Gaining new customers is like panning for gold: you can spend hours of back-breaking labor panning for just a few occasional nuggets. Your existing customers are the real mother lode—thick veins of gold you can mine for years on end.
So why do most businesses spend just 12% of their marketing budget on customer retention?
Is it possible they don't know about the hidden goldmine in their existing customer base? If you're spending all your time panning for new customers and ignoring the mine, here are 9 reasons to reconsider…
- Repeat customers are cheaper. The White House Office of Consumer Affairs says it costs at least six times as much to make the first sale as it does to make the second (or third, or fourth...). When you figure the total cost of attracting a new customer, your profit margin for a first-time sale goes way down.
- You’ll build brand recognition AND brand loyalty. Making a name for your brand isn't easy in a crowded marketplace, but when you build a legion of customers who love your brand, you’ll gain new ground via (the oh-SO-coveted) word-of-mouth. Your customers are also your fans, your influencers, and your evangelists. A satisfied fan base will spread word of your product or service in an honest, organic way by recommending you to their friends and followers.
- You’ll boost your bottom line. Most businesses lose 15% to 20% of their customers each year. What if you could cut those losses by half? You'd more than double your company's growth rate. When you add up the value of a customer, it's not about a single sale, it's about total sales over the life of your relationship.
- Repeat customers spend more than new customers. You haven't yet established a trust relationship with a first-time buyer. They don't know if you or your product will deliver the quality and customer service they expect. By the third or fourth sale, they'll be spending nearly twice as much as a first-time purchaser—and the amount they spend typically keeps growing over time.
- Loyal customers are loyal. They’re simply less sensitive to price changes and less likely to abandon you when a better deal comes along. They already know and love your company, so if you focus on customer appreciation, they won't be eager to jump ship to an unknown just to save a few bucks.
- Marketing to existing customers is less expensive. Your customers are already a captive audience. You don't have to lure them in or chase them down. You know where they are, who they are, and what they want. You can easily use your customer data to deliver offers they can't resist without spending big bucks.
- Your customers really appreciate loyalty rewards. When you offer your existing customers incentives, you strengthen your relationship and entice even more sales.
- You can easily encourage loyal customers to rope in their friends. DIRECTV, for example, offers a referral program that rewards both the existing customer and the referral. Each party gets a $10 reduction on their monthly bills for a full year. By stretching the reward out over time, the company assumes less risk of losing money on short-time customers and gives both customers a nice incentive to stay on board.
- Existing customers will answer your questions. You want to know what customers want, right? With an existing customer base, you can ask and they’ll tell you. It's like magic. Shiny happy customers will give you advice, tell you what's bugging them, and let you and everybody else know what you're doing right.
Treating your customers like the gold they are pays off in a BIG way. Your Growth Cycle Marketing strategy should include tactics for attracting new customers AND rewarding existing customers. Keep panning for new customers, but never forget where the mother lode is.