Customer retention is about trying to keep more customers for a longer period so they spend more at your business over their lifetime; it’s about keeping loyal customers instead of just finding new ones.
A study conducted by the Harvard Business Review found that “increasing customer retention rates by 5% increases profits by 25% to 95%.” That’s a pretty significant jump!
You spend a lot of time, effort, and money on acquiring new customers. It 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.
It usually costs less than spending on acquisition strategies and successfully retained customers are more likely to refer other customers to your business. Also, referred customers usually have a higher lifetime value than customers that were acquired through conventional channels too.
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.
Keep this in mind: the number one goal and purpose of customer retention is to increase profit. However, there are other great outcomes of retention, like customer satisfaction, loyalty, and brand perception.
While customers in this day and age are becoming less loyal to brands, it is still vital to put effort into your customer retention marketing. The importance of customer retention is not found in keeping around an extra customer or two, but in treating your customers the way they should be treated.
Another great thing about the time we live in is that people are vocal in their support. Treat a few customers right and they might bring 5 of their friends back to sign up. However, this is again why treating your customers right is so important. Customers might tell a few of their friends about you if you treat them well, but if you don’t, the whole world will know about it.
This is the double-edged sword of new tools like social media and online reviews. It is up to you to do something about it and start your customer retention campaign as soon as possible.