Are you spending more on acquisition or retention? If you said “acquisition,” you’re wasting time and money.
Consider these standard business statistics:
- Acquiring a customer costs 5 to 10 times more than retaining one (eMarketer, 2002).
- A 5 percent increase in retention yields profit increases of 25 to 100 percent (Bain and Co., 2002).
- Repeat customers spend, on average, 67 percent more (Bain and Co., 2002).
- After 10 purchases, a customer has referred up to seven people (Bain and Co., 2002).
- Twenty percent of customers account for 80 percent of total revenues.
The fierce battle for new business is stressful, expensive, and often unrewarding. Unless you’re an emerging start-up, stop wasting precious resources to attract new customers until you optimize profitability from existing relationships.
With stats like these, you can’t afford not to immediately refocus the lion’s share of your available talents and technologies on CRM. Stop searching for new livestock and start tending the farm. That low-hanging fruit won’t stay ripe forever.
Three Tactics Toward More Profitable Revenues
1. Know Thy Customer
Profile your best customers. Examine their turn-ons and -offs. Start with understanding what worked in the past for your business and other leading organizations. Speak with colleagues from multiple departments, and tap into the diverse experience of external partners. Ask yourself, “What ingredients pull higher responses and lead to more conversions?” For fact-based answers, look into available industry research and your organization’s own records, especially transactional data that can often reveal buyer behaviors.
If you lack a comprehensive view of the customer, ask them directly for the information you need. Forget costly focus groups. Deploy a basic email survey. People love to express their opinions. Make the exercise worth their time with an incentive. Let them know their answers will benefit them either instantly (e.g., free download) or later (e.g., a rewards club). Solicit, listen, gather, analyze, and act on their feedback.
2. Value Thy Customer
Role reversal: How many times have you provided a business with your birth date then never received a birthday greeting? Poor customer. Poorer business.
Making people feel appreciated is easy and does wonders to boost their affinity toward your brand. That adds significantly to your bottom line. Why? “Best” customers buy more frequently (more sales), spend more money (higher share of wallet), cost less per sale (operational efficiencies), and often refer others (viral marketing for exponential lead generation) for new customer conversions.
Do you treat every customer like a best customer? If not, start today. No more excuses. Send a thank-you message today. The speed and cost-effectiveness of email arms you with a ready vehicle to reach out and touch someone right now.
3. Reward Thy Customer
By nature, people respond to incentives and fall into habits when behaviors are consistently rewarded with something valued.
Be different. Connect with best customers in a timely, relevant, and meaningful way during life events such as birthdays, anniversaries, seasons, and holidays (more than 10 per year). Send an email with a reward. Your customers value time and money as much as you do. Offer one or both. A restaurant could offer free valet parking as a convenience and cost savings to a valued patron. Redemption costs the owner $6 plus marketing and produces a $35 sale.
It’s no secret people prefer to buy from businesses they have had positive experiences with over unknown competitors. Offer a reward and they’ll keep returning.
The revolving-door customer is endemic. Don’t overspend to attract new business for the short term. Gain the attention (awareness), and make a one-time sale (trial) to win new customers. But once they are sold, drive additional sales (volume) and build relationship (loyalty) by treating every customer as your best customer. Stop spending 5 to 10 times more to bring them in once. Invest a fraction of that to keep them coming back repeatedly (lifetime customer value). Good, old-fashioned customer service can now be handled cost-effectively with email.
For more information, questions, comments, or any other feedback, feel free to drop me a line. Cheers!
Barry will speak at ClickZ Email Strategies in San Francisco, November 18-19.
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