Five Good Reasons to Hold On To Your Existing Customers

It costs businesses five times more to win a new customer as it does to keep existing ones – according to a study by mystery shopping and retail intelligence analysts, Retail Active.

And repeat customers typically spend a third more than new ones.

Retail Active’s managing director, Julian Chamberlain, says: “It proves beyond doubt the value of holding on to your existing customers – especially in challenging trading conditions.

“To do that – you have got to keep them happy and offer them better customer service than your rivals.

“Maintaining high levels of customer service has never been more important.

“Repeat customers are the heart of every business and are far more profitable than new ones. They have a better understanding of the brand’s value, plus they are easier to find and communicate with.”

Retail Active is Britain’s leading mystery shopping company, sending out thousands of undercover agents each year to monitor customer service standards in a wide variety of nationally-known companies.

Although it can be vital for businesses to attract new customers, it is usually much more beneficial to turn the ones you have into loyal lifetime customers.

It is offering a five point guide to businesses on how to keep their existing customers happy.

Julian Chamberlain said: “Seeing as one new customer costs as much as five existing ones – we though the five point plan was very appropriate.

The Retail Active Guide is:-

1. Always seek to identify and solve complaints quickly. Customers will have much more trust and increased loyalty if you do this.
2. Keeping customers loyal is critical, so providing a good product or service is core to success.
3. Front Line is Bottom Line! Keep your customer facing teams highly motivated and focussed.
4. It's worth remembering that every dissatisfied customer will tell up to 10 others of any poor experience.
5. Always look for ways to exceed your customer’s expectations. Often ways to exceed expectations cost a minimal amount and can give huge financial returns
6. Always consider the Lifetime Value (LTV) of a customer. To do this take the average transaction size and multiply this by the number of purchases the customer makes from you each year. Only then can you fully appreciate just how important existing customers are: As a rule of thumb you should seek to retain every customer for at least five years.

Increasing Customer Loyalty: A Case Study

California-based pizza maker zpizza understands the importance of repeat custom to its business, having recently run an integrated direct marketing campaign combining mail, e-mail and mobile to entice consumers to join its ‘ztribe’ loyalty club. The chain - which is known for making gourmet pizza with unique toppings – is hoping to build the club with the long-term goal of doing more business with its members in the future.

Zpizza particularly wanted to increase the number of ‘heavy users’ – customers who spend over $50 a month and order at least twice - at each of their stores across the US. The aim of the campaign was to identify local people and entice them to join the loyalty scheme.

The zpizza campaign consisted of pizza themed scratch cards that were mailed to up to 3,000 people in the local area surrounding each store. Recipients could then text in their winning code revealed on the scratch card along with their email address to claim whichever prize they had won. There was an assortment of prizes, of which the majority were free coupons; however prizes up to $5000 were possible.

The result of the campaign was a resounding success. Zpizza not only spurred existing customers into action, but also reached potential new customers; receiving nearly 2000 entries from their scratch card campaign. Registrations to ztribe were up nearly 20% compared to the regular sign-up rate. Zpizza hopes to run another loyalty promotion in the near future.

The majority of businesses, including zpizza, understand that encouraging repeat business can have a huge positive impact on their bottom line. Most recently, a study from business intelligence consultant Retail Active found that it can cost as much to gain one new customer as it does to keep five existing ones, and that repeat customers typically spend about one-third more than new ones.

Vigorously pursuing repeat business can have many positive effects, including increased sales, reduced costs and higher customer satisfaction rates. Better relationships with customer’s increases brand loyalty making it less likely for them to defect to a competitor.

Zpizza’s case study above highlights the importance of reaching out to your existing customers. As a mystery shopping and business intelligence company, Retail Active knows the power of giving existing customers the best experience possible by leveraging ‘service excellence’ to keep your customers coming back to you time after time.