By Areeba Khan
Customer retention is a lot more crucial for your growth than you think. We have heard time after time that it always costs more to sell to a new customer than to your existing ones.
Meaning, if you have a healthy relationship with your existing customers and rely more on your efforts to retain them, rather than assuming the fact that your product or service is enough to keep them happy forever.
That’s a common pitfall for most businesses around the globe – the misconception that if their product or service is great, customer flow and retention will come naturally.
When in reality, it is a very short term strategy that works miraculously for a few businesses only and the rest will lose customers eventually; that is an even harsher reality!
Mainly because when you stop trying to retain customers, they would feel unimportant and no longer a priority to your business.
Why Is Customer Retention Important?
It is a well-known fact that working in sales means prioritizing customer acquisition to increase revenue. And to make that happen they have to sell more, in other words, they need new customers.
This is why, salespeople tend to focus more on gaining new customers, so much that they fail to make any efforts in retaining the existing ones.
Again, what is cheaper? Getting new customers or keeping the ones you have already got? You know the answer!
A study from Market Metrics concludes that the success rate of making a sale to an existing customer is nearly 70% compared to selling to a new one, which is 5-20% at most. Yet so many businesses spend more on customer acquisition rather than retaining their existing ones.
5 Reasons Why Customer Retention Is So Important
1. Requires Less Marketing
If you are selling a service, one thing that you will not have to go through when working on customer retention is the hassle of convincing them to buy from you – which takes weeks and maybe months in case of gaining new customers. As a result, you will be investing less while strengthening your long term relationship with customers. In fact, it will cost you 16 times less to maintain an existing customer than getting a new one.
2. Faster Conversion
Your existing customers already know the quality of service you provide (unless they had a bad experience with your service), so they are more likely to buy from you again. Your business has already gained this customer’s trust and confidence through your service or product even so you will not have to move mountains for them to repurchase. On top of that, once a customer stays with you long enough, you get to know their needs and can predict what would be a great selling point for each customer in particular.
3. Higher Profits
According to a Gartner study, 80% of total revenue in the future will be generated from just 20% of your existing customers. Imagine the importance of all 100% of your existing customers for your business in the near future!
4. Room for Improvement
You have a great opportunity to improve and increase customer satisfaction by resolving complaints and glitches by simply listening to your customer’s feedback. You can always take your time and resolve the issue, however catering to them first is essential.
5. It’s Cheaper
According to Bain and Company, customer acquisition costs your business 6-7 times higher than retaining your existing ones. In fact, if you increase your customer retention just by 5%, it can result in 75% higher profits for your business instantly!
Your takeaways:
- Never underestimate the value of customer retention.
- Become proactive in keeping your existing customers.
- Your existing customers are of unmatched value to generate more revenue
- Your profitability is directly proportional to how focused are you in keeping your customer base.
How to Increase Customer Retention?
There are no specific rules to do this, as every business and its customer base differs from each other. But these are some helpful tips to begin your customer retention strategy.
1. Customer Churning Comes with a Sign
The first and foremost step in retaining customers is to prevent them from leaving. Customer churn doesn’t just happen, it always gives you a few signals that you can detect before leaving.
An impending customer departure can be identified with the ‘warning’ signals through some of the key variables of your customer behavior. This may include product usage, purchase pattern and most importantly, history of customer service queries.
You will be able to analyze the actual cause of their possible churn and take preventive measures to stop them from leaving.
*This can be made possible through a customer relationship management system for your product.
2. Always Respond to Customer Queries
Long queues of customers can be a cause of frustration among them. It is not always possible to resolve customer issues then and there but simply acknowledging their complaints or queries will give them a sense of being heard and taken care of. For this, you may need to establish a customer support system that not only sends automated responses to your customers but also provide FAQs and self-service resolutions.
According to Helpscout customer service facts, nearly 50% of your customers don’t mind solving their product/service related issues themselves if provided self-service guides and 70% of them would like to have a self-service application.
*This can be made possible through automated customer support platforms.
3. Introduce Loyalty Programs
Keep your customer records to find out the most profitable ones and reward them with loyalty programs that offer some special benefits and value to these customers. Obviously, you do not want to lose your VIP customers and giving them a little extra will only increase your profits in the future.
This will also help you allocate your time and resources into the right customers who are generating a big chunk of your revenue; increasing your chances of up- or cross-selling as well.