Potential customers can be drawn from a firm’s existing customers or non-customers. When would companies tap...

Potential customers can be drawn from a firm’s existing customers or non-customers. When would companies tap into its existing customers? New customers? How are the criteria used for customer selection different in the two situations?

Expert Solution

The situations when the company can think of tapping for existing customers are:

- When the product is similar and the customers have already shown a lot of trust in the company, the loyal base of customers can help the company grow and get better revenues as compared to the investment in terms of customer acquisition cost.

- When the company is innovating and wants to test a new product on a smaller segment so it would try for existing customers only so as to get honest opinions and to lower the cost for getting new customers.

- If the tastes and preferences of the existing customers are more or less the same as the new product is offering.

The situations when company would want to go for new customers:

- When the product is completely different and the company wants to test it on fresh customers so as to access the market and earn better profits.

- When the saturation level has achieved and the existing customer’s needs are getting satisfied with the existing products so the company would want to tap in the new customers.

- When penetration strategy is adopted by the company and the company is going after volume.

Criteria are completely different as for the new customers much more aggressive strategies are to be achieved to penetrate in the market whereas for existing ones a subtle way of capturing a good share is enough.

keosha answered 2 weeks ago

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