4 Ways to Increase Sales With Customer Retention Strategies | Database Marketing Part 1

If you’re looking for ways to increase sales, here are four ideas that can increase sales from your existing customers. Sales from existing customers are much more profitable than sales from new customers and we’ll show you why in this article.

Marketing to new customers is important to grow your business, however, it’s just as important to retain existing customers to grow your sales, and impact the bottom line.

(Also see our next article, Database Marketing Part 2 on lifetime value)

Customer retention definition

Customer retention is the process to reduce the number of customer defections. These defections are also known as the customer churn rate.

Customer retention: Real world results in ecommerce

We did a project for a client where we changed customer retention rates. In this scenario the business was growing at 15% already. At a 15% annual growth rate, after three years the compounded growth would be 32%. Try it yourself: for example, take sales of  $800,000/year, add 15% for Year 2, and add another 15% for Year 3 = $1.058 million, and that’s 32.3% higher than $800,000.

That’s not too bad, after three years sales would be higher by about one third. But hold on…

Watch what happens when you improve customer retention: we ran two scenarios where customer retention improved to 15% (15% of customers come back and purchase again) and where customer retention improved to 50%. The result? With 15% customer retention on top of 15% growth, after three years sales were 282% higher instead of 32%! With 50% customer retention on top of 15% growth, after three years sales were 381% higher! In the example above where first year sales were $800,000 instead of $1.058 million in Year 3 it would be as much as $3.838 million!

For more on the impact of customer retention, see our next article on lifetime value.

1). Great customer service is critical for customer retention

If you want to have a positive experience with your customer, remember that it is extremely important to keep them happy. Be personal and make the customer feel like they are in good hands. Having a good connection with your customer will lead to positive and more rounded experience increasing the chance of another purchase.

2). Take advantage of your in-house email list

Take advantage of your in-house email list of customers. Why would you ignore any quality resources that you already have? In-house email lists are lists that you have added to over time as new customers have made purchases. It is very important to use this resource because these are people who have already liked your products/services enough to make a purchase. This target should be much easier to convert than new customers because they already have experience with your company. Emailing past customers with offers and new product announcements will greatly increase the probability of them making another purchase. Keep in mind that most businesses have a compiled email list of previous customers sitting under their nose. Put this useful data you collected into action to drive repeat purchases.

3). Sell the next product to increase repeat purchases

After you make your first sale to a customer, making the second sale is how you tie them in for a long time. This is how you make a loyal customer. Every time a customer becomes a repeat buyer, the chances of them coming back again increase dramatically. This is why it is incredibly important to focus on that second purchase. Not only do customers come back more frequently after the second purchase, they also spend about 20% more than they did the first time they made a purchase. All the more reason to focus on repeat customers.

So, if your customer bought an exhaust system, send them an email to sell exhaust tips. If your customer bought car wax and polish, send them an email to sell car covers.

4). Take advantage of email to send promotions and follow up customers

Remember to schedule in advance when you would like to send your email promotions. Nobody wants to be completely bombarded with emails. Make sure your emails are specific and personal at the same time. On top of this, make sure the emails are worthwhile and have a good subject line. There is nothing worse than someone deleting your email without even opening it.

When following up with a post purchase customer make sure you are being genuine and personal. Using the customer’s name in the follow up and including what they purchased is a great place to start. Not only should you do this, but you must sound completely genuine, and show that you really do care about the customer and the product you sold them. Oftentimes, it is a good idea to incorporate a survey so you can see how they liked the product and what else you can do to improve upon the product.

Final thoughts on customer retention

These four strategies will play a significant role when trying to retain customers. Loyal customers are what your business thrives from. Reaching out to new customers is much more expensive because your target is so much larger and there will be a relatively low response rate. The new customer acquisition cost takes into account all advertising that has been spent, and then divides it by the amount of new customers. This will give you the amount you have spent to bring in a new customer. After finding this cost you will realize how it is much more financially beneficial to target previous customers.

Keep in mind that new customers are important, but knowing your lifetime value (LTV) of loyal customers is what will help you determine how beneficial your business will be in the future. Lifetime value is the present value of your potential future overhead costs and profits. In other words, it is how valuable your business will be in the future based on the frequency of purchases, the duration of customer loyalty, and gross margin. Knowing your lifetime value will help you strategically plan your marketing efforts. It will give you the capabilities to best understand your marketing budget, so you can spend the exact amount needed per customer.

Our next article on lifetime value gets into the calculation of LTV.

So, whether you are in need of more sales, or don’t have the budget to target new customers, pay attention to your lifetime value and focus your marketing efforts on retaining customers and improving customer loyalty.