Successful businesses take a hard look at their numbers at least once or twice a year, sometimes even more. When they do, they hammer out weaknesses and business goals such as increasing revenue or rolling out product updates, that they want to focus on in the next six months. At the top of nearly everyone's list, you can often find one goal: growth.
If you're like most companies your growth strategies are largely focused on customer acquisition. While bringing in new business is never a bad thing, acquiring new customers is only one part of the total growth equation.
There are several opportunities that can lead to continued growth after a customer makes his or her initial purchase. According to Marketing Metrics statistics quoted by professionals like Mark Harrington, VP of Marketing for Clutch, the average probability of expanding your relationship with an existing customer is 65%, which is considerably higher than the 10% probability of turning a prospect into a paying customer.
Existing customers are also more likely to spend more in repeat transactions as your company earns their trust. Just how much more? About Money's Laura Lake estimates that repeat customers spend an average of 33% more than new customers.
So how can your business capitalize on growth from your existing customer base this year?
The answer involves shifting your focus to the parts of your customers' lifecycle that occur after they initially become customers. By tracking three additional growth metrics with as much intensity as your acquisition metrics, your business can enjoy revenue that is not only higher, but also accumulates faster.
Revenue per customer is defined by how much money you've made from each customer throughout your relationship, and is usually measured annually. In order to increase the amount of revenue your business brings in per customer, focus on upsell and cross-sell offers to entice repeat purchases.
The most effective way to encourage repeat business is to recognize what your current customers want and need. By tracking customer behavior through communities, social media, and feedback venues such as discussion forums you can find out what types of products and services your customers are interested in. Use that information to create tailored offers that address each customer's unique needs.
For instance, you can track posts in your online customer community discussion forums to know if certain customers have a problem. Could that challenge be solved by purchasing additional products or services? Once you have this information you can reach out to them through a reply to the discussion or email with information specifically catered to solve your customer's problem and encourage an additional purchase.
Since existing customers are much easier to sell to than new customers, your retention rate is an essential growth metric to track. If you have a high retention rate, you have a larger or more complete customer base to send upsell and cross-sell offers to.
A low retention rate means fewer sales opportunities and a lower customer lifetime value (CLV). It could also indicate a larger problem with customer satisfaction.
If you're unhappy with your retention rate, consider finding additional ways to resolve service issues and offer your existing customers value. Whether increasing your customer service and support efforts, solving product problems, or paying closer attention to customer feedback, taking steps to improve your retention is well worth the effort.
Keeping track of which customers are primed to be brand advocates can do more for growth than it may initially seem. Past research by TARP Worldwide, now CX Solutions, which was widely reported by organizations including Forbes, found that every unhappy customer will tell an average of 10 people about their experience. Each of those ten people will then go on to tell another five people.
That's a dire cascade on its own, and when you consider how the numbers have undoubtedly changed due to the rise of social media, you start to see the importance of customer satisfaction and advocacy. Whether you are bringing customers into the sales and marketing process or you know that your industry is very close knit, you need customers to speak positively about your brand, not negatively.
To increase advocacy, collect information about your customers through their interaction with your companyâ€”whether with your customer service department, over email, or within your online customer communityâ€”and use that to identify potential customer advocates. These segments highlight which customers you can recruit and develop as brand champions.
Tracking the development and success rate of customer advocates can, in turn, have a positive effect on acquisition rates, as your customer advocates work to bring in new business alongside their efforts to retain your existing customer base.
Your customer acquisition strategies might be workingâ€”and that's great. However, your business won't grow to its full potential if your focus doesn't expand to include your current customer base.
By tracking and evaluating these three additional metrics in terms of growth, you can obtain a fuller picture of how your company is bringing in revenue and how you can increase that revenue amount.
Just remember: your customer base is unique to your business and there's no foolproof growth formula that works across the board. You have to understand who your customers are and what they need in order to continue providing the best solutions to their problems. Trust us, ”it'll be worth it.