What Is Client Retention,
And Why Is It Important?
Our clients are the heart of our business. Without them, we have no business. Therefore, we have compiled this article to help you with ideas.
What Is Customer Retention?
Customer retention refers to a company’s ability to turn customers into repeat buyers and prevent them from switching to competitors. It indicates whether your product and your service quality please your existing customers. It’s also the lifeblood of most subscription-based companies and service providers.
Customer retention strategies are the processes and initiatives businesses put into building customer loyalty and improving customer lifetime value.
Customer retention is different from customer acquisition or lead generation. It focuses on customers who have already signed up for a service or purchased a product from you.
But retaining customers is about more than just transactions—it’s about relationships. Research shows that customers view their relationships with brands as similar to their relationships with friends. Customers like reliability, authenticity, and awareness of what matters to them.
Focus on buyer relationships with your existing customers to boost their brand loyalty. These shoppers will continue to choose your brand even when presented with other options. In addition, your brand will be more likely to weather volatile markets with this loyal base.
Customer Retention Benefits
While most companies traditionally spend more money on customer acquisition because they view it as a quick and effective way of increasing revenue, customer retention often is faster and, on average, costs up to seven times less than customer acquisition. In addition, selling to customers with whom you already have a relationship is often a more effective way of growing revenue because companies don’t need to attract, educate, and convert new ones.
Companies that shift their focus to customer retention often find it a more efficient process because they are marketing to customers who already have expressed an interest in the products and are engaged with the brand, making it easier to capitalize on their experiences. In addition, retention is a more sustainable business model that is key to sustainable growth. The proof is in the numbers: according to studies done by Bain & Company, increasing customer retention by 5% can lead to an increase in profits of 25% – 95%, and the likelihood of converting an existing customer into a repeat customer is 60% – 70%, while the probability of converting a new lead is 5% – 20%, at best.
The Importance of Customer Retention for an Online Business
You might have heard that it’s easier and less expensive to retain customers than acquire them. The most recent statistics indicate that it’s true.
For one thing, you’ll spend five times less money on customer retention.
Additionally, at best, your probability of selling to an existing customer is at least 40 percent more likely than converting someone who has never bought from you before.
Existing customers also spend 31 percent more than new leads, and when you release a new product, your loyal customers are 50 percent more likely to give it a shot.
Those statistics should prove sufficient to compel you to build and test out a customer retention strategy.
Reasons Why Customer Retention Is Essential
Loyal customers purchase more regularly and in more significant quantities. This is because they know your small business can provide products and services they want. As valued customers, they feel your business is more likely to listen to their requests and provide superior service than other businesses that offer similar offerings. Retained customers are more likely to make additional purchases if you pay attention to what brands or types of products they like. Offer discounts for loyal customers to encourage repeat business, such as a 10 percent discount after a certain number of purchases.
Customers your small business retain are familiar with your products and services, which reduces your marketing expenses by creating brand awareness and advertising your product range. For example, suppose you own a small bookkeeping business that provides services and sells accounting software. In that case, retained customers are likely to be aware of both offerings without the need for additional marketing. Familiarization with your products and services also reduces the support retained customers require.
Repeat customers are more likely to tell their friends and family about your small business. Customers feel good telling people about the quality service they received or a product that makes their lives easier.
Word-of-mouth advertising also gives your small business credibility. Customers respect the opinion of people close to them. For example, suppose you own a small accounting business that performed a complex tax return for a loyal customer. In that case, a word-of-mouth referral gives prospective customers confidence that your small business has the skills to perform their complex tax returns.
Retained customers are not as price-conscious; they know your small business provides solutions to their problems and are often prepared to pay a premium. For example, suppose you are an independent contractor and provided advice that has resulted in significant savings. In that case, a retained customer is likely to support your business again, even if your fees are more expensive than your competitors’. In addition, customers often associate higher prices with quality service.
Customers that your small business retains provide valuable feedback. As they make frequent purchases from your business, they know areas that could be improved. For example, if you own a small equipment company, a repeat customer could suggest using an alternative supplier to enhance the quality of the products you sell.
Be proactive by asking your repeat customers how your business can serve them more effectively. This can lead to new opportunities that you may have overlooked, such as a recommendation to introduce a complementary product to enhance an existing one.
Especially in these challenging times, we need to keep our clients. We hope that this article has been helpful to your client retention planning.
Article compiled by hughesagency.ca
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