The Value of Customer Loyalty
An existing customer is three times more likely to buy a new product or service from you than a new customer.
You have a 60-70% probability of selling something else to an existing customer versus a 5-20% probability of selling to a new customer.
An existing customer is three times more likely to try/buy new products or services from you than a new customer. And it will cost you five times as much to attract a new customer than to keep an existing one.
These are pretty compelling facts. Facts that all businesses need to have at the forefront of their minds when considering when to cease marketing to customers. The money, time and effort spent bringing them into contact with the business has done its job - no further action required? Wrong.
Businesses that out-perform their competition understand that the right type of marketing (to the right audience), has a measurable impact on revenue goals and a Customer's Lifetime Value to the business.
So what is CLV? CLV (Customer's Lifetime Value) is a prediction of all the value a business will derive from their entire relationship with a customer. CLV is an important metric for determining how much money a company wants to spend on acquiring new customers and how much repeat business a company can expect from certain consumers.
76% of companies see a Customer’s Lifetime Value (CLV) as an important concept but only 42% are able to accurately measure it.
What are you doing to keep your customers loyal?
Smart businesses need to focus on maximising each and every Customer's Lifetime Value and not just measure acquisition and the initial sale. Just because they’ve bought once does not mean they will continue to do so.
Here are two key reasons you should spend as much effort keeping your (loyal) existing customers as you did trying to win them in the first place.
Reason 1: Retained customers deliver more value than new ones
Over and above the stats cited at the top of this article, marketing to your existing customers increases retention. Through their transactions, you are able to demonstrate your value, and that motivates them to buy from you again.
Repeat customers spend on average 31% more per purchase than a new one and after that first purchase they are 27% more likely to purchase from you again. If, through effective marketing, you persuade them to purchase from you a second time, that 27% increases to a huge 45%. And after the third time? It rises to 54%.
Here are the most effective marketing techniques to improve customer loyalty:
- Email 56%
- Social Media 37%
- Content Marketing 32%
- Referral Marketing 26%
Reason 2: Referring a friend - the power of recommendations
A new customer referred to you by an existing one has a 92% retention rate. Significantly better than the 68% for a customer acquired through advertising. But the real key is the power they hold to influence your prospects.
By inviting happy customers into your sales process, you can attract prospects, convert them into leads and even nurture them until they themselves become customers. Here successful marketing avenues would include customer loyalty schemes, reward programmes, and direct incentives to refer, whilst simultaneously encouraging customers to post reviews, testimonials, and blogs about your services.
Testimonials give your business social proof and help to draw prospects into your lead funnel and give buyers confidence in your business offering.
- According to Bain & Co just a 5% increase in customer retention sees an increase in a company’s profitability of 75%.
- You could see a 20% increase in revenue just by marketing more effectively to your existing customers.
- Work to keep your top 20% of customers - make sure they have no reasons to leave you.
- Target customers with specific offers and customer only promotions - by knowing all about them you can find an offer that will ensure their loyalty.
- Reward your most profitable customers with extras that they aren’t expecting - as above, the more you know about them the better your offering can be. This may come in the form of information, guidance or additional delivery services. It doesn’t always have to be a discount.
- Personalise your follow up - see your customer as a person not just as an invoice. In turn, help your customers to see your business as employing likeable, helpful and accessible staff.
- Schedule regular time with your customers and ensure that you follow up any communications quickly - consider follow up call, skype meetings, emails etc. and make sure you follow up.
“When dealing with customers, remember you are dealing not with creatures of logic but creatures of emotion.”Dale Carnegie
If you are looking for areas of business growth to focus on, customer loyalty and Customer Lifetime Value are an essential starting points for every business across all sectors. To find out more about this and other topics of lead generation and the important role marketing plays in the sales process talk to MC+Co today.
Contact us at our Head Office on +44 (0) 1277 366898