Attracting new customers can cost 5x more than keeping existing customers, as estimated by differing industry studies.
That number varies depending on which study and industry you examine, and yet, no matter how you slice it, acquiring new customers is dramatically more expensive than keeping ones you already have.
Thus, it’s a lot less expensive to get people that already like you and like your products to do business with you again.
Increased Retention Rates Can Increase Profits
Bain & Company is one of the world’s leading management consulting companies and advises some of the world’s largest companies on customer acquisition and retention. A recent Bain study, in conjunction with Harvard Business School, took an in-depth look at consumer behavior. The study reports that a 5% rise in customer retention rates can increase profits by more than 25%. Return customers tend to buy more and your operating costs – and acquisition costs – drop.
Here are a few more stats that make the point from different sources:
- Returning customers are 50% more likely to try new products or expand their purchases
- On average, repeat customers spend 67% more than new customers over time
- The probability of selling to a new prospect is 5-20%, while the probability of selling to an existing customer can exceed 60%.
- 61% of small-to-medium sized businesses get more than half of their annual revenue from repeat customers
Customers may even pay a higher price than switch to a competitor once they are comfortable doing business with you. Also, they can be a good source of referrals.
Won’t Satisfied Customers Just Come Back For More?
You would think if people are happy with your service or product, and they get good customer service, they will just keep coming back for more. Unfortunately, it does not always work that way. The Bain study also uncovered a troubling finding: As many as 80% of self-described “satisfied customers” say they do not return to the company that satisfied them for additional business.
Why don’t they return? There are plenty of reasons, but the biggest one can be boiled down to “out of sight, out of mind.” If they aren’t thinking about you, you can’t expect them to remember you. You likely only call a heating and cooling company when your air conditioner breaks down. You probably don’t think to call them a year later to purchase a service plan unless something triggers the action. Unfortunately, your competitors may be out there soliciting their business – especially if you aren’t.
As many as 80% of self-described “satisfied customers” say they do not return to the company that satisfied them for additional business.
Relationships Grow Over Time
The more often you are in front of someone, the more likely they are to remember who you are and what you do. Getting someone to do business with you several times – with a positive outcome – helps grow that relationship. You are no longer “out of sight, out of mind.”
It’s not as easy as it sounds though. The audience research company Nielsen reports that brand loyalty is at an all-time low. 78% of consumers say they are not loyal to any particular brand, according to Nielsen, in part because of busy lifestyles and online purchasing.
Clicking a mouse doesn’t leave the same impression as visiting a brick and mortar retailer. It’s harder to make a positive impression when the interaction is so short. That may be why 95% of consumer say they like and rate Amazon as trustworthy, but very few can recall the specific vendor they bought products from while using Amazon.
Creating Loyalty Through Touch Points
All of this means that if you want loyal customers, and repeat business, you are going to have to work at it. You can’t just give them a good price on a product or service; someone else may be willing to undercut your price just to get their business. You can’t just rely on customers remembering you when they are in the market; there are plenty of other companies vying for their business.
One of the most profitable touch points – and one of the easiest to use – is a coupon. Unlike the old days where you had to pay for the cost of printing up coupons and putting them in the newspaper, you can now distribute coupons easily and inexpensively using services like Woobox.
Coupons can be created literally in a few minutes, with advanced capabilities, and distributed through multiple touch points, including your website, social media, email or other online advertising platforms.
For existing customers, make sure to get their email address whenever you can. Woobox coupons can be created and sent directly to customer’s inboxes to keep you front and center. Customers appreciate it. 77% of consumers say they like when companies demonstrate appreciation for past business.
Managing A Successful Coupon Campaign
Woobox allows you to create a custom campaign and promote it anywhere. Here are some of the options available:
- Email or instant delivery
- Distribute unique codes for tracking redemption
- Limit participation to one coupon
- Request participants take a specific action, like visiting your website
- Increase urgency and scarcity by limiting the number of coupons
Online coupons can give you metrics for tracking performance. In addition, you can test various offers and see which provide the greatest ROI, including which coupon campaigns result in social sharing or viral distribution. We love it when other people do your advertising for you!
Coupons Don’t Just Work For Customer Retention
Coupons do double duty by also working to attract new customers. 60% of shoppers say they will switch brands to use a coupon if they get a strong offer. Even your most brand loyal customers may be tempted by a competitor: 79% of self-described “brand loyal” customers say they will consider buying a brand they wouldn’t have because of a coupon. This offers you a way to attract new customers as well as retain existing ones.
Remember, your competitors are likely advertising as well and trying to woo your customers. If you’re not putting your message out, potential customers may go somewhere else.