Repeat customers are highly profitable.
If you want to create a significant increase in your revenue quickly, focus your time and efforts on encouraging repeat purchases from your existing clients. Getting happy customers to come back and buy again is more valuable and cost-effective than constantly acquiring new ones. And a product or service ladder will help you do this.
In this article, I’m going to explain why repeat customers are profitable and how you can encourage repeat purchases in your own business.
Why Are Repeat Customers Profitable?
Did you know that most businesses spend more than 80% of their marketing budget on the acquisition of new clients?
And while repeat purchases only make up 8% of purchases (according to statistics from the online world), they happen to result in 41% of revenue.
According to smile.io:
A returning customer spends three times more than a first-time buyer, and a loyal customer spends five times more.
This is because repeat customers are already familiar with and comfortable with your brand.
It all comes down to trust and confidence in you and your brand.
If you haven’t heard of the Customer Value Journey before, it’s a process where you turn a stranger from not knowing you exist into a loyal brand advocate. It’s a very reliable and essential process that you need to have in place to help your new prospects develop trust in your brand. But it’s also lengthy and takes time. The customer value journey is powerful but it’s also the reason why customer acquisition is costly, because build trust and confidence takes time and money.
What is a Product or Service Ladder?
A product or service ladder is a range of products or services rising in price and value. A higher price gives your clients more features and benefits.
One way to do this is to make your entry-level products or services (bottom of the ladder) free or relatively cheap. If your customer is happy and they feel they’ve received value, they’ll come back for more. And your profits increase easily as a result.
See Fempire’s service ladder below.
Your product or service ladder makes it easy to start small and build trust so that it’s easy to come back for more.
Each step of your ladder builds trust.
And when you trust that someone is going to provide you with value, you’re likely to come back for more.
How to Create Your Product or Service Ladder
If you’re already in business with one or two products or services, you can break them up into smaller products or services, or offer a ‘starter’ version.
What’s a way that someone can experience your work and the value it provides for a relatively small cost? Or for free?
For example, if you offer virtual assistance services, perhaps your signature offering might be a full social media management package including content creation (e.g. blog), graphics creation, captions, hashtags, and social media post scheduling. But not everyone is ready or financially able to jump into this big offering. Perhaps your ‘starter’ package could be comprised of graphics creation and post scheduling only. And once your clients recognise the value and freedom it gives them, they might want to progress onto one of your more comprehensive packages.
If you’re selling physical products, you could offer your products in a range of bundles, for example, starting with a single item, and then bundles of three or larger, each bundle providing more value than the next as you move up the ladder.
If you haven’t yet gone through the process of productisation for your products and services, check out this blog article How to Make Your Offerings Clear with Productisation and be sure to do this as well. It will help you set up your product ladder and be clear about what you’re offering at each step.
How will you set up your product or service ladder to maximise your profits?
I hope this article has helped you. You might also like:
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In service to your success,
Kate De Jong, Ph.D