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Should You Focus on Repeat Business or New Customers?

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There is an age-old question in marketing of whether it is better to focus resources on existing or new customers. Ideally, you should invest your time and resources into both. However, the reality is that every organization must prioritize. So, you will need to ask and answer this question for your own business.

The Value of Marketing to Current Customers

At first, it may seem counter-intuitive to market to your existing customers. However, it can be one of the best ways to build a strong foundation for your business. Furthermore, you are probably already doing this in some ways. These are some advantages:

  • It’s Less Expensive: It is much cheaper to make a second sale to a current customer than to sell to a new one (in most cases). The cost for acquiring a new customer may be $10 but selling the same amount to an existing customer may only cost you $5, for example. In many cases, the math supports marketing to existing customers.
  • Each Repeat Strengthens the Relationship: Every time you sell again to a customer, the more the chance of an additional purchase increases. Someone who has bought from you 10 times is more likely to return an 11th time than someone who has bought from you twice is likely to return a third time.
  • Loyalty Can Build a Foundation: As you grow your repeat business, you are establishing a strong foundation for your company. You can rely on repeat business in a way that you can’t for new customers.
  • It Can Impact New Customers Too: People like to buy from brands that care about their customers. Showing that you are invested in earning their business repeatedly can attract new customers too.

The Value of Earning New Customers

Of course, there is a strong case for marketing to new customers as well. These are some of the benefits:

  • You Need Them: Frankly, few businesses can survive on repeat business alone. No matter how much you can build loyalty, you will need to attract at least some new customers, if only to make up for lost ones.
  • No One Can Be a Repeat Customer Without Being New First: Every customer has to be a new customer before becoming a repeat one. So, you will need to attract some new customers before you can build a base.
  • There’s a Lot More of Them: Even the biggest brands in the world have fewer customers than non-customers. Simply put, there is a bigger pool of people to attract who aren’t yet customers.

How To Decide

So, the question remains: which is better? The short answer is that it depends. In most cases, you will want to find a strategy that can attract both. However, you will need to set your priorities. The best way to decide is to use business metrics.

Using data, you can determine how much it costs you to attract a new customer. You can also calculate your current customer lifetime value. These numbers can give you a sense of how valuable each type of customer is.

You can also run some tests. Invest a small amount into trial campaigns targeted at each group. See which one has the best bottom-line results. Remember that profitability is what counts. There is no point in spending $10 to earn a $10 sale (or worse, spending $11 on it).

Follow the data and use it to make a good choice about how to focus your marketing efforts. Plus, you should always remember that you don’t have to decide forever. You can focus on building your base now then refocus on new customers later or vice versa.

Get Started

Try applying some of these ideas to determine how you want to prioritize your marketing budget. Hopefully, using data will help you to make the right choice for your business. Remember, if you are uncertain, you can always experiment and use the results to find certainty.

Published: July 14, 2020

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Devin Caldwell

Devin Caldwell is a small business owner who loves helping other entrepreneurs succeed in the competitive business world. He owns three businesses and works as a consultant in his limited free time. Devin is also a husband and father of two beautiful children. If you want to work with Devin, reach out to him on Twitter: https://twitter.com/DevinCaldwell13.

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