Depending on which research you consider and the industry to which you belong, acquiring a new customer is close to 25, even 30 times more costlier than retention of an existing one. It is rapidly becoming obvious that a customer retention plan is the cheapest way to market. Rather than looking for resources to find a new client, the ones you have need to stay happy and satisfied for your business to prosper. Research by Bain & Company demonstrates that increase in customer retention rates by 5 percent raises the profits by 25 to 95 percent! The conclusion is that keeping customers is more important than acquiring new ones.
Why Customer Retention Matters
Your customer churn rate (or metric measuring the amount of customers who close their relationship with your business in a specific duration) matter. Any company that provides product pricing on a monthly basis such as gyms, clubs or SaaS companies look at customer churn rate by the month. For those who seek to understand the faster churn rate or value their existing customers additionally, the churn rate may be looked at monthly rather than annually as well. Equally important is the retention rate– the percentage of customers that stay.
Churn rates could be a signal that something is not working and retention rates point to the opposite direction. So, the cheapest way to market is to convert new customers into long term ones. This is a formula for successful business marketing because you spend less and earn more. To build a successful retention marketing program, add CRM, allocate a budget for retention marketing and prioritize around retention rather than acquisition strategies.
Measuring Customer Value
Measuring customer value is important, especially lifetime value. Rather than measurement of individual sales alone, sales by customer searches need to be carried out. Customer value is an important part of customer retention based on recency, frequency, and monetary value of the purchase. Higher lifetime values means more customer retention. Retaining customers through excellent customer service is important. This is a priority for businesses. Stellar services earn your business loyalty in the long run.
Send Timely Communication
Another important and cheap way to market to ensure customer retention is to remind customers of upcoming sales, coupons and deals to encourage repeat business. Interacting on social media is another positive way to turn complaints into opportunities. Rather than focusing on an acquisition driven business, service is paramount for retention. This works out to be more affordable in the long run.
Why A Long Term Customer Brings Value to Your Business
An old saying goes, “Make new friends but keep the old, while one is silver, the other is gold.” This holds true in the business industry too. A long term customer is of value as against a single deal customer. It is essential to keep a customer rather than looking out for new ones alone. Keeping a large percentage of the customers for a longer life cycle, means a revenue foundation that is predictable and profitable. This has created a strong growth base for entrepreneurs and ventures.
Keeping a customer as a long haul partner works out cheaper in the long run, because marketing costs money and keeping track of customer satisfaction is way easier. It is important to innovate to stay aligned with customer needs in an ever evolving market. The art of staying connected is important.
This is because customers have so many different choices. A customer retention plan ensures that connections difficult to manage in the past can now be easily accessed. In the current fast paced business environment, a disconnect can make a big difference. Business owners are consistently oriented towards acquisition of new customers through marketing campaigns that add to the brand value. A better go-to market strategy than catchy marketing phrases and stronger billboards is to ensure customers do not feel detached. With modern technology and social media at the fore, it is possible to build person to person relationships with each customer. More personal and authentic customer relations point to the indispensable value of an effective customer retention plan.
Staying Connected Matters
Connecting with the customers and communicating gratitude for their business is a wonderful way to generate goodwill and an enviable sales figure. Validate your customer for their importance and hard-work as well as their value over a consistent period of time. Making messages personal and highlighting what is special in each communication matters. Connecting personally with customers is important to ensure your business stays ahead in a competitive corporate ecosystem with rapidly advancing technology like Pathwwway. Research shows that quick SMSes and text messages go the long distance when it comes to connecting with customers. Your clients will not buy from brands they cannot trust. It costs much more to acquire customers than retain them, in terms of both money and effort.
According to the old 80/20 rule, 20 percent of your customers bring you 80 percent of their revenue. Unless a prospect becomes a loyal client, they do not trust the company’s brand. As the prospect flows through the marketing funnel, trust can strengthen, but only when it solidifies is there a transaction and customers trust a business. Trust is what keeps them coming back for more and take the decision whether to buy or not buy from your business again. Customers serve as social proof that trust creation works.
Customer Acquisition Costs
It makes sense to spend time and cash on retention as against acquisition if saving money and valuing growth are priorities for your business. Acquisition of new customers comes at a huge cost. Outbound/traditional marketing, inbound marketing, event marketing and sales or business development wages pile up to make customer acquisition costs massive. Taking the entire cost of sales and marketing over a given period, includes headcount related expenses. If the customer acquisition costs are more than the value of the customer in a lifetime, this is a sign the business is headed for colossal failure. Many experts and market leaders have called customer acquisition cost the startup killer for this reason.
How Retention Impacts Growth
What effect can customer retention have on the growth of a business? Retention such as lower churn rates as well as persistently rising revenue can raise the customer lifetime value and balance out the cost of acquisition. Current customers are certain to try new products, specially 51 percent more certain to check out fresh products and spend 31 percent more on an average. This means unlimited potential for cross selling and up-selling.
Sales to an existing customer have a higher probability (60 to 70 percent) as opposed to making a sale to a new prospect (5-20 percent). So if we study the numbers, the value of a Pathwwway customer retention plan as the cheapest way to market becomes obvious.
Customers as Advocates
Existing customers act as advocates for your business. Advocacy in trust impacts prospects in a positive way too. If the client gives a compelling and positive account of how it pays to be your customer, this will stimulate not just lead generation, but prospect conversion as well. Customers can attract prospects, so retention not only balances out acquisition, but influences it in a positive way as well. A plan for customer retention is an essential part of your toolkit, if you want your business to thrive and not just survive.