If you’ve been in business for even a short while, you know that it’s easier and cheaper to sell to existing customers than to go out and find new ones. But a business can’t survive on existing customers alone. Here are the reasons why developing new business is important and five steps to help you do it.
Every management authority on the circuit says that loyal customers and their repeat purchases are the cornerstone of your long-term successful business. The reason is obvious: it is less costly to get your existing customers to buy more than it is to find new ones. The lower cost of sale leads gives you higher operating margins, which you can then invest in other business building activities, and so it goes.
Since I’m bringing this up at all, you’ve got to ask yourself, “Is this old saw true?”
For incremental growth up to around 20 percent per year, the answer is yes. It’s true.
Spend your energy selling more to your top customers and you’ll do just fine. And 20 percent year after year is definitely nothing to sneeze at.
But what about faster growth? Massive growth, mega growth, breakthrough growth? What if you’ve just got to take over your market, fast?
To get revenue increases of 50 percent, 100 percent, or more, that expert wisdom is just plain wrong. To get quantum growth in your business you’re going to need more people buying your products and services – and lots of them.
Product development mastermind Doug Hall conducted research using the Scan Database, which contains over 9400 products with Universal Product Codes. Hall’s statistical model shows that new customers are 2.8 times more important to rapid revenue growth than repeat purchasers.
It’s not hard to understand when you consider this question: How much money can each customer or customer spend with your company? Can they double their spending? Maybe. If that’s true, you might squeeze that 100 percent growth from your loyal base.
But is that reasonable to expect? Perhaps for one year. But repeatedly? That’s just not likely, and companies that focus all their attention on retention are eventually going to see revenue growth stall or decline.
But can you double your customer base?
Yes, you can. And you can do it repeatedly. It doesn’t matter whether you call them customers or clients, the equation is the same: it’s easier to geometrically grow the customer base than the money each customer spends.
Of course, the strongest companies do both. They increase the spending of each loyal customer, and aggressively court new ones. But because they think it’s more cost-efficient, too many entrepreneurs focus on developing repeat business and limit their new customer activity. Don’t get caught in that trap; while you’re creating loyalty, your competitors will expand around you and with their riches, drive you right out of the market.
Developing new customers is not easy, but here are few steps to get you on the road and keep you there.
1. Continually focus on getting new customers. Develop automatic referral processes like Quantum’s Envelope Referral System. Schedule low cost or free informational seminars. Build strategic partnerships. Create affiliate marketing programs. Use direct marketing techniques: mail, email, telephone, and so on.
2. Remember that your goal is total customer growth. This means that while you’re adding new customers, be sure not to lose the ones you already have. And that means those customers are not dormant – a customer who’s not spending isn’t much of a customer at all. Any solid customer growth plan also includes a re-sell, up-sell and cross-sell program in addition to the customer acquisition plan.
3. Redefine your Unique Client Value position to include the “next niche over.” When you’ve exhausted the customers in your specific niche (defined by your Core Marketing Message and your Unique Client Value) it may be time to move into another market space. The easiest niche to segue into is one that shares characteristics with your current market. That’s why we call this the “next niche over.” Sometimes all it takes is a small tweak to your product offer or the way you package it. Sometimes, you only have to alter the marketing message and collateral.
4. Dramatize the Differences. At some point you must take customers from your competitors; that means you can’t have a me-too offering. You’ve got to be better, you’ve got to be different, you’ve got offer something they don’t have. Unless your competitors really stink their customers won’t become your without a compelling reason. And just because your mousetrap is better they won’t come running, you have to let them know, communicating your commanding value clearly and often.
5. Create segmented offerings to make the differences more pronounced. Just as you use “silver, gold, platinum” pricing to segment your own customer base, do the same to distinguish yourself from your competitors. If you need a low-end offer, remove the frills, strip down the packaging, if possible make the product “virtual,” digital, or downloadable. On the high-end, make your product super-premium. Bump up the quality of your materials. Add personalization. Add intimacy and service elements that competition will be afraid to offer.
Follow these five steps and you will be on the road to quantum growth. Remember – that as you’re driving new customers to your door you must make sure to build loyalty at the same time. In another article we’ll talk about ways to do just that.