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  • Customer Retention Planning

    A good idea is a good idea NOW!™


    The balance of power has shifted. In the bad old days, suppliers were the purveyors of knowledge and customers were at their mercy when making purchase decisions. Nowadays, thanks to product review websites, supplier forums, blogs and social networking sites, customers are much more knowledgeable about products and services. Their expectations have also increased because if you can’t satisfy them, with a few clicks, they can find someone who will.

    Knowing this, we spend a ton of money on our websites. We get everything on there that the customer could possibly want and then some! To further drive traffic and sales to our sites, we might even do some online advertising. However, in our dogged pursuit to acquire more customers, we often forget that we have existing customers who already know us, who have bought from us and who might be willing to buy again.


    In fact, the cost to keep an existing customer is far lower than the cost to acquire a NEW customer. We all know that “retaining an existing customer is only about 10% of the cost of acquiring a new customer” but some of us still seem to place our efforts on acquiring new customers. According to a report by the Harvard Business School, a five percent increase in customer retention can boost profits by 25% to 85%. So why don’t we focus on our existing customers? Existing customers are known to spend more per sale, buy more often, and refer other customers – yes that’s right, they do your marketing for you! All this at a lower cost per sale! And the longer they keep buying, the more valuable they become. This is known as the lifetime customer value (LCV).

    LCV = (sales per customer) x (estimated number of times the customer will reorder) x (number of referrals) x (percentage of referrals that become customers) – (cost of sales)

    As you can see, focusing on existing customers and ensuring that you provide long-term customer satisfaction is well worth it. When you get repeat business, its money in the bank!


    1. Be A Packrat – Capture data on your customer. Know who they are and how they got to your site. Record what they bought and when they bought it. Keep everything just in case you need it later. You may not initially know what’s useful so don’t delete anything.
    2. CSI: Customer Retention – Like the forensic scientists on CSI who solve crimes by studying the evidence, you can study your sales data to determine what types of products were purchased by the customer in the past. Use this to forecast what they would most likely buy next. Did they purchase a particular genre of DVD? Track that. Did they make smaller purchases during the week and larger purchases during the holidays? Knowing what they did in the past will help predict what they might do in future. Of course, you can influence the behaviour by offering an incentive.
    3. Dangle That Carrot – Create unique offers to get your existing customers to buy again. Don’t just give a discount; offer something that benefits not only your customer, but their referral as well. Create sample opportunities. You can even do this with services – offer a special consultation or provide added information. If you’ve updated your site with content, products or services that your customer might find useful, let them know.
    4. If You Liked That, You’re Gonna Love This! – According to a Deloitte and Touche study, the odds of selling a product to a new customer are 15%, whereas the odds of selling a product to an existing customer are 50%. Unless you are content with being a mere order taker, you should take the time to understand your customer and their needs. You can then offer related products or services – they’ve bought from you once so it would be relatively easy for them to buy from you again. If you don’t have related products or services that you can use to cross-sell, refer your customers to companies that offer complementary products or services.
    5. Would You Like Fries With That? – Don’t wait until the customer has already checked out – offer them an opportunity to purchase another item or better quality product or service at the time they are placing their order. Upsell when you’ve got them ready to buy. Maybe a special price that is only available at the time of checkout. We all love a bargain don’t we?

    Instead of spending time and resources trying to acquire more and more new customers, we should focus on customer retention – keeping our existing customers happy. We will retain them longer and they will reward us by buying more. Understanding the lifetime customer value can result in repeat sales.


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