Too many new businesses fall into the trap of thinking that only new customers drive growth and boost profits. In their efforts to acquire new clients, they often overlook the potential sitting right under their noses. If nurtured correctly, current customers are not only more profitable than new ones, but that profitability is also more sustainable and has a more far-reaching impact on your future profits.
What Distinguishes An Existing Customer From A New One?
An existing customer is one who consistently purchases products or services from your company. They may also be referred to as current or repeat customers. Give them an experience they enjoy, and they will become champions of your brand and impact business growth. Ignore them, and they can quickly become churned customers who sever all ties with your company and turn to a competitor instead.
Why Is An Existing Customer’s Value So High?
Retaining your existing customers is more crucial than acquiring new ones. Be it a small business or enterprise-level business, you should have your support, sales, and marketing teams focus on marketing campaigns and building marketing strategies around existing ones, and enhancing the customer experience for your existing ones. Here are the top 5 reasons why your existing customers are the best.
#1 They spend more than new customers
Research indicates that a loyal customer will spend “67% more in their 31st to 36th month with a brand than in their first six months of the relationship.” You must focus on your existing customer base rather than targeting new ones to drive profits. Furthermore, the probability of selling to existing clients is “up to 14 times higher than the probability of selling to a new customer.” They also open up opportunities for upselling and cross-selling.
#2 They’re more cost-effective
Over the past six years, “the cost of new customer acquisition has increased 60%.” As a result, the cost of retaining an existing customer is now five times lower than the cost of securing a new one. Although “44% of businesses focus on customer acquisition,” customer retention is a cheaper way of increasing profits and positively impacts customer acquisition.
#3 They double-up as brand advocates
Not only are current customers “87% more likely to purchase upgrades and new services ” than new ones, but around 77% will “recommend a brand to a friend after a single positive experience,” and 60% will also talk to friends and family about a brand they like.
These brand advocates or “mini-marketers” reinforce your marketing efforts, improve word-of-mouth marketing, boost the customer acquisition process by bringing in new prospects, and, in the process, save you both time and money.
#4 They improve your customer base and boost your retention rate
The higher the percentage of loyal customers that remain with your company, the higher your profits. “Increasing customer retention by just 5% leads to a 25% to 95% increase in profit,” while a 10% increase can lead to as much as a 30% rise in the company’s value.
However, if you keep losing loyal customers, you’ll soon feel the pinch. Statistics show that “US companies lose $136.8 billion per year due to avoidable consumer switching.”
#5 Their potential lifetime value far exceeds that of a new customer
The total profit a customer contributes to your business is their lifetime value, and it increases the longer a customer remains loyal to your brand. Loyal customers who keep purchasing your products or services are more valuable than new ones because there are no acquisition costs to counteract their overall profitability. In other words, the same purchase made by a new customer is less lucrative than one made by an existing client.
How To Boost Existing Customer Retention
The benefits repeat customers bring to your business are indisputable, yet keeping those clients loyal to your brand is one of the biggest challenges for many companies. The following strategies are designed to help you increase customer loyalty and, in turn, improve your customer retention rate and build your client base.
#1 Engage With Your Customers On Social Media
Social media platforms like Apple Business Chat, Facebook Messenger, and WhatsApp are tools for engaging with prospective customers and retaining them. By integrating your social media inboxes with your other messenger apps, email, and customer support, you can create seamless communication that prioritizes your existing clients, making them feel valued.
#2 Connect With Personalized Messages
Anticipate which products or services will attract your repeat customers and send them compelling, personalized messages to encourage engagement.
According to one study, “58% of consumers would switch half or more of their spending to a provider that excels at personalizing experiences without compromising trust.”
#3 Use Statistics To Increase Customer Lifetime Value
Use technology and AI to gather data about the habits of your existing clients and use this to drive retention strategies. Using data to substantiate your product is a factual and convincing way to engage with potential customers. Using product usage data and customer engagement data will help you improve your strategy to retain customers.
#4 Make Them The Focus Of Your Business
Give your current customers opportunities to drive product development and business growth. You can do this by establishing a forum where customers can give feedback or make suggestions.
#5 Introduce A Loyalty Program
High-performing customer loyalty programs drive customer satisfaction, with research showing that customers participating in such initiatives “are 80% more likely to choose the brand over competitors and twice as likely to recommend the brand to their friends.”
#6 Respond Quickly to Messages and Complaints
Good customer service includes the ability to resolve problems quickly and effectively. Research indicates that 96% of customers feel a good customer experience influences their loyalty to a brand, while 77% “say inefficient customer experiences detract from their quality of life.”
A tool like Freshchatcan help you address customer queries immediately. By adding a live chat or by leveraging automation with chatbots, you can offer high-quality customer service in real-time. Give the free trial a go!
#7 Exceed Their Expectations
Ask your existing customer base for regular feedback and use that data to anticipate their needs. Increase customer loyalty by offering value-added services, such as free access to online resources or eligibility for a lucky draw after a certain number of purchases.
#8 Show Them You’re Listening
Listening to the needs and challenges of your existing clients is one of the best ways of keeping them engaged and developing a positive customer relationship. One study conducted by Twitter and Applied Marketing Science revealed that customers who receive a response to a business-related tweet “are willing to spend 3–20% more on an average priced item from that business in the future.”
#9 Gain and Maintain Trust
Be honest about what you offer and develop a brand your customers can identify with. Be honest about your values and encourage your existing clients to help you establish and achieve your social responsibility goals.
Be transparent about how you do business through clear pricing, responding to customer feedback, and sharing reviews.
