While it’s tempting to focus all of your marketing efforts on acquiring new customers, research shows that there is far more opportunity in marketing to your existing customers. Check out the infographic below on the value of an existing customer for some stats!
So, before you start your next marketing campaign, consider the lifetime value of your existing customers and the cost of acquiring new customers. Let’s do some math.
Start by calculating the true lifetime value of one existing customer. Harvard Business School refers to this as Customer Lifetime Value (CLTV). You may be surprised to learn just how much a customer relationship is worth over a period of time. of your business doesn’t have its own formula for calculating this very important number, check out Harvard’s CLTV calculator.
The next thing, think about how much it will cost your business to acquire NEW customers. This formula is known as your Customer Acquisition Cost (CAC). To calculate your CAC, add up your total sales and marketing costs (advertising spend, salaries, commissions and overhead) in a period of time, then divide it by the number of new customers acquired during that period. This will help you understand how much it really costs to acquire one new customer.
After calculating CLTV and CAC, most businesses will see that it’s more cost effective to leverage existing customers.
And your customers will appreciate your acknowledgement of this conclusion, too. Corporate Executive Board surveyed more than 7,000 consumers and interviewed hundreds of marketing executives around the world. One finding of their study revealed that clients are bombarded with messages from new companies, which they ignore. No wonder it’s so expensive to acquire even one new customer!
When examining what made consumers more likely to follow through on an intended purchase, buy the product repeatedly, and recommend it to others, the single biggest driver of stickiness, by far, was “decision simplicity.” How easy is it for your customers to gather trustworthy information about a product and confidently weigh their options? Well, it’s super easy if they’ve already purchased from you in the past!
So what will you do to take care of the customers you already have? Here’s what we suggest:
• Make every customer experience and touch point count.
• Give loyal customers a token of your appreciation.
• Reward customer referrals.
• Offer incentives that encourage customers to take advantage of upsells and try new products
Finding new customers is one of the most important (if not THE most important) goals for every business. If you use any of these strategies, or have any to add, please let us know in the comments below.