Subscription business model

Why should you focus more on your loyal customers than the new ones? 

Isabella Wills

November 29, 2021
7 min to read

When you are looking for ways to create consistent revenue for your business, increasing your customer acquisition can be the first goal that pops into your mind; however, focusing on your repeat customers is the strategy that will bring the scalability you want.

According to a 2017 CMO survey, businesses are spending 11% of their total revenue on marketing; and although improving your CAC is one of the most important KPIs that your marketing team should be focused on, loyalty is the number one factor that will help you create the consistent revenue you are looking for. 

Now more than ever, it is so much easier for your customers to jump to competitors, whenever they aren’t happy with your service or shopping experience.

With the raising of startups and Venture Capital firms investing millions of dollars in them, many companies now have more resources to offer lower prices, discount codes, and focus on providing a smooth personalized shopping experience.

This forces you to strengthen your brand and become better. That’s why if your business isn’t generating enough revenue, then you have to rethink your strategy, by investing more time and money retaining your most loyal customers, rather than getting new ones, since acquiring new customers can cost 5 times more than retaining your existing ones. 

According to the 2021 Digital Economy Index by Adobe Analytics, 41% of an eCommerce store’s revenue is created by only 8% of its customers, and that 8% is made up of those repeat or loyal customers. 

Therefore keeping them should be your number one goal. Here are some of the benefits that adopting this strategy has for the growth of your business. 

1. Loyal customers are less expensive and easy to sell

Time is money, and when you are a small or medium business you have to figure out all the ways in which you can save the limited resources you have; and marketing your loyal customers is the easiest and cheapest way to increase your revenue. 

When you focus on persuading new customers to buy, you only have a 13% chance to succeed, but when you focus on your loyal customers and providing them with a great shopping experience, your chances increase up to 60 to 70% according to Paul W. Farris in his book “Marketing Metrics: The Definitive Guide to Measuring Marketing Performance”.

2. Loyal customers always buy more

Unlike first time buyers, your repeat or loyal customers usually have a higher average order value, which means that they not only buy more often, but they actually spend more money on your business. 

As stated by a Research conducted by BigCommerce, your loyal top 10% customers spend 3x more per order, than your lower 90% of customers, and your top 1% spends 5% more than the lower 99%.  

This happens because since they already tried your products or services, they just trust you more than other brands.

That’s why they are 50% more likely to try your new releases or cross selling products, and even spend 31% more of what they spent before, compared to your new customers. 

Even during the Holiday Shopping Season, your loyal customers always spend more. While the average shopper will spend 17% more, your repeat customers will spend 25% more per transaction according to Adobe Analytics. 

3. Loyal customers create more customers

Think about the time you had a bad experience with an airline? Or the time you purchased a product, and you said: “never again!”; not only because the product wasn’t what you expected, or maybe because it had poor quality, but especially because the customer experience you received was terrible.

Then you hear a friend or a colleague saying that they are thinking about purchasing that same product or flying with that airline; would you recommend it? Of course not! Why? Because your friends and colleagues know you care about them. 

The same happens when you love a product and you enjoy the customer experience you received.

It will make you start promoting that product among your family and friends without even noticing, and by doing that you will help the company create more loyal customers. 

That’s why 83% of customers acknowledge that they are more likely to trust recommendations from their peers than your brand, and according to Lauren Shepherd from BigCommerce, this makes “peer-to-peer referrals the most effective way to share your brand community with others.”

On the other hand, hiring influencers and brand ambassadors to promote your brand is not always affordable, but if you focus on keeping your loyal customers, you will create a community of free ambassadors that will happily promote your products and services.

Never forget that word of mouth still is the greatest marketing strategy. 

4. Businesses who have loyal customers are the ones who scale

There’s no doubt that acquiring new customers is really important, because without first time customers you can’t expect to have repeat and loyal customers. 

However, we don’t recommend spending more than 40% of your marketing budget acquiring new customers like most businesses do, because they are not the ones who create consistent revenue for your business, and neither are the ones who can help you build credibility. 

Subscription boxes

Keep in mind that 50% of your new potential buyers are referred by your loyal customers; so when you improve their customer experience, when you give them easy ways to pay and even reward them with gifts or discount coupons, they will keep attracting your new customers, and make your business grow. 

Top 4 strategies to increase your returning customers rate and conversion rate with them: 

1. Create specific strategies for VIP customers where you can evaluate LTV of your customers according to your average order value, and offer special discounts. 

Prioritize announcing new releases to the customers that have a higher purchase frequency or spend more than the average order value.

2. Create a loyalty program where your repeat customers can accumulate points through different actions like: purchases, Newsletter Subscriptions, provide Birthday Date, review any product, share your blog on social networks, and refer your website with their friends and family.

3. Create subscription boxes for your loyal customers, so they can subscribe to your products with a specific frequency instead of buying them just one time.

4. Meet your customers where they are; and so, understand who they are, what they need from you, and how they spend their time, so you can comprehend where they congregate. Give them value through your social media, blogs, YouTube channel, etc., based on that data.

Final recommendations

If you want to build stronger relationships with your customers and create a recurring revenue business consider the following:

– Provide your repeat customers with a seamless shopping experience by installing the Subscriptions Cloud App on your BigCommerce store. 

Make your loyal customers’ life easier by allowing them to subscribe to your products or services on a daily, weekly, monthly or with any frequency they want, so they can easily repeat their shopping with you. 

Make your loyal customers’ life easier by allowing them to subscribe to your products or services on a daily, weekly, monthly or with any frequency they want, so they can easily repeat their shopping with you. 

Give them a great customer experience by personalizing their purchases.

You can use the “Combo Box” feature of the Subscriptions Cloud App to surprise them with a box full of their favorite products that they can receive every month or with any frequency they want. 

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