Everyone loves the thrill of converting a potential customer into a client, but there’s a lot to be said of investing in your existing clients. Not only does it cost less time and effort to convert existing customers into repeat customers, your existing clientele is often the backbone of your business.
According to the data analysts at SumAll, 25–40% of the total revenues of the most stable businesses come from returning customers. Returning customers also helped businesses through lean patches: businesses with 40% repeat customers generated nearly 50% more revenue than similar businesses with only 10% repeat customers.
There are four ways to maximise your profits by investing in existing clients, here’s how:
1. Increase the price of your products or service
No one likes to increase their prices, but regular customers can wear it better than most because they already know your product/service fits their needs. The two things you need to remember about changing your prices is that there must be no perceived loss of value for the customer, and you need to maintain your standards of service or quality.
Other considerations you may need to make include:
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- Timing: Choose a time when customers are less likely to resist a price change based on the seasonality of your business. Other common times are at the beginning of the year or financial year when businesses commonly assess their financial position; many competitors may change their prices too.
- Discounts: Sometimes offering a temporary discount before lifting prices makes customers less resistant to the change.
- Bundling: Bundle your offering to take the edge off a price increase, as they perceive they are getting more value.
- New price scale: Introduce a new price scale and try to move your customers up the scale. For example, if you’re a hairdresser with a ‘cut and colour’ deal, make the baseline bundle a ‘wash, cut and colour’ and move the price up to make this profitable.
- Communication: How you communicate a price rise is important. Give customers plenty of notice and feel free to include an explanation as well, e.g. ‘due to Cyclone Larry, the cost of bananas has risen so we will need to charge more for banana smoothies’.
2. Increase how frequently your clients do business with you
Give your customers a reason to interact with you more often. This might mean offering specials that change frequently so customers return regularly to take advantage of them, for example a bargain of the week or a seasonal menu.
Service-based business can also do this by offering a service that meets customers’ needs in between their regular visits, for example, a hairdresser might offer a hair care session for clients between haircuts. Another strategy is to lock in their next visit at tighter intervals; after a massage, a masseuse might suggest another visit in four weeks rather than a calendar month, which in a year will equal one extra session.
You could also reward frequency, for example, by running a prize draw for clients with entries tied to each visit or purchase they make. Be aware that there may be competition regulations attached to this process.
Tapping into your existing customer’s needs is a great starting point in furthering the reach of your business, and also an opportunity to identify how your target market’s needs and wants have changed since its launch.
Stay tuned for Part 2 of these series for two more ways to spike your business profits.
How do you, as a business owner, keep on top of customer retention?