One of the ongoing discussions I have with clients is the need to balance acquiring new customers with servicing exiting ones.
Many of the businesses with which I’ve been fortunate to have worked over the last few years place a far greater emphasis on acquisition than they do on showing the love to those who are already in the fold. One of my mantras has been that it’s almost always more cost-effective and profitable to retain a customer than to find a new one and I tend to work with my clients on finding good ways to service their existing bases while helping along new customer acquisition as a lesser emphasis.
In 2012, BIA/Kelsey reported that small business owners prioritized customer acquisition over customer retention at a 7-1 ratio. Recently, a new trend is developing as 61 percent of small business owners surveyed report over half of their annual revenue comes from repeat customers rather than new customers and that a repeat customer spends 67 percent more than a new customer (emphasis mine!). In line with this, small business owners are spending less time and money on customer acquisition; only 14 percent are spending the majority of their annual marketing budget to acquire new customers, and only 20 percent are investing most of their time and effort to acquire new customers. This is a significant shift in behavior as small business owners have realized that existing customers play a more influential role in business success than new customers.
In other words, existing customers bring in more dough than new customers. The question then becomes identifying and segmenting existing customers into group that you can address in a manner appropriate to their buying habits. You need to be having different conversations with the person who hasn’t ordered in 3 months than the one who orders once every 10 days. Maybe you handle the top 10% of your customers differently or maybe you look at spending levels, purchase cycle, or even those folks with an affinity for a specific product you’re wanting to emphasize.
No matter whether it’s loyalty programs, special customer service agents or insider news and information, customer retention needs to be a focus of every business, something I think needs to be placed ahead of new customer acquisition. You?