If you’re a small business looking for strategies to increase revenue, don’t focus entirely on new business and overlook your existing customers. You can usually find a goldmine of opportunity within the customer base you already have using a few common customer retention and growth strategies.
Why shouldn’t you focus only on new customers?
There are many reasons to split your marketing focus between new and existing customers. The simplest reason is that new customers cost you more. The money it takes to win a NEW client typically involves a lot more effort from advertising to create awareness. And not every prospect closes, so you end up spending a lot of time and money to win only a portion of the customers you’re going after.
Marketing to the clients you already have, on the other hand, does not carry as many of those costs. Your clients already know you and have said yes at least once, so you likely have some form of permission to reach out directly for the next sale. A well-timed phone call, an email nurture or loyalty program and a genuinely useful check-in are much more inexpensive compared to most new business strategies.
Harvard Business Review reports that acquiring a new customer costs anywhere from 5 to 25 times more than retaining an existing one, and cites Frederick Reichheld’s research at Bain and Company showing that a mere five percent improvement in retention can lift profits by a whopping 25 to 95 percent. Every client you keep is a client your sales team or your advertising budget does not have to replace.
Customer retention marketing starts at the sale
If you really want to make the most of your existing customers, start with a look at your customer retention rate or attrition rate (whichever metric is easiest for you to calculate and track). Benchmarks typically exist for common industries, so it’s helpful to know not just your rate, but also whether or not that number is good or bad. So as a first step, if your number isn’t as high as you want it to be, look at what your customer experiences as they move from a lead to a customer. Writing it out in a customer journey map can help you analyze what happens during and immediately after the first sale.
This customer journey will look different for every industry. If you are a SaaS company, initial on-boarding might be a series of meetings with a new client to set up their account, provide training and check in after 30 days to make sure they are using their software. If you are a beauty salon, on-boarding is more like the first salon visit. How do you deliver the product or service in a way that creates a fantastic experience? When customers move through this phase happy and excited, customer growth, the next phase, is much easier to achieve.
But if this is an area where things AREN’T humming along, you can lose the very customers you worked so hard to acquire in the first place. And this really hurts a business in two ways. If you spent a lot an advertising and time acquiring these customers initially, losing them right after the sale means you must go back and spend even more advertising dollars to make up for the loss. And second, when you lose a customer early in the relationship, you can’t even start to grow them, so the delay is a potential revenue loss as well.
Growth and advocacy: the cheapest new business you will ever win
Let’s say your customer retention rate is within industry norms. You have happy customers that like you and value the products or services you provide. How do you capitalize on that?
Let’s look at a common scenario. If you run a restaurant, a portion of your marketing budget goes to advertising that attracts attention and drives new customer visits, and you are almost certainly watching both guest counts and total revenue each month. If you target email or text messaging campaigns at existing customers to bring them back one or two extra times per month, your ad budget doesn’t have to carry the full weight of driving those guest counts. If you focus on add-ons like premium beverages or appetizers, you increase your ticket average on those repeat customers as well, and that, in turn, decreases the amount of customers needed to hit your revenue goal.
Now let us take it a step further. Say your customers are super happy, coming in as often or contracting for as much as they can buy. What’s next? Advocacy could be your next pot of gold. Sometimes it’s as simple as asking your clients for a referral or a public facing review. A new client who comes to you through a referral from an existing or past customer costs a fraction of the one you had to advertise for.
Ready to activate your existing customers?
If you think your business could be doing more for your existing customers, we can help. Our fractional CMOs find the opportunities sitting in your own data, set up the KPI dashboards and benchmarks you are missing, and build marketing programs that help you grow without your customer acquisition cost growing with you. If you want to dig deeper on how we help companies like yours, here is what a CMO actually does. Fill out our contact form for a free consultation.
