The world is rapt with attention at the forthcoming outcome of the U.S. and China trade deal. The tension between the world’s two largest economies has caused instability and uncertainty about future growth for many companies who rely on the Chinese economy. It has even indirectly affected companies whose market valuations have decreased from the massive swings in the stock market due to lack of shareholder confidence. Trade news are just a piece of the conclusion that many economists and analysts are quickly coming to. The world’s economy is slowing. The IMF recently released their latest growth estimates for 2019 and they are projecting a global expansion rate of 3.5%. Despite these great concerns, business leaders are still tasked with delivering profitable sales growth every single quarter. Failure to deliver results in massive stock selloffs and stock downgrades.
Good business leaders looking to navigate their company through the waves of uncertainty will look at ways to accelerate their expansion into new and adjacent markets to sustain their growth estimates. Many will also implement cost-cutting measures to ensure that profitability doesn’t take a huge hit as they brace themselves to go through a period of slowed growth. They will also employ strategies that look at. But great business leaders will take a different approach: they understand the importance of customer retention and will focus first on finding growth with their existing customers. Great business focus on improving customer retention strategies because they understand the following:
Growing sales with existing customers is the best way to find growth at a cost-effective rate. Let’s face it, acquiring new customers and expanding into new markets is expensive. It is well known that the acquisition cost of selling products to a new customer is about five times higher than selling to an existing customer. Some companies approach expansion by merging or acquiring companies who are well established in the area that they are looking to go but a lot of analysis has to go into the ROI for acquiring that customer or breaking into that market. Business leaders looking to grow while reducing cost focus on increasing customer retention because their existing customers are significantly cheaper to sell to.
Existing customers can directly increase your bottom line. You want to increase your revenue? Focus on improving customer retention strategies. Recent studies by Invesp show that existing customers are 60-70% more likely to buy products from you and those new product and service offerings you’re looking to add to your portfolio. Your existing customers are 50% more likely to try them than a new prospect. Your existing customers represent untapped potential and developing a strong customer retention strategy will help you increase the product and service sales.
Existing customers hold the key to increasing your profitability. There’s a myth that existing customers will only drive your profitability down. Not true. While you might have traditional customers who require yearly price negotiations, you also have many customers who are willing to spend more money on your products and services. In the same Invesp research, they concluded that not only are your existing customers 50% more likely to try new products, they are 31% more likely to spend more money than new customers.
Companies that have compelling products and a strong customer retention strategy will be hard to find customers who stop doing business with them. This was recently proven by Netflix which posted 4Q earnings in January. While they posted mixed fourth-quarter earnings results, which initially sent their shares down, many analysts raised stock price targets. Why? They announced that they would be increasing their prices for their streaming service packages. Now, we know that Netflix is doing this to raise capital for the massive amount of investment they are making to develop content (see customer expansion is not cheap!), but what we can learn from this lesson is that when customers see value in you and your products and services, they will pay more to stay, even if you increase the pricing for those said products and services incrementally. The key being incrementally!
In summary, if you want to be a leader who will successfully navigates and delivers growth even during this global slow-down, you will want to focus on developing strong customer retention strategies. It has to be so ingrained in your company culture that it effectively becomes part of your DNA. Although sales teams are at the heart of customer retention and satisfaction strategies, everyone in your organization must always think CUSTOMER FIRST!
To learn more about how to develop a customer first culture, download the eBook Customer Satisfaction and Retention: The Key to Profitable Growth.
About the AuthorMore Content by Loretta Faluade