Brands and companies across the world are focusing more on client retention programs as compared to customer acquisition. Ever wondered why? The answer is simple. Repeat purchases are cost-efficient, and more importantly, they promote brand loyalty. Loyal customers have a high customer value and are an asset to any company. They spend more on the brand in their lifetime than an average or a new customer.
Although acquiring new customers is always good for business, the acquisition cost is high, while the likelihood of conversion can remain frustratingly low. Client acquisition costs approximately five times more than client retention; the chances of selling to an existing customer are 40% more than selling to a new customer. These numbers drive home why brands concentrate more on client retention than acquisition.
This article will delve into what exactly client retention is, how it works, and some important client retention strategies for 2021.
In simple terms, client retention is the process of engaging with existing clients to encourage them to repeat their purchases, build a strong customer-brand relationship, and gradually turn them into organic brand ambassadors.
Technically it is the next step after client acquisition, but it can be said focusing solely and consistently on acquisition will do more harm to the business than good. You want to ensure that the clients you have acquired build a positive association with the brand, have a good customer experience, and repeat their purchases. Client retention strategies can aid brands greatly in the quest to extract more value from the existing pool of clients.
Client retention programs give great insights on customer behavior, purchase patterns, and the effectiveness of marketing campaigns and strategies. They also highlight flaws and shortcomings in your customer services, advertising campaigns, and branding.
Cost-Efficient – As mentioned earlier, client acquisition is much more expensive than client retention. A report by Econsultancy states “82% of companies have reported that customer retention is far cheaper than customer acquisition.” Also, a new client or customer is always skeptical before their purchase, hence acquisition strategies offer no guarantee that the acquired customer will repeat their purchase.
High Return on Investment (ROI) – Efficient client retention marketing strategies have a high probability of turning repeat clients into brand advocates. Research shows loyal customers are nearly a quarter more likely to purchase from the brand compared to a new or an average customer. Even a small 5% increase in client retention can increase profit rates up to 80%, ensuring a high ROI.
Boosts Brand Loyalty– When you retain clients, you are much closer to building a connection with them, enforcing brand loyalty. Clients who turn into brand loyalists increase the company profits substantially and help build a strong brand identity for your company in the market, which gives the brand a competitive edge.
Organic publicity – Loyal customers are organic brand advocates. They are much more likely to help in customer acquisition through reviews and word-of-mouth publicity spontaneously.
Helps in Client Engagement – Repeat clients are easy to connect with. They are more likely to respond to mailers and other marketing correspondence than an average customer. An engaged client is more likely to trust the brand versus strangers and repurchase from it indefinitely.
Helps in Creating a Strong Brand Identity – Loyal clients help in creating a strong brand identity. They tend to support and engage with the brand on various platforms.
Provides Room for Trial and Error – Loyal clients will likely be undeterred by a simple one-off bad product or unsatisfactory customer service. With loyal clients, there is room for trial and error since they are more forgiving than an average customer.
Cost-Saving – Client retention strategies are far more cost-efficient and deliver higher ROI through referrals, reviews, and word-of-mouth publicity.
Profitable for Brand Extensions – Client retention also helps in upselling and cross-selling. A loyal customer trusts the brand and by default will also extend the same courtesy to the brand extension.
Time-Consuming – Client retention marketing takes a long time to come to fruition. You may not see the results in the short term, so it cannot be used as a quick fix. It is a long-term process, yet an effective brand-building activity.
Requires Commitment and Long-Term Investment – Client retention strategies are designed to yield long-term results; they require commitment, consistency, and dedication.
Potential Clients Might Feel Undervalued – When you concentrate solely on customer retention, you do run the risk that your potential clients may feel overlooked and undervalued, damaging the brand in the long-run.
Client Retention has become more important in the COVID-19 era than it was before. Here are 5 client retention marketing strategies for 2021-22.