Which option is more profitable?
As owners of online stores, we’d love to see dozens, if not hundreds, of Internet users visit our website every day and chose the products we offer. That would be an ideal situation, providing us with steady, solid income. Still, this perfect state is rather difficult to bring about, not least because of the fact that we must work for our customers’ loyalty.
A loyal customer that will come back to shop in our store many times is not someone we should take for granted. On the contrary, this type of client is way more valuable than random customers, e.g., when we take into account the costs of encouraging the latter to make another purchase.
A study on American stores shows that retaining a loyal customer is 6–7 times cheaper than acquiring a new one. What’s more, if we increase the budget assigned for this purpose by only about 5%, the profit generated from the group of regular customers can grow by up to 95%.
What should we take into account when acquiring new customers?
Acquiring new customers is costly. And not just in terms of money spent on advertising and promotion, but also valuable time required to organize these activities. What’s more, our efforts don’t always lead to a completed transaction.
We should also take into account the fact that new customers are usually very sensitive when it comes to the prices in our store, especially considering the fact that the cost is one of the main factors affecting their purchasing decisions.
Why it’s a good idea
to transform new customers into regulars?
When a new client makes a transaction and then comes back after a while to make another purchase, we can consider them one of the regular, loyal customers. In this group we can see a much lower sensitivity to price changes. This is due in part to a specific sort of trust they develop towards our store. The consumer is willing to return to the place where they were served in a professional manner, even if certain products are a little bit more expensive there.
For this reason, the risk of their moving on to competition is reduced. What’s more, such a person can also become an effective “ambassador” of our business, recommending it to their friends.
Advantages brought by regular customers
A study carried out in the United States on a group of 300 managers of marketing departments in major companies allowed us to take a look at the benefits of having a group of loyal customers.
It showed that approx. 75% of people in this group go back to shop in the place that won their trust. Almost 70% are aware of the store’s brand, which can help us cut down on costs associated with promotion and advertising.
Lower frequency of ads that appear in the media combined with fewer discounts, freebies, and similar efforts aimed at enhancing sales can thus lead to significant savings. Having a loyal customer also means that we can spend less time on service, which in turn increases employee productivity and allows us to move our attention to other aspects of our store’s operation.
The trust that the regular client puts in our store helps us introduce price updates in a considerably smoother manner, especially when we are forced to raise them for various reasons. According to the marketers surveyed, almost half of the returning customers will not mind the prices going up.
An interesting observation from the study is the fact that a loyal customer is able to engage in the store’s activity by having a real impact on increasing brand recognition, be it through cooperation in the field of promotion of the store (e.g., by recommending it to friends, which approx. 35% of consumers do) or providing advice aimed at improving the offer and quality of service (25% of customers submit their observations to the store’s customer service).
What’s the conclusion?
Acquiring customers is crucial for the development of our store, but it’s even more important to invest in retaining them by inspiring loyalty. Thanks to such people not only do we have an opportunity to obtain a higher income at a lower cost, but we also develop a reputation that enables continuous development of your store.