5 Reasons Why Customer Retention Is Key to Your Business
Customer retention means satisfying existing customers so they continue buying from your brand instead of competitors. It takes eight purchases for a customer to be considered a “regular” at a company, but customer retention is about much more than repeat orders.
So why is customer retention important?
Optimizing the customer experience and listening to their needs leads to lifetime brand loyalty, plus major financial benefits. On average, attracting a new customer costs five times as much as keeping an existing one, plus up to 30 times the marketing cost. However, increasing customer retention rates by just 5% can boost your profits by 25% to 95%!
Here are five reasons why customer retention is important for your ROI:
Lower Marketing Costs
Repeat Purchases Means Repeat Profit
Gain Valuable Feedback
Sell at Premium Prices
1. Lower Marketing Costs
Your marketing budget goes further by prioritizing existing customers in the retention stage of the buyer journey. Repeat buyers are already familiar with your products and services, so marketing campaigns for loyal customers don’t need to be as expensive. According to BCG, advertising to an existing customer costs about $7, whereas it costs around $34 for a new client一that’s over four times as much! Existing customers also have keen brand awareness, lowering their reliance on customer support that saves you money, depending on your industry.
2. Repeat Purchases Means Repeat Profit
Loyal customers who make regular purchases tend to spend up to 33% more money when they do, resulting in higher customer lifetime value. They’re also 50% more likely to try new products than new customers due to mutual trust with your brand. A valued customer not only believes that your products are superior to competitors in the market, but that your company aligns with their needs and preferences. To satisfy existing customers, take note of their buying history and recommend related products to encourage future purchases.
3. Free Word-Of-Mouth Advertising
You’ve probably heard it before, but it’s worth repeating: word-of-mouth is the most cost-effective form of advertising. And guess what? It only comes from loyal customers who believe in your brand.
Repeat customers are more likely to share their positive experiences with like-minded people, essentially becoming free advocates for your business. This tactic works because people trust the opinions of those who are close to them. Almost half of U.S. consumers say that their friends and family are their top sources of brand awareness, and 92% of people trust recommendations from their friends and family over any other type of marketing.
4. Gain Valuable Feedback
Part of winning over customers is providing an exceptional customer experience, which requires listening. In past surveys, 97% of consumers said they are somewhat likely to become more loyal to a company that implements their feedback, while 55% of consumers said they’re not likely to continue being a customer of a company that ignores their feedback.
Customers who make frequent purchases from your business will also see areas of improvement, so don’t be afraid to ask. Gathering feedback can be as easy as sending an email to your subscriber list, putting up a poll on your social media accounts, or sending surveys to clients right after they place an order. Once you implement new changes, you’ll find opportunities that were overlooked, as well as increase retention rates and sales.
5. Previous Customers Will Pay Premium Prices
Repeat buyers are far less price-conscious than new leads because they’ve used your products before. This is especially true among millennials who would only switch brands if prices were at least 10% lower. About 70% of the younger age group also pays premium prices when perks (like free shipping) are offered in loyalty programs. Overall, many customers associate higher prices with quality service, so offering added benefits motivates them to keep coming back.
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