How To Build Your Business With Existing Customers

One of the oldest rules of business says that it takes six times more effort and expense to develop a new customer than to keep an existing one. It just makes good business sense to make the most of the customer base you already have than to focus all your attention and resources on finding new customers.

Of course you need a constant flow of new customers because people move or leave your business because of other changes in their lives. If you were in a large city you'd have a larger raw customer base to work with.

But in smaller communities the customer pool is much smaller and you need to make the most of the ones you have while part of your time is spent on attracting and developing the new ones.
The value of a strong customer base

The life blood of any business is, of course, customers. Without them there is no business. So the development of a strong customer base is imperative to every business. What is the real opportunity to grow your business with existing customers? Existing customers present three opportunities for strong business building.

First, they purchase your products or services over and over again. For the most part you can count on their repeat business over time. Second, you have the opportunity to cross-sell your products or services.

An example of cross selling might be selling a camp stove to someone who just bought a camping tent. Third, you have the opportunity to up-sell. Move your customer to a better and usually higher priced, more profitable product or service.

The value of information from your customer base

If you've every bought a toaster or vacuum cleaner you've seen a warranty card. You fill it out and return it to activate the guarantee. The warranty card asks for specific information about you and your lifestyle. Age, education, income, marital status, children are just a few of the categories of information collected.

What does the parent company do with this information? It helps evaluate their target markets for future advertising. They also use it to decide if future product or services would be of value to you. And last but not least it provides the information for future contact by phone, direct mail or other methods.

How valuable is customer contact

Did you see a McDonalds ad on TV today? Chances are you did if you watched any TV at all. Is there anyone in this country who doesn't know about McDonalds? It would be very difficult to find anyone who has not heard of this hamburger giant. If that's the case why do they keep advertising on every station every day?

Because they need to re-enforce that customer contact. If they don't the advertising that Wendy's and Burger King will begin to take over your perception of where to go for your next hamburger. What does this mean to you?

It means that it's really nice that some customers find you on their own or through word of mouth from other customers. But remember, you're loyal customers are constantly being exposed to your competitors advertising and their message.

Let's suppose your business had about 10,000 customers per year, each customer averaged six purchases per year and the average ticket of each customer was $20.00. The business would do about $1,200,000 per year.

To do a direct mailing to each customer six times a year would run about $30,000. But if that mailing could generate just one more sale per year per customer that would produce and additional $200,000 in revenue.

This is truly the kind of example where advertising is an investment not an expense. I don't think anyone would have any problem spending $30,000 for a return of $200,000.

The last word on business building with existing customers

Just so there is no mis-understanding I don't want you to totally ignore efforts to cultivate new customers. Every business needs new blood on a regular basis. But a loyal, solid customer base will keep your business afloat during the tough times.

Also, don't forget the value of getting referrals from your existing customers. They are your best source of new customers but you must communicate with them to get those referrals.

If you have employees, don't forget to impress on them the value of keeping customers happy and satisfied with your goods and services. Good customer service, good products, and good customer contact will keep the business strong and profitable.