The cost of new customers vs the value of loyal customers
Over the years I have owned many businesses. Some relied on returning customers and my bridal hair and makeup agency hoped never to see that same girl get married again…. But a loyal customer doesn’t need to buy from you. A loyal customer can become a raving fan. So as much as it is important to understand your customer buying cycle, you need to treat every single customer as if you need thier business to survive. The better you treat them the more likely they will buy from you again and hopefully tell others about you.
Business owners often spend more money on getting new customers and forget about that person once they are a customer. It’s amazing considering the probability of generating a sale from a new customer is between 5-20% while the probability of making a sale from an existing customer is between 60-70%!
I think if you understood your customer’s buying cycle you would be pleasantly surprised in how much you can make from your current customers. Repeat customers spend an average of 33% more than new ones.
Most businesses do 1 or both of the following:
1. Don’t train thier email leads to buy from the beginning – Too many businesses collect leads and sit on them for months before selling to them. I have seen this happen where suddenly leads are asked to buy after not hearing from the business, or getting lots of free information, and then that lead gets upset as there has been a sudden change in the communication. It is important to set the communication standard from the beginning.
2. Don’t have a sales funnel in place – What else can your customer buy from you that is complementary to what you sold them? Or maybe a person was looking at something then decided against it. Can you sell them a “downsell”? Something cheaper, smaller, a little different? Or maybe they are purchasing something, do you have a cross sell? Some of my clients does this very well. Every item is linked to another product “You may also want xxx”. Amazon does this well also. Without a sales funnel you could be missing out on a lot of extra profit for little extra work! And these days with the automation of online sales there is no excuse for it.
Take a look at the chart above and work out which side you would rather be on.