For most businesses, one of the overarching objectives is to increase profits, which can lead to business growth—and more profits. That invariably requires strategies to increase revenues, lower costs, or both. For many businesses, growth strategies tend to focus on adding more customers to generate new sales. However, if profitability is the core objective, that may not be the best strategy. Let’s dive into some ways you can increase revenue in your business without necessarily bringing in new business.
Retaining and Pleasing Existing Customers Far More Profitable than Acquiring New Ones
Studies have shown that selling to current customers is the most cost-effective strategy for increasing revenues and profits. According to a Bain & Company study, acquiring a new customer costs 5X to 25X more than retaining an existing one. It’s not surprising then that the same study found it is up to 65% easier to sell to existing customers than first-time customers.
The study also found that companies that focus on customer retention experience a significant increase in profits, finding that a mere 5% increase in customer retention can boost a business’s profits by up to 95%.
Finally, a study by Motista found that customers with a loyal connection to a brand are worth 306% more in lifetime value than non-loyal customers.
These statistics should erase any doubt that businesses focusing on strategies to retain and leverage customer relationships can achieve higher revenue growth more profitably than those focusing on generating new customers.
Many businesses fight their way to the top by offering the best products or reducing pricing. However, whatever advantage that creates is typically fleeting. True business leaders provide something that most competitors can’t match—a genuine and deep connection with their customers. They do that by making customer loyalty and increasing the value of their relationships their top priority.
Superior Customer Service Increases Revenue…
You’ve probably heard the adage that customers remember the service much longer than they remember the price they pay. According to the American Express study, 70 percent of consumers say they’ve spent more money with a business that provides excellent service. The same survey found that 86 percent of consumers would be willing to pay higher prices for better customer service and that, on average, consumers are willing to spend 17 percent more with a business that delivers exceptional service.
…And Grows Profits
It shouldn’t surprise anyone that superior customer service increases customer loyalty and lowers the churn rate (the rate customers move on). Over time, the lifetime value of a customer includes everything they will ever purchase—today and in the future.
If, on average, 65% of a company’s revenue comes from existing customers, at five to 25 times less cost than it takes to acquire a new customer, companies interested in increasing their profit margins must focus on strengthening customer relationships.
Customer Service is the New Marketing
Word of mouth is still the best way to market your business, and digital channels such as social media can amplify its effect exponentially. According to a Temkin Group study, more than three-quarters of consumers would recommend a business after having a positive experience with a business. Businesses can leverage their marketing and advertising dollars by creating superior customer service as a key marketing initiative.
Customer Service Delivers Exceptional ROI
Small businesses that treat customer service as merely a cost center are missing out on the tremendous ROI a focused strategy can deliver. That’s why providing a great customer experience is now a top strategic initiative for 75 percent of larger companies because of the ROI it delivers. Now, an increasing number of small businesses recognize that providing excellent customer service is not just for larger companies and can directly impact their bottom line.
How to Create a Superior Customer Service Initiative
Develop a clear customer experience vision. With input from up and down the organization, develop a clear customer-focused vision to communicate with all employees. The vision can be in the form of a mission statement and core values that will be embedded in all training and development to drive your organization’s behavior.
Hire and train the right people. In addition to a well-trained customer service team, each member of the organization should have or acquire a skill set that enables them to communicate effectively with customers.
Build the right culture. Providing superior customer service must be a top-down, bottom-up initiative with an all-consuming focus on creating happy customers.
Know your customers. All employees need to understand your customers—their demographics, preferences, needs, and what they value most in a relationship with your business.
Buy the right technology. The right technology can improve efficiency and lower the cost of providing excellent customer service. Investing in an email marketing program with personalized content while increasing your social media presence can build your brand, increase customer loyalty, expand word-of-mouth, and increase cross-sell opportunities.
Capture customer feedback. You need to ask your customers how you’re doing in serving their needs. Send follow-up emails to every customer using post-interaction surveys. Make outbound calls to customers asking for feedback. Encourage Yelp reviews. Then review the information with members of your organization who interact with customers.
Measure ROI. Nothing reinforces an initiative like solid business results. Collecting data, such as the average sales and average sales revenue per customer, can provide immediate ROI feedback.
The Bottom Line
The challenge for businesses is customer expectations are rising faster than the pace of improving customer experience. Customers expect every touchpoint in their interactions with your business—from their first impression, throughout the buying process, and with all communications—to be the best they’ve ever encountered. The sooner your business makes customer service its top priority, the sooner you’ll see improvements to your bottom line.
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