Customer acquisition and development is a costly business. In this article we look at the true value of customer loyalty.
It costs more to develop a new customer than it does to retain an existing one – roughly five times more.
So then why is it that so many businesses spend more of their resources (time and money) on getting new business than they do on retaining their existing clients?
Obviously when you’re building a new business it makes sense to devote significant time and energy to attracting new clients.
But, in light of the cost of developing new clients, it is strategic and wise to focus the bulk of our effort on retaining and building loyalty with our existing clients. It’s definitely a lot less costly and the result is usually more new customers referred by satisfied already customers!
Most of us know personally the value of delivering a good product and good service for a reasonable price.
We know this because we ourselves are clients in many of our daily transactions: when we go out for coffee or lunch with a friend, when we buy groceries, clothing or bigger items like cars, when we sign up for a mobile phone, get our hair cut, etc.
These experiences help us to know what we do and don’t like. Who we will do business with again and whom we won’t.
So why is it so many of us seem to pay more attention to attracting new clients than we do to taking care of existing clients?
Why doesn’t there seem to be more of a focus on making existing clients raving fans who will end up being our biggest ambassadors? Why do we so often offer the best deals to new clients and not our existing clients, or at least offering them to both?
A satisfied client is one of the best and most cost effective marketing tools a business can have. They are the best source of ‘word-of-mouth advertising’ – and we all know the value of word-of-mouth advertising. In fact, you can’t buy this kind of advertising – you can only earn it.
When we’re a customer we know what we want and what we don’t like. But sometimes on the other side of the counter, in business, we can forget what is important.
Most client transactions, while different for each business, usually have a few things in common:
- They cost something
- They require an interaction with a human being in person, by phone or online
The overall client ‘experience’ will determine whether the client becomes a repeat customer (raving fan), a moderately satisfied customer with no real allegiance (easily swayed to the competition) or a dissatisfied customer who can’t wait to share the unhappy news of their experience with others.
As a business owner, the question to consider is what are you and your team doing to create an overall experience for your customers that makes them want to continue doing business with you and, better still, has them telling others about you and how great you are to deal with: word-of-mouth advertising.
The baseline is of course providing good quality products and services at a price that fits the value of what we are offering our clients, consistently. The icing on the cake is the way we handle and interact with our clients, consistently.
Want to discover how your customers perceive your business, your products and services? Ask them. There are a number of ways to do this, including:
- Invite clients to complete a short online survey
- Send out a mail-in survey
- Make follow-up calls to clients shortly after they have done business with you and ask for feedback
None of these methods need to be overly expensive to complete and not every client will participate. But the ones that do will give you a sense for how you’re doing. The key is to ask clients what they think and then act on any problem areas you discover.
Keep in mind: it costs five times more to develop a new customer than it does to retain an existing client. That’s a lot of money!
About the Author
Sue Cockburn is the owner of Growing Social Biz. Growing Social Biz help small businesses increase their impact, expand their market share and improve their bottom-line through social media and internet marketing.