The importance of customer retention shouldn’t be underestimated. Loyal customers are likely to buy more often from you and spend more money on each purchase. Keeping customers undoubtedly costs less than continually acquiring new ones. Unfortunately, many companies still focus much of their budget on attracting new first timers as opposed to allocating efforts towards those that have proven their loyalty. The irony is that promiscuous customers who do like to shop around, will always do so.
What does this mean for your business?
It costs 5 x as much to attract a new customer, than to keep an existing one.
Acquisition is easier than retention. Everyone is aware that retention is a lot of work. In fact, it can cost up to 5 times more to acquire a new customer than to keep an existing one. The cost of acquiring new customers often exceeds the profit gained from the first purchase. When it comes to new customers, it’s the start of your company’s interaction with a customer. They will likely have no previous experience with your brand. It takes time and money to interest them in your product and even more time and money to convince them to buy. Promiscuous customers will always demand the best deal, and this is the very reason they jump from company to company. It’s interesting to see that e-commerce companies offer high levels of cashback to attract new customers but virtually nothing for returning customers.
Why does retention matter if you’re gaining new sales?
A 5% increase in retention increases profits by up to 95%.
Thinking of investing in retention? With current customers you don’t have to fight against as many barriers to the transaction. They’ve already purchased from you previously, so they are familiar with your products and like your brand. Loyal customers are worth more. They spend more money, more frequently and cost less. Existing customers are 50% more likely to try new products and spend 31% more, when compared to new customers. Look at strategic discounts to incentivise behaviours and keep your customers loyal rather than using lower year-round cashback.
Offers like Webloyalty’s £15 cashback for every month a customer repeats purchases with the brand can be a huge incentive. The £15 is funded by Webloyalty so has no impact on your bottom line. It also takes the work away as they create the urgency for your customers by having a 30 day countdown reminder. It takes the pain away from constantly trying to retain customers and gives your customer a reward for returning. Retention will make a big impact on your long-term profits.
To keep customers returning companies need to give them a reason. What’s your reason?
Loyal customers like to feel valued and its important to focus on keeping your customers happy. Customers have more choice and power than ever before. As competition increases and markets saturate, customer retention strategies are becoming increasingly important. Help assure your customers that they’re making the right choice in choosing you. By doing this you will see a big return on your investment in the long run.