Why Does Customer Retention Matter?
If you’re looking to grow your business, improve your profit margin, have greater success with introducing new products and services and, generally, want to build a following of loyal customers, then you need to start paying attention to retention.
Regardless of your industry, repeat custom should be at the forefront of your mind when thinking about the future of your business, its objectives and strategy.
Of course, for your business to achieve real growth you must balance a steady stream of new buyers with repeat customers, but we’ve found that so many small business owners aren’t aware just how important retention is to their success…
Here’s why…
Repeat Custom Is Great For Your Bottom Line
We’ll start with the most fundamentally important reason: if you ignore your existing customers, your bottom line will suffer.
It costs you 5% more to acquire a new customer than it does to keep an existing one, and a mere 5% increase in retention can boost profitability by anywhere between 25-95%.
So, it’s not only cheaper to retain customers (a statement over 80% of companies are in agreement with) but retained customers can, with the right approach, have a tremendous positive impact on your profit margin.
It’s also much, much easier to sell to existing customers than it is to convince new customers to shop with you.
That’s because you’ve already done the hard work – they’re familiar with your product/service offering and know what to expect.
In fact, whilst the probability of selling to a new customer is around a 5-20% chance, the probability of selling to an existing customer is between 60-70%!
Those are numbers you can’t ignore.
How Can I Help Boost Repeat Customers?
There are many ways that small businesses can build repeat custom. Here are three important ways that you, as a small business owner, can look to retain existing customers and turn them into loyal purchasers of your products/services.
Think Long Term
We’ve found that the first thing a business owner can do is recognise the value of long-lasting customer relationships.
It’s incredibly easy to get obsessively focused on boosting new sales and focusing on metrics to do with widening your customer base.
Of course, this is still incredibly important for solid growth, but not at the expense of existing customers.
It can be hard to see why this matters so much, but the data doesn’t lie. The average repeat customer spends nearly 70% more with your business 2.5 years into your relationship than they do in the first 6 months.
Rather than focusing on immediate results, you should consider the lifetime value of your customers and see them as long term assets as opposed to short term profit makers.
Customer Lifetime Value (CLV) is an incredibly important metric that allows you to identify exactly that.
Take a look at the below infographic and equation to see how it is measured:
Source: Netsuite
CLV = Average Transaction Size x Number of Transactions x Retention Period
Whilst there may be significant nuances and caveats to this figure, it will hopefully help you think of customers on a more long-term basis.
Comparing your cost of acquisition to your CLV not only enables you to see how profitable a customer is over time, but it’s also a fundamentally important way of seeing if your business is sustainable, viable and geared towards long-term growth.
That’s why a 10% increase in customer retention equates to a 30 percent increase in the value of a company!
So, if you’re not tracking these metrics, it might be time to invest in a Customer Relationship Management system (CRM) or other system that allows you to easily determine the metrics needed.
Provide The Best Customer Experience
So, now you’re aware of just how important retention is, you probably want to know a bit more about how you can achieve it…
Providing a fantastic customer experience is at the heart of any customer retention strategy – a statement nearly 90% of businesses agree with. That’s because satisfied customers are 87% more likely to purchase upgrades to their current purchase or invest in new services.
So how do you keep them satisfied?
Providing a good buying experience means considering all the touchpoints a customer might have with you during their journey. Everything from that initial phone call or email right through to delivery contributes to their overall satisfaction, and one blip along the way can ruin all of your previous hard work.
According to a recent study, nearly 50% of customers would take their business to a competitor within one day of receiving poor customer service. There’s not a lot of margin for error!
The truth is, it’s hard to impress people. You won’t do it by accident! Nearly 70% of customers agree that their standards are higher than ever – whilst this might seem like bad news, we see it as an opportunity to stand out from the crowd.
To truly master this, you will need to map out every touchpoint and identify what is important to focus on at each stage.
For example, here’s a few points a service based business might make regarding early stages of acquisition:
A lot of customer experience boils down to a few key elements:
- Swift, warm and accurate communication.
- Keeping to promises.
- A product/service that matches expectations.
- Being available when they need to speak to you how they want to speak to you.
- Be obsessed with the customer – actively enquire about their experience, monitor data and constantly improve your service.
That last point may seem obvious, but 97% of customers say salespeople don’t ask enough about their needs. If you’re not talking to your customers, how on earth are you going to know what they’re after?
Many first impressions stem from your digital presence – whether that’s social media or your business’ website. We designed our website design service specifically with this in mind, so that you can be sure that no matter how your customers are finding you, they’re provided with a seamless, intuitive experience.
Invest In Marketing & Give Rewards
80 percent of businesses rely on some form of email marketing for customer retention & 56 percent of businesses see email marketing as the most effective method of reaching customer retention goals.
Social media is a close second, with frequent touchpoints and a focus on engaging customers through posts, comments and interactions seeing fantastic results; nearly 40% of retail professionals state that organic search drives customer retention too.
And that’s without mentioning mobile messaging, retargeting ads, apps, and PPC…
There are countless ways that small businesses can boost their retention, but they all require one thing: investment.
Failure to invest money and resources into retention strategies may be a very costly mistake, and if you’re not currently doing so you may be leaving a lot of money on the table.
There are plenty of ways to cultivate retention with a lower budget, so there’s no excuse! Social media can be invested in with nothing more than time; email marketing has one of the best ROIs of any channel (an average return of $36 for every $1 spent); and SEO content strategies can provide value long after your initial investment!
Another way businesses can foster customer loyalty is, no surprises here…Loyalty plans!
58% of customers that use a loyalty program purchase from that brand at least once a month, and 83% of customers say joining a loyalty or reward program will ensure repeat visits/purchases.
This doesn’t have to be some convoluted points system that’s impossible to track or reward, it can be as simple as your local cafe’s card & stamp system!
Just make sure that you’re rewarding loyalty – let your customers know that you value their repeat custom – nearly 70% of customers enjoy getting surprise gifts, and that’s certain to leave a lasting, positive impression.
How Can We Help You With Customer Retention?
We can help with customer retention across many digital touchpoints – we can help you build or optimise a user-focused website or e-commerce store, partner with you on performance driven SEO campaigns, help you create a visually consistent and impactful social media presence and much, much more.
The best place to start is an obligation-free chat – get in touch today to find out how we can help provide your customers with a fantastic user experience across digital touchpoints.
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