The Importance of Customer Retention
This article was first published on Magic.
It’s hard to overstate the importance of customer retention in business. Word-of-mouth is, in effect, free advertising for the business. Testimonials and feedback, meanwhile, are invaluable in establishing the credibility of your business to potential customers.
What Is Customer Retention
Customer retention is the ability of a business to keep its existing customers and continue generating income from them. Business enterprises use various tactics to convert buyers into repeat customers. In effect, customer retention enables your business to boost sales by providing satisfying after-sales services, discounts, or other perks.
Get Higher Customer Retention By Lowering Churn Rates
Churn rate or customer churn refers to the rate where customers stopped buying the products or services of a company over time like a month or year. It also includes customers who canceled subscriptions or won’t renew them. A high churn rate means many of the people who buy from you end up deciding not to stick with your business somewhere down the line. For any business, it’s ideal to keep this rate as low as possible.
To reduce churn rates and get higher retention, analyze the sources of these high churn rates. Talking to customers is the best way to know why they left your business. Call them up to ask why they left and how you can improve your service so they’ll continue buying your products or services. 68% of customers leave due to a perceived lack of attention and care from a company.
Special offers encourage loyalty since they give your customers a sense of VIP treatment. Discounts for loyal customers, especially for bulk orders, are a common option. Reaching out to the right target audience is also important. Attract customers who can appreciate your product’s value in the long run instead of offering freebies or cheap offers. These kinds of offers often attract the wrong customers, who are only interested in the freebies they can get instead of the value of your product or service.
5 Benefits Of Customer Retention
Having your customers’ trust means they’ll look to your business for your competitors’. Here are five improvements you’ll see when you keep customers coming back for more.
1. Reduce Marketing Costs
Customer retention aims to encourage customers to come for repeat purchases whenever they need your products or services. This is a good strategy since it costs five times more to acquire a new customer compared to keeping an existing one. Not to mention that it can cost 30 times more to market to new customers.
In addition, repeat customers already know your products or services, so you can allot $7 for ads compared to the $34 it costs to market to new customers. That’s nearly 80% reduced marketing costs.
According to customer retention statistics, increasing the customer retention rate by 5% boosts a company’s profits by 25% to 95%. This is because many recurrent customers often buy more products from that company over time.
Lastly, existing customers have clear brand awareness that let them know how to use your product enough to depend less on your customer support services. This results in lesser costs for your business, which in turn adds more to your profits.
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2. Repeat Buyers Are Bigger Spenders
Returning customers tend to spend around 67% more than new customers. Additionally, 50% of existing customers are more open to trying new products since they know your brand already.
For your business to be profitable, offering enticing deals encourages new customers to look for your products or services whenever their needs arise. Being able to provide lifetime value to your customers gives them a reason to keep coming back for more.
3. Word-Of-Mouth Is Free Advertisement
Word-of-mouth endorsement from loyal customers serves as free advertisement that can effectively attract new customers. Recommendations from family and friends are very effective ways to convince people close to them to try a new product or service. In fact, 92% of consumers believe in word-of-mouth recommendations and testimonials.
4. Get And Act On Feedback
Lessen customer turnover in your business by listening and acting to your customers’ feedback. Asking them to fill up customer satisfaction surveys allows you to glean insights from them. Remember that collecting, listening to, and acting on their feedback makes them feel important to your company, resulting in brand loyalty and customer retention.
After all, a customer who sees company changes to address your comments or feedback becomes very happy. Seeing that the company cares about you and wants you to have a good experience with products and services, thus the improvements they’ve made.
The gym management software startup, Glofox, changed its whole product roadmap to address its customers’ need for a proper guide on how to transition to online fitness classes. After a month, it created and launched software that can help customers join fitness classes on its platform. As a result, it’s now one of the best gym management software platforms in 2021.
5. Old Customers Pay Premium Prices
Repeat customers already know the quality of your product or service. So, they’re less concerned about the price, especially if you’ve established the quality of your product or service. Coupled with good customer service, you can sell to old customers easily whenever they need these.
One such trend is that 70% of young buyers are willing to pay premium prices for products or services if they offer other benefits such as discounts or free shipping. They become more inclined to be loyal to a company that offers these benefits. Plus, offer similar promos in loyalty programs that your business offers. Generally speaking, many customers think that pricey products or services suggest quality services. With other benefits or special offers, you can motivate your customers to continue patronizing your products or services.
Get Magic To Help Improve Customer Retention In Your Business
Magic employs teams of virtual assistants in the Philippines. Hire an admin assistant to provide great customer service support by politely and promptly answering customers’ queries and concerns. Also, you can steadily build customer loyalty by consistently delivering quality service.
Hiring your Magic assistant is made easy and quick — within 72 hours after the initial call. This way, you can have them work on customer retention tasks for your business. They understand the importance of customer retention to the success of your business. So, they can help you reach out better to your existing customers to develop positive customer relationships. Get started when you call us today.
