After the mid-year break – and this year it started way sooner thanks to covid-19 – most organisations get into their planning phase for the coming year in earnest. Do you know how you’re going to beat the competition next year? If not, then this article will set out some clear priorities.
Although business plans are usually developed and approved in the middle of the year before the vacation period starts, it is only afterward the seasonal break that the real work begins. So what have you promised your top management? Faster growth, increased profitability, or more successful innovations?
Whatever is in your plans, now is the time to review them and decide the very best strategies and tactics for meeting them. Let’s take a look at each of these objectives and see how best to meet them.
As you know, there are basically only three ways to grow your sales:
- Get more people to buy
- Get people to buy more
- Get people to buy more frequently
What you may never have noticed before when reviewing these options, is that all three approaches include the word “people.” And it is only by understanding them better than you do today, that you will be able to grow your business tomorrow.
So, how well do you know your current and potential customers? Do you know what they think about your current offer? Do you understand their needs, desires and dreams? Do you recognise what they really want but can’t even themselves articulate? Uncovering these are what will give you a clear competitive advantage.
Of the three strategies, the first seems to be the one that most organisations immediately think about when looking to grow their business. They go out looking for new customers by increasing their distribution channels in the hope of getting more people to buy. But that costs a lot of money, doesn’t it?
CPG (consumer packaged goods) companies on the other hand, frequently encourage their customers to buy more through promotions and discounts. This too takes a large portion of their budget.
However, it is now well documented that it is easier to increase sales amongst your current customers than it is to go out and attract new customers to buy.
A 2015 study by Price Intelligently showed that a 1% increase in customer acquisition impacts your bottom line by around 3.3%. But improving your retention rate by 1% affects your bottom line by around 7%. In other words, it is twice as profitable to retain a customer than to acquire a new one.
“It is twice as profitable to retain a customer than to acquire a new one.”
Even if you replace every customer who leaves by a new customer who buys, you end up with the same number of customers—but lower margins–because it costs far more to gain a new customer than to keep the one you already have.