If you trying to sell a product or service we’re pretty sure that you would’ve read a lot of articles, both online and offline that talk about marketing campaigns and customer acquisitions, because these things are obviously the only way for you to grow your business and client base? Wrong!
Most marketing campaigns are focused externally and geared to market to prospective new customers. More customers = More revenue. But there’s also a much more lucrative marketing angle that you are forgetting: marketing to your existing customer base, and getting them to spend money with you again, again & again.*
Here’s some quick math:
- We have pricing points ranging from $70 to $200. Let’s say that if we take the different pricing points and calculate what the average value of a purchase is by our users, we get to an amount of $100. So if we got 10 new users, on average we’d have a revenue of $1000 (10 x the average of $100).
- Now consider that we have 40 000 registered users. If we can convince 1% of them (that’s 400 users) to make another purchase with us, we’d have generated $40 000 (400 users x the average purchase value of $100). In this way, there’s no marketing or customer acquisition costs involved; we’ve just targeted the customer base we already have.
Definitely not bad business that, right? This is potentially one of your most lucrative sales channels, yet you’re probably ignoring it in favour of growing your business and revenue by only focusing on new customer acquisition. The idea is to maximize what you have (your existing customer base) by offering them reciprocal value in the most cost-efficient way.
In our opinion, this is one of the easiest ways to grow your business without having to be a marketing genius. Just add value.
25 Responses to “The Most Lucrative Business: Repeated Purchases”
I agree in general.
Another thing I do is make sure not to lose the customers I have. Product upgrades are priced at 15-20% of the new price, ensuring that nearly all customers upgrade. Many companies I have seen try to charge 30-70% for upgrades and end up losing most of their customers since most customers only really need a few of the many changes in a given upgrade, and others are actively resisting upgrades since their experience in general with software nowadays is that many product upgrades bring bugs, changed interfaces, and lost features. This makes them gun shy regarding new upgrades and expensive upgrades seem just insulting to them.
Good strategy imo. This obviously means that those purchasing decisions are more impulsive and some users are upgrading even they don’t explicitly *need* it.
Very Very Good!!
obvious much?
Troll much?
Such a constructive, value-adding conversation.
I was thinking about this the other day, when I found out a client of mine charges much less for her annual event than I would have thought she charged. Then I realized if she picks up a percentage of her attendees as private coaching clients or for higher-priced packages, she ends up making more income overall than if she would have limited the number of conference attendees by making the conference a higher price. By keeping the price low, she has a greater number of people who she can further pitch to over the course of the conference … and once they are excited about being in the door, they are already halfway there to purchase the higher package.
Ditto. So the event itself is more of a marketing campaign than a pure revenue channel. Genius.
Great point Adii, I think the main point of your article is to take care of your customers because, well, they’re your customers. It may seem simple but so many business people miss this. I recently found a competitor [who shall remain nameless] site and they had a theme I liked so I attempted to purchase it. It was an absolute nightmare. Four weeks later, I finally received a response from the company, and then demanded (and received) a refund. I’ll never go back because what they would have to do to get back in a positive light for me is to replace all that wasted time, which I’m pretty sure they are ignorant and incapable of doing.
That other business lost a customer (me) and the most important reason to maintain positive relationships with your customers….Customers have friends. While this wasn’t mentioned in the article, it is probably the most important aspect of maintaining positive relationships with your customers. You are, in fact, maintaining a positive relationship with anyone they may have an opportunity to share their experience with.
One thing that Woo does so well, is take care of us, their customers, I’ve only made one purchase (contemplating theme club) but that purchase was pleasant, and communication was timely. Since then, I come back here to see what’s going on, and appreciate watching the great entrepreneurism going on here. The success is well deserved.
Pete
You hit the nail on the head: our most valuable asset at WooThemes is every single one of our customers (albeit with a once-off theme purchase or a loyal club member). We would not be able to grow and do the cool stuff we do without them. So we really try our best to keep them as happy as possible and add as much value as we possibly can along the way.
Good article, but missed two points, both for and against.
For.
