Customer Retention is crucial for every business regardless of its size. An increase of just 5% in loyal customer base can bring in 75% more revenue but don’t know why most organizations don’t realize the importance of it and end up spending a large amount on customer acquisition.
On average, companies spend 30 times more on customer acquisition which may be a worthy pursuit but at the cost of loyal and significant customers. Is that a good strategy? No. It’s not.
Though companies spend 30 times more on customer acquisition, the profit ratio is much less in hand. According to a research report, the probability of selling to new customers is 5-20% while the probability of selling to old customers is 60-70%. Such a vast difference. Besides this, there are umpteen benefits that can help you skyrocket your business growth.
Benefits of Customer Retention
Here are a few benefits that prove that customer retention should be the top priority for businesses:
1. Money Savings
It is often said that 20% of the time should be spent on making a product and 80% of the time on marketing to acquire new users. So, in this case, if we evaluate the total cost of marketing per day, it exceeds the budget. Can a company bear this high cost? No.
If we choose the semaphore option and focus on retention, don’t you think it will save a good amount which we can use in other business areas? Besides this, the same customers will help you in promoting and marketing your products in various ways helping you drive tremendous traffic to your company’s website.
2. Increase in the Number of Recommendations
Do you know how much benefit you get when you meet your loyal and most valuable customers’ needs? If you don’t know then you losing a large community of like-minded people who are in search of reliable and trustworthy companies.
Assuming Amazon’s marketing strategy. We know that Amazon is the #1 e-commerce store across the globe with 300 million active users. This gigantic store mainly focuses on user acquisition and retention. More than a store, it’s a brand. It includes top-notch digital technology for marketing but at the same time focuses on offering the best to loyal customers. That’s the reason when it comes to online shopping, Amazon is the first name we recommend to others.
Suggested Read: What is Customer Retention? 6 Examples & Proven Strategies
3. Free Word-Of-Mouth Advertisement
This is one of the effective marketing strategies where you don’t have to make any investments. Your contribution is only to offer the best products and services to your customers. Loyal or be precise longtime customers play a major role in doing so.
Longtime customers are likely to spread your company more compared to new customers because they are aware of your services. By spreading the word they do a type of advertisement that influences another buyer’s purchasing power. According to a statistical report, word-of-mouth accounts for a 13% increase in sales. Further, 90% of potential users are influenced by the brands recommended by their friends. The users who make a purchase through word-of-mouth marketing have a higher lifetime value compared to users who get influenced in other ways.
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4. Valuable Feedback
You may have certainly heard of this saying, “Old is gold”. And, this best fits especially in product-based companies. When you sell your products to the old customers they provide useful feedback on it rather than just penning lame feedback. Such valuable feedback helps you in improving your product.
This technique can be explained perfectly by giving the example of brick and mortar store. Whenever the owner launches a new product, he tries to sell the new product to the regular customer and requests feedback. If not selling, he tries to give away the product as a free sample and asks for feedback. He does it because apart from the trust and bond he has, he knows that the customer is the better person to provide him the useful feedback and can help him in making improvements, if there are any.
5. Builds Healthy Relationships
An old customer is like an old friend because being an owner, you instantly understand his purchasing pattern. Also, you don’t have that insecurity of losing your valuable customer. This gives a huge relief from stress, protects your revenue and makes the life of your life easy.
For instance; whenever a customer purchases a product from the brick-and-mortar store, the owner considers him whenever there is an offer or sale or a product launch ceremony. Why he does do that? He knows that the customer will bring a few more customers along to increase his business’ customer base. Second, such invitations build a good rapport between the owner and the customer.
6. Free Promotion and Marketing in social media forums
Today, social media marketing is a must for any business. Hence, if a happy customer promotes your services and products on his social media channels, it adds a golden feather to the company’s hat. Though the ratio is less, such deeds made by loyal customers influence others’ purchasing power. This can be addressed as one type of influencer marketing.
Influencer marketing is booming nowadays, especially on Twitter and Facebook. According to a statistical report, there is an increase of 5.2X purchasing intent when an influencer tweets about a product. Therefore, in this case, if your loyal customers become your influencers, imagine the user acquisition rate, it can increase to 10X.
7. More Purchases More Profit
Loyal customers will often come to you and purchase in bulk because they trust you in the product quality. Hence, the ratio of the existing customers buying your product is 3 to 10 times more than the new customers.
For instance; We often visit Amazon to shop online for any product. Be it apparels, books, home appliance, gifts, almost everything. Why? Because we know the credibility of this gigantic store. Amazon does not have to prove it. The company has already created an impact on the potential users who often visit the store to make purchases. According to a statistical report, Amazon’s net revenue was $178 billion U.S. dollars up from 135.99 billion U.S. dollars in the year 2016.
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The main purpose of this blog is to motivate you to include the customer retention strategy in the top list. Yes, not denying that retention is a challenging task but at the same time, it is fruitful. There is one more benefit and I think it is the most important one. Customer Retention will help you create an edge over your competitors. So, now the choice is yours. Think about it.