For many small and medium businesses, especially new ones, getting customers is the most important objective. For the new business to survive, it needs to attract, engage, and acquire customers at the correct pace. The growth of the business also depends on generating sales and reaching new market segments.
This approach works great in many situations, but it is not the only strategy you should employ when you’re trying to get your small business off the ground. To reach a higher level of success, retaining customers and boosting their lifetime value is the way forward; here are the top three reasons why this is the approach to focus on in 2018.
Customer Loyalty is Good for Business
Customer loyalty is what most businesses strive for. Customers who are genuinely happy with your products and services are more likely to recommend you to other potential customers. Those potential customers start their journey from a different point, mainly because the recommendation of close friends or colleagues is seen as being more credible than any digital marketing instrument you have.
Loyal customers will also use your products for an extended period of time. This translates to repeat purchases, which also leads to the business having stronger cash flow and more sustainable growth. Let’s not forget that loyal customers are far more likely to try the new products you release.
According to the experts at 89degrees.com, a digital marketing agency with years of experience in customer loyalty, loyal customers are also great assets for the business’s online activities. They share more articles about your products or the business itself, expanding your reach like never before.
The second – and perhaps the most obvious – reason for boosting customer lifetime value is profit. It is far more affordable to maintain existing customers than acquire new ones, especially in a market as competitive as today. Investing in customer lifetime value leads to better profit, making it a great move for the future of the business.
Let’s say two customers, a new and existing one, both spend $10 on your products; this is a rough example, so bear with me. The $10 they spent translates to different margins for the business. With the new customer, you have to deduct your acquisition cost, which can be as high as $9.
With an existing customer, on the other hand, you may not have had to spend any money for them to make that purchase. You just have to make sure they are very happy with the products and services you offer; attractive customer loyalty programs help too.
The last reason why customer lifetime value is the metric to develop is the extra flexibility it brings to the table. In a conventional approach – using the previous example – you want to spend less than $10 on acquiring new customers.
With the customer’s lifetime value in mind, you have room to push your customer acquisition cost of $15, knowing that the customers’ subsequent purchases will more than make up for the loss. This is an approach that many businesses are now using to gain an advantage over their competition.
In the end, a higher customer lifetime value is always great for the business. These reasons simply emphasize the importance of customer loyalty and boosting customer loyalty for the future of the business.