Back on the Amazon story a little…

It’s extremely important in business to keep your customers happy, a happy customer is a repeat buyer, it’s cheaper to have an existing customer buy again than it is to acquire a new customer.

It typically costs 30%+ more to make a sale from a new customer, than it does an existing.

How so?

Simple, to acquire a new customer alone it requires marketing, and most of the time sales support. Both cost time and money.

Something people don’t often factor into their marketing spend is the time that it takes to produce the marketing campaign as well. Even though say your cost per click is $1, and you get 100 clicks a day – total daily spend of $100, you might have spent a week designing the campaign and the landing page for it etc (collateral).

Your time for the week is worth say $1,000. So your monthly spend on the campaign could have been 30x$100 a day ($3,000) + the 1 week setup and the additional 1 day a week for monitoring the campaign ($1,500) which is a total for the month of $4,500.

So your monthly cost per click which in theory was $1, is in reality $1.50, a 50% higher rate than expected.

So you’re spending in theory, $4,500 a month on brining in new customers, a small portion of which will actually make sales, but to make a sale of an existing customer, who’s not an active buyer already would only take a phone call, or an email, either a personal email or a newsletter, these things only take minutes to a couple of days to achieve, and if you have a database of say 3,000 names, you could drum up a higher conversion rate than your CPC campaign is achieving, mostly because these customers have dealt with you before, they know and trust you and should be happy to buy from you again.

In theory you would have only spent $500 to make more sales than your $4,500 from your CPC campaign with a higher profit margin since your profit from the sales aren’t having to cover marketing expenditure.

In saying that, it doesn’t mean you should stop marketing to attract new customers, it means your new customer acquisition marketing should be just that, targeted at new customers, not everyone.

You should have different marketing strategies, one for new and one for existing. Your new customer acquisition marketing should be competitive with your competitors and offer something more, and your existing customer marketing should offer them reassurance on customer service and a comeback and buy again deal, maybe a discount for being a loyal customer.