The fundamental rule of business is to retain customers. It has also been proven by numerous studies it cost five times more to attract a new customer than to keep an existing one.
These studies go on to show only 18% of companies actually work on client retention.
There are many factors, other than the economical one already mentioned as to why you may want to switch your focus more into the retention side rather than the acquiring effort.
Focus on customer retention because:
- The probability of selling to an existing customer is 60 – 70%. Selling to a new customer drops the probability 5 – 20%. Where would you like to spend your time?
- Existing customers are more likely to try new products from you to a tune of 50% and they will spend 31% more on new products, or, buy other products to augment the efficiency of the original product. In other words, existing clients are very prone to the upsell.
- A 5% increase in customer retention has shown to increase profits of 25% – 95% as per studies conducted by Earl Sasser of the Harvard Business School.
- Existing customers are more loyal and will sing your praises to others as long as you care about their business needs. There is no loyalty built or singing done with a new customer.
- Existing customers are less price-sensitive. They know and trust you to provide value for what they pay. It is the trust, which needs to be continually worked on, making it easier for you to introduce new or add-ons for them to purchase because you understand their needs. This will take time to establish with new customers and you have no idea what the needs are.
You may be questioning why this happens and why people spend so much effort and resources in securing new clients and not simply going back to existing customers?
Further proof you may want to spend more time with existing clients includes:
First, simply look at what is involved in selling your product or service. Sales involve explaining your product or service from square one. Your existing client is already aware of the product or service. There is no more explanation. You save time. You may have heard the saying: “Time is money”; merely by saving time, you have saved money.
Secondly, having the positive experience with the product or service, renewal either by purchasing more product or increasing the service becomes as automatic as the experience. Therefore, it is critical to ensure you have done everything in your power to make it a positive experience. See previous blogs on true customer service for tips and suggestions.
Thirdly, I am not suggesting one stops prospecting completely for new clients. However, what I am suggesting is some of the time you are currently spending on prospecting, be spent with existing customers as they are a great conduit to those prospects. How better to get a new client than to ask for an introduction from a satisfied existing customer? Yes, I am referring to referrals. This simple step will greatly decrease your prospecting time and costs which will allow you to spend time more productively, efficiently, and profitably.
Again, as a reminder: “Time is money.” Which activity are you spending your time and therefore, your money on?