Monday, April 4, 2011

Where's the Best Revenue Stream? Take a Look into Your Existing Customers

Ever heard of Pareto principle?
This fancy term actually has a more well-known name called the 80/20 rule, meaning 80% of the effects generally come from 20% of the causes. In the case of marketing and sales, this applies to 80% of the sales coming from 20% of the customers.

Mr. Vilfredo Pareto, who discovered the 80/20 rule -

The 80/20 rule showcases that the majority of the revenue stream comes from a small portion of customers who can actually provide higher profit margins. So who are these 20% top tier customers?

Studies have shown that the majority of the profitable customers are in fact our "existing" customers. This group of people likes the products and/or services offered, which makes them keep coming back for more. Existing customers also require less marketing expenses since the brand awareness has already successfully implemented. As a result, the initial advertising lump sum used in attracting new business is not needed for this group. The best part is that existing customers are usually more loyal compared to new comers. They sometimes even spread the positive word of mouth, referring businesses to their friends and families.

Our recent economic downturn might make it harder for small businesses to obtain new customers. However, maybe it's time to take a deeper look into your existing customer base and dig out more unexplored possibilities. Here are some tips to help you start out the process:

1. Understand Who They Are

Always keep and update customer records constantly. Understand where they come from and what was the product/service offered. Most of the marketing channels can now track customer sources automatically, showing who click on the ads or the access point where they reach the promoting company.

2. Learn What They Want

Communicate with your customers. Learning their wants and needs are the key to success. Existing customers are the one who understand your products/services the most. Therefore, they can usually point out what you do the best and what needs to be improved or modified in order to stand out from the competition.

3. Tailor to Their Needs

Listening is not enough. You need to deliver. Only products/services that deliver to customers' wants and needs can retain loyalty and profits. Implement a training program for all the customer service representatives, even the entire company in order to maintain a constant service quality.

4. Keep in Touch

No one likes to be called or emailed only when others are trying to get into their wallets. Who says you can only contact customers when trying to sell them something or informing about a new promotion? Next time, try to contact them and give happy birthday wishes or holiday greetings instead.

What's even better? Slip a few samples or gift cards as a gift. Not only it makes your loyal customers happy, but also brings in future revenue as well!

New customers and sales leads are hard to come by these days. Why don’t we turn to another direction and start cultivating what we already have - our beloved existing customers, building a relationship that can really last through harsh times.

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