by Jenn Mathis
On the surface it seems like such a great idea – build your customer base by offering a First-Time-Buyer discount. The theory being customers will love your service or product so much that they will come back again. So what if you don’t make a profit on that first sale? You can make it up later, right?
It’s a great plan…until it backfires.
When you raise the price the second time around you have given your customer a License To Shop. What will they find? That First-Time-Offers are all over the place. Getting a customer in the front door by offering steep discounts is a sure-fire way to get them out the back door once that discount goes away. <cue engine backfire – ouch!>
Just how much is that shopping costing you? Take a look:
- Probability of converting an existing customer into an additional sale: 60-70%. (Marketing Metrics)
- Probability of converting a new prospect: only 5-20% (Marketing Metrics)
- Percentage of companies who say retention is cheaper than acquisition: 82% (Econsultancy)
- Increase in company profits from just a 5% increase in Customer Retention Rate: 25-95%! (Bain & Co)
In short: Get more revenue by keeping your existing customers happy. (Hint: raising the price the second time they come to you does not make customers happy.)
So what can you do instead? Here are 3 ideas that won’t break the bank:
1. Offer Referral Rewards – show that you know they will love your service so much that they will want to tell all their friends about it (our company’s referral program pays up to $500 for successful referrals).
2. Incentivize Add-On Sales – make customers feel valued and appreciated by offering just for them. They don’t all have to be discounts. Is there a company you can partner with who would like to cross-sell to your customer base (and vice versa)? Partner up! If you each have a Referral program, agree to waive it for each other and instead pass that discount on to customers. You make your customers feel special (because they are!) and it doesn’t cost you.
3. Be Open For Input – Stay connected with customers and make it easy to engage with your company. Don’t just talk at your customers, talk with them. What do they need to be more successful? You may find out you can help them in ways you never imagined! (Example: our customers asked us for Equipment Protection Coverage that was more cost effective than business insurance. We did some research and found a great option – our customers are happy and we have an additional revenue source. Double bonus!)
The best part about each of these options is that none of them reduce the value of your service – just the opposite! They show your customers you care about them and encourage customers to stay with you for a long time.
Let’s learn from each other… what does your business do to keep existing customers happy?