FIVE REASONS WHY BUILDING CUSTOMER RELATIONSHIPS IS ESSENTIAL TO YOUR BUSINESS SUCCESS
Without customers, there is no business.
It’s why so many companies put lots of cash into campaigns and promotions that attract new customers to their brand. In 2019, companies in the U.S. spent $240 billion on marketing alone.
But the real value for a company doesn’t come from how many new prospects it can attract. It comes from how many of those prospects it can keep.
It’s just good business to focus on building those customer relationships. And here are five reasons why.
IT MAKES FINANCIAL SENSE
A quick internet search on ‘new customers versus existing customers’ will yield countless articles echoing a similar statistic—acquiring a new customer can cost five times more than keeping an existing customer.
Now, that figure may be a bit outdated , and will vary considerably between companies, but let’s consider the logic behind this claim.
Acquiring a new customer involves attracting their attention, educating them on your offering, gaining their trust, and finally convincing them to make a purchase. That involves targeting them with visual assets (static images, perhaps video ads), smart copy, email campaigns, sound bites, promotions, and whatever else the current marketing trend may be.
Repeatedly.
An existing customer?
They’re educated.
They trust you.
They’ve already been convinced.
And most of the things that will keep them and persuade them to make another purchase should already be in place. Things like a solid product, a delightful customer experience, and a responsive support team.
What’s left? Keeping in touch with them. Maybe a monthly newsletter that updates them on brand developments. Maybe a text letting them know that the latest product line is about to launch. Maybe an email survey asking them for their valued feedback as a loyal customer.
Don’t get the wrong idea. Customer retention shouldn’t be approached like a walk in the park. On the contrary, BECAUSE it is easier to maintain a relationship that is already built than it is to build it in the first place, companies should be vigilant in providing adequate resources toward retention.
Here is another widely repeated figure:
The probability of selling successfully to a prospect—5-20%
The probability of selling successfully to an existing customer—60-70%
Even taking the high and low end, respectively, existing customers are still three times more likely to make a purchase than a new prospect.
Those are odds that no company should bet against.
MOMENTUM IS ON YOUR SIDE
Have you ever watched a surfer catch a wave? As the swell rolls in, the surfer starts kicking and paddling in an attempt to get into position and take advantage of the wave’s momentum for an exciting and enjoyable ride.
Lots of energy up front.
But once the surfer is standing, it’s less about energy, and more about balance.
Acquiring new customers, and then building upon those relationships can be similar to the surfer and the wave.
A business with no customers will understandably need to expend a lot of resources into growing their customer base. But once people are purchasing, and presumably turning into loyal customers, you’ll gain a resource that builds upon itself.
Referral marketing.
For better or for worse, referral marketing, like the wave, is largely out of the hands of you and your company. Proper incentives can certainly help, but in the end, it will be up to the customer to pass the good word along.
And this makes referrals a much more powerful way to get new customers (and even keep your existing ones). It’s the reason why services like Yelp and Amazon have gained widespread adoption.
People seek out reassurances to check if they are making the right decision. And when it comes to purchasing decisions, a third party testimonial holds more weight than the company that is doing the selling.
You expect the Costco demonstrator to tout every single bell and whistle available on that cutting edge blender.
What you don’t expect is the couple passing behind you to utter the words “Best purchase we’ve made all year!”
And just like that, another blender sold. A new customer created.
But referral marketing has another side-effect.
When a customer recommends someone else to try out your product, they’ve crossed a line that turns them from an existing customer into a loyal advocate. Now it’s not just another product to them, but something they feel can bring value to others. And they’re putting their name out there on your behalf.
Whether purposeful or not, they’ve solidified their relationship to your company.
BETTER DATA
Customer relationships get even better.
When available, business decisions should be based on data. And the more data you have, and the more accurate the data, the more precise your decision making can be.
Repeat customers are a wealth of useful information.
Examining who the repeat customers are will further define your target audience. This will lower marketing costs by allowing for more targeted campaigns. Rather than casting a wider net, you now know where to double down for the largest return.
And they don’t need to just be observed. They can be tapped directly for even greater insight
Keep record of what issues cause them to contact customer service. Send out surveys to measure service levels and learn more about what they like/dislike about your offering. This is all real-world information that previously could only be speculated about in boardrooms.
Having strong customer relationships will also shed more light on what direction to take future product/service developments.
This is a win-win situation where companies can gain valuable insight, and customers are rewarded with better service and higher quality products.
JOB SECURITY
A company can’t survive the ups and downs of an unpredictable economy without a loyal customer base. During a healthy economy, new customers can be plentiful and allow companies to grow. But during a downturn, the first to go are new sales.
It’s during these times that strong customer relationships are arguably the most important.
And it’s not just economic downturns.
What happens when your product releases with a flaw? Or service levels see a dip? Customers that have a deeper connection to your brand can be convinced to stay, provided that you’re taking measures to make corrections.
They may even come to your defense.
New customers and prospects? Not so much.
Investing in customer relationships is a strategy for the long-term. Unlike a successful marketing campaign that can result in an immediate spike in new sales, customer retention doesn’t come with instant gratification.
It takes a steady approach that takes months, perhaps even years.
But the reward is a customer base that can help with more sustainable and reliable growth during the good times, and keeps you afloat during the not-so-good times.
WE’RE HUMAN
Think of all the relationships you’ve had thus far. Both in your personal and professional life.
Some will be inconsequential. Others will have played an important role in shaping who you are and how you behave.
And that’s because as humans, we are social creatures. We love to interact. And when an interaction uncovers commonalities, and hints at even greater joy and fulfillment, it makes sense for us to hold on to that relationship.
Even science has shown that we are hardwired for these connections. According to a number of studies, it was concluded that those with healthy social relationships tend to live longer and have a higher quality of life.
And while businesses may be viewed as unfeeling legal entities, it’s still comprised of humans. From this lens, it can’t be stressed enough that our most fulfilling business endeavors are those that create lasting relationships with our customers that not only enrich our lives, but theirs as well.
Being a contact center provider, customer service and customer relationships are topics we are passionate about. If you’d like to get in contact with us, click here.
