In business as in life, growing profits are a strong indicator of your organization's performance. And while there is a tendency to think of ‘growth’ as something that happens as a result of expansion and by reaching ever higher numbers of people in more places than ever before, this is not always the case. The reality is that no matter how many people you could reach, the proportion that will convert to become a paying consumer will always be smaller than overall reach, and the number of consumers who will pay repeatedly is smaller still.
That's why for many businesses looking to grow their profit margin, it makes more sense to channel that energy into their already existing customer base. By working to develop the relationship that has already been established between the brand and the consumer, businesses have the opportunity to deepen their relationship with customers and encourage brand loyalty. Focusing their efforts on this demographic will inform businesses on the needs and wants of their target market, ultimately leading to better customer retention. This in itself encourages a higher gross profit for the business, with a minimum effort made to attract new customers.
These recommendations are supported by insights from Oracle’s ‘Seven Ways to Grow Your Profits’ whitepaper; “Here’s the kicker: You’re 60-70% likely to sell to an existing customer, compared to the 5-20% likelihood of selling to a new prospect.” That change in focus has a positive knock-on effect on other aspects of the business since it costs up to five times as much to attract a new customer as to retain an existing one.
Moreover, at a time in which British businesses are buoyed up with confidence, according to the National Federation of Independent Business (NFIB), growth is on everyone’s minds. But growing profits requires a more sophisticated approach than a fire-and-forget approach that reaches people indiscriminately. Instead, according to the whitepaper, the companies that truly take advantage of those high levels of business confidence will be those that focus on those repeat consumers.
Ultimately, pleasing existing customers is dependent on the ability to minimize the hassle and pain they encounter in all aspects of their working lives. As the whitepaper explains: “For upselling and cross-selling to positively impact your firm’s bottom line, your account managers should be constantly communicating with customers and teasing out their unfulfilled needs.” Oracle gives the example of using regular communication to discover when a client is launching a new department or subsidiary, one that could benefit most from offering them a ‘one stop shop’ bundle of services and products. Effectively, it’s using the insight you have into an existing company to elide the pain points that prevent them from growing their own businesses.
Developing those regular touchpoints and selling more to your existing customers as a result is one single example of how to increase your business' profit margin, outlined in the Oracle whitepaper. The six other sections set out how businesses can best invest in strategies to maximise the value of their ongoing operations, from expanding into global markets to selling through an increasing number of channels.