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The Compounding Customer - One of the Secrets of Business Success

By Deborah J. Sparks

You've heard the power of compounding interest? The same is true of compounding customer. There is no marketing force more powerful than positive word-of-mouth from a satisfied customer.

Let's face it - many organizations are struggling to provide a high quality of service these days.

What you might not know is that it costs 5 times more on average to obtain a new customer than it does to retain an existing one.

Focusing on the creation and retention of loyal customers is not only a sound economic strategy, but it will separate you from your competition.

You can achieve a competitive distinction by developing a strategy of creating loyal customers. It has been proven that organizations with high levels of loyal customers typically grow revenues at twice the rate of their competition.

Developing loyal customers must become part of your organization's culture. If one is driven by profits only, often times it will be at the expense of the customer. This short-term thinking is an organizational disaster waiting to happen.

We know that a loyal customer will always return to purchase your product or service, which in turn creates a long-term stream of revenue.

The Satisfied Customer versus the Loyal Customer:

So, your customer says they're satisfied. That's great, right? Not so fast. What that means is that they feel you have provided them with a product or service that met their expectations. Will they return to you the next time they require your product or service? Perhaps. But they will just as easily go elsewhere.

What if they were more than satisfied with your product and felt that your service was outstanding? If they didn't feel like they were just another "transaction" or number? If they felt as through their business was truly important to you?

If the focus is on consistently providing an outstanding level of service and building long-term business relationships, the chances of developing a loyal customer base are very high.

What can that mean in revenues? Let's take a look at a "satisfied" customer's total revenue opportunity versus a loyal customer.

Grocery Store Revenue Per Visit Number of Visits Total Annual Revenue Opportunity Total Revenue Opportunity (based on 10 year relationship)
Satisfied Customer $50.00 1 $50.00 $50.00
(1 visit only)
Loyal Customer $50.00 52 $2,600.00 $26,000.00
(based on an average of once
 a week for 10 years)

Loyal customers always come back and they will tell others. That is the power of compounding customers.



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© 2010 DJH Training & Application Solutions Inc.

WOULD YOU LIKE TO USE THIS ARTICLE IN YOUR NEWSLETTER, EZINE OR WEB SITE? You can, as long as you include this complete blurb with it: An entrepreneur at heart, Deborah J. Sparks established DJH Training & Application Solutions Inc. over 20 years ago, realizing her dream of creating a company known for providing high quality computer software training, application development and support and exercising her passion for teaching. To learn more and to register for DJH's free newsletter, Innovations, please visit www.djhsolutions.ca.