The Importance of Prioritizing Customer Retention in Business
In the world of business, sales have always been seen as the cure-all for a company’s success. But in reality, customer retention is just as important, if not more so, than acquiring new customers. While the need for new customers will always exist, it’s those loyal customers that present the most value to a business. They become brand advocates, generate referrals, and facilitate word-of-mouth marketing. In this article, we’ll explore the reasons why prioritizing customer retention is critical to a company’s bottom-line success.
Why You Should Prioritize Customer Retention
Retaining customers is critical to the success of any business. Loyal customers present an opportunity to develop brand advocates, gain referrals, and encourage word-of-mouth marketing. In this section, we’ll look at the benefits of prioritizing customer retention.
1. Get Positive Word of Mouth
Customers loyal to a brand are 75% more likely to refer their friends and family. This desire to share comes from a company’s retention efforts. Prioritizing customer retention initiatives has the power to convert customers into brand advocates, increasing the likelihood of gaining referrals. A third-party recommendation can be the final push for a prospect to buy from your company. When customers are happy with a brand, referral programs can be launched to realize their full potential in promoting the business. For instance, Ellevest rewards both the referrer and the referee for each successful transaction through its referral program.
2. Boost Conversion Rates
A customer who has made a purchase twice is nine times more likely to buy again than a new buyer. Current customers can help increase conversions and generate more revenue for a business. CVS Pharmacy targets current customers through personalized email messages containing deals and coupons based on their previous purchases. Google Ads or Facebook pixels can also be used to run advertising that targets people who have already visited or purchased from websites. Retargeting campaigns help companies bring customers back and sell more in the process.
3. Increase Your Customer Lifetime Value (CLV)
Customer lifetime value is the total monetary worth of a customer during the period of their relationship with a company. Buyers are 37% more likely to spend more with a business if they’re loyal to the brand. Repeat customers are not only more likely to buy from a company but also inclined to spend more, resulting in a high CLV and low cost of marketing.
4. Reduce Marketing Expenses
Acquiring customers costs more than retaining them. Acquisition requires businesses to allocate a budget for sourcing new leads, advertising websites, lead nurturing, and customer onboarding. Conversely, retaining customers is cost-effective since companies have contact information and information on the best ways to reach them. Customers already served are likely to need similar products again. As a result, the cost of marketing is relatively lower.
5. Get Predictable Revenue
Happy and satisfied customers will keep buying products and services from a company. Annual subscriptions rely solely on a business’s ability to retain customers as the main source of growth and at the end of 12 months, customers renew their subscription based on their needs and level of satisfaction with the product or service. By retaining customers, businesses can maximize the potential of predictable revenue.
6. Shield Your Business From The Competition.
A competitive advantage is having customers become more habitual in terms of preferring a brand. These customers do not get easily swayed by other brands as long as the product or service works for them. One example is Bombas, which builds customer loyalty by communicating its philanthropic mission of donating to the needy. When customers are served with inspiring stories that help them connect with a brand’s mission and values, they experience a strong sense of loyalty.
7. Improve Business Operations
82% of consumers agree that they would move to another brand if they experience poor customer service from the brand they were loyal to. That means businesses must ensure that their operations are aligned with customer preferences. Loyal customers give valuable feedback that helps improve products, services, and overall customer experience. Southwest Airlines immediately follows up with customers who voice negative experiences or issues, even on social media platforms. This helps them to get insights straight from their customers, and in turn, improves the overall customer experience.
Customer retention should be as important as acquiring new customers in any business. While the need for new customers will always exist, loyal customers are critical to the long-term success of a company. To achieve a steady growth rate, businesses need to prioritize customer retention initiatives. Retained customers generate referrals and encourage word-of-mouth marketing, boast high conversion rates, improve business operations, and reduce marketing expenses. Prioritizing customer retention is crucial for the long-term sustainability of any business.