Market to New and Existing Customers

Are you focusing all your marketing on attracting new customers, or are you remembering to value the ones you already have?

If you think you value existing customers, check how much you spent in the past 12 months on marketing to get new customers compared with marketing to existing ones – you might be surprised! When I look at most small and medium businesses I regularly find that the budget for marketing to existing customers is zero. That’s odd when you consider how much was spent to get each customer to start with, and that you know your existing/past customers are willing to buy from you.

When I look at a business, either an established one or a new start up, one of the first things I look at is the potential for repeat sales. A company that is well suited to repeatedly selling to the same customers is likely to be much more profitable than one that doesn’t. Even better is when sales are on a regular recurring basis, especially if it’s set up on Direct Debit and is just going to keep the money rolling in.

Think about it – the major cost in dealing with a customer is typically getting the new customer in the first place.

You might need to get ten or even a hundred leads, i.e. identified prospects, to get one new customer that you sell to. For example, imagine you placed an advert at a cost of £500 and got 10 sales leads from it. You respond to all of those ten and make a sale worth £100 to half of them. That’s £500 revenue from a marketing investment of £500.

But if your profit margin is 50% you’ve actually spent £500 to make £250 back, which doesn’t seem very good! In the case where a customer is buying every month, you’d be getting £500 revenue and £250 profit from those five new customers every month. And let’s assume that on average they keep buying for 12 months… that’s actually 12 x £250 = £3,000 gross profit over the course of the year from the initial £500 investment.

Not all businesses are able to sell the same thing every month to the same customer.

But if that’s the case for you, the question is whether you could sell them different things every month, or the same things every few months, or add a new service you could sell them time and time again. If you can find a way to do that, your business will be much more profitable and stable.

You can look at this perspective of marketing to get a customer as ‘buying’ a customer. In the case above it cost £500 to buy five customers, so each customer cost £100 each to buy. If you only sell to them once, you need to be certain you’re making more than £100 profit on the sale! And your marketing spend will need to be enormous.