Here's two business tidbits for you:
- Most of the marketing literature tells you to focus on increasing customer loyalty.
- The easiest way to grow your business is to find new customers.
In other words, if you currently retain 40% of last year's buyers, you should not expect to find a marketing strategy that allows you to retain 80% of last year's buyers ... you may find a strategy that increases loyalty to 44%, or you may fail, causing loyalty to drop by 36%.
So much of the marketing literature focuses on loyalty. Here's the deal, folks. Loyalty matters much more if you are Wal-Mart, Starbucks, McDonalds, Nordstrom, Target, any place you purchase from at least once a month. In those situations, getting a customer to go from 12 purchases a year to 13 purchases a year is easy, and it has a huge impact on the profit and loss statement.
Now pretend you are Pottery Barn. Folks, you don't buy from Pottery Barn once a month, do you?
Here's another key point. The vast majority of us work for businesses that generate less than a billion dollars of sales a year, right? Well, in those cases, the best way to grow is to find new customers. Heck, I can recall being at Nordstrom back in 2005, and one of my analysts produced a slide that showed that we had something like 3-6% market share in womens apparel ... and we sold more than a couple billion dollars of womens apparel a year. We could still find new customers, and we were an eight billion dollar company.
You don't have 3-6% market share, in all likelihood, do you? That being the case, go out and find new customers. It's easier to find a new customer than it is to increase customer loyalty, and if you do find a way to increase customer loyalty, you'll increase loyalty among prior buyers and the new buyer you just acquired ... a multiplicative effect, right?!
OK, that nails the point home. Thanks for re-posting this research Kevin.
ReplyDeleteawesome post. makes total sense too. I'm glad you backed it up with some facts.
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