Business owners tend to believe that gaining new customers should be the first priority in business. If this is your mindset as a business owner, you might want to think again. What could be better than gaining more customers? The answer is customer retention!
Attracting new consumers is a good thing, but retaining existing customers will yield a higher ROI over time — and it will cost 5 to 25 times less.
Your best bet at achieving customer retention is to have a strategy in place.
To achieve long-term profitability, the most valuable trait any business can have is repeat-customers. With the economy steadily improving, keeping consumers should be high on a company’s priority list for success.
Unfortunately, many businesses lack a simple plan for client retention. The lack of long-term vision may have catastrophic consequences, particularly if the company begins to lose its short-term customers.
When is the last time you looked at ways to re-engage clients and encourage them to return? If you haven’t yet developed a coherent customer retention strategy, now is a good time to start.
We’ve broken down some of the most effective customer retention strategies that are used by successful companies. We’ll go over all the must-haves that every consumer success/marketing team should implement.
What is customer/client retention?
Customer retention refers to a set of practices in order to maximize the number of repeat or returning customers and increase the profitability of a current customer. The ultimate goal is to turn one-time consumers into loyal customers and increase their overall lifetime value.
Client or customer retention strategies allow you to derive more value from your current customer base. You want to continue to get value from your hard-earned customers by maintaining a positive relationship with them and keep them returning to your product/service.
In other words, acquisition builds a foundation of customers, while preservation builds customer partnerships and maximizes sales for each one. How much time and money do you put into your retention strategy? That depends on you.
Most businesses place a greater emphasis on acquiring new clients than on keeping existing customers. In fact, approximately 44% of businesses prioritize customer acquisition, while only 18% prioritize customer retention, and 40% prioritize both.
Consumer retention is far less expensive than customer acquisition. Companies need a good balance of both client acquisition strategies and customer retention strategies. Think of it this way- the more new customers you acquire, the more customers that you can persuade to stick with your product/service.
Why you need a customer retention program
Repeat buyers account for a large majority of a company’s sales; the more they spend, the more likely they are to buy again. According to one report, customers are just 25% likely to order from the business again following their first transaction. They are 45% more likely to make a third purchase after two sales, and 54% more likely to make a fourth after three purchases.
Customer retention strategies are important because it helps you measure customer satisfaction, the quality of your customer service, and if there are any red flags that could scare off potential buyers. Here are some more reasons to focus on client retention as much as client acquisition:
Customer retention is much cheaper than customer acquisition
A study from Econsultancy shows 82% of businesses states that customer retention is much cheaper than customer acquisition. However, many businesses still opt to invest far more on acquisition than on nurturing existing clients.
Increased average order value
Retaining existing customers is not only more cost-effective, but such clients continually purchase more over time. According to research, loyal consumers are 23% more likely than average customers to purchase from you.
Repeat customers tend to spend more
You’ve already persuaded a current buyer to order from you, and the more purchases they make, the more likely they are to spend more money on your business. According to one study, shoppers spent 40% more on their fifth buy than they did on their first. When the customer made their tenth order, they had spent an incredible 80% more.
Taking care of your clients and maintaining them over a long period of time will boost your profits. According to data, raising customer satisfaction by 5% will raise revenues by anywhere from 25% to 95%, and current customers account for 65% of a company’s revenue.
Word-of-mouth & Brand loyalty
Customers who are pleased with your business are more likely to tell their friends and family about you. Having a strong customer retention strategy keeps clients coming back, and subsequently boosts word-of-mouth marketing. According to Yotpo, 60% of customers discuss a brand with their families and friends. This is extremely valuable as word-of-mouth marketing will grow your business exponentially.
Better client data
Existing and returning consumers will create more data for your business, which you can use to obtain actionable information that can help you maximize revenues. For example, a current client is more likely to receive a full profile than a new one. This means you can learn more about who they are, why they like your products, and their purchasing patterns. This knowledge can then be used to create marketing campaigns for specific demographics.
How retention fits your business
The strategy you should pursue is heavily influenced by what you sell. The highest consumer lifetime value (CLV) belongs to a shop whose consumers regularly buy high-value products. These are the businesses who stand to benefit the most from a successful customer retention strategy.
For example, businesses who sell furniture, vehicles, or houses should focus more on client acquisition. On the other hand, businesses that sell coffee, electronics, pet supplies, or shoes should focus more on customer retention strategies.
When to focus on customer retention
The stage of your company’s life cycle determines whether you should prioritize customer growth or retention. A business that was established last week will have different priorities from one that has been in business for many years.
You’re just getting started
There’s only one thing you can concentrate on when starting a new business- gaining clients! Your acquisition efforts can totally outweigh your retention efforts at this stage. If you’re just starting out, concentrate on strategies that aid in the expansion of your client base.
You’ve attracted buyers and are making occasional profits. You should start introducing retention strategies at this point to motivate each customer to buy more. You can start with retention email campaigns that are designed to persuade a previous client to buy from you again.
You now have a steady stream of profits. Now is the time to start thinking about incorporating more retention into the acquisition efforts tactics. Consider launching a referral and/or loyalty program, as well as marketing automation.
You now have an established business. While customer acquisition can result in several one-time sales, a retention strategy may encourage consumers to buy more often, increasing their lifetime value. As an established business, you should be thoughtful and intentional about your customer retention strategy.
Your business has made it over many hurdles. At this point you’ve most likely implemented systems and automations. Now is the time to put a lot of emphasis on retention.