lead times, meaning less time, meaning you can focus more attention in other areas (like winning new customers!).
That doesn’t mean to say that existing customers are worth less of your attention, far from it! If you don’t give every customer the respect they deserve then they will leave you and go elsewhere. What I mean is that if you do your job right from the start, the process of retaining customers should be far easier than the process of attracting new ones.
Happy customers means you are also in a position to benefit from additional customer referrals. Good old word of mouth marketing is still a great tool for any business, especially now that you utilise the internet. If you have dozens of satisfied customers talking about you online, and possibly sending out referral offers to their friends it means that those friends who approach your business aren’t a “cold” customer. They already know about your business and have had a personal recommendation from a friend.
Existing customers should be at the heart of your marketing strategy, without a strategy to retain customers you leave yourself open to losing customers unnecessarily which puts you right back at square one, looking for new customers who cost you seven times more to win than retaining existing customers costs.
Given the recent economic turmoil (even the weather is being blamed for a potential triple dip recession!), frankly we could all do with whatever help we can get in order to reduce spending and increase efficiency. Our customer bases are one of our best assets and most valuable resources, make sure you’re getting the most out of yours!
Leave your comments below, we would love to know your thoughts are on customer acquisition vs repeat business!