Why Relying Too Much on Existing Customers Is Dangerous
When it comes to growing a business, many marketers are quick to focus on existing customers. If ‘a bird in the hand is worth two in the bush’ as the old expression goes, it should be easier to squeeze additional value from previous purchasers by way of reactivation, category expansion, or an accelerated buy rate.
However, the appetite for growth that most companies have exceeds what existing customers can satiate. Here are five reasons why relying too much on existing customers is dangerous.
Brand loyalty isn’t what it used to be. About half of all consumers will switch from one brand to another, if the new brand can offer them better service, better pricing, or a customer experience that better suits their expectations. Unless a brand can create a massive moat for its products and services, it’s bound to lose retention and reactivation opportunities to competitors willing to slash prices or offer a more appealing customer experience.
Cart sizes are shrinking and average order values aren’t what they used to be. According to a McKinsey study, up to 40% of consumers decreased spending on discretionary categories in the last 12 months due to financial concerns that won’t likely be relieved for several years as the global economy struggles to recover from the impact of COVID-19. Constrictions on disposable income limit what consumers can do for a brand. It means they’ll be less likely to increase their buy rate, less likely to try new (or more expensive) products, and less likely to reactivate if they’ve lapsed.
At the end of the day, consumers aren’t numbers on a balance sheet—they’re people, and people can get tired of being pushed. When customers are constantly peppered with promotions to buy more (or buy new) products and services they’re bound to grow cold at some point, and when they do, they won’t be able to contribute to revenue growth.
Consumers aren’t static and they can’t be expected to stay active on one channel forever. If a brand isn’t set up to reach them no matter where they go (desktop to mobile, social to email, brick-and-mortar to ecommerce, etc.), and do so in real-time, its connection with them—along with the consumers’ loyalty for the brand—will wane. As the connection withers, it will become more and more difficult to entice current customers to spend more or step into new categories.
All customers lapse, but not all customers lapse for the same reason. Some lapse because of economic circumstances (e.g., job loss). Some lapse because of personal reasons (e.g. kids are finally potty trained). Some lapse because of a negative experience with a brand, and it’s these customers who are all but impossible to reactivate. About 90% of customers who have a bad experience with a brand will never come back, and if a customer won’t come back, they can’t contribute to revenue growth.
Read our Micropaper, Why Does Real Growth Always Come Down to New Customer Acquisition?
However, the appetite for growth that most companies have exceeds what existing customers can satiate. Here are five reasons why relying too much on existing customers is dangerous.
They get lured away by competitors
Brand loyalty isn’t what it used to be. About half of all consumers will switch from one brand to another, if the new brand can offer them better service, better pricing, or a customer experience that better suits their expectations. Unless a brand can create a massive moat for its products and services, it’s bound to lose retention and reactivation opportunities to competitors willing to slash prices or offer a more appealing customer experience.
They have less to spend
Cart sizes are shrinking and average order values aren’t what they used to be. According to a McKinsey study, up to 40% of consumers decreased spending on discretionary categories in the last 12 months due to financial concerns that won’t likely be relieved for several years as the global economy struggles to recover from the impact of COVID-19. Constrictions on disposable income limit what consumers can do for a brand. It means they’ll be less likely to increase their buy rate, less likely to try new (or more expensive) products, and less likely to reactivate if they’ve lapsed.
They get tired of being pushed
At the end of the day, consumers aren’t numbers on a balance sheet—they’re people, and people can get tired of being pushed. When customers are constantly peppered with promotions to buy more (or buy new) products and services they’re bound to grow cold at some point, and when they do, they won’t be able to contribute to revenue growth.
They start spending time elsewhere
Consumers aren’t static and they can’t be expected to stay active on one channel forever. If a brand isn’t set up to reach them no matter where they go (desktop to mobile, social to email, brick-and-mortar to ecommerce, etc.), and do so in real-time, its connection with them—along with the consumers’ loyalty for the brand—will wane. As the connection withers, it will become more and more difficult to entice current customers to spend more or step into new categories.
They’re gone for good
All customers lapse, but not all customers lapse for the same reason. Some lapse because of economic circumstances (e.g., job loss). Some lapse because of personal reasons (e.g. kids are finally potty trained). Some lapse because of a negative experience with a brand, and it’s these customers who are all but impossible to reactivate. About 90% of customers who have a bad experience with a brand will never come back, and if a customer won’t come back, they can’t contribute to revenue growth.
Want to learn more about growth, existing customers, and acquisition?
Read our Micropaper, Why Does Real Growth Always Come Down to New Customer Acquisition?
