It's that time of year again. Christmas adverts are a-glittering from our TV screens, twinkling lights are adorning every other shop-front and high street, and businesses are doing all they can to ensure their festive season is a cracker.
No doubt you've got your own cunning plans to snaffle up some seasonal sales, whether that means taking your big target clients out for a turkey lunch or offering special offers on star products to attract a wider market. It's always a big push to generate enough business to tide you through the usually low-revenue bleakness of January.
But it's also crucial to keep that momentum going at the start of 2013 and beyond. Whether customers are making business or consumer purchases from you, keep in mind that it is far more effective to retain existing customers than try to acquire new ones. Need proof of that? Even just a 5% increase in customer retention can increase a company's profitability by 75%, according to a study by consultants Baines and Company. Why is customer retention so effective and important for small businesses?
1. Easier to build revenue
It's just common sense that it's going to be easier to persuade an existing customer who is already satisfied with the service or goods you offer than a brand new one with no previous dealings with your business. The customer will already know the level of quality you offer. This gives you the perfect opportunity to offer a loyalty programme relevant to your sector (making reward achievable relative to spend), like the printed.com Rewards Programme. You can also cross-sell more to the customer. Read more about the art of cross-selling to increase sales.
2. Big savings on your marketing spend
The problem with marketing to acquire new customers is that you unavoidably have to pay to reach far more people than will ever convert into customers, whatever channel you use. That makes your price per customer significantly higher than if you invest in communications with existing or previous customers. You already have a relationship with existing customers, and they are more engaged than a new customer might be, as they already know your business. Which makes marketing to existing customers much more cost-effective than targeting new ones.
3. More accurate sales forecasting, and reliable revenue streams
Because marketing to new customers is so much less reliable than selling more to existing ones, it tends to wreak havoc on your sales forecasts. If you've invested in marketing activity targeting new customers, you're never going to know in advance how many people will convert to customers. By instead focusing on selling to a solid customer base over the long term, you can start to recognise purchasing patterns, giving you a firmer idea of how often customers will buy from you and when. This makes sales forecasting a heck of a lot easier, and gives you a nice steady stream of revenue you can rely on for the coming months.
4. Keeping an edge over your rivals
The goal of selling more to and retaining your existing customers will focus your customer service efforts, and sharpen the way you communicate with existing customers. Once everyone in your business (even if it's just you!) know that you need to keep all those existing customers coming back for more, you'll be going the extra mile to keep them happy. That enhanced level of service will give you the kind of longer-term relationship your rivals long for, and, if your customer service is good enough, it'll give you a real unique selling point over competitors too.
5. Turbocharged word of mouth marketing
Half of global consumers say friends and family are the number one influence on consumer awareness, according to a 2012 report from Jack Morton. Word of mouth marketing is more trustworthy and effective than any types paid for by a company, and it doesn't cost you a penny. Learn how to retain your customers long-term, and you'll find you don't just have a solid customer base, but a fan base too. Satisfied long-term customers extol the virtues of your products or service to their contacts and friends - which means more customers and more sales for you.
Want to know the best methods for keeping those customers on board with your business? We'll be sharing more expert insight in the second part of this series on customer retention, coming soon to the printed.com blog.
This article first appeared on Smarta.com, a support platform for business owners and entrepreneurs. Their aim is to provide a one-stop-shop where business owners can connect, learn and actually do business.