In talking to a number of veteran marketers, we’ve learned that there are two fundamental ways to grow your local business:
Horizontally - get more customers
Vertically - get existing customers to come back more frequently
There are pros and cons to both approaches that we’ll cover here.
Horizontal Approach - Pros
There is tremendous value in attracting new customers to your business:
- Getting exposure to a new consumer unlocks their buying power towards your business as well as their extended friends and family, which can be additional customers.
- The long term “upside” of a new customer is the your greatest opportunity for growth but is also the hardest to attain.
Horizontal Approach - Cons
Unlocking the full potential of a new customer is really, really hard and difficult to track:
- Tends to offer a lower ROI over time.
- Customer acquisition is really expensive and often risky.
- Effective targeting can be challenging and costly and won’t deliver value unless you have the right message or promotion.
In all, approaching marketing by trying to get new customers it the hardest and most expensive way to grow, even if it does have the most potential.
Vertical Approach - Pros
Getting a customer that already shops with you to shop more is much easier than convincing someone to shop with you for the first time:
- Tends to deliver a higher ROI.
- Each time you engage with that customer and they shop with you, you have the opportunity to deliver more value and service to them and build a deeper relationship and increase their loyalty towards you.
- Least expensive way to get the most growth.
- Consider a customer that comes to your business twice a year. Incentivizing them through promotions so they come to your business once a month (6x more than before) is much easier than convincing someone new to come 12 times a year.
- Can leverage social media and track how it works by giving your online network something meaningful to share with their friends, like a promotion.
Vertical Approach - Con
The major challenges with the vertical approach are that you:
- Can see the light at the end of the tunnel
- If you are a clothing store and have 100 customers who each shop once every 3 months, then you make 300 sales with them. If you can get each of them to come back 3 times every 3 months, then you can earn 900 sales. That’s a 300% increase which is amazing even though it is a finite growth potential.
- Risk cannibalizing some of your sales.
- You may cannibalize the first visit but the upside of the next two visits is worth that risk.
When deciding which approach to take, ask yourself which is more important, the ROI of your spend or the overall growth potential of your efforts? If it’s ROI, then you go vertical!