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The general situation with businesses that we work with is that they spend a disproportionate amount of time looking for new customers when an absolute goldmine is staring them in the face ¯\(©¿©)/¯. Their customer base!
Most businesses lose between 15% to 20% of their customers each year. Typically, customers lie dormant, having only transacted business with the company once or twice. The remaining customers will be the ones who are the loyal ones, from whom the profits can be significant.
To counteract this, to achieve a 10% increase in sales, you have to add 30% more customers! These statistics are startling, considering the average business spends six times more to attract new customers than to keep old ones.
The old 80/20 rule certainly applies to your customer base. 20% of your customers will bring you 80% of your revenue. It’s this 20% who are the loyal customers that come back to do business with you time and again. These are the customers that you should be focusing your time and energy on.
A widely quoted statistic is that a person is 21 times more likely to buy from a business they’ve bought from in the past than one they’ve never purchased from; this puts you at a considerable selling advantage when it comes to your current and past customers.
The real profit is figuring out how to sell more to existing and past customers and increasing their lifetime value. Let’s look at a few ways to do this.
One of the most overlooked ways of increasing the lifetime value of a customer is simply by raising prices. Most businesses fear that raising prices could lead to a customer exodus or backlash of some sort.
While it does need to be handled strategically, you’ll generally find your customers are far less price-sensitive than you imagine. If you’re delivering a great customer experience, most customers will happily accept price rises.
If you’re particularly concerned that your existing customers won’t tolerate a price increase, you can try grandfathering. This is where the price increase is only applicable to new customers, and existing ones are “grandfathered” in at the current price level. If you do this, ensure you tell your existing customers what you’re doing, as this can reinforce to them what a great deal they’re getting and increase their loyalty to you since you’re making them feel special.
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