What is the True Value of Customer Retention?
Do you remember one of our previous articles (customer loyalty) where we discussed that it takes approximately seven times more to gain a new customer than it does to retain one? Hopefully you do, listen up now, though! Other studies have shown that bringing a new client in might actually cost a business up to 10 times more than to keep one. According to Kissmetrics, acquisition marketing is the single most important goal for 63% of the surveyed companies – do you belong in this club? If so, you might want to reconsider. Read on if you’d like to know why.
Acquiring new customers has been and will always be a fundamental aspect of any organization when it comes to profitability, however, loyal customers should also be accounted for. Retaining customers has a relatively low cost, high ROI (return on investment) and countless long-term benefits. Not only is it cheaper to keep previously acquired clients, they are also way more likely to make higher value purchases. And we’re talking big here: existing customers spend 67% more than new ones. According to Invespcro’s research, boosting customer retention by 5% may increase profits by up to 95%. It’s also worth mentioning that a returning shopper spends 33% more on average than a new one. Now, do you still think that acquisition is the best segment of your company to pump money into?
If you still have doubts, let us show you that customer retention is not negligible. Did you know that a massive 75% of US companies who have some sort of loyalty program generate a return on investment? That doesn’t happen by chance! Customers like being appreciated. According to Selfstartr, 83% of customers say that these programs make them more likely to keep doing business with companies that offer some sort of reward.
And what happens to those businesses who don’t show their appreciation enough? Two things, John E. Hogan and Katherine N. Lemon say:
- They either lose their customers to other companies, or
- Their customers simply give up altogether on a certain product/service category.
The former means that the customer abandons a certain company, the latter means that the entire category loses the customer who could have been a walking, talking advocator of a brand/product/service. It is important to understand that people not only buy goods, they also use and talk about them. Taken together, losing a customer is a double bereavement: your profit drops and your free promoter is gone. The main reason for a customer to stop shopping with a brand? Surprise! Poor customer service. According to Vision Critical’s research, it only takes two bad experiences for 42 percent of Americans to do so and, 68% of customers, Accenture says, will not return to a brand once they have left.
All in all, while both keeping and attracting new customers benefit a company, the capability to provide both groups with valuable and personalized marketing is absolutely essential. If you need help with that, request Liferay’s free demo here and retain customers like a breeze!