How to boost your profits with existing customers
Every company wants to increase their profits, but it can be hard to know where to start. Putting up your prices is one approach, but that could jeopardise the relationship with your customers. There are alternatives and we discuss these options to help you increase your profitability.
Increasing customer lifetime value
Customer lifetime value is a measure that some companies use to see how much customers are worth to their business. This looks at the amount the average customer spends over the time they stay with you, while taking into account the costs for acquiring them.
If you’d like to calculate this, multiply the average monthly spend of your customers by the number of months you retain them, then subtract the cost of acquiring them. This will show you how much your customers are worth.
Increasing your customer lifetime value is a great way to increase your profits. There are two main ways to do this:
1. Increasing retention: figures show that increasing customer retention rates by 5% increases profits by 25% to 95%
2. Encourage customers to spend more on additional services: it’s much easier to sell more to existing customers than sell to a new client. Research from Marketing Metrics shows businesses have a 60% to 70% chance of selling to an existing customer versus 5% to 20% to a new prospect.
The first step to keeping your customers is to understand what makes them leave. While you may assume that they will switch to competitors offering better deals, the reality is quite different. Research shows that:
• 70% of people leave because of poor service
• 60% leave because they perceive that salespeople are indifferent
Customers like to feel valued, so make sure your customer service is excellent. The same research found that customers who thought their sales contact was exceptional were 10 to 15 times more likely to remain loyal.
Happy customers stay longer – there are a number of ways to ensure they do:
• Make them feel valued: answer their emails and phone calls quickly, keep them up to date with what’s happening with their advertising and address any issues quickly.
• Share valuable information: going beyond simple sales support can make a big difference to retention. Help your customers by sharing useful information. This could be through email, your social channels, in person or by running events. Anything that helps them get more from your services will build the relationship.
• Show the value: when budgets are tight, customers will sometimes cancel advertising. Of course, this is a false economy but it can be hard to prove that if you haven’t been sharing data about the impact of the services you provide. 78% of CEOs say that they don’t receive enough data about performance, so do take the time to keep customers informed about what their advertising is delivering.
Cross-selling other services
The other area that could improve your customer lifetime value is to get your customers to increase their spend.
As you’re already working with your customers, you should be well-placed to understand their needs. That means you should be able to spot opportunities where you could increase the reach of their advertising by using other media.
Research shows that companies which use multi channel marketing see a 300% increase in campaign performance, so your clients would reach more people by running integrated campaigns across several touchpoints. That’s great news if you have more than one channel that you can sell in.
But, even if you don’t, think about ways that you could provide additional value that might appeal. Take a flexible approach, talk to your customers about their needs and look for opportunities. The more you can do to understand their needs, the easier it is to adapt your services, sell more advertising and increase your profits.
Whatever your business, we can help you develop an effective direct sales strategy. Make an enquiry