What is a common misconception businesses often have when it comes to profitability?
“Only new customers equal growth. So, we need more new customers.”
As a Business Coach, I hear this a lot. However, it’s not true and this could actually be holding your growth back.
Unfortunately, the default strategy most businesses take when aiming to increase revenue tends to revolve around constant prospecting. However, this involves spending significant amounts of time, effort and money in marketing trying to attract new clients.
At the same time, we tend to neglect a highly profitable group: our current customers.
Here’s why smart businesses focus more on the revenue potential of their current customer base, and how they do this effectively.
Why do we need to pay more attention to current customers?
The answer is simple: repeat customers cost less to acquire and typically spend more.
It’s widely known that customer acquisition costs a great deal more than retention.
In fact, a recent study by Invesp showed that:
- Acquiring new customers costs 5x more than nurturing current customers.
- Compared to new customers, recurring clients are also 50% more likely to try new products and spend 31% more.
- Increasing customer retention by 5% increases profits by up to 95%.
So, while your intentions of looking for new customers to grow your business may be good, overlooking the profitability potential of your current customers could actually be holding you back.
Of course, that doesn’t mean I recommend you stop focusing on new customers altogether! The key to getting the most out of customer profitability is to optimise both old and new markets.
How to get the most from your current customers
The key to encouraging your current customers to keep coming back and spending more with you is simple: continue to offer ongoing value.
By doing this, you’re building a base of loyal customers because they associate you with reliability, responsibility, connection and superiority over your competition.
In the end, repeat business is a good measure of how much value your business delivers.
Avoid these 3 incorrect assumptions if you want to truly tap into repeat customer profitability
If effective customer retention offers businesses so much more opportunity for growth and revenue, then why do so many struggle with it?
It’s because there are some commonly held misconceptions about how to approach current customers which need to be dispelled. These include:
1. “If I do great work, they’ll just come back” – wrong
People are busy and highly distracted. No matter how good your business is, they are still likely to forget about you sooner or later. While you don’t have to be always in their face, don’t forget to keep checking in every so often to keep your brand top of mind.
2. “They know what I offer. I don’t have to tell them” – wrong
Businesses often assume that their current customers know everything about what they offer. However, that’s often not the case. Sometimes, all it takes is keeping an eye open for more opportunities and when you see further problems that you can address, don’t be afraid to say you can help them with those too.
You’ll be surprised how relieved they’ll be that you can also assist them with their additional needs.
3. “This is forcing me to over-sell to my current customers” – wrong
It’s ironic how, in fostering meaningful client relationships, we fear that additional work may cause us to lose them. We’re worried about sounding too “salesy”. However, keeping up with your current clients’ needs doesn’t mean you’re harassing them (unless you’re doing it to extremes!). Instead, try suggesting other solutions if you feel that they need it rather than disconnecting out of fear.
When you stop communicating with them, you’re not only stopping yourself from providing further value, but you’re also forgoing profit. Don’t think of it as selling – think of it as educating them about how you can help them further.
How to increase profitability by focusing on repeat business
If you truly want to tap into the profit potential of your current customers, here are a few tips I would suggest:
- Get familiar with your customer loyalty ladder and work out how to convert regular customers into delighted advocates.
- Improve the way (how, where and when) you communicate to keep brand awareness high, even over time.
- Provide excellent customer service that leaves a great impression and encourages people to spread positive word of mouth.
- Launch product and service extensions so your current customers can see more value in what you offer.
- Find ways to make ongoing purchases easier for current customers so the process is more streamlined, such as subscription or retainer models.
Even though creating a system that wins new clients and keeps them coming back is not always easy, remember that it’s always worth it.
By updating your business processes to increase the probability of repeat business, you can be more efficient, offer more value and, of course, drive up your business’ profitability.
Do you want to tap into the profitability of repeat business?
Repeat business equals more profit. As an experienced Business Coach, I can assist you with implementing a system that helps you retain more customers and unlocks more revenue generation opportunities for your business.
Let me guide you towards achieving your business goals.
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