One Time Customers or Returning Customers, Where Should the Focus Be ?
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80:20 rule – We often spend 80% energy on getting newer customers, and only 20% energy to understand and grow 80% of our existing customers. The fact is…you need to spend less to retain your customers.
Have you ever heard an entrepreneur say he has enough business? As entrepreneurs, we can only dream of such a happy situation. As an entrepreneur myself, I would say that with the internet and telecom explosion, most of our target audiences are online, all of the time! One may say this has affected the way we have traditionally done business, or that the basic principles governing consumer behavior may not apply anymore.
In my experience, business development continues to be a consumer-driven activity. Keeping customers happy continues to be the number one priority. It has become even more critical to know who our customers are, why they buy from us, and the value they perceive over our competition.
Knowing your customer and his habits and meeting those needs every time becomes critical to customer satisfaction and needless to say will translate into a healthy bottom-line. It is important to understand that revenue is generated both from returning customers as well as one-time customers. While a lot of businesses spend time and money on customer acquisition, one should not ignore existing customers.
The following points suggest why focusing on repeat customers is equally if not more important.
Easier to Lure: Returning customers are easier to entice to spend more since they are already aware of your products or services. This means there is a lesser cost that is incurred to get their foot in the door. There is a stark contrast when it comes to new customers who are unaware of your services. It takes time and effort on your part to first educate them about your products and then convince them enough for them to buy into your business / product.
An example, what immediately comes to my mind would be a very simple but effective pre sales discounting coupon that one of our customers used to entice his customer base to try and buy a new product. The customer is excited and will approach with curiosity to encash the coupon, not minding the barriers of logging in, the discomfort of finding your store etc….the fact is that if your online customer has used your app or website three times, then they are likely to continue with your brand. You have to give an incentive to get them to return.
Promotion of Business: One of the best ways to promote your business is by word of mouth. Repeat customers who are satisfied with your service are more than likely to spread the word about your service, in a positive fashion, leading to your product promotion. This goodwill-based promotion is almost like free marketing for your brand. You have to build virality to your online tool and one very good way to do this is to refer and earn. This depends on who your customer is. If you have a high end customer then a small incentive will not work. If you are targeting a teenager, then a smaller referral incentive could work adequately.
Introduction of New Products: One of the smartest ways to grow business is to introduce new products that can be sold to the existing customers. They already have trust in your business and they will be more open to trying new products that comes from you reaching out to them can be as easy as sending an email. Looking at their list of last purchase you can send them a list of the products tailored to suit their needs. With online tools you can send in–app pictures, text notifications, blog links, and even real-time deals. As long as you have the customer database, visual appeal works for some products or brands especially if it is a product launch. The crux is to retain a direct customer touch.
Understanding of the Target Market: The repeat customers help you understand your target audience. Buyer behavioral patterns and their interests provide the information that will help you grow your business. Better understanding of their interests will help satisfy your target audience and allows you to build brand credibility. If you are a Meat selling company for instance, and you realise that a particular area demands more fish, or chicken, you can analyze the orders and understand which part of the of the city has your target audience for a particular offer on that product. You can tweak your marketing spend based on the geography you want! This is the best feature of an online tool that can capture this information at one go and help you slice and dice the analysis.
This does not mean that businesses should ignore one-time customers. If a new customer visits your online/physical store and finds your product/services satisfies his requirements, there is a possibility that he will look forward to more purchases and hence might turn to a permanent customer. Also, if one can identify the needs and interest of the new customers, it will be easy to retain them. In today’s multi-channel sales scenario, it is easier to retain, engage and sell to loyal, returning customers, while allowing enough incentive for them to bring in newer customers and first-time users. Virality is a big plus with an online selling tool.
Studies say that acquiring new customers is five times more expensive than retaining an existing one. But, if one manages to retain them successfully then it might revitalize the business, especially for start-ups. An old proverb says that if the old friends are gold then the new ones are silver. This is relevant even for the business. Repeat customers are the basic profits of the business whereas the new ones are the add-ons. But, no business can grow without acquiring new customers. Also, new customers help the business grow not only in terms of profit but also in terms of products and services. It might get expensive in the first place but that can go unseen once they become permanent.