Have you ever felt, as an existing customer of a business, that you’re less important to that business than a brand-new customer? It’s certainly happened to me…
Often, I see businesses focusing all their efforts on chasing new customers – big marketing drives in that direction, sign-up bonuses, and various other initiatives, while loyal current customers seem left on the sidelines.
Entrepreneur and author of “Company of One: Why Staying Small is the Next Big Thing for Business,” Paul Jarvis, observes this conundrum, while there is so much evidence to support the idea of focusing on customer retention.
So, what are the advantages of focusing on existing customers?
- Cost – there’s an old saying that it costs five times more to get a new customer than serve an existing one. Although the number itself might be in doubt, the principal is certainly correct: existing customers cost less – marketing costs are saved, account set-up costs are saved, payments issues are fewer, and so on.
- Marketing – apart from the cost savings attached to being able to focus on a narrower, more committed base, existing customers generally like being marketed to, so spam issues are much reduced, and they’re more likely to buy, especially when promotions are on offer.
- Profitability – research clearly shows the benefits of engaged (current) customers. They buy almost twice as often, spending an average of 60% more per time. They’re also more inclined to try new products or services from you. On average current customers are almost 25% more profitable than average.
- Brand Profile – think about how few businesses really seem to value your custom. Not many, I’d bet. But those that do benefit from you mentioning them, apart from your own more regular purchasing. This “evangelising” by satisfied customers is gold to a brand as it bypasses the traditional marketing costs, going straight to the customers most likely to buy.
- Feedback – another significant benefit of loyal customers is that they’re more inclined to give feedback. Not just when things go wrong, although hearing of this before somebody ‘votes with their feet’ is always good, but with what they’d like to see from you in terms of service and products. Who knows, your next ‘unicorn’ product or service could come from this feedback.
- Employees – this, too, is often overlooked. People working for a business that has strong customer loyalty are more engaged, too, making them more productive and less likely to leave. Did you realise you can reduce employee costs by having more loyal customers?
- Risk – of course, focusing on your existing customers reduces risk, too. They’re more likely to forgive you if you do make a mistake, more likely to try new offerings, more likely to pay on time and more likely to give you feedback to prevent other mistakes.
It’s amazing to think that, according to an Accenture study, some $1.6 trillion is lost in the USA each year when customers who had a poor experience move brands – that’s more than 6X the total advertising spend there! Clearly, many companies focus on the wrong things.
If you need more convincing of the benefits of customer loyalty, these statistics might help…
So, rather than spending massively on trying to attract new customers, spend time and money on your existing ones. Make sure they’re able to receive the best offers you have – whether for renewal rates or other incentives. You’re not giving money away by doing this, but saving it: more loyal customers always lead to better profitability.
#BusinessFitness #Advertising #CustomerCare #CustomerExperience #CustomerService #LifeTimeValue #Loyalty #Profitability #Risk #Sales #Service #Trust #QOTW
Some other posts around customers and loyalty:
- “Happy employees lead to happy customers, which leads to more profits.” — Vaughn Aust
- “It’s not the employer who pays the wages. Employers only handle the money. It’s the customer who pays the wages.” – Henry Ford
- Defining Your Ideal Customer Boosts Profits
- “Price is what you pay. Value is what you get.” – Warren Buffett
- “Excellence is Not a Skill. It is an Attitude.” – Ralph Marston
- Go the extra mile. It’s never crowded there.
- “Your most unhappy customers are your greatest source of learning.” – Bill Gates
- Measuring the TRUE Value of Your Customers