कस्तोमेर्सोल्दंड़व

Something New, Something Old: Customers


Last week, I started counting the signs and marquees I saw in our little town alone:
“New Customers Half off first rental”
“Free XXX with first purchase”
“10% off First Year Fees”
“ First Time buyers—no payment until 2007”

At first glance, I thought, isn’t this terrific marketing. Then it hit me: I was not eligible for any of these because I was an already established customer. And then I did not feel quite so kind. What am I missing out on by being an old, reliable, non-threatening, buy and never complain type of customer? Are you taking me for granted—good old reliable Paul. Are you being complacent about me? Perhaps it is time for me to shake you up and change businesses. I (and I suspect most people as well) do not like being taken for granted and discriminated against (which is exactly what this is, discriminating for new customers/businesses at the expense of us older clients).

Is your business doing likewise? Working overtime to attract new customers and not paying attention or giving time to present, existing customers? This is a recipe for disaster. Do you think that once you bagged a new customer, s/he will be yours for ever and you can go hunting for new clients without regard for your previous catches? Think again.

Do you know what the numbers say? It takes five times as much time and money to get a new customer as it does to enhance an existing customer’s business. The typical business gains less than 5 to 10% of lifetime potential business from the initial sale to a customer. If you do not go back to your existing customers, you are missing out on up to 95% of potential revenues from that customer. You have already established a relationship with the customer, s/he knows your products, your company, your service capabilities and your employees. You have already established awareness and a reputation (hopefully a good one) with your existing customers. Think of the costs involved in gaining the levels of awareness and reputation that already exist in current customers to new customers who may have never heard of you. That is the benefit of your established base.

If you are already aware of these benefits and still chase after new customers, why? For many of us, the roots of the problem can be found in our evolutionary past: it is the thrill of the chase and the immense joy in the successful ‘kill.’. Or the pride achieved in a new ‘conquest.’ That as it may be, it is time to tame the primitive hunter and use the rational civilized mind to run a business, not a wild game chase on the Savanna.

I recently received a notice in the mail from a health plan I belong to. They indicate a rate increase is forthcoming. Then they indicated they could either raise the rate only on old customers thus “keeping our new customer rates lower to attract new business,” or raise rates on both old and new customers. They decided to do the latter. They have foregone the temptation to lure in new business while taking advantage of older customers. In the end, they will gain less new business but retain many more older customers. I cheer them on with their decision.

What can you do?
1) Many of the challenges can be traced directly to the incentive system provided to salespersons—more bang for new accounts than for managing older existing ones. Modify it so appropriate weights exist.
2) Do not actively discriminate between old and new customers. Your existing customers will play the game to get the ‘newie’ benefits: they will create new email addresses to confuse the system into thinking they are new customers. Don’t get into playing games. Stick to providing the best products and services you can offer. Everything else will follow.
3) Of course you should always be seeking new business. Remember that new business that comes because of deep initial discounts or freebies will more readily leave when the next vendor offers better deals. Seek those businesses/customers who will be long-term customers. Gain their attention with your product/service/reputation/quality not with a one-time deal.

Remember your old existing customers for it is they that will grow your business.