You know the old adage, “If I had a dollar for every…”
Well, that phrase couldn’t be more true when it comes to the number of times I’ve observed clients make new customer acquisition the priority and strategic center for brand marketing campaigns.
There’s a natural allure and nearly reflexive assumption embedded in marketing-think that recruiting new followers and believers to a brand is the first order of business. Reach new customers and then sell more product, right?
Well, at the risk of making a heretical statement from an agency executive, I say no.
Yes, it’s healthy to attract new consumers to the franchise, but the path to growth and profitability is writ large on the ability to retain (and sell to) existing customers first.
Numbers don’t lie…
- According to the book Marketing Metrics, the probability of selling to an existing customer is 60 to 70%. The probability of selling to a new customer is more like 5 to 20%. Further, it costs 6 to 7 times more to acquire a new customer than to retain an existing one.
- About.com marketing columnist Laura Lake says repeating customers spend 33% more on average than new customers.
- A study from Bain and Harvard Business Review claims increasing customer retention rates by 5% can increase profits anywhere from 25 to 95%.
- And the icing to this cake is the Gartner Group’s assessment that 80% of profit will (usually) come from 20% of existing customers – otherwise known as heavy users.
Thus, those in the category already, those who know you and maybe even love you are far more likely to respond to new offers, products, events and experiences than those who don’t.
So what does that look like?
It begins with a near religious effort to mine insights from your user base about their wishes, needs, concerns, passions, troubles and lifestyle aspirations. The more you know about them the more you are able to align with their priorities. This form of reciprocity is fundamental to building a real relationship.
Online panel research with brand fans can be a serious adventure into discovery of what they feel and believe.
And why does this matter? McKinsey suggests that 70% of buying experiences are based on how the customer feels they are being treated. Knowing how they feel and why is incredibly important – because relevance to them is the lynchpin to growth.
So to the extent you’re investing in and building online communities of your own followers and fans, you’re able to assess close-in how they feel about your products, your marketing, the purchase experience, your message and their assessment of new ideas coming in the pipeline.
It may seem almost counterintuitive to focus on what you already have. As if they’re already in the barn so it’s only sensible to go round up more participants. But we see compelling evidence that your devotion and focus on those who are already engaged and listening to you will yield better results more quickly – rather than first pounding the pavement hoping to convert non-believers.
Existing customers are easier to market to because they’re already engaged in the proposition, already listening and open.
If the annual marketing plan begins with strategies aimed at building and leveraging existing customer relationships, you’re on the glide path to faster and more profitable growth. Working from that solid foundation, the missionary work coming behind it makes more strategic sense.
What do you think?
Bob Wheatley is the CEO of Chicago-based Emergent Healthy Living. Emergent provides integrated brand strategy, communications and insight solutions to national food, beverage, home and lifestyle companies. Emergent’s unique and proprietary transformation and growth focus helps organizations navigate, engage and leverage consumers’ desire for higher quality, healthier product or service experiences that mirror their desire for higher quality lifestyles. For more information, contact Bob@Emergent-Comm.com and follow on Twitter @BobWheatley.