How Your Existing Customers Are the Key to Business Growth
Understanding the lifetime value of your existing customers is key to building a successful business.
PHOTO CREDIT: Getty Images
Have you ever heard the phrase: "The customer is always right -- even when they're wrong?" As a business owner, this can be one of the hardest concepts to grasp -- because it means you may have to maneuver through some tricky situations in order to make your customers happy.
Recently, I was flying home on a business trip on an airline where I have elite loyalty status. I missed the first leg of my flight on a basic economy, non-refundable, non-changeable ticket -- through no fault of the airline. However, the gate agent rebooked me on the next flight without even blinking. I ultimately made it home. Not as lucky, however, were the non-elite couple who had been sitting in the airport all day, who had missed their first connection due to a weather delay, and who were now stuck on the standby list until the next day -- because I was given the last seat on the plane they needed to get home.
As I was walking on the plane, I heard the couple asking why they didn't get a seat and I did. I heard the gate agent's calm reply, "She is one of our most loyal flyers."
From the airline's perspective, they made the right call: I'm a repeat customer. They can predict that I will give them a reliable amount of travel per year, and they don't want to give me any reason to change that. Additionally, simply having the knowledge that loyalty to the airline gives privileges may inform the future booking behavior of the couple.
For small businesses, your plan of attack should be in alternating between attracting new customers and retaining existing customers. Here's how to understand where to focus:
Watch for churn.
No matter what type of business you have, you need to know your churn rate. For e-commerce, the average churn rate you can expect (people buying once and not coming back) can be as high as 80 percent.
Additionally, if you're selling anything--airfare included--63 percent of people will never revisit your store after purchasing from you, even to buy the same thing a second time. This has to do with the ubiquity of price aggregators for every type of item search online.
In other words, acquiring a repeat customer is super hard.
Have you ever tried to reach a company that has failed you in some way and not find their contact information? You're not alone.
Too many companies have no email, chat, phone, social, or another form of contact listed-- and when you need them, that is telling. Conversely, if they do have those things listed and don't respond to any, that's just as bad.
In order to ensure you can retain the customers you do have, make sure you're responding to their feedback -- whether you agree or disagree.
Whatever's wrong, make it right.
Remember that bit about the customer always being right? That's key.
Once, I stood in line behind a woman in a mom-and-pop grocery store customer service line. She had a garbage bag, and when it was her turn at the counter, opened up to show a turkey carcass. Just the bones. She explained, in a strong, clear voice, "This was the worst turkey I've ever had." The manager took her receipt and refunded her immediately, no questions asked.
By ensuring that her issue was resolved, they cemented her as a loyal customer. And that receipt? It had over $400 of groceries on it -- of which the turkey was only $25.
When you're just starting, there's no way around it -- you have to do the work of building a customer base. However, after you have that initial bump, understanding the real value of keeping your existing customers and how to do so is much more important.