The 1 customer you have vs. the 2 you want
One of the older marketing adages is that the one customer you have is worth two you don’t.
The idea behind this is pretty simple. The adage is premised on some basic facts which many firms choose to forget in their drive for greater revenues.
It costs money and resources to market and sell to a prospect. You already have a client in whom you already invested the money to acquire and who is now providing revenue. Too many firms acquire clients, then neglect them in order to focus resources on acquiring additional ones. In turn, the existing clients get disgusted and move on.
The lesson is simple: don’t divert resources that will keep a present company happy in order to find a second one. Sadly, this truism is too often honored in the breach by small and large companies alike.
As your small firm tries to grow, are you keeping this in mind? Each present client, especially in the services sector, represents an ongoing revenue stream far into the future. Your business has to grow, obviously, but it must not grow at the expense of the present client base. Are you often tempted to shift some operational resources from maintaining that relationship in order to get new clients? Be careful. If that happens, you just step onto a treadmill where you add a new customer, and lose an old one–not a good model for business growth.
To re-phrase it, customer retention should be a very strong focus of even the smallest business.
Why? 3 quick reasons
- Present customers are easier to sell to. They already trust you, so they are more likely to consider you for ongoing, as well as additional, purchases.
- Referrals and word-of mouth are excellent sources of revenue. How do you get them? Have some satisfied customers already.
- Repeat customers buy more than new customers. Significantly.
An older, but still valid study by the HBR and Bain & Co. argued that increasing the rate at which you retain present customers dramatically increases sales. They suggest a 5% increase in retention yielded 25% plus greater revenues.
In short, as a small firm, you have very limited marketing resources. Don’t assume the best revenue driver will be the acquisition of new customers. Give thought to focusing more of your marketing efforts on satisfying present clients as a more effective method of increasing revenues..