Why Retaining Your Existing Customers Is Important
Every company wants its sales to grow from one period to the next. However, do they always follow the correct steps to get the results they aim for? Many studies suggest that one of the most important actions that enterprises often neglect is customer retention.
Retaining existing customers can rapidly increase profitability. Companies, by only focusing on acquiring new customers or on their brand, undervalue an extremely important asset: their existing customers.
Customer retention costs you less than customer acquisition
Bringing new customers to your company is crucial. Customer acquisition is a strategic set of techniques that will help you increase your brand awareness and boost your sales. However, when it comes to measuring profitability, retaining your existing customers is always a winning choice.
One reason that makes customer retention more profitable is that it costs less than acquiring new customers. Based on the lifetime customer value calculation formula, research suggests that it costs 4 to 10 times more to get a new customer than to retain an old one. In some contexts, this number can even go up to 30 and may vary based on the type of your company and the industry you operate in.
Loyal customers push your sales up
Taking a step further, customers that keep on shopping at your store become loyal customers. These are the ones who can increase your company’s sales. Since they already know you and trust your brand, they have higher chances to buy more products and services at more expensive prices. The same behavior is, however, not noticeable for new customers. As they don’t know you, they might be more skeptical about your brand and your offer in the beginning. Their shopping behavior mirrors their thoughts. Most probably, they will not buy expensive products or in big quantities during their first shopping trips.
Overall, a company loses 20% of its customers each year as it doesn’t satisfy them. And this number can increase a lot. Therefore, bear in mind that your company should always keep working on the actions or activities that will help it retain its existing customers.
Short-term or long-term loyalty programs are proven tools for companies to keep their customers happy and loyal. Loyalty programs that reward customers for shopping at your store can contribute to a great customer experience. As a result, retailers can quickly notice a boost in their sales and profits. When combined with loyalty mechanisms tailored to a specific target group—children and families, for instance—loyalty programs can have even more impact. Check out our cases to learn how short-term loyalty campaigns can work efficiently.
Existing customers are your top brand advocates
A positive reputation is one of the most important attributes that make a company stand out and increase profitability. Word of mouth is an all-time-classic, powerful weapon that costs you literally zero money and should always be in your hands. Based on facts, 92% of consumers trust recommendations from friends and family above all the forms of advertising.
When your customers loyal to your company, it means they definitely like your brand and your products and services. They can highly enhance your good reputation and are your best advertisers. Chances are high that they will speak about you to their friends and family, who then become your new customers. Because these new customers had a good impression of your brand before even buying from you, they are likely to purchase more and pay more compared to other customers that you are trying to acquire.
To sum up, you already have gold in your hands. But for you to keep it and increase its value, you need to play hard. Undoubtedly, customer acquisition is important for a company to keep on existing. However, nonstop effort on customer retention creates strong relationships and is key to your company’s long-lasting success.