retain existing customersAll of the leading experts recommend that you spend 75% of your budget to retaining existing customers (and re-engage them). Yet surprisingly, most companies do the exact opposite. Even large corporations like Coles, Woolworths, Max Factor and Target (not just the little SMEs) make the mistake of spending too much chasing new customers (or ones that have left) and often ignore their existing ones.

Several years ago I held a senior commercial role at one of the largest retail businesses in the country and I can confirm that they spent <20% to retain existing customers. They, like 95% of businesses out there, spend the bulk of their budget on chasing new customers or attempting to re-engage those that have left and gone to the competition.

And therein lies the biggest mistake you can make as a business owner…

Every dollar spent on direct marketing to retain existing customers is actually worth 50x the equivalent amount spent chasing new customers. With above the line advertising, it is very hard to capture the attention of new customers, embed your message in their mind and compel them to act. It is much easier (and cheaper) to reinforce your message with an existing customer and encourage repeat visits.

So, if everyone knows it is easier and cheaper, why are most businesses NOT focusing the majority of their attention and budget on their existing customer base? The answer to that question is unclear. But what is clear is that there are 4 Simple Strategies that you can use today to boost sales and retain existing customers.

1.   Spend 75% of Your Budget on Existing Customers – The bulk of sales and marketing efforts should be focused on direct communications and NOT on social media, newspapers, PR, magazines or pay-per-click advertising.  For those of you who are established and have been in business for a few years, this is going to free up a lot of time that has been wasted on chasing new customers.

2.   Do Your  Homework to Maximize Return on Investment (ROI) – I recommend that you take the time today to analyse your existing customer data:

–   What are they buying?

–   What could you introduce them to which would increase gross profit margin?

–   How can you drive frequency (visits)?

3.   Frequency Lifts Sales by 75% More Than Upselling – It is much more effective and profitable, to focus on getting customers to return to your website or business, as opposed to trying to sell them one more thing while they are there.

4.   Focus on Customers Within a 10km radius – Customers who have moved outside a 10km radius of your business can be particularly tricky to re-engage. In research conducted at one of the largest retailers in the country, we discovered that 82% of the revenues were attributable to customers that lived within a 10km radius. And in my experience working with hundreds of small-midsized businesses, this statistic still holds true. If your customer has moved outside of this radius, it does not make sense to waste any of your budget trying to reactivate them.

Even though it’s important to appeal to and attract new customers, it’s absolutely crucial to your business’s survival that you retain and nurture the customers that have supported and shopped with you to date. Everyone knows that is cheaper and easier to garner incremental business from existing customers but what separates the truly successful entrepreneur from the pack is the ability to put this knowledge into practice by allocating a large portion of your budget and focus to existing customers.

 

ImagineeringNow
About The Author
Rhondalynn's life changed forever after the loss of her mother due to a senseless tragedy in 1992. She decided that despite her formal training and a promising career as a lawyer and chartered accountant, she wanted to do something more. So despite the fact she had already invested 10 years of her adult life in university and articling, she did the unthinkable. She left her high paid job as Commercial Manager for one of the largest corporations in the country, she re-trained herself in the sciences of the mind and she discovered a passion for writing and sharing her knowledge with business owners and executives. Rhondalynn has distilled the secrets to business success - that she learned from her life experience and working in GM level roles with Price Waterhouse Coopers, Max Factor, Village Cinemas, and Coles Group Ltd. - and produced a simple step-by-step process that you can apply to your business to boost your sales and bottom line. Rhondalynn can help you put strategies in place to grow your bottom line and ensure that your customers would never think of going elsewhere. She is the leading expert on harnessing the power of your brain and using it to improve your financial results in business. Rhondalynn is the author of On The Shoulders of Giants, Imagineering Your Destiny, Sobre Hombros deGigantes, Financial Foreplay, and Sales Seduction. She has appeared on CNN, Bnet/CBS, Channel 7, Channel 9, Kochie's Business Builders and 3AW, and writes for Yahoo, MYOB, Fast Thinking, Sunday Life, Dynamic Business, Business Spectator and Australian Retailer.

2 Comments:


  • By John brandt 22 Oct 2014

    You actually make it seem so easy with your prseentation but I in finding this matter to be really one thing that I believe I might never understand. It seems too complicated and extremely extensive for me. I’m looking forward in your next post, I will try to get the hang of it!

  • By ALARM CAPITAL BLOG 04 Mar 2015

    […] than retaining your current ones. And for most companies, more costly.  Author and strategist Rhondalynn Korolak recommends allotting 75% of your marketing budget to retain existing clients, but states that 95% […]

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