Perhaps the most misleading client acquisition tip you can receive from the myriad and many self-proclaimed online marketing experts who proliferate the internet today is: focus on new clients to grow your business.
The truth is, client retention is far more valuable – and profitable – than signing up new clients. (Uh oh, was that thunder from the Marketing Gods on high we just heard?)
Obviously, finding new clients is important for growing your business, and we would never suggest that you ignore attracting new clients. But, your return on investment from client retention is almost guaranteed to be higher than your ROI for client acquisition. Substantially higher, in fact.
Repeat Business Boosts ROI
For most business owners, the need to increase revenue and/or steady their cash flow leads them toward investing their hard-earned dollars in finding new customers. That’s fine when you have plenty of cash but, it turns out, generating new business is expensive and the returns tend to be small.
Let’s look at some numbers (with help from ConstantContact.com), shall we?
- Repeat customers spend more money – 300% more, according to RjMetrics.com. Not only are your repeat customers purchasing more over time than new customers, they likely trust you enough to purchase your more expensive products or services.
- Repeat customers are easier to sell – You have limited time and resources; you don’t want to waste them on potential customers who never end up buying anything. Keep in mind, when you’re marketing to a prospective customer, you only have a 13% percent chance of persuading them to make a purchase. On the other hand, repeat customers have a 60% to 70% chance of buying.
- New customers cost you more – If you’re a small business, you need to save money anywhere you can. It costs five times more to acquire a new customer than it does to keep a current customer. Plus, closing that new customer costs 16 times more than making a sale to your current customers.
- Repeat customers promote your business – Marketing can be expensive but, by focusing on repeat business, you’ll create a group of loyal customers that will happily sing your praises and promote your business for you. Repeat customers refer 50% more people than one-time buyers.
- Businesses are built on customer retention – Your business shouldn’t be a revolving door of customers. By increasing customer retention just five percent, a company’s profitability will increase by an average of 75%.
One last thing to consider is the good old 80/20 rule of business; in this case, that 80% of your future profits will come from 20% of your current clients.
So, is this really a “client acquisition tip”? Maybe not, but maybe yes. Since you worked so hard to acquire your current group of clients, it makes sense that you should work even harder to keep them – because they are so very valuable to the future of your business.
Looking for more client retention strategies, online marketing tips, and ideas? Get in touch with the YOMT Team today.