Existing Customers vs New Customers…the pros and pros!
Customers are the lifeblood of all businesses. No matter what industry you are in and no matter what type of product and service you offer, you need customers to keep your business alive. But one of the major dilemmas facing organisations I work with, or people I speak to is how to differentiate the marketing strategy for acquiring new customers and retaining your existing customers.
Think of a bucket that is full of water but that has a hole in the bottom. Slowly the water starts to leak out, and, if left unattended, there will soon be no water left. However to keep the bucket full you can do 2 things:
1) Plug the hole to stop it leaking, or
2) Keep topping it up with new water
Think of this analogy in a business sense with the bucket being your business and the water being your customers. If when full of customers, you leave them be and don’t give them attention they are likely to look, and go, elsewhere, or be the water leaking out of your hole. If however you pay attention to their needs, and fulfill their demand and work hard to keep them there (i.e plugging the gap) then you will retain your customer base. This is leak number one in the Watertight Marketing methodology.
Customer retention is generally about keeping customers happy and continuing to fulfill their needs and desires. This may be by consistently supplying a product they demand but also enticing them with new products that fulfill additional needs, or by providing an incentive, i.e. promotion, for them to purchase again. The more loyal customers are then the less promotional activity you need to carry out, but the main thing is giving the customers the care and attention they deserve. This can be done by personalising communication for example and sending them relevant information with applicable and personalised offers and products. Another is to make sure that they feel “loved” and valued and that they are constantly reminded about the benefits of choosing you for their product or service needs. The main attribute of retention marketing is working hard to communicate effectively to your existing database.
New customers are a slightly different kettle of fish. To go back to my original analogy, the new customers are the water needed to top up your bucket to make sure it remains full. Getting a new customer on board is a more difficult process than keeping a customer, as the likelihood is the potential new customers doesn’t know much about you. You need to work very hard in order to acquire new customers.
New customer acquisition is often more promotional and incentive driven. Think how you are attracted to new products or companies…it is usually a free trial, trial price, new customer special or a promotional offer of some sort. This is in order to attract you to give the product or service a go as you probably don’t have all the necessary information yet to commit to paying full price, so you have to overcome this obstacle by providing exceptional value!
Don’t be too frightened to do this, as the key to customer acquisition is getting the customer to try your product, and once they are satisfied it is easier to get them to come back again.
One word of caution though; new customer acquisition is not as profitable in the short term as selling to your existing customers. With the promotional offering to entice, it may even be that you lose money on their first order or purchase. However the big picture should always be kept in mind, and think of the subsequent value of these customers in the long term.
Remember without new customers (water) your bucket will either a) run out of water or b) remain the same size! If you can top up your customer database, as well as retain the vast majority of your existing customers, your business will grow… or you will need a bigger bucket.
If you want to know more about how to plug the leaks in your marketing process in order to maximise your profits, come along to our seminar in Aberdeen on 24 March
Next week I will expand a little on this topic next week and talk about how to measure the worth of your customers.