Relationship Marketing: How to Maintain Old Customers

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For a company to survive and thrive, it must generate profits, and those profits come from customers’ purchases. The sources of corporate profits from customers can be divided into two main categories: one is new customers, who are attracted through extensive advertising and promotional activities using the traditional 4P marketing mix, in order to encourage them to purchase the products for the first time; the other category consists of existing customers who have already bought the company’s products, are satisfied with them, have no complaints or grievances, and are willing to continue purchasing the products if the company provides proper customer service. 　　When acquiring new customers, it is first necessary to conduct extensive market research to understand their opinions on various aspects. The results of this research are then analyzed, and based on those findings, appropriate advertising strategies are developed. Additionally, regular large-scale promotional campaigns are carried out to remind consumers to make purchases. Each of these steps requires substantial financial, material, and human resources support; as a result, the cost per unit increases significantly, which in turn reduces the company’s profits. However, when it comes to existing customers, there is no need for these steps in order to encourage them to make further purchases. But how can businesses keep existing customers engaged in transactions and ensure that they maintain sufficient confidence and goodwill toward the company’s products? Businesses must adopt customer retention strategies from relationship marketing, recognizing that existing customers are the most valuable asset of a company – and this is the key to its long-term success. 　　The necessity of retaining and maintaining existing customers In past corporate marketing efforts, a considerable number of companies focused solely on attracting new customers while neglecting to retain those they already had. As a result, these companies prioritized pre-sales and in-sales activities, which led to many problems in after-sales service not being addressed promptly and effectively, causing a significant loss of existing customers. However, in order to maintain sales volume, companies must continuously acquire \"new customers,\" creating a continuous cycle. This is the famous “funnel principle”. A company can lose 100 customers in a week and gain another 100 at the same time; on the surface, its sales performance seems unaffected. In reality, however, the costs associated with marketing and promotional efforts to acquire these new customers are significantly higher than those needed to retain existing customers, which makes it highly uneconomical from the perspective of return on investment. Therefore, using the “funnel” principle as a guiding concept for formulating a company’s marketing strategy is only suitable for an era dominated by traditional production concepts, as well as product and sales orientation concepts. Today, in a buyer’s market, products are becoming increasingly homogeneous. At the same time, due to advances in science and technology, the lifespan of products is getting shorter. Many companies employ similar marketing strategies and tactics, and consumers have become quite rational; as a result, it is essential to provide customer maintenance and after-sales services. 　　The role of customer retention First and foremost, retaining existing customers helps maintain a company’s competitive advantage over the long term. The services provided by enterprises have evolved from a stage of highly standardized, detailed services to one that involves personalized customer engagement. 10 years ago, when IBM’s annual sales volume surged from 10 billion to 50 billion dollars, IBM’s marketing manager Rogers, speaking about the reasons for their success, said, “Most company marketing managers focus on acquiring new customers, but our strength lies in retaining existing ones; we at IBM will go to any length to satisfy our repeat customers.” ”Another example is Joe Girard, known as \"the greatest salesman in the world.\" Over a period of 15 years, he sold 13,001 cars through retail sales; on average, he sold 1,300 cars per year for those 6 years. The record he set for car sales has not been surpassed to this day. He always believed that the first car sold to a customer was just the beginning of a long-term partnership; if a single sales transaction did not lead to further business deals, he considered himself a failure. 65% of transactions come from repeat purchases by existing customers. The key to his success was providing high-quality service to his existing customers, enabling them to keep returning to him to buy cars. It is evident that successful companies and successful marketers regard retaining old customers as one of the top priorities for the development of both the company and themselves. Retaining old customers is more important than acquiring new ones, and even more so than market share. Multiple surveys conducted by consulting firms have shown that retaining existing customers contributes far more to a company’s profitability than focusing solely on market share and achieving economies of scale. 　　Secondly, retaining old customers also significantly reduces costs. The effort required to acquire a new customer is five times that of retaining an existing one. In many cases, even after acquiring a new client, it takes a year before real profits can be made. The main reason why marketing a new customer is costly is that the expense of making an individual sales call is much higher than the relatively low cost of serving regular customers. Therefore, ensuring that existing customers make repeat purchases is the best way to reduce sales costs and save time. 　　Furthermore, retaining existing customers also **helps to acquire new ones. With such a wide variety of products available, the role of existing customers in making sales cannot be underestimated. Because for a consumer who intends to make a purchase, they need to gather a large amount of information before buying the product. Among these, recommendations based on the personal experiences of relatives, friends, colleagues, or others are often more trusted by buyers than those provided by the company itself. The word-of-mouth effect for customers is as follows: 1 satisfied customer can generate 8 potential deals, of which at least 1 will result in a sale; 1 dissatisfied customer can affect the purchasing intentions of 25 people. 　　Finally, gain more market share. As companies focus on developing long-term, mutually beneficial relationships with their customers, it has increased the loyalty of a significant portion of their existing customers to those companies. Loyal customers are willing to purchase more of a company’s products and services; their spending amounts to two to four times that of casual consumers. Moreover, as loyal customers age, their income increases, or the businesses they work for grow, their demand will further rise.