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This is why new customers hunting is not the best idea 

Jaime Jimenez | Oct 16, 2014 111 views 2 Comments

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Numbers drive the current environment, and profitability is key for any activity or initiative we would like to run. In a previous step, we should deeply analyze the ROI (return of investment). And every sales or marketing program or initiative a company would like to launch should go through this step.

All we well know, and there is a lot of books talking about this, than customer is the main and more important asset for a company. Without them there are not sells, and without sells there are no incomes. Although we should take into account than not all the customers are similar (taking about how they interact with our products). There are customer that used to buy very often our products or services (branding is very important in this point). Also there are sporadic customers. Those could buy our product depend on some criteria (price, stock, seasonality, promotions…) and the third big group of customers are the new customers. Those one our company does not already know, as these customer have not buy our products. We should put extra additional efforts and resources in order to get a new sell.

From a company point of view, not all these customers provide exactly the same profitability. More over, the company needs to put different resources depending on the kind of customer we are talking about. But several public studies reports than it is 4 time more expensive sell a new customer rather than retain or maintain an existing one. In this point it is very important have in place a good CRM platform, in order to help us fully understand all our customers and the sales lifecycle.

Get a new customer required extra effort from the company as product advertisement and communication, pricing policy … however for an existing customer we only need to provide a product that cover all customer needs. All these information, communication, competitors differentiation or pricing policy are not needed for these existing customers

There are several techniques to run these customer fidelity programs. In our customer`s shoes we could talk about a lot of experience. For instance gas station applies extra discounts or gives points to use in this kind of programs. Some car manufactories apply really good discounts to the car prices, if you are already owner of an old model of this brand. Airlines and hotel also run very actively loyalty programs (gold cards, extra miles…). Frequent customers get discounts, extra services or points as much as they buy this companies´ services.

Although not all companies take the full advantage of loyalty programs, and the associated benefits you could get when running them. Any company, in any sector could design and run these programs; only a bit of creativity is required. But also a CRM platform and a customer data bases could help us to get deeper customer knowledge.

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2 Responses to This is why new customers hunting is not the best idea

  1. Michael Lowenstein October 20, 2014 at 6:33 am (1326 comments) #

    Most companies will not expend the effort, or conduct the necessary customer lifetime value (CLV or LCV) analysis to understand either what elements of value motivate behavior, by individual customer and segment, which customers, by microsegment, offer the best overall financial return and opportunity to build a long-term, mutually beneficial relationship:

    http://customerthink.com/avoiding-the-one-night-stand-targeting-customers-who-will-stay-with-you/

    http://customerthink.com/optimizing-lifetime-customer-value-or-dont-worry-use-churn-models/

    http://customerthink.com/perceived-value-and-customer-life-stages-a-tale-of-two-bakeries/

    Also, major consulting organizations have demonstrated that loyalty programs may not be the best engines to stimulate retention and loyalty, especially among customers with the highest purchase potential: http://customerthink.com/if-you-build-a-loyalty-program-will-customers-come-if-they-come-will-they-stay/

  2. Jaime October 20, 2014 at 10:24 am (6 comments) #

    Thanks for your comments Michael.

    There is very valuable info in the links you provide. Of course loyalty programs and CRM system is not enough for a company. They need to adquiere new customers, but what I tried to explain is not only we could learn a lot from existing customer but also we should built a robust relationship with them. This allow us to have recurrent sell out, increasing incomes with lower cost of sales (ROI). The key is know how to use the customer data base and maximaze revenue (in combination with new adquisition)

    Thanks for your comments.!!

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