Retain, Reactivate and New

The key to any successful business is leveraging these three concepts: Retention, Reactivation, and New. Understanding these ideas will help your business survive and thrive.

The basics

The most important asset in virtually every business is its customer list. This list generally has two components: ever-boughts and never-boughts. The ever-bought list contains everyone who has ever paid you for one of your products or services, whereas the never-bought list comprises those who responded to an ad or asked for a sample, but never paid you for a product or service.

Your understanding of your customer list and what actions to take will be different, depending on your objectives around each concept. Here are some thoughts:

Retain (retention):

The place to start. As you look at your customer list, those that are actively buying from you often represent a lion’s share of your revenue, sometimes up to 90%! That makes this group important to your business’s success and this importance can be summed up in one word: RETAIN.

Your goal: Understand the number and percent of active customers that come back during your business’s current year. Then apply revenue attributed to these customers to calculate a revenue per active customer. Most businesses use a 12 month cycle to calculate their retention number, but your business may be different.

Action: Calculate your retention number and percent for the past three years. Look at the trend and determine what action is required.

Reactivation:

Bringing back key customers. Once you identify your ever-boughts, there will be a number of customers that are no longer buying your products or services. With this group you need to determine how long it’s been since their last order. This aging of accounts is important, as customers who most recently bought from you will be easier to reactivate than a customer who has not bought from you in a number of years.

Your goal: Create a list of your inactive customers based on when they last bought from you, then determine why the customer(s) is no longer using your products or services.

Action: Target your recent inactive customers and develop a contact plan to entice them to come back to you. Even if they don’t, try to understand why they left so you can apply the answers to your current customer base.

New Customers:

Expensive, but worth it. You’ve focused on retaining your core customers and recovered a number of valuable, inactive clients, so what’s next? This is where activities to attract new customers comes into play.

Your goal: At a minimum, you’ll need enough new customers to replace those that were not retained. (Reactivated old customers should not be considered new.) Know what this number is and decide if you wish to maintain or grow your enterprise.

Action: By understanding your current customers, you can target similar new customers that will provide the greatest value. Leverage word of mouth advertising with your key customers, and look for creative ways to bring in new clients. If you aren’t sure where to start, look at last year’s new customer list and learn what brought them into your business. Then use these clues to create your marketing plan going forward.

To summarize, focus on retention, then fill in with reactivating prior customers, and finally don’t forget to add new, high-value customers to expand and grow.