The Value Of A Repeat Customer

Guest Post from our partner, iD Commerce + Logistics.

So you’ve launched your business, you’re up and running, and you’re profitable. You’ve started a killer Adwords campaign, invested in promotions via social media, and are looking for ways to attract new customers. The problem is the customers you attract from those promotions are not nearly as profitable as the ones you already have.

Don’t get us wrong, acquiring new clients is a wonderful accomplishment – it’s exciting, it’s new, at iD we thrive on acquiring new clients. However, we’ve learned to not take our focus away from the client who’s already made a conscious decision to support our business. According to a marketing study performed by Adobe, the average eCommerce store devotes more than 80% of its marketing budget to acquisition, while retention takes a back seat. Huge mistake! After years in the eCommerce and fulfillment industries, we’ve learned just how profitable repeat customers can be – let us show you.

They advertise for you

While AdWords campaigns and Facebook “Boost Your Post” functions are great ways to advertise your business, a repeat customer gives your store increased word of mouth advertising, which we all know, is almost always regarded as the best kind of advertising.  According to Bain & Company, the amount of people a customer refers to your site increases with the amount of purchases they have made.

Their study showed that after a customer has made 10 purchases with your business, they refer 50% more people than a one-time purchaser to a store. This study proves that repeat customers actually increase profitability by attracting more clients, who will then, as a result, make a purchase with you.

They save you money

We mentioned AdWords and social media campaigns, but the truth is some companies can’t even afford those methods of advertising. AdWords alone can drive up a huge bill for your business, which is why it typically costs 6 -7 times more to acquire a new customer than it does to retain an existing one.

At iD, we’ve learned that the probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is much lower, at only 5-20%. This number accurately defines how much more profitable it can be to spend your efforts on trying to get a customer to return rather than focusing only on attracting new customers.

They spend more and more on each purchase

We’ve witnessed this first hand, but if you don’t believe us. Research suggests that a repeat customer spends 67% more than a new customer.

A study by RJMetrics found that your loyal top 10% spend 3x more per order than the lower 90%, and your top 1% of customers spend 5x more than the lower 90%. Bain & Company also found a direct correlation between the amount of times a customer has been shopping with you and the amount they spend per visit. Bain found that apparel shoppers purchase 67% more per order after shopping with a company for 30 months than they spent on their initial purchase. They found similar results in all of the categories they studied!

They’re loyal

Above everything, aside from them being profitable and bringing you more business, a study conducted by the Marketing Science Institute found that a repeat customer is extremely loyal to your company. As a result, they are less susceptible to negative information about your brand than most people.

So if you’re having a PR nightmare or some bad reviews online, a repeat customer is less likely to be persuaded to damage your brand. This, in concrete terms, is the potential benefit you would reap from building customer loyalty with your repeat customers.

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