Retain and grow current customers
Growth through current customers is easier, more cost-effective and more profitable.
As marketers, we’re constantly thinking about growth: whether it’s growing sales, profitability, call count, leads, maintenance plan customers, top of mind awareness, etc.
And because of this, we often think the best and easiest way to grow is through acquisition of new customers. After all, more customers mean more growth, right?
While the assumption of growth through acquisition (more is more) is true, would you believe growth through current customers is easier, more cost-effective and more profitable? Many marketers forget about the value and impact their current customers have on the business.
A study done by Bain & Co., and Harvard Business School shows a 5% increase in customer retention can lead to an increase in profits of between 25% and 95%. This outcome has been tested many times in many settings and it’s widely accepted that, across industries, customer retention drives an increase in profits.
Here are a few other reasons that demonstrate why current customers are so important:
• It costs five to 10 times more to acquire a new customer than retain an existing one, that according to a February 2017 study by Market Expert.
• The same study finds, on average, current customers spend 67% more with you than new customers.
• Loyal customers represent a steady stream of income over their lifetimes.
• Current customers are more willing to refer your company to others.
According to the American Marketing Association, referred customers have a higher margin, remain customers longer and have a 16% higher lifetime value.
Realizing the importance of current customers, a question we often get is, “What do you mean by current customer?”
Nexstar defines a current customer as someone who has used your company in the past 18 months for HVAC (unless they’re a maintenance plan customer, in which case we say the past 12 months), the past 3 years for plumbing and the past 5 years for electrical. We based the timing on the general frequency at which customers need each service.
We look at and differentiate your current customers in three buckets:
• Maintenance plan customers;
• Non-maintenance plan customers; and
• Lapsed users.
If you’re a multi-trade company, we encourage you to go one step further and segregate your non-maintenance plan customers by which trades they’re using. This will allow you to develop a cross-selling strategy and convert them to using all your trades, eventually trading them up to becoming a maintenance plan customer.
Differentiating these groups allows you to prioritize your marketing efforts, messaging and budget. Capitalize on the lowest hanging fruit, if you will.
Your number-one priority is your maintenance plan customers. After all, they are paying you to be your customer and you’ve spent the time and money putting a fence around them, so to lose them now is like throwing your efforts and money down the drain.
Your next priority is your non-maintenance plan customers. Like your maintenance plan customers, you’ve put in the time and money converting these consumers to use your services. Now, with focus and attention, you can get them to “trade up.” If you’re a multi-trade company and these customers aren’t using you for multiple trades, go after this opportunity first. If they are using all your trades or you offer only one trade, get them to become maintenance plan customers.
The last current customer bucket, lapsed users, is your third priority. While these folks have used you in the past, for one reason or another they stopped. This doesn’t mean they will never use you again, however, and because they’ve used you in the past they will be familiar with your brand-making conversion easier than with a new customer who may not have heard of you.
Did you know one of the top three reasons customers stop using a brand is because the brand stopped talking to them? This is particularly challenging in our industry because people don’t want to think about our industry. To them calling us means spending a lot of money on something that is not fun. If you stay in contact with them, however, you stay top of mind so that when they (or their friends/relatives) need you, you are the first company they think to call.
Lastly, when you think of current customers, think long-term. Consider their lifetime value, not just the amount of money you’ll make during one transaction or service call.
Melanie Tauring is a marketing coach with Nexstar Network. Her expertise in consumer marketing planning and strategy has led to the development, transformation and growth of several brands. Melanie’s energy and passion for marketing helps businesses drive their brand messages through effective advertising while maximizing every channel available to them. To learn more, call 888-251-9188 or visit www.nexstarnetwork.com.