Day after day, B2B product manufacturing companies discuss the best way to increase their top line sales and improve their brand penetration. Often the discussion ends around the product improvement, a new business blitz, or on how they can move into new market segments to attract new customers. As the old proverb goes: the first place to look is at your current birds or customers.
Let’s look at increasing customer equity as a tool to enhance sales. In plain terms, customer equity is the sum of the lifetime value of the customer. An existing customer is much more valuable than a new customer; in fact, it costs four to seven times more to replace a current customer than to keep one. It is also very typical that a customer that is exceedingly satisfied with your product and their customer experience will promote you and your brand to his peers and contemporaries tenfold. Yes, a Bird in the hand is worth 2 in the Bush.
Okay, so your loyal customers are more valuable, they favor your company and product, they will pay a premium, they are much less receptive to competitive advances, and they often forgive your mistakes more quickly. So why do we spend so much of the budget on customer acquisition and practically nothing on retention? There certainly must be some way to enhance customer equity. Tune in later; we will talk about that another time.