Predictability and a reduction in costs to attract new customers are not the only advantages to having loyal customers. There is a third advantage that helps reduce cost in dealing with customers. New customers have to learn how to buy from you, and teaching them takes time. You have to learn how to service new customers, and learning takes time. New customers may have bad credit habits, high returns, and a million other problems that need to be overcome before you can figure out how to best work with them, and overcoming these problems takes time. You must learn how (and if) these new customers are going to pay. You must learn what their delivery requirements might be. What styles or selection will these new customers prefer? Will these new customers be returning products or changing their minds on a regular basis? How demanding are they of service? How responsive are these new customers to special sales or promotions?
Only after you learn about them will you be able to deal with these new customers effectively. All this extra time costs you money—time is money—and all your potential profit is spent on learning how to deal with these new customers.
Charlie is a retired real estate agent in southwest Florida who owns several condominium units that he rents on an annual basis. When Charlie has a vacancy in one of his units, he places an advertisement in the local newspaper. He screens phone conversations with potential renters and only shows his property to those he thinks will be good tenants. When he shows the property, he completes a credit application and tries to learn as much about his prospective renter as possible.
Charlie and his wife spend their summers in the cool mountains of Tennessee. He does not want to have problems with property damage or rent collection during the summer when he is a thousand miles away from his property. Because Charlie knows he will be away from his rental property for several months, the amount of time and effort he spends screening and qualifying prospective tenants is substantial.
The amount of time Charlie spends renewing leasing with existing tenants is minimal. He knows his tenants: He has already transacted business with his existing tenant and he already knows what kind of tenant they are and if they are credit-worthy. Charlie understands the value of ease of doing business with a loyal tenant: Finding a new tenant is expensive and time-consuming, but renewing a lease is quick and easy.
Here's the good news: After you figure out how to deal with a new customer, you do not have to spend a great deal of money trying to attract the new customer, you have some level of predictability in dealing with the new customer, and you have an excellent chance to see some profit if they return to buy from you again.