“The probability of selling to an existing customer is 60 – 70%, while the probability of selling to a new prospect is 5-20%.”
The exact numbers depend on your category, of course, but in general: yes, the probability of selling to an existing customer is much higher than to a prospect. Existing customers already know you, have their memory structures refreshed when they bought you and thus your brand is more mentally available for this group.
It doesn’t mean, as many marketers think, that you need to invest most of your resources in existing customers.
The NBD (Negative Binomial Distribution) tells you why. The NBD is the name of the shape that emerges when you plot the frequency or value of buying against the number of customers. The shape is the same for any given brand in any given category. Every brand has many light/low value buyers and few heavy/high value buyers. As a marketer, it is perhaps the most fundamental thing to know, because THIS SHAPE DOESN’T CHANGE.
So, of course you want to increase the number of customers at the right side of the distribution. We all do; you’ll make more money from them than from those guys at the left. But if you know that the shape stays the same while brands grow, there is only one possibility to grow: all the bars in the graph go up a bit, but mostly on the left.
This is in line with what renowned marketing effectiveness researchers Peter Field and Les Binet have found consistently in their IPA database: campaigns targeted at all customers are more effective than campaigns targeted at new or existing customers.
Remember this for your next discussion about cross- & upselling, targeting, account-based marketing strategy and/or where your aspired growth comes from.