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One of the key questions most new or established small businesses, regardless of their size, ask themselves is: how can we grow quickly? After all, owners want their small business to succeed and one way of achieving this is to identify and implement strategies that help increase revenues in as short a timeframe as possible, without putting too much strain on themselves and their small business.
Most business owners associate growth with acquiring new customers on the basis that the more customers you have, the more sales you can generate and therefore the more money you make. However, while this may seem a logical and reasonable strategy, it can also be a very expensive one because the cost of acquiring new customers can be high.
So, if you do find yourself in a situation where you’re up against stiff competition and have a limited sales and marketing budget, what are your options? In my experience one of the best ways to grow any small business long-term is to focus internally as well as externally. That is, to focus also on your existing customer base and grow your sales through people you know and who know you.
Independent market research has revealed some staggering findings when it comes to identifying the benefits to business when they focus their attention on growing sales through their existing customer base.
To grow your small business, focus on your existing customers
Here are ten key observations you may find surprising:
- Around 60% of small businesses reported that more than half their revenue comes from existing customers (Source: BIAKelsey)
- On average, loyal customers are worth ten times as much as their first purchase (Source: Marketing Tech Blog)
- It costs five times more to acquire new customers than to keep current ones (Source: The National Law Review)
- A 5% increase in customer retention can increase a business’ profitability by 75% (Source: Bain & Co.)
- Reducing your customer defection rate can increase your profitability by between 25% to 125% (Source: DestinationCRM)
- Eighty two percent of businesses stated that its cheaper to retain customers then acquire new ones (Source: Econsultancy)
- The average repeat customer spends 67% more in months 31 to 36 than they do in their first six months (Source: Bain and Co.)
- A 2% increase in retention has the same effect as decreasing costs by 10% (Source: Leading on the edge of chaos)
- Word of mouth is the primary factor behind 20% to 50% of all purchasing decisions (Source: McKinsey)
- Customers are 77% more likely to buy a new product when learning about it from family and friends (Source: Nielsen)
These research findings provide some compelling reasons why businesses should devote time and effort into growing their sales through their existing customer base. Simply put, if you want a competitive advantage focus on your existing customers! By the way, it’s most likely a number of your competitors will be spending a lot of their time and effort chasing new customers at probably a high cost, thereby sapping their valuable time and resources – all to your advantage!
It’s worth reflecting on your own buying experience and what happens after a product or service is acquired. I know from my own experience, once I’ve made a purchase I’ll often get follow up contact from the seller about further products and service offering and special deals. Those that are relevant to me, I’ll consider. Those that are not relevant, I’ll ignore.
In order to identify and implement a successful growth strategy through your existing customer base, you must be able to identify and understand the touch points and those factors likely to encourage them to buy more from you.