Getting more revenue from old clients

October 17, 2013 by Ademola Alawiye

   

One of the mistakes business owners make is ignoring their old clients in the process of searching for new ones. ADEMOLA ALAWIYE writes on how to increase income by engaging existing clients.

Sales should be about relationships. People buy from those they trust, which is why branding is so important. Many entrepreneurs believe that the only way to increase income is to find new clients. But experts say this strategy leaves out an obvious potential source of new sales. According to them, it’s much easier to get an old client to buy from you than to convince a new client to take the plunge. They note that entrepreneurs who pursue new clients at the expense of old ones are forgetting the low hanging fruit, which is their existing customer base. Professionals say if you want to expand sales, the number one place to go is the old client base, as they already trust you.

Business owners often talk about the lifetime value of customers, without realising that their value is far more than just the sales value of having them stay with the same model car, as an often quoted example gives. Old clients are more profitable than new ones, yet businesses are constantly extolled to sell more, without any qualification whatsoever. It is quite true that revenue is tied to sales volume and no one would argue with the proposition that business begins with the sale, but which sale and to whom can be important. The wrong sale can cost you profits either directly or as an opportunity cost. By opportunity cost, the same sale elsewhere might have made you a higher profit. Remember the 80/20 rule, which states that 80 per cent of your profits as an entrepreneur always comes from 20 per cent of your clients.

Small business analysts say it’s infinitely easier and always more profitable to work at increasing the purchasing of your satisfied clients than it is to go out and add new ones. They note that there are many reasons for this, but among the most important are that you have established your expertise, credibility and trust. It costs money to acquire new customers and to set them in your system. And new customers tend to buy in smaller amounts. Businesses often spend a small fortune to get new customers. Think of your advertising. Some of it is intended to remind people of your business, but mostly it is intended to encourage new customers to buy. Some of the reasons why it is important to concentrate on old customers include the fact that they cost less to service and are easier to deal with because you are more likely to know and understand their requirements.

Experts say because they trust you, they are likely to buy more often, and to buy more expensive products or services. If they become raving fans, they are also more likely to refer others to you. Word of mouth is the most powerful form of promotion which you will enjoy from existing clients. The benefits of intentionally focusing most of your selling and marketing efforts on your current customers, according to experts are: lower costs for additional sales, greater customer loyalty, higher customer satisfaction scores, and more profits. So, just how might you go about increasing sales to old clients, and increasing the profits to your business by more than if you just got out on the street to chase more sales. If you could keep the same number of clients but increase the size of their orders, you’d increase your revenue, and if you managed to do that without reducing your margins, you would increase your profits. Or if you could keep the same number of customers, and the size of their order, but persuade them to consume more often and therefore order more often, you would also increase revenue. Below are other means to boost sales from old customer base, according to experts:

Offer some products in bundles

You can offer some of your products or services in bundles for a special price to try to get an old client to try some of your other offerings. Look for ways to boost sales and draw your clients the more to your services. Convince your sales employees to go back to existing clients and try to sell those clients related products or services. A common example is a warranty, experts say. Think of how many times you’ve purchased electronics and a sales person has tried to sell you an extended service plan. Clients sometimes take the bait, expert say.

Provide useful information

According to professionals, if a client is eyeing a product but about to put it back on the shelf, make sure you let them know that the product is going on sale the following week. If you monitor your website’s online shopping cart, you may email an existing client, who didn’t complete a sale and offer them a discount to complete the purchase. Do not allow your clients to rescind their decision on any product which you know has been useful to them, except if they have genuine reasons to do so. Always look for ways to improve on what you offer and make them see reasons to continue dealing with you. Brainstorm with your team what you know about each business. You will be surprised at the cumulative knowledge in your business.

Consider giving out rewards

Experts say this pays, as many clients are pleased to receive gift items from their suppliers. Like the airlines have done with frequent fliers, there is no reason a small business can’t reward good customers with a loyalty programme. Offer a discount on their birthday or for every 10 purchases give them one for free. Give free samples. Offering freebies isn’t necessarily going to cost you an arm and a leg, but it can increase sales by engendering good feelings among existing clients, convincing them to pass on the sample to a friend or family member, and/or convince them to buy your latest hand cream or ice cream flavour. This is a good way to win customer loyalty and boost business sales.