The incredible value of a Repeat Customer
Repeat customers are more profitable. Period.
There is overwhelming research on this subject.
- Existing customers are much easier to sell to, according to a study from Marketing Metrics. The probability of converting an existing customer is 60–70 percent versus a probability of only 5–20 percent for a new prospect.
- Once consumers return a 3rd time, the probability of them coming back a fourth time increases to 54%.
- Additionally, data by Bain & Company indicates that a 10% rise in customer retention yields a 30% increase in the value of the company.
- Another interesting stat is that only a 2% increase in customer retention has the same effect as decreasing costs by 10%. Decreasing costs increases profits proportionally.
Data shows that repeat customers are more inclined to purchase again. However, an even more exciting stat is the fact that repeat customers are also likely to spend more. In fact, repeat customers spend 67% more than new ones according to a study by Local Commerce advisory firm BIA/Kelsey.
With data like this, why is it that so many local merchants and retailers put so little emphasis, time, training and marketing dollars in getting more customers to come back more often? Why do they spend more time on customer acquisition and getting new customers when it is far easier to get an existing customer to buy again? Repeat customers should be considered their most valuable target market.
Local businesses compete not only with larger retailers who have probably already invested in customer retention programs like loyalty marketing, but also compete with online stores. Focusing on getting repeat business is smart and those businesses that make repeat customers a priority will outlast their competition.
The scope of this article is not to answer the question of why, but rather to help provide guidance into what local businesses can do to help convert one time customers into repeat customers so as to positively impact their profitability and sales.
In a nutshell, local businesses need to entice one time customers to return and buy again. So how do businesses improve customer retention rates? Why do customers come back?
Well, there really is no one best way to boost customer retention. There is no magic bullet. Would implementing a loyalty program help? Probably. Would discounts drive traffic? Probably. However, there are two aspects in every business that needs to be worked on first before any other marketing or retention programs are put in place. Great products and excellent customer service are the two fundamental areas that will impact retention the most. Once a business has a handle on these, other retention programs such as loyalty marketing can be introduced.
To remember: Repeat customers = Increased Profits