Neglecting existing customers in pursuit of new ones is a common mistake which is why it’s an issue that lies at the heart of most conversations on customer retention. It’s been debated for years, and yet it still happens in many organisations, across many sectors.
Why then, do we still need to talk about the value of retaining customers?
A large part of the reason is the focus on customer acquisition as a core strategy for business growth. There is huge pressure, particularly from leadership teams, investors and market analysts, to add customer numbers to the bottom line to demonstrate a thriving, forward-thinking business.
Of course, growing your customer base is critical to overall business growth, but it isn’t the only approach – and can be a hugely detrimental and short-term strategy if it’s not measured and balanced. After all, if you’re spending most of your time courting new customers, it’s likely that few resources are being directed towards your existing ones – those who are already interacting with your business, using your products and services, and spending their money with you.
Today, having a well-defined, laser-focused customer retention strategy is more important than ever to successful, sustainable business growth. Understanding your customers’ needs and wants, and delivering exceptional experiences that answer these, is the only way to maximise the lifetime value of existing customers and should be a central pillar of your business strategy.
A strong customer retention strategy is good for your bottom line in many more ways than simple customers numbers. That’s because:
Repeat customers are more profitable: Compared to new customers, repeat customers tend to spend more and are more likely to try your new products. According to Emarsys, studies show that loyal customers spend 67% more on products and services than new customers.
Businesses with long-term growth goals should therefore work towards building a customer base with trust and loyalty towards their brand, to see their profits increase over time.
Marketing costs are controlled: It’s well-documented that it can cost up to five times more to acquire a new customer than it does to retain an existing customer. Your existing customers already know about your products and services – so why not gear efforts towards retaining them, rather than focusing solely on marketing to potential new customers?
Word-of-mouth recommendations by loyal customers can be more lucrative and credible than any marketing, and many customers are ambassadors for your brand on social media. In fact, some studies show that word of mouth marketing can bring in five times more sales than paid media.
Retention uses less resource than acquisition: It takes much more time, effort and resource to convert a lead into a customer. In addition to marketing, you’re also reliant on sales teams reaching out and understanding requirements (a process that can take many weeks or months). If you’re executing a well-designed customer acquisition strategy, you’ll also be investing in customer onboarding and customer success – all critical processes, but ones that take time to deliver value.
Customer retention can drive customer acquisition: Attracting new customers requires continuously honing your products and services to stay one step ahead of your competitors, and loyal customers can help you achieve this by providing valuable feedback.
Understand your existing customers – find out what they like and dislike about your products and services, and what sort of changes could help to improve their experience with you. Acting on this invaluable feedback to meet your customers’ needs and improve your products and services is how you truly set yourself apart from your competitors, using proactive customer retention strategies to spot new opportunities for growth.
Retaining your customers using insight
So, how do you retain your ever-important existing customers? A strong customer retention strategy will involve learning more about your customers’ expectations and experiences with you.
Using a deep insight into customer experience to guide your product and service, you can ensure you are keeping pace with customers’ ever-changing needs and are giving them no reason to look elsewhere.
A successful customer retention strategy should be part of your wider, over-arching CX strategy, in which you understand your customers’, prospects’, and rejecters’ journeys; evaluate your organisation’s CX Maturity; understand the ‘promises’ you make to customers; and understand the impact that positive CX has across every aspect of your organisation.
When it comes to retaining customers, it boils down to the simplest of relationship rules: show that you value them, and they will value you right back.
Article written by Nicole Holt, Head of Research