We’ve pointed out that a good relationship marketing strategy focuses on building customer loyalty and lasting, long-term relationships with clients. Let’s now shift our focus to WHY your business needs to be investing in this often, under-prioritized effort.
The cost of attracting new customers rather than building relationships
Many of our clients struggle with the budget required to consistently maintain a focus of relationship building with customers that already exist. Everyone understands setting aside money to run digital campaigns, content creation and even print ads. But some of the basics of relationship marketing rarely make the cut, if even acknowledged as an option.
Why is that, when we’ve all heard the stats about the cost of attracting new customers being higher than simply retaining your current ones?
Most reports say that it will cost you between 5-7 times more to attract new customers. And a recent study by Invespcro tells us that the probability of selling to that new customer is just 5-20% versus selling to an existing customer is 50-70% probable. Finally, when that existing customer does repeat, they’ll spend 31% more. Doesn’t it seem like customer retention and relationship building would be something worth a portion of your business’ spend?
In today’s online world, the customer is presented with unlimited options product options. It has become increasingly difficult to cut through the noise and win a new customer’s attention. Yet, only 40% of companies surveyed by Invespcro say they have an equal focus on acquisition and retention. According to Fred Reichheld, author of the Loyalty Effect, a 5% increase in your customer retention could lead to a 25 – 100% increase in profit.
The benefits of customer loyalty by the numbers
Is your company doing enough to build the long-term loyalty and repeat that will increase profit? Let’s look at how you could benefit from focusing on retention of just a small portion of your database
- How many customers are in your current database? Take 5% of that.
- How much is an average sale? What would that number be if the customer spent 25% more the next time they purchased?
- What is the average repeat cycle of your product or service? The number of times you expect them to repeat in a year
- Let’s say that 5% of your customers spent 25% more on their repeat, how much additional profit would that be? Don’t worry, we’ve also created a handy calculator to do the math for you. Visit: https://calculators.cultivatingsales.com/Return-On-Relationships
After seeing those numbers, it’s time to get to work on your retention plans. There are plenty of simple steps you can take to get started, but the first step is acknowledging the value and committing to an on-going focus of customer relationship marketing.