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Looking for profitable growth? Invest in your existing customers

Jesper krogh Jørgensen I børsen I 1 october 2017

Read the full article in Danish  

PA Consulting Group’s customer loyalty expert Jesper Krogh Jørgensen discusses why businesses would be wise to invest in existing customers if they’re looking to create profitable and organic growth. 

In the past, many companies have been too eager to boost their profits by making aquisitions in an attempt to buy attractive companies before they become too expensive. But this is a risky strategy. A recent study by Sorbonne University shows that a mere 9 percent of companies have realised their business goals through mergers and aquisitions. 

Attracting new customers is often very costly because it requires companies to invest in marketing, sales activities, introductory discounts and the like, and it’s much harder to maintain them. But if companies invest in their existing customers and their continued loyalty, they have a far better chance of creating a more stable, organic growth. These customers already know the company and are more likely to buy more from them or recommend the brand to other potential customers, if they are satisfied with the service or product. 

To strengthen customer loyalty, B2B companies should focus on keeping customers that represent a high share of wallet, and strengthen sales towards customers where it is low. In B2C markets, business need to look at how to bring in more customers by turning existing ones into brand ambassadors.

Many companies, even those leading the market, can double their revenue solely by increasing sales to existing customers. A business case showing how much more value business can create for shareholders by boosting customer loyalty can easily be made using a few key figures such as yearly revenue, operating margin and annual customer churn in percentage of revenue.

Jesper Krogh Jørgensen is a customer loyalty expert at PA Consulting Group.

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