How important are existing customers to your business? Do you know?
Who doesn’t want a good base of individuals or businesses who are loyal, regular, repeat customers. We all do surely, it makes sound business sense.
But do you know how important existing customers are to you business? Are you confident that you are placing enough emphasis on retaining existing customers compared to attracting new customers? Perhaps now is the time to find out by calculating your Returning vs New Customer Metrics.
These metrics will help you understand the real value of these two groups to your business and enable you, as with any good metric, to make decisions on how much time and money you should put into your marketing for the different groups.
• Start by calculating your Total Number of Customers either at a specific point of time e.g. 1st January or over a point of time e.g. in 2018. Now split these into new customers and repeat customers to see your new customer to repeat customer ratio.
• Next work out the Value of an Average New Customer to your business vs that of a Returning Customer over the lifetime of your relationship. We generally recommend it’s worth also considering the costs you incur with attracting new customers e.g. advertising and retaining existing customers e.g. loyalty incentives. You can now see the costs of generating business and how the business generated between the two groups varies over time. Does that value change over the period a customer stays with you?
• Finally look at calculating the Average Time a Customer Remains Loyal to your business. This is a good indicator of your customers views towards your organisation, how good you are at maintaining existing customer relationships and their likely purchase intentions.
With this understanding conduct a review of what you do to attract new customers and keep existing customers. Think about the time, money and effort you put into these two groups. Have you got the balance right? Should you for example amend your advertising spend or customer relationship management approaches? Should you consider incentives to either attract new customers or keep existing customers? Perhaps if you discover customers aren’t particularly loyal you should consider loyalty schemes or enhancing the quality of your customer service.
Whatever you do with this knowledge you’ll be in a much stronger position as a business to maximise the benefits from both groups and drive your business forward.