ROCKS DIGITAL  BLOG

John Carroll

It’s All About That Base … The Customer Base

Base CustomersNo, I’m not referring to Meghan Trainor’s hit song by the same name, I’m talking about your installed base of customers.

Baseline Customers are Critical to the Growth and Longevity of Your Business

When you look at the financial profile of the majority of small businesses, a limited number of customers often dominate the profits achieved. This principle is called Pareto’s Law. In a typical small business, 20% – 25% of the customer base can account for 75% – 80% of the revenues and profits. Given this fact, where should you invest your time, energy and resources to grow your business in 2017? Here are some more hints …

New Customers are More Expensive to Acquire

What we also know is that it’s 6–7 times more expensive to acquire new customers than to retain existing ones and 2/3 of the customers who leave do so because they feel neglected. Likewise, a 5% improvement in the customer retention rate could yield a 25% to 50% increase in profits or more. So, it just makes good business sense to protect and grow those profitable business relationships in order to increase the lifetime value of each customer. Right?

What is the Lifetime Value (LTV) of a Customer?

The Lifetime Value of a Customer is the Average Purchase Amount x Frequency of Purchase x Average Length of the Customer Relationship.

The chart below provides an example of the importance of not only retaining but building upon those profitable client relationships.

Customers LTV

As you see reflected in this example, just a 10% improvement in the average purchase amount, the frequency of purchases and length of the relationship yields a 34.4% change in the LTV of the customer. Likewise, a 30% improvement in the categories would yield a staggering 141.4% positive change in the lifetime value of an individual customer.

Move Customers and Sales from Transactional to Relational

From the example, it’s easy to see in pure financial terms the value of staying in touch with your existing customers and continuing to build upon those profitable relationships over time. It also points out the necessity of moving away from a transactional to a relational sales and support model. Why? Because customers are people too, not transactions, and we’re all in the human-to-human (H2H) business. Also, it’s time-consuming and expensive to make up the revenue and profits associated with a customer loss.

So, if you want to make this your most profitable year so far, then invest more time, energy and resources nurturing those established client relationships while protecting and growing the base. You’ll come out ahead in the end because it’s all about that base!

How are you nurturing your customer base? Share your ideas with us!

John Carroll

John Carroll is a Business and Leadership Strategist, Best-Selling Author, Blogger & Speaker. Top 100 Leadership Expert to Follow. Who's writing your story today?

More Posts

Download Our SEO Guide

Created in a joint partnership with Advice Local, this guide — What You Need to Know About SEO — provides an introduction to SEO concepts, strategies and best practices for optimizing a website. Complete the form below and get instant access.

    ROCKING DIGITAL SERVICES

    Web Design & Development

    Your website needs to be aesthetically pleasing and functional. We build websites for desktop and mobile that are both.

    LOCAL SEARCH & SEO

    Your website needs to attract search engines and consumers. We are experts in local search and SEO, and can make that happen.

    CONTENT CREATION & MARKETING

    Anybody can write words on a page, but can they write content that integrates SEO best practices and converts? We can.

    Here’s What our CLIENTs have to say

    [RICH_REVIEWS_SHOW num="all"]

    Their Local Business Websites Rock

    ★★★★★
    Rocks Digital knows how to build local business websites that convert prospects to customers. Not only do I recommend them to work on my reputation management client’s websites, but they work on the Reputation Sensei brand, too.
    - Chris Snellgrove

    They Customize Their Solutions

    ★★★★★
    Rocks Digital customizes to meet their client’s needs. We needed our existing website optimized for search. We are now placing for more industry keywords and continue to improve. They consult with our in-house team on content optimization, manage our GMB listing & more.
    - Greta Valenti

    Highly Recommend

    ★★★★★
    Rocks Digital manages not only the Association of Directory Publishers website, but our Trusted Local Directory. From helping us get our event information on the website to producing guides, blogs and new content, they have what it takes.
    - Cindi Aldrich
    [RICH_REVIEWS_FORM]

    LATEST BLOG POSTS

    LOCAL VISIBILITY REPORT

    Is your Google My Business listing helping or hurting you? Is bad data causing consumers and search engines to lose trust in your business? This is information you simply must know.

    To get these answers right now, just enter your business name below to run our FREE
    visibility report.


    Need a facelift
    for your website? More search traffic? Need to blog, but don’t have time?

    Our Digital Services Could Be For You