Let’s face it: Most marketing budgets are tight. Where should you prioritize your direct mail or email marketing dollars when funds are limited? On engaging your existing customers! While attracting new clients is essential for growth and to counteract attrition, your current customers offer the highest return on investment. Here are five key reasons why this is so.
- Higher Spending Potential
When a retailer attracts a new customer, it may be for a specific item, like a bathing suit. However, when retained, customers will likely purchase additional items such as shirts, shorts, and accessories. According to RJMetrics, existing customers typically spend 67% more than new ones.
- Greater Profitability
It’s well known that acquiring new customers can be five times more expensive than keeping existing ones. Suppose it takes three marketing interactions to gain a new customer, costing $5 each. If that new customer makes a $50 purchase, it results in a net gain of $35. In contrast, marketing to an existing customer may require just one interaction to achieve the same $50 sale, which could lead to a net gain of $45.
- Easier Sales Process
Your current customers already know and trust your brand, which keeps them engaged. This familiarity increases the likelihood of a successful sale. You have a 65% chance of closing a deal with an existing customer compared to just 13% with a potential new client. Concentrating on your existing customers is an intelligent strategy if you need to meet a sales target quickly.
- Referral Potential
When you provide excellent service to your current customers, they will likely refer 50% more new clients to your business than new customers. This means your satisfied customers can effectively market your business for you.
- Foundation of Your Profits
You may be familiar with the 80-20 rule, which also applies to customers. 80% of your profits typically come from just 20% of your customer base. Retaining these key customers is vital. Research from Bain shows that a 5% increase in customer retention can lead to a 75% boost in profitability.
Every business can benefit from a profit increase. If it’s been a while since you tailored a direct mail or email campaign specifically for your most valuable asset (your existing customers), now is an ideal time to take action.
