At some point down the line, we’ve all heard the expression, “a bird in the hand is worth two in the bush” – there have never been truer words spoken in regards to customer retention. So many business owners seem to be focused on all the customers they don’t have while forgetting about the customers they’ve already got.
A savvy business owner knows that yes, attracting new customers is important, but retaining customers you already have is essential. Now, we’ve told you all about how to retain your customers in previous posts, so before I continue to go on with more lame idioms about grasses being greener or killing cats with curiosity… let’s jump into why exactly focusing on customer retention is so important for your business's success.
1. A Repeat Customer is More Likely to Spend More
I think it’s fair to say that most business owners obsess with attracting new customers because they believe in a simple truth “more customers = more $$$.” This is true, BUT there’s also a huge opportunity to increase revenue by focusing on customer retention.
A good customer retention strategy breeds customer loyalty, and loyal customers are so much easier to up-sell or cross-sell to than new customers. You’ve already gained a loyal customer’s trust. If you tell them that in addition to service X they should purchase a bottle of product Y so they can apply some at home, chances are they’re much more likely to listen to you rather than a customer you just met.
2. Costs More to Acquire a New Customer
Not only is there a huge opportunity for revenue to be made with a good customer retention strategy, there is also the fact that it costs about 6 times more to acquire new customers than it does to simply put in the effort to retain the ones you already have. Last year alone, it was reported that American businesses as a whole spent about 180 billion dollars in advertisements.
I mean, think about it – you spend tons on televised, radio, mobile, online, directory, and/or print ads with the hopes of attracting more customers through your doors. Is that really all that worth it when you can set up a simple loyalty program or a basic email marketing strategy to just remind existing customers to come back and spend more?
3. Higher Chance to Make a Referral
A good customer retention strategy not only presents your business with a sales increase opportunity, but it also gives you the chance to bolster your marketing efforts too. It’s a double win!
You’ve spent time perfecting your company’s brand, and a loyal customer is someone who’s really connected with it – what you stand for, and the services/products you provide. Essentially you’ve made a friend. But don’t forget, your new friend has friends of his/her own. With a good customer retention strategy, your new friend starts to tell all his/her friends how they just have to try your business because it’s great.
Well, would you look at that – now you’re attracting new customers to your business and you didn’t even have to lift a finger.
4. Combats Fierce Competition
Alright, so we both know your business is the best out there, but sometimes when the competition attempts to raise up and challenge your grandeur things can get kind of intense– especially when you don’t see them coming for you! It’s okay though, you’ve got a secret weapon to combat the competition – a great customer retention strategy.
We’ve talked a lot about how an effective customer retention strategy breeds loyal customers. Unlike new customers, loyal customers are not fickle lovers. They are committed to your business regardless of what the competition claims to have over you. For example, if one of your competitors slashes their prices you don’t have to worry as much to match them. Your customers have already fallen in love with your brand and will pay a little more if that means continuing business with you.
Well, I’ve said my piece… so what do you think? Do you agree with focusing on customer retention, or are you still more committed to attracting new customers? Leave us a comment below!
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