Every business wants to acquire new customers, but do you know what is actually more effective? Retaining customers.
Business owners are continuously striving to retain customers and increase their profit margins. But why should your efforts be focused on retaining customers rather than acquiring new ones?
Why is customer retention important?
Retaining customers and keeping them satisfied throughout each stage of the customer journey can boost loyalty and increase repeat business.
If you can retain your customers, they will become loyal to you, and won’t hesitate in shopping with you weekly, or, for some, daily! By improving your customer retention rates by 5%, your business can increase their profitability by up to 95%.
Did you know?
- It costs six times more to acquire a new customer than it is to attract business from an existing customer.
- Once customers are loyal to your business, the top 10% of customers spend on average three times more than regular customers - so investing in these customers is key.
- The probability of selling to a new customer is 5-20%, while the probability of selling to an existing customer is 60-70%.
- Returning customers spend 67% more than new customers!
Customer retention is therefore a vital component of your overall strategy, and so you should not underestimate the value of customer loyalty. Loyal customers are the most valuable to your business due to their greater spending power, as well as the potential information they can provide on business feedback for improvement.
How can I improve customer retention rates to grow my business?
Loyal customers are one of the main sources of business growth and profitability. To stay competitive within the market and retain customers, it is not enough to just offer great products and services at great prices. As a business, you must build and maintain positive relationships with customers during each stage of their journey with you.
The secret to securing customers lies in simplicity. Throughout a customer’s journey, they search for information about products and services. This can become an overwhelming experience and lead to indecisiveness.
To combat this, your business must simplify the decision making process through minimising alternative options for them, reducing information points, providing trustworthy reviews and recommendations, and displaying relevant options. Make a divide between you and your competitors, so your offering is the obvious choice against competition. This will help customers move confidently towards a decision and, as a result, a purchase from your business.
Further options for your business include, providing customers with value through your expertise and knowledge, offering personalisation, fast shipping, easy and quick returns, or perhaps even guides and recipes, such as brewing tips for coffee at home. Implementing these techniques as extra added value features will encourage repeat business from customers.
Should I abandon customer acquisition?
No! When you decide which strategy is best for your business, you can focus most of your energy there. However, do not neglect the other, as it should be an omni-channel approach!
To help you decide, you must consider what stage of the lifecycle your business is in. If your business is new, acquiring customers is more important to kickstart your venture. If your business has been around for a while, customer retention is where your efforts should be focused, with a 50/50 or 60/40 strategy. Find a balance that works best to achieve your business goals!
If you are wondering how best to attract and retain customers, book a demo with us!