To Churn or Retain ?

Many web marketers are really good at generating traffic and bringing total strangers to a website.  if that’s your strategy, you’ll probably have to be content with single figure percentages of your visitors becoming customers. But what if you were to  try another way – help your loyal customers to order more often ?    Well you might find two things:

  • Your systems aren’t doing as well as you might think.  Typically, while SMEs believe that 80% of their customers are regulars, the true figure is less than30%
  • Keeping customers loyal is easier said than done !    Why ?

High Customer Churn

Do your customers constantly churn, buying once  and moving on, never to be seen again ?

Retaining Customers

Or do you have a system for retaining customers ?

Think back a few years – perhaps in 1995 local businesses were listed in the Yellow Pages; people who needed a local business would ask a friend or look in the Yellow Pages and would eventually find the category where a business was listed.  And then they’d ring the biggest advertisement or the first listing (eg A1 Window Cleaners, so named to be the first in the book).  Over time, businesses put up websites and tried SEO, then local search, then Pay Per Click advertising.  After that it was social media and now video and advertising on these sites.  While people used to ring a business and leave a message, now they just move from website to website and its hard to know they were even there.  Nor is it easy to know where leads and sales have come from.  If you buy leads from a directory site, they keep the customer’s contact details.  With all these methods of reaching the customer, is it surprising that few small businesses have the time and resources to organise it all and plan a campaign.    (If that why you’re not campaigning to your existing customers, let me know in a comment below?)

Lets do some simple sums to remind ourselves why repeat business or loyalty programmes can drive revenue and profitability.    Here’s the first part of the Customer Churn calculation:

Number of customers 750
Average Revenue per purchase 100
Average Annual purchases 2
Annual Churn (%) 80
Customer Acquisition Cost 40
Revenue 150,000
Cost of Sales 60,000
Cost of Delivery 60,000
Profit 30,000

Let’s suppose you get better at retaining your customers which means that

  • your customer acquisition cost decreases to £30
  • some customers order more than twice  (say the average becomes 2.5 orders per year

Revenue becomes  187,500, cost of sales becomes 45,000  and and profit becomes £82,500 – a respectable improvement !

Or look at it from the customer profitability angle:

Job 1 Job 2 Total
Income 200 200 400
Cost of Sales 100 0 100
Cost of Delivery 50 50 100
Profit 50 150 200

We all know that retaining customers is more profitable, but it used to be easier said than done.   Gathering all your orders and receipts and working out where each customer came from (PPC, SEO, Yellow Pages, Social Media or whatever) isn’t a small task. Keeping track of all that, whilst you and your team are busy delivering the work also takes massive effort.  But what if you could get this work done automatically and someone would get all your paper into a system and advise you what campaigns to run  ?  If your business works on regular service to clients and customers then perhaps you should consider using this approach.  These businesses are typical of the kind that can benefit from a retention campaign.,

HVAC & Plumbing Hair/Beauty Salon / Spas / Massage / Tanning Cleaning Services
Pet Care Lawncare / Garden Services Pest Control
Personal Trainers / Sports Coaches Taxis & Limousines Appliance Repairs

so If you’re spending three figure sums on Pay Per Click advertising every month then please talk to James Gunn about reducing your advertising expenses and increasing your repeat business and income.   You may be surprised how easy it s and you’ll probably like our guarantee of 3 x ROI.