Here's a silly question:
How would you like to increase your profits by up to 125%?
What would you do with the extra cash?
As small business owners, we are always on a mission to increase profits. The bottom line (no pun intended!) in all business is money - and specifically profits. The more profits we make, the better we can do our jobs, and the more people we can help.
Through all my years of helping small businesses do awesome things, I see the same problem... A misunderstanding on where the biggest profits in business come from.
So let's set that straight.
According to Bain and Co. across most industries, customer retention explained more profit than ANY other factor. Which makes sense.
But how much sense only becomes clear when you really begin to crunch the stats:
It costs 500% more to acquire new customers than it does to keep current ones. (Social Annex)
Holy cog! OK but surely the new customers will be more profitable in the long run? Nope!
The cost of bringing a new customer up to the same level of profitability as an old one is up to 16x more. (Social Annex)
And what about selling to new customers? Isn't that easier?
Well - the probability of selling to existing customers is 60 to 70 percent, compared with 5 to 20 percent for a new prospect (Marketing Metrics).
Getting the picture? Cos I'm not done yet!
Lowering your customer churn rate by 5% can increase your profitability by 25-125%. (Bain and Co.)
And that's because on average, loyal customers are worth up to 10x as much as their first purchase. (Social Annex) Not to mention that the average repeat customer spends 67% more in their 31st to 36th months of their relationship with a business than in months 0-6. (Bain and Co.)
So that long term retention really starts to pay off. But putting your foot wrong is easy, and it's going to cost you: 47% of customers would take their business to a competitor within a day of experiencing poor customer service (24/7)
One day! That's all you got.
So automating a process to keep your current customers happy becomes paramount.
So here's a question for you. Do you know your Customer Lifetime Value?
Here are some more questions about your own Customer Lifetime Value and it's strategy:
Can you quantify it?
Do you have a plan to increase it?
What are you doing to reduce churn?
And of course, what are you going to build into your loyalty programme that ticks all the above boxes...