The Importance of Customer Retention and Cross Selling to Small Business Owners
Do you know what your customer lifetime value is?
Why spend time and money gaining new clients if you aren't then going to provide the new customer with the quality service they require to stay with you for a lifetime? According to Gartner Group, 80% of your future revenue will rely on your existing customers; compared to only 20% revenue from new customers. Furthermore, Harvard Business Review states that increasing your customer retention rate by just 5% will increase your profits by 25-95%!
Additionally, further benefits of customer retention are:
- Customers that stay with you longer have the ability to spend more.
- Customer purchase history and behaviour can be analysed to inform future strategy.
- Loyal, raving fan customers are more likely to provide your company with positive reviews. Testimonials are a powerful marketing tool to use when a potential customer reaches the decision stage in their buyer's journey.
- Happy customers will recommend you to their network, allowing you to grow and gain new customers without any marketing spend.
- You'll build a reputation as the industry leader for customer service.
Customer retention enables cross-selling which is essential to any industry, yet many fail to understand the importance of customer retention. Here are a few tips to help you to cross-sell more products and services to your existing customers.
Cross selling is simply selling a different product or service to an existing customer.
Amazon.com attributes up to 35% of its revenue to cross-selling. When purchasing you will see both the “frequently bought together” and “customers who bought this item also bought” sections, promoting related products.
The key is to illustrate the value to the client of purchasing a complimentary product or service. For example, an accountant may wish to communicate to clients that in addition to audit and tax services, their clients can also benefit from payroll or business advisory services. There is a “value add” in that the client is buying all of these services from one accounting firm.
Data Driven Campaigns
The firms that are most successful at cross-selling unite insights driven by data with focused marketing campaigns. There is a fine line between timely offers and annoying spam, and understanding buyer timing is critical. Your marketing content strategy is key to cross selling to existing customers, but you also need to understand how you will measure success. Use a CRM system to record customer data including which clients bought what service. Use this database to identify clients who have not yet been cross sold to and create a campaign which focuses on creating a value proposition in the mind of those clients. Ensure your sales or business development people engage with the target clients at the appropriate time.
Listen to Your Customers
You can’t sell additional products or services to your customers if you don’t understand what they actually want or need. If for example, you are selling business services, ask your customer about their business plan. Where are they going in the next 3 to 5 years and how do they hope to get there? Consider some of the challenges that they will face and identify where your services will be able to make their life better in some way.
E.g. a Marketing Agency should continue to build in campaigns and brand refreshes, a recruitment agency should understand a client’s growth plans and take note of when they will need help recruiting staff.
Listen and respond to each client and every interaction. This two-way conversation should extend to your own internal teams, as you ask questions and measure outcomes to continuously improve the customer experience.
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Tags: Growth Best Practices