#10 Help Them Achieve Their Goals
Find out what challenges your customers are facing and give them the tools to resolve them. Streamline their customer journey by highlighting current pain points and developing a strategy to remedy them. You could, for example, offer e-commerce opportunities or provide a self-service platform to facilitate easier transactions.
Put the focus back on your existing customers
New customers are expensive, old customers are dangerous, leaving repeat customers to drive business development and customer acquisition, boost sales, and deliver on customer referrals.
Although the majority of companies put more emphasis on securing new customers than retaining existing ones, the most successful businesses know the value of their existing clients and put their needs at the heart of their operations.
While a single new customer may bring in a few extra dollars, the costs of that acquisition will counterbalance the perceived profitability. An existing customer that stays loyal to a company, on the other hand, could generate hundreds of dollars over a few years.
An old customer that takes their business elsewhere means a loss of profits and a loss of face. It’s estimated that around 13% of old customers tell 20 people about their unsatisfactory customer experience. Similarly, 72% of happy customers will share a positive experience with 6 or more people. If you lose 100 clients a year, it equates to around 260 people hearing about your company’s poor customer service.
This failure to retain current customers can do significant damage to your brand reputation and customer acquisition targets, with around 60% of potential clients being unwilling to use a company that they’ve read negative reviews about.
As Sam Walton, the founder of Walmart, once noted, “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
Look after your current customers, and they’ll look after you.
4 Reasons Existing Customers Are Valuable:
Once they've made a purchase with your business, they're familiar with the brand and they're comfortable with the quality of your products and the purchase process. Familiarity and brand recall makes customers more likely to revisit your site.
The novice value investors might think the value investing is simple, and it is just buying a stock when its price is much lower than its value. The problem here is that the “value” is never a fixed number, even if you can precisely pinpoint the cash flow in the next 100 years.What is more important acquiring new customers or retaining old ones? ›
Acquiring a new customer can cost five times more than retaining an existing customer. Increasing customer retention by 5% can increase profits from 25-95%. The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.What is the voice of the customer McKinsey? ›
The voice of the customer is the collection and synthesis of the customers' ideas, concerns, priorities, and feedback, on a particular product, service, process, or project. The application of voice of the customer can and should be applied to most problem solving that happens across an organization.Is it important to consider existing customers or new customers? ›
Existing customers are easier to sell to
Your limited time and resources are better spent with customers who are more likely to buy. Various studies have shown that the likelihood of a new customer buying from you is anywhere between 5-20%, whereas existing customers are 60-70% more likely to buy form your business!
Customer retention is critical because the cost of acquiring new customers is much higher than retaining existing customers. Retained customers are also more likely to engage in word-of-mouth marketing or become brand ambassadors.Why does value investing work? ›
A value investor seeks out above-average companies and invests in them. Therefore, the probable range of return for value investing is much higher. In other words, if you want the average performance of the market, you're better off buying an index fund right now and piling money into it over time.What are the disadvantages of value investing? ›
- Value investment is complex. Any error and one may catch hold of a 'value' trap, which does have lower valuations, but no potential for growth.
- Value investment requires patience. The waiting period could be in years. ...
- Value investment may not give you enough diversification.
Value Funds can be exposed to economic risk, as undervalued stocks may be more sensitive to changes in economic conditions. For example, if there is a recession, companies with weak fundamentals may experience a decline in earnings, leading to a decline in their stock price.Why is it cheaper to keep an existing customer? ›
A significant factor in the difference in cost is that consumers tend to buy from brands they trust. This is why it takes a lot more effort to convert a new customer than to hold a loyal one.
Returning customers are also known as recurring or loyal customers because they are loyal to your brand and are likely to make many more purchases from you in the future. Repeat clients also turn about to be the best advocates of your brand and bring repeat business.Why customer retention is challenging? ›
One of the biggest customer retention challenges faced by businesses is the fierce competition in the market. Customers have a plethora of options to choose from, and businesses have to offer something unique to keep their customers engaged. Customers are constantly looking for better deals, products, and services.How much do McKinsey customer success managers make? ›
Customer Success Manager salaries at McKinsey & Company in New York can range from $34,560 - $80,000. In New York, The Customer Support Department at McKinsey & Company earns $2,511 more on average than the Sales Department. Last updated 5 days ago.What is the voice of the customer Six Sigma? ›
Six Sigma DMAIC Process - Define Phase - Capturing Voice of Customer (VOC) What is Voice of Customer? Voice of Customer is the customer's voice, expectations, preferences, comments, of a product or service in discussion. It is the statement made by the customer on a particular product or service.What is the voice of the black customer? ›
The Voice of Your Customer is a Black-owned and minority-certified consulting firm specializing in market research, secret shopping, outreach campaigns and call center services.What is the value of existing customer? ›
Loyal customers purchase more
The probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is 5-20%. Show value to your current customers after their first purchase, and follow up. This will help show how much you value their business and really care.
Existing customers are easier to convince to buy more products from you than new customers. They will reduce advertising costs, increase lifetime value, refer friends, and hence increase profit. It's 5 to 25 times more expensive to acquire a new customer than to retain an existing customer.How valuable are repeat customers? ›
Reward repeat customers
Keep the 80/20 rule in mind to grow your business: 80% of business usually comes from 20% of customers. That's why encouraging repeat customers to shop is vital to keeping acquisition costs down and increasing revenue.
Current customers are generally more reliable buyers than new customers. As you increase upsell, cross-sell, and other marketing offers to existing customers, they're more likely to purchase new products or upgrades.