Healthy relationships, especially with your current customers, are a critical element for maintaining a successful brand. A strong customer retention rate can lead to improved customer loyalty and advocacy, meaning notably higher revenue for your business.
Yet even with these significant benefits, many brands aren’t taking full advantage of thorough and effective customer retention management. Instead, they focus more on customer acquisition – to the detriment of their core customer base. We explore the full value of a customer retention program and how it can be even more important than new customer initiatives.
Recent studies show that a vast majority of brands continue to put a great deal more emphasis on attracting new leads than on engaging with and retaining current customers. In one survey, 72 percent of small businesses intended to use the largest part of their marketing budget and strategies for new customer acquisition.
The issue with this approach is that it largely ignores one of your brand’s most powerful assets: your satisfied customers. At the same time, the focus on acquisition is less cost-effective for your business. It can cost seven times more to secure a sale from a new customer than it does to keep an existing customer engaged.
Part of the reason for this discrepancy is that potential customers are at the top of your sales funnel, just beginning their buyer’s journey. At this early stage, these visitors are still discovering and exploring options, and there’s a greater distance to the final purchase. This means a much higher barrier to entry for these individuals, compared to your current customers.
The following are just some of the key reasons that customer retention management is so important for your brand.
New leads may require several visits and multiple interactions with your brand to make a purchase, but continued visits from existing customers lead to more revenue. In fact, up to 40 percent of an e-commerce store’s revenue is contributed by just 8 percent of its customers. The same is true of physical stores, giving a higher lifetime-value (LTV) to your most loyal shoppers.
You can capitalize on the higher revenues brought in by current customers by providing these loyal shoppers with strong incentives to return. This can include targeted emails highlighting products related to their previous purchase, or a loyalty program that offers them a discount based on the number of purchases or amount spent. Strategies like these will keep your best customers returning.
When it comes to attracting new customers, loyal customers can be a more compelling force than even the best marketing campaigns. Your most satisfied buyers can become enthusiastic advocates for your brand and your product as they share their experience with family and friends, in person and online.
This can be a huge advantage for your business, as 92 percent of potential leads trust personal recommendations more than any other kind of marketing. The better the experience and the more purchases they make, the more likely these customers will be to share your products with others. One way to encourage these brand advocates is to offer a referral incentive as part of your customer retention program.
For any brand in B2C sales – and even some in B2B – holidays and special sale days throughout the year represent a significant portion of your annual sales. Some brands make 40 percent or more of their yearly revenue during the end-of-the-year holiday season. In these busy shopping seasons, even when spending is down overall, repeat customers have greater value.
According to research by Adobe, the average customer’s holiday transactions are 17 percent higher than usual, but repeat customers spend 25 percent more in each transaction during the holiday rush. By providing early access to Black Friday and Cyber Monday deals, or by giving existing customers special holiday offers as part of your customer retention program, you can take full advantage of this increased holiday spending.
Your best customers are also your best source of information on the audience groups you are targeting since they are confirmed purchasers of your products. Their shopping and purchasing patterns help you better understand why and how leads become customers so that you can refine your marketing and targeting efforts. You’ll know which type of visitors are most likely to make a purchase – and which ones will become loyal brand enthusiasts.
At the same time, existing customers can offer insights for products that may be missing from your current line up. Cross-selling, which can increase profits by up to 40 percent, is also easier with repeat customers than with new customers. Improving product recommendations and collecting regular feedback from loyal customers can help you make the most of these opportunities.
From a better understanding of your brand’s conversion process to free word-of-mouth marketing for your products, repeat customers drive significant value to your brand – even beyond an increased lifetime customer value. The right customer retention management system and strategies will allow you to leverage those benefits, setting up your brand for even greater success.