on 24 Sep, 2015.
All of our clients have the same goal – maximise revenue and profit. All of our clients also exist in the extremely competitive world of ecommerce. Whilst there is no shortage of consumers, there is a plethora of companies bidding for their transaction.
There is one simple observation, bigger than ecommerce, bigger than any single industry that cuts through any noise and waffle, and gives a clear focus:
Your existing customers, are worth more than new customers.
This is often ignored by business across industries, who spend the vast majority of their time looking for and trying to win new customers, when in reality, they should be prioritising their existing customers. But why?
It costs 6 to 7 times more to acquire a new customer, than to retain an existing one.
All the efforts assigned to attracting new customers drive high acquisition cost. Interestingly, even if you manage to drive new customers to your site, the probability of selling to an existing customer is between 60% and 70%, compared to a 5% - 20% chance with a new customer. It is also a well-documented fact that repeat customers typically spend up to double that of a new customer.
For this reason, a 2% increase in customer retention has the same effect as decreasing costs by 10%. Equally, a 5% reduction in customer defection can increase profits by 5% - 20%. Moreover, you know more about your existing customers, and therefore they are less likely to have product or price related issues, and more likely to be brand affiliated and/or happy with the service.
From a marketing perspective, existing customers offer far greater possibilities. We can provide highly personalised, relevant, and tailored experiences for our customers, as we have their preferences and profiles. This is of great benefit to both parties, not just the retailer, but the customers too.
Whilst these statistics are drawn from the world of ecommerce, the principles transcend industries, and should be adhered to by any business. Commercially, looking after existing customers yields great rewards. However, perhaps more importantly, the faith that a customer puts in your business should be reciprocated by you providing the best possible experience for them.