When the balance between new and repeat customers changes suddenly it can have a devastating effect on your business. A high influx of new customers can overwhelm your current service capabilities, which can seriously damage your existing customer base. Before you know it, your regular customers are taking their money somewhere else.
If you’re thinking that your new customers will simply replace your repeat business on a one to one basis you’re in for a big shock.
❝ No matter what you sell or service you provide, you are in the business of making customers happy. If not, you are going out of business. ❞
If your customers keep coming back for more, then you’re doing something right! Keep on doing it. But if your customers never return to your business, you need to identify why and do it FAST!
Often the first and most obvious place to look is your customer satisfaction levels. At the end of the day, when bills have been paid, are they happy? Do they feel they are getting good value for their hard earned money? This can be a big pill to swallow, so let’s take a quick look at the benefits to your business when you get it right.
Why Customer Retention Matters
It’s common knowledge that it costs a lot less to encourage an existing customer to make a second purchase, than it costs to attract and get a sale from a first-time customer. But just in case you’re not convinced why repeat business is good business, here’s a few things to consider:
- It cost 6-7 times more to find a new customer than it does to keep a current one.
- The probability of selling to a new prospect is 5-20%
- The probability of selling to an existing customer is 60-70%
- New customers are more price-conscious.
- Average conversion rate (sales) from promotions sent to new customers is less than 1%
- On average loyal customers are worth up to 10 times as much as their first purchase.
- 80% of your total revenue comes from 20% of your customers.
That being said, attracting fresh new customers is still a vital part of any marketing strategy. Though one area that does not get emphasised enough, is the importance of balance between your new and experienced customers. Keeping that balance can be difficult, especially since many factors may be outside of your control. Understanding that your business has different types of customers and finding the ones that generate the most income is just the first step.
The Effect Your Customers Can Have On Each Other
Imagine that your business is a simple ATM (cash machine). Your service does not change from person to person, so ‘customer experience’ will be affected by the customers themselves. Their direct interaction with your business, as well as your other customers waiting in line behind them.
Picks the right machine and has the right card ready to go. They know the pin number and more importantly, which buttons to press in order to complete the desired transaction. The whole process takes less than a minute. The repeat customer satisfaction is high and your business is ready and available for your next customer – perfect!
They don’t really know if your ATM is the best one to use but will give it a go, they have a selection of cards to pick from and will need to find a compatible one with the ATM. Next they have to carefully read the on-screen instructions and locate the correct buttons for the options they are looking for. Naturally it takes considerably longer for a first time customer to achieve the exact same service results as a repeat customer. Although they are happy to have got their money, the experience wasn’t as enjoyable or as simple as they are used to.
If your first-time customers do return to your business (and it’s not changed too much) they will have a more enjoyable experience and before long they may transition into repeat customers.
If you have more repeat customers than new, the queue at the ATM machine will move quickly and at a fairly predictable pace. There might be a slight delay from time to time but for the most part all your customers will be happy. As a result, you will get regular customers visiting your business.
If new customers outnumber your regulars each process will take considerably longer, everyone feels the effect of a drop in service. It’s unfortunate, but the first people to see the drop in service levels and value are always your most regular customers. They will also be the first ones to go elsewhere.
Lifetime Value: If your regular customers visits you machine every week for a year that’s even better than 52 first time visitors that use your ATM only once. Why is it better and not equal? Because your repeat customer needs no assistance and does not cause unexpected delays to your other customers.
Sometimes purchase frequency can be much slower, but even if your customers purchase cycle is once a month or even once a year. Over 10 years the lifetime value of that customer to your business is significantly greater than a single first-time customer. So when considering your customers lifetime value, focus on purchases over an extended period of time.
Advocate Potential: When every customer has an on-line voice (social media) all your customers have the potential to be powerful advocates for your business. It’s one thing to read a review or recommendation from a stranger, but when that advice comes from a friend it’s hard to ignore.
Repeat customers make powerful advocates for your business. For a start, they are more likely to be happy customers (which is good). But they are also more likely to promote your business with friends, family, on social media sites and even blogs. If that wasn’t good enough already, the icing on the cake is the frequency that your regular customers act as advocates on your behalf. The more they visit your business the more opportunities they have to talk about you.
New customers are also very likely to share their opinion of your service. But there’s no guarantee it’s going to be good so you can’t count on them being advocates. New customers by nature are more demanding of services and are far more likely to complain on-line if your service doesn’t meet their personal expectations.
The bottom line is that when you introduce new customers to your business, you’d better give them your A-Game.
Find Your Balance
Maintaining the right balance of repeat and new customers, so that your business can keep its service standards is essential. It’s not so much about specific numbers, it depends entirely on the service you provide and your ability to provide consistent levels of service to all your customers at all times.
It’s important to be aware if this balance point for your own businesses and if your customer base changes, you need to adapt your business to match.
The ATM example although simplistic, highlights the fact that customer satisfaction and your ability to attract repeat business can be affected even when your service remains exactly the same.
❝ Loyalty goes both ways – If you are not loyal to your customers, why would they be loyal to you? ❞
Keep Them Coming Back For More
For all the above reasons (and more) most companies work extra hard with their new customers to encourage them to become repeat customers. The good ones also make sure to keep their repeat customers happy; the great ones even make their customers feel special.
Like many small businesses, you might feel you have little or no control over which customers visit your business, even if that was true (which it certainly is not), you do have complete control over the service you provide and how you provide it.
If you’re looking to build your repeat clientèle – consider who your ideal customers are and where you could find them. If you operate a business that doesn’t attract locals in your area, then you need to establish why. It’s not always easy to identify the problems yourself. Your best bet is to ask your customers, or even your staff.
Problems With Service
If customers have had a bad experience with your business it can be hard to get them back. Start by admitting that there were problems with areas of your business (be specific) and fixing them. Once fixed, let people know you’ve made some big changes and ask them to come back and try again.
Just make sure you’ve really fixed the problems first. Second chances are hard. Third chances are very rare.
Problems With Value
If your customers think your prices are too high it doesn’t matter if they are or not. Your customers won’t buy. You should review your pricing structure to evaluate where you stand in the market. It’s also possible your customers don’t fully understand the value of what you’re offering. This is very common with service related businesses. If this is the case, you will need to educate them accordingly. Using printed flyers and leaflets are a great conversion tool when customers are already considering your company but need a little more convincing to make a sale.
Ideally you should be educating potential customers while they are in the investigation phase of their purchase. Having the right information on your website helps your customers early on in the buying process. It also builds trust that you are a reliable, informed and have a professional attitude to your business. All good signs that potential customers like to see.
Problems With Awareness
This is always a big one. Are you the best-kept secret in town. If this is the case, double check you don’t really have a Service or Value problem (ask your customers) and then identify who your customers are. Then target your advertising directly to them.
Before buying additional advertising or promotions, double check your web content and landing pages. Even if you are handing out flyers in the street, most customers will check you out online before they contact you directly. If you fail to impress, they are just a click or two away from your competition. Check your website is listed locally and that you contact information is easy to find and accurate. If you’re listed in directories make sure your information is up to date and that your company is accurately represented.
If your website is mobile friendly then social media targeted advertising campaigns are relatively inexpensive and simple to create. You need a good idea of your target market if you want to get results and when you’re attracting customers, and as always it’s vital you have a decent online presence for your business or you’ll just be throwing money away.
If you’re a local Phuket business and you’re struggling to find customers or feeling the effects from a drop in repeat customers, feel free to get in touch. We’ll help you identify who your customers are, where to find them, how get their attention and keep them coming back for more.