It is much cheaper to get repurchases from current and former customers than it is to find new customers. Returning customers also spend more money and contribute to word-of-mouth marketing. Companies must realize the importance of customer retention, and also learn about the best strategies that retain customers and encourage them to keep coming back to you for business.
Customer retention is a company’s ability to produce repeat customers. By retaining customers, a business can increase the lifetime profitability of each customer. Creating a customer retention strategy is all about maintaining engagement, building trust, and creating significant value for your customers. An example of a customer retention strategy is creating a loyalty program.
This program provides customers with appealing benefits and perks as a reward for doing business with your company for an extended time. In other words, it is equivalent to providing repeat customers with special treatment so that they are not tempted to do business with other competitors.
Customer retention strategy is different from an acquisition strategy which requires a funnel and repetitive techniques that generate demand and interest amongst new potential buyers. Companies mustn’t confuse acquisition strategies with retention strategies. An acquisition strategy creates a customer foundation, while a retention strategy extracts maximum value from that foundation.
Importance of Customer Retention
The importance of customer retention comes down to affordability, loyalty, referrals, and ROI, or return on investment. Focusing on customer retention and succeeding in creating loyal customers will be instrumental for new companies.
It will allow them to budget and scale since they will no longer have to spend much on customer acquisition costs. Attaining new customers with the means of different marketing techniques can be 25 times more expensive than retaining existing customers.
Since you do not have to waste the time, money, and resources for customer acquisition, companies can focus on keeping the existing customers satisfied. Loyal customers tend to spend more money than new customers and this is mainly because they trust your business, and regard your products as valuable.
Customer retention can also pave the way for customer acquisition through the help of referrals. For instance, if you happen to keep a customer satisfied for a long time, this means that they will play the crucial role of referring partners. They are most likely going to share your business with their friends, family, and colleagues, and introduce new customers to your business.
How Much Should Companies Focus on Retention?
If your business is based around selling high ticket items that need to be sold in high volume, then you will gain plenty of benefits from implementing a customer retention strategy. Any business that needs to scale must focus on a customer retention strategy. Ignoring it rids you of the chance of benefiting from loyal customers and repeat sales.
Best time for Companies to Focus on Customer Retention
If a business is in the starting phase, then there is no need for customer retention strategies. Instead, business leaders should only focus solely on getting new customers and building a strong consumer base to gain some traction in the industry. Once companies start picking momentum and experience an increasing cash flow, then they can start looking at retention plans and strategies.
It is best to spend most of the time acquiring new customers at the start, without completely neglecting the existing customers. Even if the business is at an early stage, you must reward your existing customers since they are some of the few people that have seen real value in your business. They are customers that support you and wish to see your business grow.
This is why you want to make sure that you give back the support that you get from them. Once you start getting consistent sales, make sure to split yours between acquiring new customers and retaining the existing ones. Marketing automation and loyalty programs are two methods where you can achieve customer acquisition and retention.
Maximizing your focus and implementation on acquisition properties will lead to many one-time purchases, and not many long-time customers. On the other hand, if your business is well-established, then you should have automated processes in place for your customer acquisition property. This is the time when you will have to focus heavily on customer retention.
Overall, boosting customer support requires companies to integrate a solid customer support strategy. It further requires businesses to increase attention towards customers. Effectively solving customer issues, giving them quick refunds, and being prompt with queries and complaints is an easy way to satisfy your customers and retain their loyalty.
Helping customers avoid problems and get the most out of your products and services not only satisfies them but also helps with your customer retention goals.