It is a proven fact that it costs five times more to attract a new customer than to retain a current customer. This is according to a study conducted by Invespcro.com as well as their infographic, “Customer Acquisition Vs. Retention Costs – Statistics And Trends”.
The findings also revealed that 44% of companies place most of their attention on customer acquisition versus the 18% who actually work on retaining their current customers.
Customer Retention Defined
Customer retention is the marketing strategy that involves captivating customers into purchasing your services or products. This should not be confused with lead generation or customer acquisition since the conversion of the customer has already happened at least one previous time.
When you implement an effective customer retention strategy, you are paving the way to formulating solid customer relationships that will strengthen both your business and your brand.
Another great advantage is that your most loyal customers could even become your “brand ambassadors” spreading their positive experiences with your products or services across social media or just their own social circles.
One effective customer retention strategy is to make a great impression from the very first customer purchase. A poor or difficult first purchase will almost guarantee that the customer will not return. Therefore, it is of utmost importance to ensure that both the checkout and delivery system are as seamless as possible.
The Facts Are In The Numbers
The figures all point to the fact that by keeping your current customers satisfied, they are more likely to make recurring purchases. This is critical to the growth of your business. If your customers love your business, they will help build your brand and increase your profit margin.
Marketing Metrics found that the possibility of selling to a current customer is 14 times greater than the possibility of selling to a brand new customer.
The Harvard Business School and Bain & Company discovered that when a business increases its “customer retention rates” by only 5%, this can translate to a rise in profits by 25% to 95%.
Neil Patel of CrazyEgg.com noted that an existing customer is 40% more likely to purchase something than someone who has never purchased from a business before. And when a new product is launched, current customers are 50% more likely to try by buying it.
Why Keep Your Existing Customers Happy
By targeting your current customers, you are able to maintain a high “retention rate”. A retention rate is the percentage of customers that have stayed with your company over a long length of time.
If you have a higher retention rate, this means your profit margin will be high as well.
Also, the longer period of time that the customer has been a loyal patron of your establishment, the higher their “lifetime value.
The lifetime value measures the “total profit contribution” that a customer has provided for your business.
There is always a “one-time cost” associated with acquiring a new customer. And therefore, you will always make more profit coming from the purchases of your existing customer.
The more customers that you successfully retain, the higher your “average customer lifetime value” is. This will always lead to increased profits.
Why else should you keep your customers happy?
Loyal and happy customers will lead to more referrals. Your best customers are your most enthusiastic cheerleaders. As your biggest supporters, your customers will be driven to spread the word to their friends, family, and followers on social media.
People still rely on and trust referrals from friends and family and therefore should not be taken lightly.
Another bonus? You don’t have to spend a dime on these marketing efforts. Your biggest customers are doing the work for you, free of charge.
How To Increase Customer Loyalty
So now you know that keeping your existing customers happy is paramount to the success and growth of your business. But how can you keep your loyal clientele happy and coming back for more? Here are a few tactics:
Keep The Communication Lines Open
Any relationship is bound to disintegrate if there is no communication happening between both parties. Same with the business and customer relationship.
Stay in contact with your customers via e-mail and your social media platforms to inform, educate, and entertain. Alert your customer base when there are special sales and discounts. Have giveaways to show your appreciation for their business. This will keep your business at the top of their mind, drawing them in to check out the latest happenings within your space.
Give Them What They Want
There is nothing more powerful than a business that fulfills the pain points of its customers. You don’t have to be a mind-reader to determine or guess what offerings your customers want to see from you. You simply have to ask.
This can be as simple as providing surveys via social media or in an e-mail. Ask them what keeps them up at night. What is that sticky problem they need fixing?
Offer Customer Loyalty Programs
What better way to show your appreciation to your most ardent fans and customers than a customer loyalty program?
This is one of the most popular ways to give back to your customers and form long-term relationships. For those who sign up, you can offer special member discounts and coupons.
A point system can be created to get free products and services once they have reached a certain number of points tied to purchases. The idea is to show your love back to your customers and delight them, giving them a reason to keep coming back.
The Verdict Is In: Love Your Existing Customers
It bears mentioning that although the aforementioned statistics show a strong argument for customer retention, few businesses are actually doing it. If you want to see your business reach its profit goals now and for years to come, show some love to your existing customers.