Importance of Customer Retention: The Value of Keeping Customers
You spend a lot of time, effort and money acquiring new customers. Customer retention means keeping those customers you’ve already worked hard to acquire. It means creating repeat customers who will happily buy from you again and again.
Why is Customer Retention So Important?
Because customer acquisition is extremely expensive. It can cost up to 5 times more to acquire a new customer than it does to retain an existing customer. There’s also a link between customer retention rates and profit margins.
Make Savings on Marketing
Why does it cost so much to acquire new customers? It’s mainly down to marketing. Without marketing, potential customers may never even know you exist, and an intelligent marketing campaign can encourage customers to choose you instead of your competitors. But marketing costs money. It also takes time. If you want to get anything out of your marketing, you need to be prepared to make a significant investment.
But you don’t really need to market to your existing customers. They already know about your products and services. So, the higher your customer retention rate, the less you may have to spend on advertising.
It gets better: when a customer’s happy with a product or service, they’ll tell people. They may even explicitly recommend your products or services to their friends. And a recommendation from a friend can be more powerful than any marketing campaign could ever hope to be.
Focus on delighting your existing customers and you might expect a lot of free word-of-mouth advertising.
But the opposite is also true. If you fail to meet your customers’ needs, you’ll likely lose customers and get some damaging negative word of mouth.
Repeat Customers Are More Profitable
So why does boosting your customer retention rate boost profits? Because loyal customers are repeat buyers. They tend to buy more and spend more than new customers.
According to research by MarTech, existing customers are up to 70% more likely to buy a new product or service than a new customer. They also tend to spend around 33% more than new customers. This is most likely because existing customers know you and trust you.
Listen to your customers’ requests and fulfill needs and they’ll become loyal, possibly for life. Show you value them, and they’ll value you right back. And if they value you, they’ll be more likely to pay premium prices for your products and services – as they know that they’ll get their money’s worth.
Repeat Customers Will Help Your Business Grow
Business growth isn’t just about boosting your profit margin. It’s also about honing your products and services until you can truly say you’re the best in the business. You need to stay one step ahead of your competitors, and your loyal customers can help you achieve this.
Talk to your existing customers. Ask them what they like about your products and services. Also ask them if there’s anything they dislike, and what sort of changes could help improve their experience.
This feedback is invaluable. Most important, though, is that you act on any feedback you receive. Because this is how you truly set yourself apart from your competitors – through working hard to meet your customers’ needs.
Customer feedback will help you grow. It will help you improve your products and services, and it may help you spot new opportunities for growth.
Customer Retention is Good for Your Employees Too
An obsession with customer acquisition can have a negative impact on employee satisfaction. Nobody likes cold-calling, and the constant hunt for new customers can be exhausting and demoralising.
But if you focus on customer retention, your employees may have a chance to form meaningful relationships with your customers. Rather than faceless numbers, long-term customers can be known individuals with unique stories to tell. Work becomes less about the sales, and more about the people. For many of your employees, this will make work considerably more rewarding.
How to Retain More Customers
We understand that customer acquisition is important. But it should not be your sole priority. Don’t neglect your existing customers. Understand more about their expectations and their experiences so you can make them better.
To find out more about managing and improving your customers’ experiences, download our Fundamentals of Customer Experience Management whitepaper. A useful guide for directors, customer experience professionals and insight managers, learn more about what makes a good customer experience and how to take action.