Finding New Customers

It Takes A Plan!

Company X Pricing Chart

New customers are essential to maintaining any business. Statistics show that businesses lose 15% of their current customer base every year through no fault of their own. Customers stop doing business with good companies for many reasons including moving, dying or just because they no longer have a need for the products or services. That’s why it’s essential to replace this natural attrition by finding new customers every year.

How many new customers does it take to maintain your business? If you know what the average ticket of a customer’s purchase is (total sales / total number of sales transactions) and the average number of times a customer purchases from you each year (total number of sales transactions / total customers making purchases), then you can calculate the average yearly value of your customers. From these numbers we can then determine the number of clients you need to gain and the total dollar value of sales lost through attrition.

Ticket Equations

Let’s look at Company X as an example. Company X is selling $350,000 per year, has a customer base of 1400 clients, and did 2800 sales transactions in a year. Company X determines that the average purchase made is $125 and that on average a customer shops with them 2 times per year. That would mean that the yearly sales value of each customer would be $250. If Company X loses 15% of these clients even though they have provided excellent service and products, that means they would need to find 210 new customers each year who are willing to spend the typical amount when they purchase ($125 per purchase, or $250 a year). Remember that finding customers by offering discounts or coupons could attract those who will not support the average ticket and therefore Company X would need far more than 210 new clients to offset the natural sales loss if they were discounting. Company X is losing $52,500 due to natural attrition. If they discount average sales to their 210 new customers and lower their average sales value per client to $200, they will only make new sales of $42,000 and will not break even on that $52,500 loss. You can see the importance of finding new customers by doing the math!

Businesses who understand the need to replace existing customers find that it is not easy to do, but several strategies can help these efforts. First, current customers are excellent leads to finding potential customers. People often associate with others who shop for the same things. Marketing your business to neighborhoods where you already have many current customers gives you a much better chance of finding customers who will support what you offer. If you can get your current customers to offer positive reviews and testimonials to friends and family, it will also increase your chances of attracting new business.

Also consider the need to add new layers of customers who may want your product or service but have different needs for it. By re-branding what you offer, you can make your business appeal to a completely different segment of customer. For example, if you primarily sell to homeowners, you may increase your customer base by targeting sales to businesses. Doing so demands a different marketing strategy than selling to homeowners, because businesses often have different needs. This new business prospect may need many more services than a homeowner because they are too busy to come to you. By determining the needs of a new customer layer, you can market directly to what they want. If you can figure out what that is and create a way to let them know you will provide it, adding new customers will be much easier.

Categories: Improving Profits.

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