Why Customer Retention Should Be the Top Most Priority for Businesses
Customer Retention is crucial for every business regardless of their sizes. Increase in just 5% of loyal customer base can bring in 75% of more revenue but don’t know why most of the organizations don’t realize the importance of it and end up spending a large amount in customer acquisition.
On an average, the 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 in customer acquisition, the profit ratio is pretty 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.
Here are a few benefits which prove that customer retention should be the top most priority for businesses:
1 Money Savings: It is often said that 20% of the time should be spent in making a product and 80% of the time in 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 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 for reliable and trustworthy companies.
Assuming Amazon’s marketing strategy. We know that Amazon is the #1 eCommerce store across the globe with 300 million of 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 the loyal customers. That’s the reason when it comes to online shopping, Amazon is the first name we recommend to others.
3 Free Word-Of-Mouth Advertisement: This is one of the effective marketing strategies where you don’t have to do any investment. 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 a word they do a type of advertisement that influences another buyer’s purchasing power. According to a statistical report, word-of-mouth accounts for 13% increase in sales. Further, 90% of potential users get influenced by the brands recommended by their friends. The users that make a purchase through word-of-mouth marketing have a higher lifetime value compared to users that get influenced by other ways.
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 a 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 request for the feedback. If not selling, he tries to give away the product as a free sample and asks for the feedback. He does it because apart from the trust and bond he has, he knows that that customer is the better person to provide him the useful feedback who can help him in making improvements, if there any.
5 Builds Healthy Relationship: 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 the 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 the product launch ceremony. Why he does 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 in his social media channels, it adds a golden feather on the company’s hat. Though the ratio is less, such deeds made by the 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 on 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 for 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.