Flip the Funnel: How to Use Existing Customers to Gain New Ones

MEASUREMENT GUIDELINES

New paradigms inevitably call for new metrics. What we measure and how we measure it will determine short-term performance, medium-term direction, and long-term achievement.

For example, USAA doesn’t just measure retention (they retained 96 percent of their customers in 2008; thanks for asking). They also track “retention for life” (95 percent of their customers plan to be lifelong members), which is pretty cool and enviable. Global information services corporation Experian uses 11 different key drivers to help determine various elements of customer experience and loyalty.

I’d like to suggest another more direct comparison. It’s time to take on the big dog—acquisition itself—with all its bloated blubber and unnecessary padding of superfluous brand hyperbole and esoteric symbolism.

We must determine both the exact cost and the return on that cost to acquire a new customer using traditional acquisition channels versus acquiring a new customer via existing ones. We should also look at an apples-to-apples comparison of one additional (repeat) purchase from an existing customer versus a purchase from a new customer (singular) from a basket-sized perspective. Finally, look at the transaction value of a preferred customer. How do these three buckets compare to one another?

All you have to do is follow these simple steps:

1. Figure out where your business is coming from—that is, segment new (unaffiliated), referred (affiliated), and existing/returning customers. ...