Consider this: Your digital marketing initiatives are concentrated on generating new leads for your attractive e-commerce site. There are obvious calls to action on your website, and you occasionally run specials to bring in new visitors. You maintain active social media pages that advertise your most recent offerings and company history. You keep an eye on your lead generation and conversion rates and optimize for bringing in new clients who will make purchases.
You do all this so you can maximize your sales. But, in reality, you need to be thinking of the bigger picture.
The strategy above definitely works, but the issue with it is that it is only focusing on acquiring new customers
. If you really want a more sustainable marketing strategy, you need to include your existing customers in the picture through loyalty marketing.
What is loyalty marketing?
Loyalty marketing is a strategy that encourages your customers to do repeat business with your company again and again. Most often, these strategies involve incentivizing purchases and building up customer loyalty
—but more of those specifics in a minute.
Why loyalty marketing?
Loyalty marketing focuses on bringing back and retaining existing and past customers with initiatives and incentives—which is better for your business. Here’s why.
Customer acquisition is expensive
How expensive? According to Forrester Research, about five times as much as it is to retain existing customers!
According to data from Forrest Research, it costs five times as much to acquire new customers than it does to keep current ones.
Think about all the steps you need to take before a potential customer decides to buy from you. You have to make them aware that your brand exists, tell them what you do, and explain why you do it better than other brands. Then you have to convince them to take the first step in checking out your website. Once they’re on, you have to impress them enough and provide a seamless user design flow to help make purchasing easier.
Now, imagine you were trying to convince an existing customer to buy from you again.
You could easily skip most of the steps where you educate them about your brand. Since they already know you and have first-hand experience with your products, you can just jump straight to giving them a good deal.
When comparing the customer acquisition cost, or CAC, of a new customer to an existing one, it’s clear that focusing on existing customers makes better financial sense—which is why customer engagement and loyalty are essential to any growth marketing strategy.
Of course, a business cannot survive on just its existing customers. But that being said, if you don’t already have a solid customer loyalty strategy in place, we suggest you spend more effort thinking about it.
It’s easier to sell new products to existing customers
Engaging existing customers is not only cheaper but also easier. Existing customers already have prior knowledge and experience with your brand, so it seems easier to convince them to buy from you.
And this has been backed up by data.
According to the book Marketing Metrics, the probability of companies selling to an existing customer is 60-70%. On the other hand, the probability of selling to a new customer is 5-20%.
Global research and advisory firm Gartner Group also released a statistic on customer loyalty that stated 80%of your company’s future revenue will come from just 20% of your existing customers.
These statistics show that customer retention strategies are essential to the long-term profitability of your company and is something you should focus on right away.