New customers or old

Go after new customers or concentrate on the existing ones? You might want to consider the following:

• Businesses spend five times as much for new customers than they do on present customers, yet current customers are worth ten times the cost of acquiring a new customer*.
• Response rates to direct mail advertising average 1 - 2 %, yet loyal regular customers respond at levels of 20 - 40 %.
• The 80/20 rule applies - 20% of your customers represent 80% of your business.

With existing customers so important to business, it's critical that we not sacrifice current customers or lose our focus. The recent problems of America OnLine demonstrate how easily we can risk current business. A new service designed to meet customer needs was unsupported by too little capacity. Continuing promotional effort to win new business while the problems of existing customers went unsolved simply added fuel to the fire. The result: unhappy customers, threats of law suits, refunds, and a lot of customer dissatisfaction.

New customers are important, but to keep your business alive and growing, don't forget those customers that are already doing business with you.

*Source:
Allan J. Katz,
The Age of Loyalty Marketing,
Potentials in Marketing, September 1995.

April 1997

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