Your business is taking off! You’ve worked tirelessly to make sure you’re offering the optimum product or service, at the optimum time, at the optimum price. But how do you continue to attract and retain the optimum customer?
We already know customers can make or break a business. Understanding the value of each new and existing customer can have an astonishing effect on your business’s continued success.
Attracting new customers
Many people suggest that attracting a new customer is often a lot more expensive than maintaining and enhancing an existing one. While it might be more exciting to search for new customers, neglecting your existing ones can be a recipe for disaster.
First, let’s look at the cost associated with each new customer. You can determine an actual number value with a simple formula. For example, look at how many new customers you get from advertising on certain marketing channels. If you spend $300 on Facebook ads and they bring in 20 new sales, then your cost per customer is $15 ($300 divided by 20).
Next, think about how you are going to attract those new customers. Are you going to offer freebies? Use social media? Send out brochures/business cards? Attend trade shows? Whatever the avenue, be sure to measure the results so you can choose the most effective marketing mix for your business.
Maintaining customer connections
Attracting new customers can be time consuming, expensive and in this competitive environment, very challenging. Keeping existing customers should be a priority. Devoting a larger part of your marketing budget on customer retention and strengthening existing relationships are smart moves for your business. The longer you keep your customers, the more profitable your business becomes.
Customer satisfaction should always be at the forefront when it comes to customer retention. If your business excels at customer service, you will enhance loyalty and create more return sales. In turn, increasing the volume of sales means more profits.
A happy customer is less distracted by competition, is less sensitive to price, and will often stay longer with a business. Excellent customer service is a smart business strategy, as it increases both new and existing business.
How can one strengthen existing relationships? The key is communication.
- Listen to your customers. Base your reactions on actual customer behaviour versus forecasted behaviour. Misreading your customers can be a costly mistake.
- Engage your customers. Enable your customers to provide feedback on Twitter or Facebook and reward them for their comments with coupons or special discounts. This lets existing customers know that you value their business and input and in turn strengthen their devotion to your business.
- Offer loyalty programs. This encourages and rewards repeat buyers. Customers feel special and this also strengthens the relationship.
The importance of both new and existing customers is not up for debate here. Both are crucial to a business’s survival. However, you might want to choose what your focus will be to ensure the best results for your business.
Other formulas to keep in mind
VEC: Value of each customer. (A*N)*Y, where A is the amount a customer spends per purchase (i.e., $20), N is the number of purchases per year (i.e., 3) and Y is the number of years (i.e., 5). The customer’s value to your business is $300 or $20 x 3 sales = $60, $60 x 5 years = $300.
CR: Conversion rate. M/R where M is the number of marketing tools used/sent, (i.e., 200 emails, posters, business cards, etc.) and R is the number of responses with sales (i.e., 20), then your conversion rate is 10% or 200/20=10.
RR: Retention Rate. ((E-N)/S)*100, where E is number of customers at the end of a period (i.e., 250 total customers), N is the number of new customers acquired during that period (i.e., 10 new customers), and S is the number of customers at the start of that period (i.e., 300 initial customers), then your retention rate is 80% or ((250-10)/300)*100.