Why Repeat Customers Are Better For Your Business

When most of us start out in business, we do not care who our customers are, or where they come from. All we care about is that they buy from us! That is a good strategy when you are getting started, but, over time, you probably want to start looking at your customer’s transaction rates too.

I have a formula for business success that I share with my clients, and one of the things that play a role in that formula is your transaction rate. Simply put, your transaction rate is the number of times that your average customer decides to buy from you.

The secret here is that a repeat customer is better for your business than one who only buys once, and that you never hear from again.

If you are wondering why, the answer is simple.

It costs more to win a new customer than it does to do business with an existing customer. Think about it. When you woo a new customer, you have to spend time convincing them that you are trustworthy enough to do business with. You have to spend time, money, and effort connecting with them, and building a relationship with them. That means phone calls, emails, visits, and possibly even business lunches. In short, by the time they have bought from you, you have probably spent a significant chunk of your profits getting their business.

When it comes to a repeat customer, however, the equation is very different. They need to buy something that they know you supply, and because they have already done business with you, they trust you, and know that you can deliver. Chances are, they will contact you to place an order, and you will not have to do much wooing at all.

The result is that your sale is quick, easy, and much less costly than the one that required you to find a new customer.

That is why improving your transaction rate is so important. If all of your customers are new customers, then you are spending all of that extra money convincing them to buy from you, and it is eating into your profits. If you can convince that customer to buy from you twice, however, the cost of the initial relationship building is spread over two sales, and if they make another purchase, it is over three. Notice how you are already going to be making more profit over your sales?

It is fairly clear that convincing people to buy from you more than once is a more cost effective and profitable method of doing business, but how do you go about it? Several methods actually.

The first option is to provide something that no one else does. Whether it is a patented product, or a unique service, if you are the only one selling something, you are almost guaranteed a higher transaction rate on your sales figures.

Another option is to provide better pricing or service. It is always risky to trade on price alone, but being only a little bit cheaper than your competitors can increase your transaction rate and the increase in profits should offset the loss in price. Likewise, if you charge the same as your competitors, but offer superior service, you are likely to have more repeat customers, and a higher transaction rate, and the increase in profits will offset the extra work in providing great service.

Then there are the clever schemes. Ever noticed how many chain stores offer a customer loyalty card, that gives you points, that you can redeem in their store? You can bet that the cost of the discounts they give you for coming back time and again is more than covered by their increased profit, purely because they have to advertise less to get your business! You could offer the same sort of scheme in your business, offering loyal customers a discount structure to entice them back time and again.

As you can see, there are several benefits to having a loyal repeat customer base, and a higher transaction rate per customer. As with many things in business, this just proves that it is often better to focus on working smarter, rather than harder, and that you can build a more profitable business by making small changes in strategy. So why not come up with methods of turning one off clients into loyal repeat purchasers, and reap the benefits?