It’s a topic that gets plenty of debate.
Where should you focus your attention? Customer Acquisition or Customer Retention? While they are both important for your business to grow and prosper, customer retention is in my view more important.
While customer acquisition has that satisfying end result for marketers (acquiring customers is always fun & rewarding), for more established brands and businesses, it’s often better to focus your efforts on customer retention.
Why?
My argument is down to priority. What’s the point of investing time, effort and resources into customer acquisition, only to waste the potential of their relationship once you have them on board?
Nurturing these customer relationships will lead to many positives for your brand. Let me explain below.
Customer Retention is Cheaper
Acquiring new customers is great, but it can be expensive in terms of time or money spent. It can also be hard work depending on the methods you are using to bring new customers into your brand.
So what I like about customer retention is that the costs associated for repeat business are usually much cheaper. This means that keeping a customer is cheaper than acquiring a new one.
If you simply target existing customers that have clearly shown an interest in your product and willingness to buy it, you’re giving yourself a much stronger chance of making more sales.
What’s more…
Marketing to your existing customer base not only offers a clear reduction in your ad spend, it also presents a chance to demonstrate your commitment to rewarding loyalty. Doing this will build out more lifetime value.
Customer Retention Means more Customer Acquisition
If you have been in business for sometime, you appreciate the importance of customer loyalty. These are the customers that keep coming back to spend money on your business again and again.
But what this also can result in is the added benefit of acquiring more customers. Once you start to develop brand advocates for your business, you’ll begin to notice them sending you customers.
Word of mouth advertising comes into play here and is not only free, but possibly one of the most credible forms of advertising a business can have in their arsenal. Customers will always talk of good and bad experiences they have from different companies and brands.
They always listen to other customers. Because of how this develops, just a 5% increase in customer retention can increase a company’s profitability by 75%!
Customer Retention Gives You a Better Understanding Of Your Customers
Having a good customer retention rate positions your business in a stronger light. I say this because the longer you get to keep selling to customers, the more of an understanding you develop on who your actual ideal customer is.
This is very important because this data is vital to your customer retention efforts and gives you the tools to create personalized and targeted promotions to maximize your chances of success.
The customer retention data you acquire will help you in your future acquisition efforts. You will know exactly what kind of people are most likely to become loyal customers.You’re crafting a perfect customer avatar(s) and figuring out things like:
1. Who they are?
2. Where do they hang out online?
3. What motivates them to buy?
4. What kind of messaging they best respond to?
5. What offers garner the most attention?
See where I’m coming from here?
On the other hand…
If you neglect your customers, this represents an incentive for them to shop with your competitors. Statistics show 61% of consumers take their business to a competitor when they end a business relationship, which is why retention is vital to the success and growth of your company.
By crafting out and implementing the best possible customer retention plan for your shopping brand, you can set yourself apart from your competitors. In the end… who doesn’t want the reputation of being a business that takes care of its customers? It’s impossible to overstate the importance of this type of brand reputation.
Customer Retention Has a Faster Sales Process!
As I’m sure you’re aware, it’s much easier to sell to an existing customer than it is to sell to a brand new one. The main reason for this is because all barriers to purchase have already been overcome. Customer’s bought from you because they know, like and trust you. They are happy with what you have to offer them.
When selling to existing customers, all it may take is a slight nudge in order for them to whip out their credit card and take you up on your offer. With trust, rapport and respect earned between you and the existing customer, the entire sales process is quicker in terms of conversion.
You have already offered existing customers a positive customer experience from previous transactions and because of this, they are much more likely to make future purchases and generate more business for you.
On the other hand…
Trying to persuade cold prospects to become customers sometimes requires a lot of time, sweat equity and monetary costs. There is usually more nurturing involved from cold prospect to a sales conversion. You just don’t have this same barrier with existing customers and therefore, the sales process is a lot quicker.
Existing customers simply want a pleasant and consistent experience from your brand. They just want you to keep your promises. By focusing your efforts on great customer retention, you’ll find yourself making quicker sales with easier-to-please customers.
Conclusion
No doubt Customer acquisition is critical in the early stages of start-up businesses & beyond. But once you’ve built a steady customer base, as soon as you’ve got one customer, retention should be on your mind. The more customers you have, the more important retention is. Remember to keep this statistic in mind: 80% of your brand’s future revenue will come from 20% of your existing customers.
