What is the value of an existing customer in our digital age? In today’s online world?
For years we’ve heard it said that it costs more to develop a new customer than it does to retain an existing one. (I’ve been guilty of spreading, and believing, this rumour.) But is it true? Not so, says Ipsos Loyalty!
According to Ipsos Loyalty:
“This myth is so pervasive and so seemingly intuitive that it has stood unchallenged for 20 or more years!
We, too, have published prior works repeating this fallacy. There is currently enough contrary information to bury or signiﬁcantly qualify this truism, based on three major flaws.”
The myth was revealed as having three flaws, according to the book Loyalty Myths. You’ll find them laid out in this pdf created by Ipsos Loyalty (click here to download).
But whether or not new customers cost more to acquire than existing customers, it still makes sense to take good care of and retain the customers we have, especially in today’s online world.
Customers Carry Much More Power & Influence Today
Today, existing customers carry much more power and influence than they did before social media entered the picture. A comment posted online about a product, service or organization can travel far and wide in a day, reaching dozens, hundreds, and even thousands or more people. The information is also floating ‘out there’ in cyberspace, waiting to be discovered by some eager searcher.
This is true of both negative comments and the positive ones. Of course, the negative ones are likely to travel faster and farther than the positive ones. (One only need watch, read or listen to the news to confirm this!)
So, the apparent myth that it costs more to develop a new customer than to retain an existing customer, shouldn’t sway us from focusing on taking care of our existing customers. Because today, in our online world, our customers play such an important role in determining our brand reputation through their online influence.
When we lose a customer due to poor products, services or customer service, the potential is there for the ex-customer to share their discontent much more broadly today than they could in the past. And there is a cost to this kind of negative advertising.
Recommendations From People We Know Rated #1
Nielsen’s 2013 ‘Under the Influence: Consumer Trust in Advertising‘ report, based on findings from an online global survey across 58 countries, showed the following as the top 3 most influential forms of ‘advertising’:
- Recommendations from people I know – 84% (up from 78% in 2007)
- Branded websites – 69% (up from 60% in 2007)
- Consumer opinions posted online – 68% (up from 61% in 2007)
Number 1 and number 3 are far more likely to come from people who have done business with us, than those who have not. Thus, the influence of our existing customers is more potent now than in the past, due to the internet. This carries financial ramifications – good for businesses that deliver on their promises, not so good for those who don’t.
It’s not uncommon for businesses to spend more time, energy and money on getting new business than on retaining existing customers. And as long as we’re taking great care of our existing customers, in their minds not just ours, then spending time and money to attract new business makes sense. New business is needed to keep our business going and growing, to generate income so we can pay our day-to-day and ongoing expenses, including salaries, etc.
But if we go after new business at the expense of our existing customers it will come back to haunt us, and in a way that couldn’t have happened 10 or 20 years ago.
A satisfied client is one of our best and most cost effective marketing tools. In today’s online age, this type of advertising, ‘word-of-mouth advertising’ from satisfied customers, is invaluable: it usually can’t be bought, it has to be earned! It’s also an important and influential factor in our ability to attract new clients and build our business.
So how do you harvest the benefits of happy customers? Stay tuned … this is my next post and it’s ‘in the works’ for sharing at the end of this week.