I dont often use information from clients but in this case I have made an exception and I am not given away any confidential information. The reason I am using this this information because it perfectly illustrates the old adage that it is better and cheaper to look after your customers, than to continually chase new customer sales. More importantly it puts it more elegantly than I ever could and this is a "real world" example from an online retailer, which is why such detailed information is available. I am very grateful to my client to be allowed to use this information.
Following on from our meeting, I've calculated some costs for acquiring new customers as well as some stats on new vs repeat customers which makes interesting reading as below.It would seem a disproportionate amount of time and expense is focused on gaining new customers, when clearly there is greater advantage in targeting existing customers.
New visitors = 78% (of total visits), Revenue Share = 53% (of total revenue)
Repeat visitors = 22%, Revenue Share = 47%, Average order value = +5%
Cost of acquiring new customers = £8.60 per customer
Results: 47% of the revenue comes from 22% of visitors (repeat) who also spend more per order. Acquiring new customers is relatively expensive compared to marketing to existing customers.
Conclusion: Focus on existing customers more and/or increase number of repeat customers.
Another e-tailer client of mine struggles to build profits despite rapid turnover increase because of their very low repeat order rate; in their case 9%. The moral of this story is don't neglect your customers. They are your best source of revenue and they already know and like the products or services you provide.
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