The business you’re chasing may be right under your nose.

By Roy Harryman

Cable TV, as of this writing, is on a downward trajectory. It’s an industry that’s easy to pick on because of its nearly universal reputation for shoddy performance and terrible customer service.

When customers get fed up, they leave for a competitor. This is called “churn” and every business hates it.

To counter this, cable TV companies improved their products and services. Ha! That would be too logical. Instead, they offer deeply discounted rates to new customers, often for a full year. After a year, you get the regular rate and the same lame service. Customers often simply switch again after the term is up.

I know I’m living in a dream world here, but why not make the service reliable, then reward customers after they’ve bought in for a year? They might have an incentive to stick around.

Yet as far as I know, no one does this. So the trend of churn and burn continues.

“What if these companies spent the same amount to keep their customers that they do to acquire new ones?”

What happens when people stay with a business
Customers do business with people they know, like and trust. When this happens, a relationship is built. A bond is cemented. And not only that, people invite others to join the relationship.

Think about it.

“Where’s the best place around here to get Greek food?”

“I like Niko’s.”

“Wanna’ grab lunch there?”

“Sure.”

If Niko’s delivers, it has a new customer based on satisfying an existing customer. And it spent no money in the process.

Now, what if Niko’s invests in retaining this new customer with special offers via email or text?

Cha-ching!

Two customers have now become fans at a minimal cost.

And all because Niko’s is good at what it does.

Spend less, make more
“It depends” is the answer to many questions about business strategy. So I won’t make universal statements here.

But in my experience (limited as it is to me), a significant amount of business comes from past or present customers. Past customers return for additional services. Current customers ask me to take on additional projects outside the realm of our existing agreement. And, they constantly refer me to others.

These clients already know me, and I already know them. I understand their fears and dreams. I know what they want to accomplish. The time spent on introductions is past and we can productively get important stuff done. Everybody wins.

Trying to glue the new
Now, don’t get me wrong. New customers are wonderful. And they’re essential. Customers come and go, often for reasons that have nothing to do with us. The customer pipeline must always be flowing.

But consider this:

Introducing yourself to prospects costs money. Somehow you’ve got to get on their radar screen.
Studies show the vast majority of proposals to new customers (once you get a meeting) are rejected.
Even when you win a new deal, there is a “getting to know you” period that involves trial, error and your company’s resources.

“Yes, you need new customers. But you need existing ones even more.”

The research
I certainly wouldn’t recommend a business strategy based on my personal experience. It’s too narrow to be universally applicable. So please consider these data points:

It can cost up to 500 percent more to attract a new customer than to retain an existing customer.
Increasing customer retention rates by 5 percent increases profits by at least 25 percent.

Source: Forbes

The probability of converting an existing customer is 60-70 percent vs. 5-20 percent for a prospect.
Repeat customers are more likely to purchase again and spend more than new customers.

Source: Medium

Repeat customers spend 300 percent more than new customers.
By increasing customer retention 5 percent, profitability increases by an average of 75 percent.

Source: Constant Contact

What’s next?
If you agree with this assessment, what should you do now? Let me respond with two questions:

Do you know who your customers are?
If so, do you have a way to contact them?

If the answer is no, then you’re at the bottom of a hole staring up. It’s time to start climbing out. Start today. Your customer database is the most important marketing asset you have (or lack).

Of course you don’t market to people without their consent. Ask permission. There are many creative ways to do this: Provide an incentive, a coupon, a gift – or simply ask nicely. Put a popup window on your website or invite signups on social media. Just get the data.

What data should you acquire?

That depends on what data you need. If you run a pet supply store, you might want to know what kind of pets the customer has so you don’t send cat food coupons to dog owners. You’ll certainly want basic information such as email addresses, but don’t stop there. Many consumers would like to receive texts. And snail mail still works – but only if you have an address.

“Wherever you’re at, just start. If you’ve started, improve the process.”

The 80/20 rule and you
There’s no need for me to re-invent the wheel when Rustin Nethercott of Constant Contact said it best:

“Your business shouldn’t be a revolving door of customers. … When you imagine future success, picture strengthening existing relationships rather than forging new ones. After all, 80 percent of future profits come from 20 percent of current customers.

“Investing in repeat business costs you less and makes you more.”

Roy Harryman is the principal of Roy Harryman Marketing Communications. He helps small businesses and non-profits maintain their vital connections to existing customers.