By Travis Reading – Nextpond Co-Founder
If you think that increasing your margins and ramping up your marketing strategy is the easiest way to increase profits and gain new customers, you might be surprised to hear of a more effective way.
When Bain & Company along with Earl Sasser of Harvard Business School analysed costs and revenues derived from serving customers over their entire purchasing life cycle, in many industries, the increased cost of acquiring customers rendered many client relationships unprofitable, particularly in the early years of business. But, the moment customer retention increased to five percent, profits increased to between 35 and 95 percent.
The key takeaway from this study it to shift your business focus to delighting the customers you already have. When you focus on your current clients and turn them into satisfied customers, it will cost you much less.
Why do appreciated customers beat high revenue and low cost?
They are less inclined to switch to your competitor
If you can offer your clients a positive experience, they’re more likely to stay with you and not move to your competitor.
They aren’t as sensitive to price
Where a customer is usually seen as a price-sensitive consumer, reports show that when they become a satisfied customer, they turn out to be very loyal and high-spending consumers who actively promote a brand.
They offer your business free PR
When you have a satisfied customer, they are your best form of free PR and will promote your business for you. Referrals are the best form of business promotions because they’re based on actual experience which consumers seriously consider before using a business.
They are more likely to buy other products you upsell
When you have a customer who is satisfied with the products or services you supply as well as the customer experience you offer, they will only have eyes for your business, making it even more difficult for your competitors. When you have delighted customers, getting new products in front of them and up-selling can be extremely effective.
They cost less to service
Gaining new customers can be a tedious and slow process of brand awareness and trust building. With your current and loyal customers, however, the hard yards have been done, they don’t need to be educated, they already trust you and love your product/service, you just need to keep them happy! It certainly costs a lot less than finding new ones.
Want to increase your profits? Get to know your current customers, find out what’s important to them and deliver. Keeping your customers happy and delivering the best possible product or service along with a smooth and enjoyable customer experience will beat high revenue and low cost, every time.