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Which is Better: Repeat Business or New Customers? - Part
1 of 2
by Paul Lemberg
Published on this site: April 29th, 2006 - See
more articles from this month
Every management authority on the circuit says that loyal
customers and their repeat purchases are the cornerstone of
your long-term successful business. The reason is obvious:
it is less costly to get your existing customers to buy more
than it is to find new ones. The lower cost of sale leads
gives you higher operating margins, which you can then invest
in other business building activities, and so it goes.
Since I'm bringing this up at all, you've got to ask yourself,
"Is this old saw true?"
For incremental growth up to around 20 percent per year, the
answer is yes. It's true.
Spend your energy selling more to your top customers and you'll
do just fine. And 20 percent year after year is definitely
nothing to sneeze at.
But what about faster growth? Massive growth, mega growth,
breakthrough growth? What if you've just got to take over
your market, fast?
To get revenue increases of 50 percent, 100 percent, or more,
that expert wisdom is just plain wrong. To get quantum growth
in your business you're going to need more people buying your
products and services - and lots of them.
Product development mastermind Doug Hall conducted research
using the Scan Database, which contains over 9400 products
with Universal Product Codes. Hall's statistical model shows
that new customers are 2.8 times more important to rapid revenue
growth than repeat purchasers.
It's not hard to understand when you consider this question:
How much money can each customer or customer spend with your
company? Can they double their spending? Maybe. If that's
true, you might squeeze that 100 percent growth from your
loyal base.
But is that reasonable to expect? Perhaps for one year. But
repeatedly? That's just not likely, and companies that focus
all their attention on retention are eventually going to see
revenue growth stall or decline.
But can you double your customer base?
Yes, you can. And you can do it repeatedly. It doesn't matter
whether you call them customers or clients, the equation is
the same: it's easier to geometrically grow the customer base
than the money each customer spends.
Of course, the strongest companies do both. They increase
the spending of each loyal customer, and aggressively court
new ones. But because they think it's more cost-efficient,
too many entrepreneurs focus on developing repeat business
and limit their new customer activity. Don't get caught in
that trap; while you're creating loyalty, your competitors
will expand around you and with their riches, drive you right
out of the market.
Developing new customers is not easy, but here are few
steps to get you on the road and keep you there.
- Continually focus on getting new customers. Develop
automatic referral processes like Quantum's Envelope Referral
System. Schedule low cost or free informational seminars.
Build strategic partnerships. Create affiliate marketing
programs. Use direct marketing techniques: mail, email,
telephone, and so on.
- Remember that your goal is total customer growth.
This means that while you're adding new customers, be sure
not to lose the ones you already have. And that means those
customers are not dormant - a customer who's not spending
isn't much of a customer at all. Any solid customer growth
plan also includes a re-sell, up-sell and cross-sell program
in addition to the customer acquisition plan.
- Redefine your Unique Client Value position to include
the "next niche over." When you've exhausted
the customers in your specific niche (defined by your Core
Marketing Message and your Unique Client Value) it may be
time to move into another market space. The easiest niche
to segue into is one that shares characteristics with your
current market. That's why we call this the "next niche
over." Sometimes all it takes is a small tweak to your
product offer or the way you package it. Sometimes, you
only have to alter the marketing message and collateral.
- Dramatize the Differences. At some point you must
take customers from your competitors; that means you can't
have a me-too offering. You've got to be better, you've
got to be different, you've got offer something they don't
have. Unless your competitors really stink their customers
won't become your without a compelling reason. And just
because your mousetrap is better they won't come running, you have to let them know,
communicating your commanding value clearly and often.
- Create segmented offerings to make the differences
more pronounced. Just as you use "silver, gold,
platinum" pricing to segment your own customer base,
do the same to distinguish yourself from your competitors.
If you need a low-end offer, remove the frills, strip down
the packaging, if possible make the product "virtual,"
digital, or downloadable. On the high-end, make your product
super-premium. Bump up the quality of your materials. Add personalization. Add intimacy and
service elements that competition will be afraid to offer.
Follow these five steps and you will be on the road to quantum
growth. Remember - that as you're driving new customers to
your door you must make sure to build loyalty at the same
time. In another article we'll talk about ways to do just
that.
Business Coach http://paullemberg.com
& Strategist, Paul Lemberg is the President of
Quantum Growth Coaching, the world's only fully systemized
business coaching http://quantumgrowthcoaching.com
program guaranteed to help entrepreneurs create More Profits
and More Life
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