A recent trip to the mall made it abundantly clear to me what is missing in most businesses today.
At the food court, free samples were offered to entice new customers to come try them out. I was greeted at department stores with perfume samples and an offer for a free makeover.
Look around you and you’ll see dozens of ways businesses lure in new customers. And don’t get me wrong, acquiring new customers is critically important.
But you have to be careful.
Pay too much attention to this one thing like many of these businesses at the mall were and you could be in danger of making a grave mistake.
You see while the un-rich believe the most important marketing is in attracting new customers, the exceptionally successful and rich entrepreneur realizes marketing to and nurturing the existingcustomer is paramount.
In Dan Kennedy’s book, The Ultimate Marketing Plan, he says, “It is a grave mistake to be overly attentive to getting new customers and neglectful of marketing to and nurturing relationships with existing customers.”
Dan quotes Joseph Jaffe, author of Flip the Funnel, in which Jaffe says, “In an acquisition focused world, we pull out all the stops to woo a stranger to sample our wares, yet we ignore the very people who essentially fund our acquisition efforts in the first place. It is tantamount to feeding yourself by holding the steak knife the wrong way, by the blade—not only will you go hungry, you’ll end up in the emergency room.”
Why is this so important to your business?
1) It’s becoming more and more expensive to acquire new customers. It used to be that when acquiring a new customer, you could make a profit or at least break even. Nowadays businesses that are only focused on customer acquisition are missing out on a lot of money. According to Lee Resources, attracting a new customer costs five times as much as keeping an existing one. Plus the probability of selling to an existing customer is 60-70% while the probability of selling to a new prospect is only 5-20%.
2) There are a finite number of new customers available. It may be true that new customers are born every minute, but the reality is if you only focus on acquisition, eventually you will run out of new customers – especially if you operate in a niche market. Not to mention, if you are losing existing customers faster than you acquire them.
3) The majority of customers leave businesses because of neglect. In The Ultimate Marketing Plan, Dan breaks down why you lose customers such as switching to a different product or service due to price or a better product, death of customer, etc. But the biggest reason for leaving? Customers feel unappreciated, unimportant, or taken for granted. Dan says, “Sixty-eight percent switch because of what they perceive and describe as indifference from the merchant or someone in the merchant’s organization.”
It stands to reason that if you strategically engineer your business to retain, nurture and grow the value of your existing customers, you will grow your business and your profits.
How do you do this?
Make your customer feel important, appreciated and respected. Find ways to express gratitude individually, en masse and publicly through things such as customer appreciation events, acknowledging them in your newsletter by name, and creating a reward program. Also, greet them as honored guests, take time to answer their questions and don’t create policies that drive them away.
View retention as a marketing function and a profit center. Don’t think of money spent on existing customers as an expense. Instead view it as an investment.
Have a lost customer plan in place. Track your customer’s activity. When one goes missing, send that customer a letter with a great offer or pick up the phone to find out why the customer is no longer purchasing from you. And don’t give up to early or too easily.
Develop new products and services for your existing customers. Your existing customers may have moved beyond your initial offering. Work hard to do more business with them by coming up with new offerings that will appeal to their wants, needs and desires.
Dan Kennedy says, “If you are going to buy customers, you’d better get better at keeping them and fully monetizing them.”
Your existing customers are your most important asset. If you want to grow your business and profits, neglecting them is one marketing sin you don’t want to commit.