There’s a lot of conflicting ideas about what’s more important for businesses, customer acquisition or customer retention. Well, the truth is that it’s often better to focus your efforts on customer retention, particularly for established businesses. This is simply because of the many benefits and the little cost involved in retention marketing.
In fact, research by Harvard Business Review has shown that customer acquisition is anywhere between 5 and 25 times more expensive than customer retention. So clearly, customer retention is something all businesses should be working to improve!
What is customer retention
So what exactly is customer retention? Well, in marketing it’s the process of engaging your existing customers to continue buying products or services from your business.
In other words, it’s all about preventing your existing customers from slipping through your fingers. After all, what’s the point of investing time, effort and resources into customer acquisition, only to miss out on the benefits of building a relationship with them.
The value of customer retention
As we’ve already mentioned, customer retention costs 5 to 25 times less than customer acquisition. That’s a massive saving on your marketing campaigns. Not only that, increasing your customer retention rates by just 5% can lead to a 25-95% increase in profits!
With these stats in mind, it’s clear to see how valuable customer retention actually is to businesses.
The benefits of good customer retention
Having good customer retention is key for businesses for a number of reasons. Below are just a few of the many benefits:
It’s cheaper than customer acquisition
Firstly, retaining your existing customers costs far less than acquiring new ones. As we’ve already mentioned studies have found that acquiring new customers is anywhere from 5 to 25 times more expensive than customer retention. Not only that, your retention marketing efforts are more likely to work since your target audience already have a demonstrated interest in your products.
So customer retention marketing is actually extremely cost-effective for businesses.
Repeat custom means repeat profit
It’s been proven that loyal customers, who make regular purchases, are more likely to spend more money when they shop with you. Statistics also show that existing consumers are up to ten times more likely to make a purchase than a cold lead who hasn’t shopped with you before. A repeat customer knows they can trust you and believes that you offer a better service than your competitors. Therefore it’s also much easier to market to your existing customers since you already know what products they’re interested in.
Existing customers are more likely to buy more
Research has shown that once a brand has proven itself with one product or service, customers are six times more likely to try a new product or service from the brand as soon as it becomes available. This has the obvious advantage of increasing your profits without actually having to spend much on marketing your products or services!
Ways of improving customer retention
So now you know more about customer retention and how valuable it is to businesses, you may be wondering how best to go about improving your customer retention rates. Well, below are some of the most effective customer retention strategies that actually work:
Prioritise your customer service
Customer service is a key aspect of ensuring customer retention, after all, if a customer isn’t happy with the service that you provided them, the chances are they’re going to take their business elsewhere in the future.
In terms of customer retention, ensuring good customer service is key! Research has shown that 52% of consumers have purchased more from a company after having a positive customer service experience. Providing your customers with an excellent quality of service helps to increase their loyalty and makes them more likely to recommend you to their friends and family.
Listen to what your customers are saying
It’s your customers that dictate what would cause them to remain loyal to your business, so make sure you listen to what they have to say. Ask your customers for their honest opinion and for any recommendations they may have on how you can improve the experience for them.
Showing your customers that you value their opinion and acting on the recommendations they give will show them that you value their custom and that you are committed to improving their experience, this, in turn, can improve customer retention.
Engage with your customers over social media
Nowadays, social media plays a big part in helping businesses build more meaningful relationships with their customers.
Social media is a useful platform where you can nurture your customers until they eventually become not just loyal customers but even advocates of your brand. Being active on social media also enables you to respond to any queries and to keep an eye on what people are saying about your brand or products.
Create a customer loyalty program
Finally, an extremely effective way of improving your customer retention is by creating a customer loyalty program.
Loyalty programs work in two ways. Firstly, by giving your customers something back, you make them feel more valuable and that their custom is appreciated. Secondly, it encourages your customers to take action that benefits your business, such as buying more products.
Businesses that have a loyalty program in place enjoy a significant increase in customer retention rates. In fact, 77% of consumers say loyalty programs make them more likely to stay with brands!
Want to learn more about PERX and how it can help your business to increase customer retention? Fill in the form below to speak to a member of our team and book a demo.
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