Every organisation understands the necessity of winning new business but makes the mistake of just focusing on it, and forgetting the importance of retention. A strong customer retention strategy should run alongside customer acquisition activities for continuous growth.
By concentrating on new business may increase short-term profitability, but it is building customer relationships that will do the most good in the long-run. It is far more likely to help you build a sustainable venture and win more business through customer referrals. Here are some of the benefits of having a retention programme;
#1: Retention is more economical than acquisition
To maximise business profits and growth, costs or spending needs to be minimised or controlled. By diverting some of the sales and marketing efforts towards retention rather than new business, it will not only lower expenditure but also generate more ROI - as it tends to cost five times as much to bring in new business compared to selling to existing clients. As multiple studies suggest building existing relationships is far more economical because you already know who the contacts are, what the business does, what products they are interested in, when they are likely to order etc.
#2: Repeat customers offer better returns
Not only do repeat customers cost less to keep hold of than new customers do to bring on board, but they also tend to deliver better returns. Research suggests that the former would buy 90% more frequently, spend 60% more per transaction and deliver 23 % more revenue and profitability than first-time purchasers. Therefore, retention is one of the ways to grow and increase profits.
#3: Help you to stand out from the crowd
The potential profitability of a measure is always going to play a big part whether you choose to adopt it or not, but on a less materialistic note, customer retention strategies are also an effective way to help you stand out from the crowd. Many brands tend to focus on acquisition alone, but targeting your customer base will also help you to indicate your appreciation for their patronage, encourage repeat custom and referrals from your existing base.
Three quick tips to help you increase your customer retention rates
There are many different ways to implement a customer retention strategy, it may take a while before you can see the results, but it would be beneficial to the organisation’s long-term strategy. To give you a quick idea, here are three easy to implement tips that should help you increase the number of returning clients who give your business their patronage.
- Utilise CRM software to send targeted offers to your customers based on their purchase history.
- Reward your most profitable customers to incentivise future purchases.
- Use your CRM system to help you personalise your follow-ups and ensure an increased ROI.