Existing customers have already demonstrated that they are in your market, and you have won their trust. So the likelihood of repeat business is very high.
Against.
Many people are starting a new businesses online, so there is no list to market to. So here they need a strategy to get that list. Many of your themes don’t include this ability.
Also, you may be selling once only products. For instance I help people with new home sales. Not only a tight market, but hardly one that delivers repeat business in a workable sales cycle. Yes they do exist, but not often to even factor in.
So in this type of business you are always looking for new prospective customers.
Repeat business is rare and has a long wait attache to it.
Good point, even though a strategy of adding value to ensure repeated purchases can possibly still be used for new businesses without a list. Here’s how you do that:
1) Build up your list slowly.
2) As you build up your list, start building a track record / reputation of doing over-and-above what is expected for your customers. Add more value than they expect.
3) Use #2 as a marketing tool to build your list even further.
4) Rinse & repeat.
Smart points, you didn’t miss a beat at all! Subscription models that seek to education, inform and help people grow. People will pay people consistently for a great product and service, very simple! Sometimes, we over think the obvious! Great post….
WooThemes business model seems to be a great one. What I find interesting is over the last year the new theme companies that have come out use the WooThemes layout or some variation for their website. I know it is a copy cat world but you guys are definitely pioneers in your industry.
Imitation is the greatest form of flattery.
That said, our approach and our website is hardly unique. We’ve just combined a bunch of really great strategies and best practices from other companies and are now broadcasting that the world in our unique voice.
I think that you can (and already have with your refresh of classic themes) apply the same principles in this article to theme design. Why continue to churn out new themes when you can refresh some classics? I’ve often wondered how much overhead it’s taking Woo to manage, maintain and support older themes and the large quantity of themes so diligently. Does one really need to offer 5 news themes or 6 portfolio themes? Or just one good one? Just like marketing to existing customers, refreshing and expanding tried and true themes may be a better solution than developing new ones.
Good points Frank.
On the other hand, re: “Does one really need to offer 5 news themes or 6 portfolio themes?”
That would depend on your perspective.
What does a good news theme look like to you?
Which in your opinion, is the best of the 6 portfolio themes?
On the basis that theme design is changing, new themes are a must.
And as you suggest new features will also enhance the general offer.
As an analogy, I work in home design, which are copyrighted. In Australia if you ask a home buyer what they are looking for in a new home, 95% will say, 4 beds, 2 baths, and a double lockup garage.
So just how many ways can there be to meet that requirement? Thousands. Yet new home buyer will walk around a display village, see 50 home designs built by 20 builders and not like one of them! A typical response to “what is it you are looking for in a new home” Is ” I’ll tell you when I find it”.
And as you say about web design, many of those home builders will stop showing their past best sellers because of the urge to create something new. [I have this problem with the builder I am working with now. Their new designs are not customer focused,but builder focused and their old best sellers are no longer displayed. Result? loss of market share over several years.
So imo a mix of tweaked, refreshed winning designs, and new designs with the latest trends would be a far better formula for a successful builder, homes or web themes.
I perceive that a lot of Woothemes best customers are “web designers” who are happy to just tweak Woos designs for customisation to client requirements, or “web developers” who know how to code but not layout a design.
Every client I would imagine, would want several designs to select from, before that tweaking occurred.
So Woothemes are spot on as far as I see. They always show and enhance the oldies, and offer new design trends as well. “New” after all is a big seller, but I take your point, newest is not necessarily best for purpose.
I don’t give my clients multiple designs to select from or even ever show them a WooThemes design. I listen to their business goals, brand objectives, help them define their website requirements based on those goals and then design/develop a site based on those goals. I mostly use the Canvas theme, but it they had specific niche like real estate, I’d look at a more specific Woo theme for customization.
My thoughts above were based mainly on sustainability from Woo’s perspective. They offer 89 themes I believe. At some point soon they’ll be forced to pair those down to survive.
Maybe. But we’ll figure that out when we get to that point.
This is Great. Appreciated.
Hey I think your blog is good. I found it on yahoo I will definately check back soon.
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