Revenue teams are always buzzing about metrics that align with new customers.
“What’s our acquisition rate?”
“What’s our number of new leads?”
“Are we getting enough customers into the funnel?”
Sometimes this focus on bringing new customers into the funnel can distract companies from an abundant source of profit that’s right in front of them: their existing customers.
On cost alone, existing customers can be more valuable than new ones. The cost of acquiring a new customer can be anywhere from five to 25% more expensive than retaining an existing customer.
But what about profitability? Bain & Company found that increasing customer retention rates by merely 5% can improve a company’s profits by as much as 95%.
The data says that spending time to adapt to the needs of your existing customers has a wealth of benefits for an organization — and includes the information you will need to attract new ones.
Lessons Learned from Listening to Existing Customers
Spending the time to develop insights about those who are already spending money with your company can drive solid, data-driven, and strategic decisions. It can also help you avoid costly mistakes. Even large, successful companies can overlook the value of their most current and loyal buyers.
For instance, a DMI client and major car manufacturer were preparing to bring a number of connected car features to the market. Before they did, they asked DMI to help them to examine and decipher the reception of new features with their customers. After presenting the features to a subset of customers, DMI found that the services the company had been planning to offer for free were the ones that the same customers indicated they were willing to pay for. Perhaps more surprising to the automaker: DMI found that customers expected free access for the connected car features the automaker had planned to charge for.
Had the organization moved forward, they would have lost millions as well as frustrated their drivers. Instead, the company retooled the program before launch based on the understanding that their drivers brought to the table.
Another example: A women’s clothing brand and DMI client wanted to understand consumer behavior before making any decisions about sales and offers, particularly about free shipping. DMI searched through the company’s customer data and found that one set of customers would make purchases based on whether they received free shipping or had to pay for it.
Another set would abandon their cart when there was no free shipping option. Therefore, the retailer was able to boost their revenue simply by offering free shipping to the customers who would only buy under those circumstances and saved money by not offering free shipping to those that would pay for it.
As DMI’s Allison Mataya, Executive Vice President, pointed out, “Brands all too often are just focused on finding somebody new. Give your returning customers a little incentive, and they’ll probably spend three times as much as the new person.”
New Tech Can Diminish Solid Decision Making
Understanding your existing customer is foundational but can get lost in the rush for acquisition or in the misguided idea that new technologies will appease them. Many companies substitute implementing new technology for building out a profile of current buyers.
It’s critical to avoid the trap of thinking that a new commerce suite or CRM will solve any problems you might be experiencing with customer retention. Instead, businesses should consider focusing first on why their past buyers are no longer shopping with them. Encouraging repeat purchases may be far more simpler and less expensive than deploying new technology.
5 Steps to Get to Know Your Customers
When it’s time to surface what your existing customers want and need, there is a straightforward process that can be followed to uncover that information.
Step 1: Segmentation
Not all buyers are created equal, and not all customers will be incentivized in the same way. Leveraging qualitative, quantitative, and behavioral data enables you to define your customer base into concentrated groups with similar characteristics, like our women’s retail shoppers from the previous example. This customer modeling allows you to communicate, create offers, and develop experiences that appeal to each type.
Step 2: Communication Strategy
Once segmented, you can develop a communication plan for each group that customizes when, how, and what messages get delivered. With the data in hand, you’ll better understand what the key inflection points in the customer experience are for these different shopper types. Then, you can deliver personalized messages that show you both understand them and want to build a relationship with them.
Step 3: Engaging Creative
Tapping into your shopper’s emotions is what will set you apart from your competitors. With data about your groups, you’ll have the tools necessary to develop engaging and creative marketing that genuinely speaks to a specific group and present it through the channels they already populate.
Step 4: Omni-Channel Strategy
You may see the individual channels that you have as separate, but your customers simply see them collectively as your brand. As such they want to be seen and recognized, no matter where they engage with you, in the same way, and with the same data backing the experience. Choosing the right marketing technology will enable a 360-degree omnichannel strategy.
Step 5: Measurement
This is not a one-and-done exercise, but an ongoing process. Optimization and refinement must happen over time, and that process requires measuring results and redefining goals. Retention strategies are likely to change over time, and regular measurement and adjustment will encourage the changes needed to keep up with shifting consumer demands and preferences.
DMI Can Help You Understand Your Customer
DMI is uniquely qualified to be your partner through this process. At our core, we are a people-centric organization that uses technology to make our customers — and yours — happier and more productive. Technology is an integral part of the process, but only as an enabler. It doesn’t require the most expensive solution to accomplish your customer experience and revenue goals, but it’s nearly impossible to reach without technology to boost your activities.
This philosophy is deeply ingrained in our Customer Experience assessment, which we’ll talk about in future posts. This service lets us look at what both you and your competitors are doing so that we can help you reimagine your goals and strategies that meet your business’s unique needs.