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- Why you should focus on existing customers rather than new ones - February 6, 2020
We meet businesses too often who have too much focus on generating new business. Business should absolutely be seeking to acquire new business and customers if they wish to expand but not if it is at the cost of neglecting their existing customer base. Existing or repeat customers are those who have purchased a product or service from your business previously.
We share below the reasons behind why your existing customer base is so valuable. Also some research and statistics to prove that ensuring that you give your existing customers the time and attention they need will be one of the most rewarding and successful exercises your business carries out.
1. New customers cost you more
All business needs to reduce spending where possible.
Research from Forrester shows that it cost five times more to acquire a new customer than retain a new one. (1)
By targeting existing customers who already have an interest in your product or service and have shown a willingness to buy it gives you a much stronger chance of making a sale.
Studies have shown that the probability of converting an existing customer is around 60 – 70%, whereas the likelihood of converting a new prospect is only 5 – 20%.
Therefore, spend your money where you know it will have most impact. By doing so will also demonstrate your businesses willingness to reward loyalty, which will help your overall brand.
2. Existing customers are easier to sell to
They have already opened their wallet or purse to your business once so are much more likely to do so again, rather than seeking a new business to purchase from. Whether you realise it or not there a is already a level of trust established with your business (assuming you did a good job for them 1st time round!)
Your limited time and resources are better spent with customers who are more likely to buy. Various studies have shown that the likelihood of a new customer buying from you is anywhere between 5-20%, whereas existing customers are 60-70% more likely to buy form your business! I know where I would want to spend my money.
3. Repeat customers spend more money
Your repeat customers are going to purchase more over time than any new customers. Figures from RJMetrics (2) show that existing customers spend around 300% more.
Your existing customer base, fuelled with that ever growing trust they have in your business , are also more likely to purchase your more expensive products or services.
4. Retention = profitability
Selling to existing customers is less focused on price, as opposed to selling to new customers.
Since your existing customers trust you already, it gets easier to convince them to become interested in even more of your products or services through up-selling and cross-selling.
In fact, Gartner Group statistics(3) tell us that 80% of your company’s future revenue will come from just 20% of your existing customers
When you imagine future success and profitability, picture strengthening existing relationships rather than forging new ones.
5. Repeat customers promote your business for free
Customer loyalty is priceless, and this can also lead to acquiring more new customers.
Word of mouth advertising is not only free, but possibly one of the most credible forms of advertising. Customers will always talk, and they will always listen to other customers.
It’s because of this that just a 5% increase in customer retention can increase a company’s profitability by 75%(4).
Statistics like this prove that if you treat existing customers well, you will consistently reap the benefits.
After all, your customer base is a growing source of referrals for new customers.
We will talk more about ‘how to’ retain and market to your existing customers in a future article.
We hope that you can now you can see that investing in your existing customer base costs less and earns you more. Although gaining new customers can be seen as a sign of business growth, ignoring or neglecting you existing customer base is far too expensive for your business.
Your existing customer base is more likely to provide your business with more sales and profit than any new customers.
At RCP we advise any business, whether they are prospering or struggling, to focus efforts in this area.
This knowledge is something we implement strictly in the running of our own businesses too.
If you need some help or support in these areas or want to know more of how to implement these strategies in your business then please get in touch here:
(1) See Webber, Alan E., B2B Customer Experience Priorities in an Economic Downturn: Key Customer Usability Initiatives in a Soft Economy (February 19, 2008), Forrester Research