The best way to grow is through more customers, right? Actually, it can be 25 times more expensive to acquire a new customer than it is to retain an existing one.
Customer retention is important to any growing business because it measures not only how successful you are at acquiring new customers, but how successful you are at satisfying existing ones.
Marketing and sales company Hubspot define customer retention
as a percentage that measures how many customers a business keeps at the end of a set time period. The numbers are impacted by the number of new customers acquired and the number of customers your business is churning through.
Why you should prioritise existing customers
It is easier and more cost-effective to retain customers than to acquire new ones. Returning customers spend more and buy more often, and frequently refer friends and family. According to Hubspot, a 5% increase in customer retention has the potential to increase your revenue by 25-95%.
Here are four customer retention strategies to implement in your business today to help prioritise your existing customer base.
1. Communicate frequently
Avoid losing your customers interest by building meaningful relationships and keeping in touch with a regular calendar of communications. This could be in the form of automated emails, a phone call or event invitations. It all depends on what best suits your product or service.
The communication should occur regularly (but not unnecessarily) and at defined points in the pre-sale, sale and post-sale process. This kind of communication reinforces the customer’s value to you and your business, acknowledges them and keeps them informed.
2. Don’t settle for the initial sale
Most businesses do an excellent job of making the initial sale. However, it’s easy to drop the ball and get complacent, ignoring these first-time buyers once they’ve left your business.
To lock in another sale (and the referrals and repeat business that will flow from it), you need to make use of the opportunity immediately.
Thank your customers and remind them again why they’ve made the right decision to deal with you. Put a system in place to sell to them again, and again, constantly proving they made the right decision. This could be in the form of a rewards program, discount offers or extraordinary customer service.
3. Reward your most profitable customers
The information gathered in CRM software (your customer database) can tell you which customer accounts are most profitable to your business. These are the customers with the greatest ongoing value. In other words, they are your VIPs.
Knowing who brings your business the most revenue allows you to allocate time and resources efficiently to these accounts. It can also increase your chances of cross or up-selling.
4. Measure the lifetime value of your customers
There’s a difference between the one-off profit you make on an average sale from a ‘walk-in’ customer, and the total profit your average customer represents over the lifetime of their business relationship.
If you recognise how much combined profit a customer represents to your business when they repeatedly make a purchase (over months, years or decades), you’ll realise the critical importance of taking good care of these customers.
customer lifetime value calculator to get started.