Too many company owners and managers look to boost their profits with quick solutions by focusing on acquiring new customers and spending a huge part of their marketing budget on advertising and marketing strategies. Through research, this method may not be the best approach to take to boost sales and ROI. Rather than looking for new customers, companies should turn their focus on existing customers who already know what they like and need. In fact, over 50% of future profits will come from only 20% of your current customers.
Don’t expect large profits over night
Just because your current customers have already invested in your products and services doesn’t mean you can double their purchases by centering attention on them. It may take longer than you think to turn large profit margins from existing customers. However, the high cost of finding new customers outweighs the cost of customer retention. Over time it costs less to market and sell to existing customers as their spending activity increases which will yield large returns.
Unlike the effort it takes to generate leads, retention marketing campaigns take longer to produce results. When you consider the long term profits existing customers provide over new customers, you will find it well worthwhile to focus on those customers. You can forecast profits your current customers will provide by following their current spending activity. New customer profits may be based upon their single purchase. New customers may not be repeat customers or may later choose a cheaper product or service which greatly decreases the profit margin they yield after all the time and effort it took to acquire them.
Even though customer retention takes longer to produce profits you can view it as a long term investment. If you still wish to pursue new customers at least you will keep a steady flow of ongoing profits with your current customers. The wait will be worth the wait because if you invest even as little as 5% toward customer retention you can increase profits tenfold over time.
Customer retention may be more profitable than new customer acquisition
Customers are more likely to stay with companies they are familiar with as long as they are happy with them whereas prospective customers aren’t familiar with your company so you have to work harder to get their business. Repeat business is better than no business and the customers who keep coming back are more likely to spend more money than new customers. Recent studies show the average repeat customer spends 30% more on products and services than new customers.
Customer retention can help with customer acquisition
While you shouldn’t focus all your attention on customer retention you can use retention to help increase new customer acquisition. Through referrals, testimonials, and word of mouth customer retention attempts can help bring new customers. Satisfied customers are more likely to tell others about their experience. However, dissatisfied customers will likely spend time to tell several more people about their negative experience so keep your customers happy!
One of the ways to retain existing customers is to provide top-notch customer service. ONE.AI is here to help. By using ONE.AI you can keep conversation with your customers on a 24/7 basis without incurring additional costs. Sign up now and start your FREE 14-day trial. No credit card required.