Updated: Mar 13, 2018
According to Ad Age, there are scores of companies that spend over $500 million each year on advertising. Firms like Kohl’s, General Motors, AT&T, Apple, Amazon and more.
In fact, you might say that we live in a nation of advertisers. Even people not the least bit interested in football will gather around the television during the Super Bowl to see which company has the most creative and fun commercial.
While advertising serves it purpose, most advertising dollars are wasted. And while the American public may rave about a funny Budweiser commercial; but the Board of Directors isn’t even going to giggle until they see a healthy return on investment.
Start-up and smaller businesses must be even more careful when it comes to advertising.
And that’s why, the majority of small business advertising should be put in one place – advertising to your current customers. The fact is that most businesses spend way too much money advertising to get new customers. And once they get them, the don’t fully leverage them.
Rather, by advertising to your customers, they will buy from you more often, buy higher priced items, tell their friends about you and so on. The fact is that your customers already have a track record of buying from you. They know you and typically trust you. So they are many times more likely to buy from you again than a customer that may have never heard of you before.
Maybe you can’t advertise to your current customers via radio or newspaper ads, but you can certainly advertise directly to them via direct mail, newsletters and social media among other channels.
Read on for some specific examples and strategies for you to employ to leverage your customers to dramatically grow your revenues and profits.
What Is Customer Retention?
Customer retention is the concept of keeping the customers you already have. We have become so controlled by the acquisition mania, that often we neglect existing customers to acquire new ones.
Come on, admit it…you’ve done it. You’ve put an existing customer on hold to pitch a sale to a new customer. The allure of new money is strong, but it may also be wrong.
In most business models, the cost of acquiring a new customer is far more expensive than the cost of retaining your existing customers.
Naturally, the type of business you have may dictate your need to fish for fresh bites. A car salesman for example, may get occasional repeat business from a customer. Where as a quality massage therapist can secure a high volume of repeat business from existing clients.
Find Adjacent Sales and Services
Clever business owners figure out how to sell to their existing customer base by ensuring they have high value adjacent products or services. Almost all car dealerships have a service center that is typically more lucrative that the sale of the car.
A great example of adjacent sales comes from the medical equipment industry. Certain businesses are required to have a defibrillator on premises. However, to have one, you must have people on staff certified to use it. In some areas, that certification has to be renewed every year.
A clever medical equipment distributor figured out that if she only sold the equipment, a business may buy one every five years, but if she became a certified instructor, she could teach the annual required courses and exponentially grow her revenue.
Later, she also determine that batteries needed to be replaced every two years, and set up a database to automatically send letters to every customer one month before their battery expired creating a whole new revenue source for her business.
Work the Referral Business
Did you know that some business do not advertise at all? Everyone has heard of doctors or lawyers whose services are so desirable you have to wait months for an appointment.
Successful family doctors stop accepting new patients. How do they do this? By treating each customer exceptionally well and providing the very best products and services. Treat your customers like gold and not only will they remain your customer, they will become your personal marketers.
Social networks such as Facebook and Twitter have given word of mouth immense power. Online rating guides such as Yelp and Urban Spoon have moved the power of the professional critic into the hands of the public.
Disappoint a customer, and hundreds of people may know about it in minutes. Blow them away with great service, and they will sing your praises to their extensive networks.
Leads Are Not Inexhaustible
A few years back an education company went out of business. They had a great product, but customers often complained about slow service. The leadership team did not want to invest in the infrastructure to fix the customer service issues; they were focused on new sales.
They figured it didn’t matter if customers cancelled, as long as they could gain new customers.
Eventually, they had worked every lead available in their market. They inadvertently started calling leads that had already been customers. In the end, they ran out of market. Because their service was substandard they lost so many customers, they couldn’t sustain operations.
Beware the myth of unlimited leads, as every market has an eventual saturation point.
As you map the growth of your business, make sure you have a balance between acquisition of new customers and retention of existing customers. Hopefully you see now why gaining repeat business and developing a referral business can be far more profitable than constantly chasing new leads.