Why is that we always try hard to impress our new clients and we get so lost in this process that we start giving less attention to our existing clients. Your most valuable customers are the ones that you already have won by offering your products or services to them. You don't need to go the extra mile to please or impress them and having existing customers have tons of benefits for your business as well.
As already mentioned, you don't have to put in extra effort to make them stick to your business. The more time they remain in contact, the more value they will bring to your company, and they will help you generate more revenue. Once you succeed in retaining a strong relationship with your existing clients, they might vouch for you in their friends, make referrals, and as a result, they will be a reason for a whole bunch of new customers. Now let us take a look at the importance of focusing on existing customers in detail.
They Are Less Costly
It is evident that things are always challenging and costly at the start, especially when setting up a new business is concerned. And when you are trying to approach a new customer, think of all the things you need to do.
Social media campaigns
And the list can go further, depending on your strategies and for every step, you will have to put up the effort and money. Sometimes you waste your time targeting the wrong group of clients by calling the cold leads. The advertising budget is also affected when you plan on making new business ventures. Studies have shown that over the past couple of years following things have become even more difficult when you are trying to make a sale.
Hearing back from prospects 40%
Reaching the decision maker 31%
Closing deals 30%
Identifying good leads by 28%
And after all the efforts if you are successful in convincing a new customer, it will probably take weeks or even months before you can earn your first profit. Now, if you compare the chances of selling to new customers (5-20%) with the chances to sell to your existing customers (55-70%), you will find it wise to give thorough attention to your retained clients.
But keeping your customers is not free. There is always a cost involved. You might need to hire and train additional sales or customer success staff in order to entertain your existing customer's queries and needs.
If you are still not convinced that retaining customers is really important for your business, then you need to read this. A study has found that if you can achieve an increase in retaining the customer by 5%, you can accept an increase in profit margin by 25 to whooping 95%, depending on the domain and size of your business
Repeat Customers Spend More on Each Purchase
Returning buyers not only tend to buy more often, but they also spend more on purchases as compared to the new buyers on an average. Which means repeat buyers are synonymous with more profit.
But to make them spend more, you need to make sure you give them the quality products/services. Once you do that, it will be far more comfortable and cost-effective to persuade them to buy from you again. Following are some stats that prove that customer retention is significant for your business.
The probability of making your returning customer purchase is much higher (60-70%) than that of a new client (5-20%).
Almost 80% per cent of the profit is going to come only from 20% of your loyal customers.
65% of a company's business is a result of returning buyers.
Customer retention is the priority of 32% of the executives.
Twenty-seven % of the small business owner estimates that 11-20% of new buyers do not return to purchase again.
Retaining customers can get you a lot more than increased revenue, upselling and cross selling. If you somehow figure out how to keep your customers satisfied and make them feel valued, then they can turn into a living referral system. And we all know how dear are referrals to every business.
Referrals are far most the best way to promote your product/service. 2018 State of Inbound report shows that about 56% of new customers head out to a business due to word of mouth and about 46% by customer references. So, you can well imagine how big game changers referrals are.
It must not be a surprise to you. We all know that when our friends or relatives suggest some product/service, they do not have anything to gain and certainly have no other hidden intentions. All they do is suggest things with which they had a great experience, and they trust using them. But when a sales representative suggests anything, even when he wants to help us or thinks that their product will make our life easy, he still has some motive at play. Their clear purpose is to sell things because they are rewarded that way, and that is their sole purpose. And this is what many prospects leads always have in mind, which makes it difficult for the sale representative to close a deal.
However, the customers that are flocked in buying your services/products through referrals usually have a shorter sales cycle. The reason is that they considered buying products/services from you due to their friend's suggestion and if they are not satisfied for themselves after making a purchase, they will not come back. So, once you have new customers onboard, make sure you give them your best, and they will hopefully return the favor.
Upsell and Cross-Sell
One of the significant advantages of having returning buyers is the fact that upselling and cross-selling them product and services are relatively easy. However, many of the sales representatives think that once they have made their sale, they have achieved everything. But that is not the case. You need to carefully listen to your customer. Listen to what they have to say and what they need.
A sale representative is in a perfect position to know what is going on in the customer's mind regarding their needs. Talk to your customers; make them speak. Once they open up about their needs, that is the right time to make an upsell or cross-sell.
Let's suppose you are an insurance agent and you are going to meet your client to renew their car insurance. But on your way, you see another car parked in the driveway. Once you have achieved your primary target, now is the time to talk with your client. After talking you might discover that the client is not happy with the insurance services offered on additional vehicle and is ready to discuss a new possible offer if it is available.
A win, right? You just made a new sale without spending a single penny.
One benefit of having existing clients that comes side by side with referrals is customer advocacy. Customer advocates are those who always try hard to tell people about your company; how great it is, how great customer service your company provides etc. The cherry on top, they do it all free of charge.
By now, you already know that influencing your customers is important. Along with word of mouth and referrals, another way to influence (that is getting popular and popular) is through the internet.
There are many websites like social media sites, forums, ecommerce sites etc. where these advocates leave their feedback. And these feedbacks play a great role in flocking in new customers as everyone opt to read the reviews before buying any product or service. So, it is very important for your business that you make sure these websites speak positively for you.
Now there is no doubt in the fact that you cannot make all your clients happy, no matter how excellent your services are. There might be something that will bother your clients at some part of their journey with your; some technical glitch or anything. You cannot do much about it. But what you can do is that make up for it by providing great customer service and giving your clients the idea that they are your top priority!
Another thing that you can do here is, bring forward your brand advocates that were having similar kind of problem. As we know already, peer-to-peer feedback is always going to be stronger than any other assurance coming directly from the company. Who knows after your customer knows that your company is taking proactive steps to resolve their issue, you might gain a new customer advocate!
Giving importance to your existing customers will help you get your retention rate high
You might be thinking about what retention rate is? Retention rate is the percentage of customers that stick with your company over a specific time. Whereas, Chun rate is the percentage of customers lost over a while.
For instance, if you had 1000 customers by the start of the year and by the end of the year you were left with 700 customers then your customer retention rate is 70%, and your Chun rate is 30%. So, it is obvious that having a higher retention rate will result in higher profits.
A study shows that if you achieve a 2% increase in customer retention rate, it will be equivalent to the profits given by cutting cost by as high as 10%. And if you happen to get an increase in the retention rate by 5 %, the chances are that you can increase your company's profits by 20% to 120%.
You existing customers are the best customers because it does not cost you much to get their attention. They spend more than any other customer and ultimately get you more profit. They are loyal and they keep on advocating for your brand. So, it is always wise to pay them at least equal if not more attention than your new customers.