The Retention Pyramid – 6 Steps to Keeping Customers Forever and Increase Your Profits


The most expensive customers you have are your brand new ones. Your cost per acquisition results in just one sale, typically.

Plus, your chances of selling to a brand new prospective customer is less than 3%.

However, your chance of selling to an existing customer a second, third, or fourth time is 60%-70%.

Because your cost per acquisition stays the same, every time your existing customers buy from you again and again, your profit increases.

Unfortunately, for most businesses, the low-hanging fruit of existing customers go unpicked. Instead, most businesses are constantly chasing after the most expensive customers – brand new ones.

What if you could sell a second product to your existing customer base? Couldn’t it double your revenue?

And how would it affect your margin if it cost you zero to sell that second product?

Unfortunately, most businesses let their existing customers go cold after the first sale so the second sale often costs them the same amount as the first.

So let’s change that because you can radically improve your bottom line if you just retain your customers and nurture a relationship with them.

Here are the 6 Steps of the Retention Pyramid that help you keep customers forever and increase your profits:

Step 1: WOW the Customer


WOW the customer by creating a product or service that provides superior value. How can you improve your product or service? Focus your attention on service, quality, and functionality to get better, quicker results.

Don’t forget that the appearance of your offering – packaging, design, etc. – impact the perceived value by your customers. (Just look at how Apple positions the value of its products through their design and packaging.)

Step 2: Create Continuity


One of the simplest ways to retain your customers and create repeat purchase opportunities is by creating a continuity program. Can you create a membership or club for your customers that presents them with special offers every month? Can you create a subscription service for your customers that automatically generates monthly sales? Can you change to a recurring revenue model rather than a one-off revenue model?

Before you say, “No” to any of these questions, just consider that Nike recently launched a subscription service for their footwear. Previously, every other sneaker manufacturer treated sneaker purchases as one-off events. But Nike looked at the success of subscription services in other industries and adopted the model.

Step 3: Communicate


With today’s automation technology, you have no excuse in letting your customers turn cold. You can communicate with them regularly through email, social media, direct mail, and online retargeting for zero to little cost.

The hardest part is creating the content, but you don’t have to get fancy. Plus if you can’t write the content yourself, you can hire a copywriter to help. Or you can license existing, already-created content. The point is to keep the communication open by providing your customers with valuable information. Just remember, your communications should be 80% value add, 20% promotion.

Step 4: Create Barriers to Exit


Make it difficult for customers to leave you. You have human nature in your favor here – it takes ten times the perceived benefit to buy from someone else than it does to continue buying from you.

If you can create just a little pain to leave you, while still providing great value, then customers will stay with you. For example, my cell phone company provides me with great coverage and good service; while it might be a little more expensive than a competitor, the pain of switching – changing phone numbers, dealing with sales people, going to the store – far outweighs the slightly higher cost. So I remain a customer. What barriers can you erect that cause just enough pain so it’s not worth leaving you to find another?

Step 5: Reward Loyalty


Creating barriers is the stick. Rewarding loyalty is the carrot. Sandwich shops and video stores used punch cards to reward loyalty – after the 10th purchase, you got a free one. American Airlines took this concept and revolutionized the airline industry with frequent flyer miles. How can you reward your customers for their loyalty with bonuses, discounts, better pricing, added value, personalization, etc?

Step 6: Community


When you turn your customers into a community, they self-identify with your brand. This is the apex of retention because a community will advocate for your brand, purchase all of your products, and shun your competitors. Look at how iPhone users self-identify as iPhone users and disparage Android users. It may seem ridiculous, but Apple created a community of lifelong customers who eagerly await every new product launch and stand in line for days to be the first to purchase. How can you foster community by creating clubs, memberships, events, forums, and using social media to foster a particular status associated with your brand?

IMPORTANT NOTE: Do not attempt to put all six steps into place at once. Go for easy wins by putting in place the easiest ones. See how your brand and offerings align with the different steps. Some tactics will work better than others.

The point here is to move forward, take action, make changes. If you try to do it all at once, you’ll paralyze yourself and remain stuck. Make one decision and move forward towards change.

What’s one action you can take today to improve your retention?

Please share your idea with everyone in the comments below!

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Tony Guarnaccia

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About Me

Tony has grown over 10,000 small businesses and a dozen Fortune 500 companies, including ADP, Ford, and AutoNation and became the Google Partner of the Year. Later, Tony returned to his entrepreneurship roots to bring the strategy, tactics and resources normally reserved for large enterprises to small businesses. Today, he is focused on bringing that same vision to podcast hosts and guests – to make Podcasting profitable.

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