Invest in Getting Them Back

Time for some math. This could be tough because math isn’t my strong suit. I’m going to try to make the point that while we all invest big bucks in acquiring new customers — we don’t spend nearly enough on retaining them.

Let’s say I sell buttons at nicksbuttons.com. Through a variety of promotional means, I attract 1,000 visitors to my site. These people have never been to my site before. How many can I convert into purchasers? Let’s say 30. That’s 3 percent. This percentage will vary, depending on how well qualified the 1,000 visitors are. These 30 people buy some buttons. To do so, they have to go through the painful process of telling me their address, credit card number, and so on. They have to complete a customer profile.

This registration process is a pain in the butt for everyone. I guess the offline equivalent would be having to complete a detailed questionnaire if I wanted to buy something from a bricks and mortar store for the first time. Well, good luck Mr. Store. You’ll have to have something I really, really want to put me through that entire hassle. (Anyway, to make our new customers feel a little better about the registration process, we’ll give them a five-ounce bag of mixed buttons free).

So now for the first question of the day:

Of the 30 people who became first-time buyers, how many can we attract as return purchasers?

Let’s go nuts here and say 10 percent. We’ll get them back through some emails (yes, we got their permission to email them as part of the sign-up process). If my math is holding up here, I’m over three times as likely to get a sale from an existing customer as I am from a cold prospect.

Sounds reasonable to me. They’ve already signed up. So a major hurdle to making a quick purchase has been removed. Making that second purchase will be easy. Plug this information into a spreadsheet and take a look a few months down the road. You’ll see a very significant proportion of your revenue coming from your repeat customers.

So here’s the next question for the day:

If you spend $10 to acquire a new customer, how much do you spend on generating additional sales from that customer?

If you look at the spreadsheet you should be prepared to spend a few bucks per customer to get them back to buy again and again. Do you spend a few bucks per customer to get the buy again? I bet you don’t.

Recently I purchased some software online. It was my first purchase from that site. I received an email confirming my order and nothing more. Same with an online bookstore. I purchased a book as a first time buyer and received just the one confirmation email.

Let’s say it cost these guys $10 to get me as a new customer. And how much did they invest in retaining me as a customer? About one tenth of one cent is my guess. Really, they put in zero effort to retain me as a customer.

In a word, I call this stupid.

If a large proportion of your profits are going to come from customers coming back for more, invest a few bucks in getting them back to buy again. Go back to the spreadsheet for a moment. Look at what happens to the bottom line when you raise that conversion rate from 10 percent to 15 percent.

Mucho more profits for nicksbuttons.com.

More on how to make this happen next week.