Most business folks know Kiss Principle I. It's "Keep It Simple, Stupid!" That's a powerful principle, but it's not the only KISS principle. Let me introduce you to KISS II, which can really help you pump up your profitability.
Most of us have gotten kissed. And lots of us have gotten kissed recently. If that's you, then here's my question. "Where are you most likely to get your next kiss?"
Will you get that kiss by heading out into the highways and byways and soliciting a sample of the folks you meet? Or will you most likely get your next kiss where you got your last kiss?
For most of us, the second one is the answer. You get more kisses where you've gotten kissed before. And you get more business where you've gotten business before.
People who've bought from you before are more likely to buy again than folks who've never bought from you. In fact, research by Fred Reicheld and others indicates that it costs you about five times as much to sell a new customer compared with a repeat customer.
It gets better. The longer folks stay customers, the more likely they are to buy. This even extends to folks who aren't your active customers right now. Those folks are more likely to buy than new prospects.
It's even better than that. The longer folks stay customers, the larger their average order is likely to be.
Despite all those good reasons to concentrate on repeat customers, lots of businesses spend most of their marketing budget, time and effort chasing after new customers. Maybe we think that the grass truly is greener over there. Or maybe it seems boring to just keep making money with the same old folks.
Whatever the reason, spending all your money and effort on new customers is not a good idea. If that's what you're doing, then it's time to repent of your unprofitable ways. Here are a couple of things you can do.
Pay attention to retention. Simple thank-yous and attention to service can work wonders. Many businesses lose about 40% of their customers a year. Start with 100 customers and at that rate you've got less than 15 in five years time. Cut your attrition to 20% per year and you'll have 40 left after five years.
Bring back the lapsed. Set up a program to re-capture folks who used to be customers, but have fallen away. They're still a better bet than the new prospects.
Keep working on those new customers, for sure, but put some effort into your marketing to current and recent customers and your profitability should soar.
Created/Revised/Reviewed: 30 July 2002
This is only one Big Idea. You'll find more in Wally's book, What's the Big Idea? and in his Big Idea column. There's a complete list on the Main Big Idea page. You may also order the book by clicking here.
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