June 29, 2016
We recently broke down the “Eight Reasons Every Business Needs Recurring Revenue” and mentioned “flight risks” in that piece.
Flight risks are the customers that may leave you soon.
You won’t know until they are gone.
Their silence should be a warning sign for your business.
Keep your existing customers
The research is all over the place when it comes to the cost of acquiring new customers compared to the cost of keeping your existing customers.
At Diffactory we always use the conservative estimate of a 3x cost to attain a new customer versus keeping a current one. Some experts put that factor closer to 10x. No matter which number you use, new customer acquisition is way more expensive than keeping your current ones.
With this knowledge, most business owners would agree that focusing on retention is far more productive compared to new customer acquisition. Sure, your business needs new customers to grow, but you don’t want to disengage with your current ones in order to do so.
One of the powerful things about a subscription or membership business model is the ability to stay close to your customer. By moving from a transactional to an ongoing relationship, you and your customer are positioned for success.
Bonus: Because your relationship is sticky (recurring) vs. transactional (one-time purchase) you are less likely to lose customers when the occasional blip comes up.
Decrease market research time and cost
Being close to your customers allows you to test new features or services without having to conduct expensive market research. Technology companies are known for testing new features on small segments of their users before pushing out an update to the masses. These iterative tests allow tech companies to conduct research with the audience that matters most, current customers.
What can you do to keep your current customers?
By offering part (or all) of your solutions via a subscription model, you set your company and customers up for a success. The great news is that you don’t have to change your whole business to do this.
Here are some how some of our clients have added the power of repeat and automated business into their business models:
- Nutritional Supplements- Pro Alpha Nutrition, a Kansas City all natural supplement company, offers a “Subscribe and Save” option to make sure their products arrive automatically. Thanks to Amazon’s mass-adoption of the subscribe and save feature, Pro Alpha’s customers are already conditioned to place an order once and have it automatically fulfilled every month.
- Roofing & Siding – RSG Construction, a KC roofing and siding company, offers an annual roof maintenance program where they proactively inspect roofs twice a year for a small monthly fee.
- Childcare – Nannies of KC offers a membership based platform that guarantees parents have immediate access to childcare.
- Medical – Navitas Health Group acts as a proactive wellness medicine and primary care practice in your pocket. They do so by working directly with patients who pay them a quarterly or annual membership fee and cut out health insurance waste.
- Financial Services – National Credit Federation and US Student Loan Center help people with credit issues and student debt navigate the complicated worlds of credit and government programs. How do they do it? Monthly membership fees.
- Aviation – MemberJets has the “M” word in its name. A member-driven private aviation company who solves problems for operators and travelers
- Apparel – Cumpy’s T-Shirt Shop has a ton of street cred in KC by doing awesome things in our community. We are helping them create a monthly subscription t-shirt business based on their original designs.
Your turn
What can you do to keep customers, stay close to them and make your business more valuable and fun to manage? Here are three tips:
- Delight your existing customers every day. If you do this you will be better than 95% of your competition. Exceed expectations and be remarkable.
- Talk to your customers. What is their sentiment? If it is less than awesome then change things
- Create a small or large subscription component for your business and stay close to your customers. The benefits to your business are immense.